ECR Asia Pacific Pulmuone & Lotte Mart Effectiveness of Store Clustering

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ECR Asia Pacific Pulmuone & Lotte Mart Effectiveness of Store Clustering

  1. 1. Effectiveness of store clustering by consumer life style Jointly Presented by August 2008
  2. 2. Company Profile Project Partner LOTTE GROUP LOTTE Mart Global Biz Plan by 2018 ㆍThe Affiliate Companies : 44 Companies VRICs ㆍLOTTE Group’s Total Sales in 2007 : USD 35 Billion • China 200 stores Russia China • Russia 30 stores LOTTE Shopping co., LTD • India 50 stores ㆍ89th rank retailer in the world (2006) by NRF survey • Vietnam 25 stores India Vietnam ㆍ1st rank retailer in Korea (2007) : USD 11 Billion Major Types Hypermarket Department Store Supermarket Sales (2007) USD 3.8 billion USD 5.2 billion USD 0.8 billion Miscellaneous • 3rd Largest in Korea • 1st Largest in Korea • 2nd Largest in Korea • 57Stores • 21Stores • 79Stores 2
  3. 3. Company Profile Project Partner Natural Fresh Foods Company Business Strategy Core Business B to B • Market leader(M/S No.1) in Tofu, Sprout, Refrigerated Noodle in Korea Foodmerce • Created synergy through core competence in sourcing, manufacturing & logistics • Net revenue is USD 0.8 billion in 2007 Lead Pulmuone’s globalization • Developed US market since 1991 • Acquired Wildwood which is American style B to C Pulmuone Wildwood Tofu manufacturing company in 2004 • Planning to enter into Chinese market Domestic Global 3
  4. 4. Refrigerated Noodle Category Definition [ Market Trend ] The main ingredients, grain and starch, takes over USD 150 million won in the market place and grows over 10% yearly 200 are shaped and processed, than 200 180 combined with sauce (meat brew) and 159 garnish, kept and shipped by the Cold 100 Chain system and arranged in a 100 refrigerator 7 0 '05 '06 '07 '08 '09 stored in a cold storage below 10℃, ℃ period of circulation within 45 days Fresh Cold Noodle With Fresh Cold Noodle With Premium Dongchimi Broth Spicy Seasoning Broth 4
  5. 5. Contents 1. Project Overview – Background & Objective – Methodology – Schedule 2. Achievements – Store Clustering – Assortment & Arrangement – Promotion 3. Key Benefits 4. Next Step 5
  6. 6. Project Overview Voice of Consumer Stores don’t satisfy each consumer’s needs Problem is… Category management is based on only sales rate, not by consumer’s changing life style 6
  7. 7. Project Overview Background & Objective Differentiated stores should be able to satisfy consumers Background Objective Consumers have not been able to What is the 1 Assortment find the products needed, ending regional up buying a different product or characteristics shopping at a different store of the All store arrangements have consumers? been assorted by sales criteria, not consumer’s needs. What is the right 2 Retailers and manufacturers end up products for the with a lot of ‘out of stock’ and too consumers' much stock. characteristic? What is the right Consumer’s didn’t respond to the 3 promotion for Promotion the consumers' promotion, and when not intention characteristic? Under a very competitive purchase, didn’t purchase again circumstance, promotions have been focused on sales rate, not consumers • Store clustering by consumer’s For retailer the promotion was characteristic characteristic useless and for manufacturers there were excessive products • Differentiate products and promotion by cluster 7
  8. 8. Project Overview Project Effect Eventually consumer’s satisfaction leads to increasing efficiency Purchase the product needed. Store and brand Consumer satisfaction Re-visit and re- purchase rate increase Create Shopping Value Sales increase by less Sales increase by less out of stock products out of stock products Expense reduce by Expense reduce by stock reduce Retailer Supplier stock reduce Consumer’s Brand loyalty increase satisfaction and loyalty increase by store clustering. 8
  9. 9. Project Overview Methodology What we have done…. Hypothesis Implementation Evaluation Shoppers’ Differentiated Store Clustering Evaluation Next Step Behavior Research Implementation • Plan for store Research on Execute roll-out customers’ Differentiated Research & analyze • 2nd Decade purchase Assortment surrounding environment Project Plan decision tree & of stores Arrangement Project Define Organi Differentiated Project Evaluation zation Criteria Research on consumers’ Execute Analysis on consumers’ Differentiated purchase pattern characteristics Promotion when facing stock-outs • Plan for store • Shoppers’ purchase • Cluster Result Summary • Differentiation Result • Executive Summary roll-out pattern analysis report • Cluster Mapping Report • Next Project • New Principle Plan 9
  10. 10. Project Overview Schedule 10-month pilot test and 3-month roll-out to other stores Schedule Tasks ‘07 ‘08 11 12 1 2 3 4 5 6 7 8 9 10 11 Research on consumers’ purchase pattern Shoppers’ when facing stock-outs Behavior Research Research& Analyze purchase decision tree Research & Analyze Store Environment Store Clustering Store Consumer Analysis Define differentiated Criteria on Assortment &Arrangement, Promotion Implementation Apply and evaluate differentiation on Assortment& Arrangement, Promotion Evaluate cluster characteristic Evaluation Store expansion Measure Test effect plan Next Step Planning of expansion 10
  11. 11. Contents 1. Project Overview – Background & Objective – Methodology – Schedule 2. Achievements – Store Clustering – Assortment & Arrangement – Promotion 3. Key Benefits 4. Next Step 11
  12. 12. Achievements Key Message Consumers’ satisfaction recipe through collaboration Consumer’s Satisfaction Recipe Store Managing Recipe Promotion Source Reduce Stock Holding Days Consumers’ Tastes Reduce Assortment Source Out-of-Stock Product Development Consumers’ Satisfaction service level Improved Refrigerated Noodle 12
  13. 13. Achievements Shoppers’ Decision Tree Shoppers’ Store Clustering Differentiated Implementation Behavior Research Consumers belong to 3 different groups in terms Research on customers’ purchase decision tree Research on consumers’ purchase pattern when facing stock-outs Research & analyze surrounding environment of stores Analysis on consumers’ characteristics Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated Promotion of decision buying tree Shoppers’ purchase pattern analysis report Cluster Result Summary Cluster Mapping Differentiation Result report Decision Tree 1st 2nd 3rd 4th research result A Group Brand Price 44% Cooking Family 30% 24% 18% 14% B Group Cooking Family 48% Price Brand 40% 22% 20% 10% C Group Family Price 46% Cooking Brand 30% 23% 21% 10% * Research Period : ‘07 Nov ~ Dec * N=5,300, Lotte Mart 53 stores, for consumers having purchased refrigerated noodles 13
  14. 14. Achievements Shoppers’ Reaction to Stock-out (1/2) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Stock-outs leads consumers’ to choose Research on customers’ purchase decision tree Research on consumers’ Research & analyze surrounding environment of stores Define Differentiated Criteria Execute Differentiated Assortment different brands or not to purchase at all Execute Differentiated purchase pattern when facing Analysis on consumers’ characteristics Promotion stock-outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping 9 Consumers’ purchase pattern 22 21 when refrigerated noodles are out-of-stock 37.2 25 8 Manufacturer Retailer 18 15 10 Buy different products Delay purchase 25 39.7% 37.2% 12 28.2 19 20 Do not purchase Substitute 20.4% 20.4 43 Same brand 11.5% 32 21 11.5 + Substitute Buy at another store 2.6 Cosm etic Sham poo Snack Refrigerated Different brand 28.2% 2.6% Delay purchase Noodle Substitute Different brands In case of refrigerated noodles, when out of stock, Do not purchase Substitute same brands the rate of not buying the product and changing Buy at another store brands are higher than other products. * Research Period : ‘08 Jan ~ Feb 14 * N=1,000, consumers intending to purchase refrigerated noodles at Lotte Mart
  15. 15. Achievements Shoppers’ Reaction to Stock-out (2/2) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria Research on consumers’ Invisible out-of-stock should be managed Execute Differentiated purchase pattern when facing Analysis on consumers’ characteristics Promotion stock-outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Supply Chain Management Course of out-of-stock Vendor Manageable Stock-outs Unmanageable stock-outs management Disuse Inventory KPI management • Non-entered • Disuse • A large amount of sales • Non-arranged Loss loss • Non-assorted products Production Planned Error • far to seek A large Demanding amount of Forecasting Error sales Non-arranged Non-assorted products Non-Delivery far to seek 15
  16. 16. Achievements Key Finding Shoppers’ Store Clustering Differentiated Implementation Behavior Research Store differentiation strategy increases level of Research on customers’ purchase decision tree Research on consumers’ purchase pattern when facing stock- outs Research & analyze surrounding environment of stores Analysis on consumers’ characteristics Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated Promotion consumer satisfaction Shoppers’ purchase pattern analysis report Cluster Result Summary Cluster Mapping Differentiation Result report “Consumer’s purchase pattern is effected by their life style” “Product assortment according to consumer’s life style can minimize the rate of out of stock.” “The consumer is satisfied when stores are clustered and managed by consumer’s life style.” 16
  17. 17. Achievements Voice of Consumer Shoppers’ Store Clustering Differentiated Implementation Behavior Research Consumers purchase products based on Research on customers’ purchase decision tree Research on consumers’ purchase Research & analyze surrounding environment of stores Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated their life styles pattern when facing stock- Analysis on consumers’ characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Is it easy and convenient? By myself? With my family? HOW ‘ how will I eat ?’ WHO ‘ who will I eat WHEN with?’ ‘when will I eat?’ How Much Weekday? Weekend? ‘ expensive? Cheap?’ buy promoted product? WHAT buy according to brand? ‘What will I eat?’ 17
  18. 18. Achievements Refrigerated Noodle Market Trend Shoppers’ Store Clustering Differentiated Implementation Behavior Research Ready-to-cook product sales have been Research on customers’ purchase decision tree Research on consumers’ purchase pattern when facing stock- Research & analyze surrounding environment of stores Analysis on consumers’ characteristics Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated increasing Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping 76 Pre-prepared food 74 72 Crossing Over 70 Ready-to-Cook 68 66 64 62 Pre-prepared food Ready-to-cook <TNS Purchase Pattern Research> 60 2005/04/24 2005/07/17 2005/10/09 2006/01/01 2006/03/26 2006/06/18 2006/09/10 2006/12/03 2007/02/25 • Pre-prepared food: Noodles and sauce are packed together. Easy to cook without additional ingredients. • Ready-to-Cook : Noodles and sauce are separated Mix-n- match by personal taste or purchase them individually • TNS Research : Consumer purchase pattern data, POS data analyze specialist company 18
  19. 19. Achievements New Category Segmentation Shoppers’ Store Clustering Differentiated Implementation Behavior Research Refrigerated noodles can be categorized by the Research on customers’ purchase decision tree Research on consumers’ purchase Research & analyze surrounding environment of stores Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated type of convenience pattern when facing stock- Analysis on consumers’ characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Refrigerated Noodle Convenience Ready-to-cook Pre-prepared food Subcategory Spaghetti Udon Oriental noodle Spaghetti Udon Udon noodles noodles sauce Size 1 2 3 4 1 2 3 4 1 4 6 1 4 6 Noodles and sauce are packed together. Noodles and sauce are separated. Mix-n- match by Easy to cook without additional ingredients. personal taste or purchase them individually 19
  20. 20. Achievements Store Clustering (1/3) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Surrounding environment of stores have an Research on customers’ purchase decision tree Research on consumers’ purchase pattern when facing stock- Research & analyze surrounding environment of stores Analysis on consumers’ characteristics Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated influence on consumers’ purchasing type Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Store location Sales rate by product convenience Apartment complex district (over 50%) Ready-to-cook Pre-prepared food 58% 42% Office, shopping district (over 50%) Ready-to-cook Pre-prepared 51% food 49% Private home district (over 50%) Ready-to-cook Pre-prepared 41% food 59% * Lotte-Mart Location Analysis (08’ Jan ~ Mar) 20
  21. 21. Achievements Store Clustering (2/3) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Consumers’ occupations have an influence on Research on customers’ purchase decision tree Research on consumers’ purchase pattern when facing stock- Research & analyze surrounding environment of stores Analysis on consumers’ characteristics Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated their purchasing type Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Consumer’s occupation Sales rate by product convenience Office worker Ready-to-cook Pre-prepared food 42% 58% Self-employed Ready-to-cook Pre-prepared 51% food 49% House-wife Ready-to-cook Pre-prepared 41% food 59% * Lotte-Mart members card customer’s information Analysis (08’ Jan ~ Feb) 21
  22. 22. Achievements Store Clustering (3/3) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Family size of consumers have an influence on Research on customers’ purchase decision tree Research on consumers’ purchase pattern when facing stock- Research & analyze surrounding environment of stores Analysis on consumers’ Define Differentiated Criteria Execute Differentiated Assortment Execute Differentiated their purchasing type characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Consumer’s family size Sales rate by product size Single 1 portion 67% Small 20% 17% Small Family 21% 2~3 Portions 58% Medium 29% Large Family 12% 4-5 Portions 22% 54% Large * Lotte-Mart members card customer’s information analysis (08’ Jan ~ Feb) 22
  23. 23. Achievements Store Clustering Summary Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria 3 Clusters of consumers’ life style Research on consumers’ purchase Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Definition of Characteristic of Characteristic of Purchase pattern Consumer’s life style Major Consumer • Progressive person who refuses traditional values • Single men, women • Westernized and trendy and newly-weds in High rate of purchasing convenient noodles Cluster A • Not interested in realistic their 20’s and 1 portion meals problems • Mostly apartment • Interested in leisure and residents dilettante life • Very Traditional • Consumers in their • A family oriented person 30’s~40’s High rate of purchasing 4 portion meals and Cluster B Interested in health, children, • Big families discounted products relationship • Mostly house • Waits for sale seasons residents • Technology oriented but not leading, rather following and • Married women in family oriented their 20’s~30’s High rate of purchasing inconvenient noodle Cluster C • Interested in shopping • Apartment, house and big portion meals • Interested in income and residents savings * Lotte-Mart members card customer’s information analysis (08’ Jan ~ Feb) 23
  24. 24. Achievements Store Mapping Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria 3 Types of clustered stores Research on consumers’ purchase Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Cluster B Cluster A Office Cluster A 20 Stores Cluster C Cluster B 24 Stores Apartment Environment Cluster C 13 Stores Factory 24
  25. 25. Achievements Quick-win Implementation Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria We have focused on … Research on consumers’ purchase Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping - Category Management Process - 1. Category Definition Arrangement 2. Category Role 2008’s Assortment Project 3. Category Assessment 8. Category Review Promotion Product Development 4. Category Scorecard Space 5.Category Strategies Store Lay out Communication 6. Category Tactics Merchandising 7. Implementation Store Development Program 25
  26. 26. Achievements Differentiated Criteria Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiate Research on consumers’ purchase d Criteria Differentiation by convenience level of cooking Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping To- Be Arrangement Assortment Ready-to-cook Pre-prepared + Ready-to- Pre-prepared - Cluster A 60% food 40% cook food As- Is All stores Ready-to- Pre-prepared Ready-to- Pre-prepared Only one Cluster B cook 50% food 50% cook food Plan-O-gram Ready-to- Pre-prepared - Ready-to- + Pre-prepared Cluster C cook 40% food 60% cook food 26
  27. 27. Achievements Assortment Implementation (1/4) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria Cluster A Group Research on consumers’ purchase Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Before After Out-of-stock Out-of-stock Out-of-stock Out-of -stock Out-of-stock Out-of-stock Out-of-stock All stores only one Plan-O-gram Cluster A Group Plan- O-gram Cool Oriental Spicy Cool Oriental Cool Spicy Pre-prepared food Pre-prepared food Ready-to-cook Ready-to-cook 60% 40% * Lotte-Mart Suji store 27
  28. 28. Achievements Assortment Implementation (2/4) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria Cluster B Group Research on consumers’ purchase Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Before After Out-of-stock Out-of-stock Out-of-stock Out-of-stock Out-of-stock Out-of-stock Out-of-stock All stores only one Plan-O-gram Cluster B Group Plan- O-gram Cool Oriental Spicy Cool Oriental Cool Spicy Pre-prepared food Pre-prepared food Ready-to-cook Ready-to-cook 50% 50% * Lotte-Mart Bupyeong store 28
  29. 29. Achievements Assortment Implementation (3/4) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria Cluster C Group Research on consumers’ purchase Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Before After Out-of-stock Out-of-stock Out- of-stock Out-of-stock Out-of-stock All stores only one Plan-O-gram Cluster C Group Plan- O-gram Cool Oriental Spicy Oriental Spicy Cool Cool Pre-prepared food Pre-prepared food Ready-to-cook Ready-to-cook 40% 60% * Lotte-Mart Geumcheon store 29
  30. 30. Achievements Assortment Implementation (4/4) Shoppers’ Store Clustering Differentiated Implementation Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria Differentiated assortment has a positive effect Research on consumers’ purchase Analysis on consumers’ Execute Differentiated pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Key Performance Indicator SHD OOS Sales Stock Holding Days Out of stock + 25% - 25% - 28% Cluster A - + - + - + + 20% - 18% - 29% Cluster B - + - + - + + 35% - 12% - 31% Cluster C - + - + - + *POS data by Cluster, compared to previous year 30
  31. 31. Achievements Voice of Consumer Preferred types of promotion differ by consumers’ life style Free 20% Household Buy 1 Get Discount item 1 Free~ 31
  32. 32. Achievements Differentiated Criteria Shoppers’ Store Clustering Differentiated Implementation DC coupon Behavior Research Research on customers’ purchase Research & analyze Execute Differentiated decision tree surrounding environment of stores Assortment Define Differentiated Criteria Research on consumers’ purchase Execute Differentiated Analysis on consumers’ Differentiated promotions make different results? pattern when facing stock- characteristics Promotion outs Shoppers’ purchase Cluster Result Summary Differentiation Result report pattern analysis report Cluster Mapping Additional Main Product same product Cluster A ? Additional alternative product + = Cluster B ? Additional household item 20% Discount Cluster C ? * Implementation Period (08’ Jun ~ Jul) 32

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