Effective Customer Centric Merchandising Strategy

1
Effective Customer Centric Merchandising Strategy

• Steve Olsen
• Vice President, Merchandising
• Sears Seminar Series
• Miller Center for Retailing Education and
  Research
• University of Florida
• April 17, 2009

2
Agenda

• U.S. Office Products Industry
• Retail Challenges
• Merchandising Strategy Definition
• Category Management Framework
• Merchandising Strategy Tactics

3
U.S. Office Products Industry
Market is large and growing
CAGR02-07 2.8
Billions
337B
331B
323B
312B
302B
294B
Delivery120B
Delivery122B
3.1
Delivery117B
Delivery113B
Delivery108B
Delivery105B
Retail211B
Retail206B
Retail215B
Retail199B
Retail194B
2.6
Retail189B
Source School and Office Products Network
State of the Industry Report 2008 / Office Depot
Estimates
4
U.S. Office Products Industry
OSS comprise a small portion of the overall U.S.
office supply industry
2007 OSS Market Share
Other
Contract Stationers
Specialty Stores
ODP 3.4
Contract Specialists
SPLS 4.3
O.S.S.
Independent Dealers
OMX 2.3
Internet/Direct Sales
Institutional/School Firms
Mass Retailers
Stationery/Gift Stores
Food/Drug Stores
Copy/Printing Services
College/Bookstores
Source School and Office Products Network
State of the Industry Report 2008 / Office Depot
Estimates Note Figures may not add to 100 due
to rounding
5
Office Depot Business Overview

• Office Depot is a leading global provider of
  office products and services
• 2008 sales of 14.5 billion
• Supplies 61 of sales
• Technology 25 of sales
• Furniture and Other 14 of Sales
• Multi-channel stores, catalog, Internet and
  contract serve business customers of any size,
  from small home office to Fortune 500 accounts
• 58 of 2008 sales were not in North American
  Retail
• One of the worlds largest e-commerce retailers
  4.8 billion in sales in 2008

Artistree
N.A. Business Solutions (29 of 2008 Sales)
Artistree
International (29 of
2008 Sales)
Artistree
North American Retail (42 of 2008 Sales)

• Over 1,200 stores in U.S. and Canada
• Largest concentration of stores in California,
  Florida and Texas

• Catalog, contract and e-commerce
• Dedicated sales force works with medium sized to
  Fortune 100 customers
• Orders serviced through 20 distribution centers

• Catalog, contract, e-commerce and retail
• Sells to customer directly and through affiliates
  in 45 countries outside of North America
• 35 websites and over 400 stores

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Challenging Times
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Category Management Methodology
Strategic Levers

• Assortment
• Brand Management
• Pricing
• Space Planning
• Promotions
• Inventory

Strategic Plan
Category Role
Growth Intent
Category Management Framework
Category Strategy
Resource Allocation
Category Tactics
- 7 -
8
Merchandising Strategy Tactics
Price
Product
Merchandising Strategy
Promotion
Placement
9
Product

• Line Review Process
• Style / Function / Design
• Pack Size
• Packaging
• Brand Awareness
• Innovation / Exclusivity

Product
Price
Merchandising Strategy
Promotion
Placement
10
Product Line Review

• Comprehensive process
• Complete merchandising solution
• Market share and Industry trends
• Product quality, innovation, design and
  exclusivity
• Willingness to help Office Depot grow
• Ability to support and service Office Depot
• Negotiate the best cost/value relationship

11
Style, Functionality Pack Size
12
Improved Style, Functionality Pack Size
13
Packaging
14
Improved Packaging
15
Brand Awareness Exclusivity
16
Price

• Pricing Strategy
• Business Objectives / Financial Goals
• Competitive Strategy
• Zone / Channel Strategy
• Price Sensitivity
• Retail Prices

Product
Price
Merchandising Strategy
Promotion
Placement
17
Pricing Strategy

• Strategic objectives
• Business objectives / financial goals
• Category management framework
• Customer segment / profitability objectives
• Channel / Store format
• Competitive positioning by category / store /
  region
• Price zones

Formulate
Manage
Pricing Strategy
Adjust
Execute
Monitor
18
Strategic Pricing Process
Consumer Price Sensitivity



Department Strategies
Business Rules
Corporate Planning

• Category role
• Growth objectives
• Private brand strategy
• Competitive strategy
• Financial goals
• Marketing strategy
• Zone strategy

• Cent ending
• Pack size
• Product family
• Competitive
• Good/Better/Best
• Brand relationship

• POS data
• Product attributes
• Insert media
• In-store promotions
• Clearance events
• Competitive data

• Corporate strategy
• Brand strategy
• Customer strategy
• Merchandising strategy
• Financial plans

Prices Aligned with Financial needs and Corporate
Goals
19
Setting Retail Prices
Traffic
Destination
Destination
Profit
Traffic
Convenience
20
Placement

• Color / Fashion / Trend
• Brand Position
• Assortment Flow / Adjacencies
• Signage / Messages
• Shopping Experience

Product
Price
Merchandising Strategy
Promotion
Placement
21
Color, Fashion Trend
22
Improved Color, Fashion Trend
23
Brand Position Assortment Flow
24
Improved Brand Position Assortment Flow
25
Signage Messages
26
Improved Signage Messages
27
Shopping Experience
28
Promotion

• Promotional Plan
• Print Advertising
• Direct Mail / Email
• Multi-Channel Promotions
• Loyalty / Sponsorship

Product
Price
Merchandising Strategy
Placement
Promotion
29
Promotional Plan
Q1
Q4
Q3
Q2
30
Print Advertising
31
Direct Mail Email
32
Multi-Channel Promotions
33
Loyalty - Worklife Rewards
34
Sponsorship - NASCAR

• Official office products partner of NASCAR
• More Fortune 500 companies than any other sport
• 1 sport in terms of brand loyalty
• 1 spectator sport
• Relevant to our target customer

Source NASCAR
35
Merchandising Strategy Tactics
Price
Product
Merchandising Strategy
Promotion
Placement
36
Summary

• Retail has become a challenging environment and
  consumers are harder to predict, satisfy and
  reach
• A merchandising strategy is critical because it
  determines how a company will compete in the
  marketplace and build customer loyalty
• Category management principles are foundational
  to building a merchandising strategy and
  improving revenue and operating margins
• The 4Ps, product, price, placement and promotion,
  are critical tactics for an effective
  customer-centric merchandising strategy