StrategiesTraffic buildingConsumer drawn to store/categoryHi share, lo margin, frequent purch.Trial and Entry/Turf ProtectorConsumer enters store for initial shopping exp.Freq. purchased, intensely preferred, featured by target competitor (maintain mkt. share)Transaction buildingConsumer spends more in the category or market basketLarger transaction size

StrategiesExcitement creationSense of theater/urgency/opportunityNew products, seasonal, rapidly growing Cash generatingConsumer shifts purchases to more profitable productsHi margins, hi loyalty, hi ring, not price sensitiveImage creatorCategory builds consumers image of storeReinforce store theme or topical subject

Pasta Category

Case Study - Toothpaste

Tactics Traffic buildingAggressive pricing on loyalty products/low marginsMedia on frequently purchased itemsProminent space

In Class #4 list namesSelect product categoryCarbonated beveragesIce creamCerealSalad dressingBeerSalty snacksDevelop strategy for category products

___________ Category

Space Management OverviewExceeding customer expectations through merchandising excellence

Training ObjectivesUnderstand why Space Management is importantIdentify the key responsibilities of Space ManagementDescribe the primary tools used by Space ManagementExplain the goals of Space ManagementAt the end of this session you should be able to:

So, exactly what Space are we talking about?

Space is the medium that we use to:Display and promote our productsRacks and ShelvesGondolas and Endcaps

Space is the medium that we use to:Communicate the brandInteractive DisplaysCreative Signage

The Best Buy Experience

A multitude of inputsMany departments have input on how the store should look & shopStrategic MarketingBrand management

BuyingBuys product

InventoryManages inventory stock levels

Store PlanningImplementation of prototype standardsCommunicationInternal communication, public and community relations

Visual MerchandisingDevelops fixtures, graphics, interactivesRetail OperationEfficient processes and programs for the companySpace PlanningSpace allocation and evaluation

So, who develops and communicates the merchandise plan for this valuable space?

Space ManagementMissionTo provide product placement that compels our customers to purchase complete solutions.

Space Management GoalsEnhance the Best Buy brand by improving our customers shopping experience.Provide Retail with easy-to-execute Maps and PlanogramsAnalyze category and item effectiveness to determine the optimal use of spaceProvide customized maps and planograms to support market specific assortments

Key Responsibilities Where do the categories go? Where do the products go?

Key Responsibilities What is the best use of the space? Hmm Not a lot of free space here!

Space ManagementOrganizational StructureDirector of Space Management - Heather Elliott-KirschMerchandise Layout TeamPlanogram TeamSpace Planning TeamSR. VP John Thompson

Merchandise LayoutEach small block is an individual sectionStore maps are created using AutoCAD

Educated LayoutFinancial ObjectivesRevenues, Turns, Margins, etc.Operational ObjectivesAisle Width, # of Registers, LP Desks, Stock Capacity, etc.Aesthetic ObjectivesBest Buy Branding, Clear Sight Lines, Fun Interactives, etc.Each and every store needs to be designed with the following criteria in mind:

What is a Planogram?Planograms are created using Intercept

How to read a PlanogramDisplaysBoxstockProduct ListingFixture PlacementSignage

New Planogram?When section performance is downNew products are added to assortmentMajor trends indicate changesCompetition demands Seasonal space needsOther categories need spaceModification of store plans/fixtures

Space PlanningSquare Foot Analysis (Store, Dept, Class, Subclass)Store Capacity and Cubic Space Store Overstock and Closeout AnalysisAdjacency RecommendationsMarginal Return on Space AnalysisAd Hoc Retail Space Related InvestigationsMission: Providing Best Buy with Space Allocation and Evaluation Recommendations which Enable the most Effective use of Retail Space.

Benefits to StoresBalance inventoryReduce costly out of stocksEliminate wasteful overstocksCut instore inventory costsIncrease inventory turnoverInfluence shopping behaviorMatch mix with demandPosition products by retailer goals

Benefits to StoresImprove customer serviceOrganize for shopping easeBeing instock fosters loyaltyIncrease store efficienciesEnsure optimum case packsCut backroom overstockSpeed reset times planogramsProper placement for new items/performance

Space PlanningAll the Right stuffSpace AllocationPositioningAdjacency & AttachmentThe Right PlaceThe Right NeighborsThe Right Space

PositioningThe Right Place

AdjacencyThe Right Neighbors

Opportunity Report

Welcome to Space Management overview!

Erin Gladstone - Planogram Analyst - Audio

Audio Dept - # people that work on 444 stores

Work as far as 12 weeks out. Did you know that Space is one of your categories single largest expenses? Are you using it wisely?

What is it that we do?

What is the Mission of the team? What are they trying to accomplish?

So, lets start out with a simple questionWhat space are we talking about here?

Ask class for answers. Get students thinking about what space might consist of and why Best Buy would manage it.

After discussing space briefly, go to next slide.

Need 1 clear voice / vision

One of the things that Space is used for is to display and promote our products. Here are some examples of that

Gondolas are also called sections. The Low Bay versions are typically 4-feet long and 5- or 6-feet tall.The High Bay versions are typically 8 feet tall.

Racks and Shelves are the pieces within the Gondola that physically hold the products.

The other way we use Space is as a medium that we use to communicate our brand to our customers. Here are some examples of that

Interactive Floor Displays are a way for our customers to touch and feel the products before buying them. It creates an atmosphere of fun and exploration within our stores.

Signage is the eye-catcher that can both inform and inspire our customers.

Space is a critical component to the sales process, as it defines the customers touch point with the store and the product. Its essentially where the buying decision is made!

So together, all of these space components create the Best Buy shopping experience and have a direct impact on our sales volume

Makes customer feel at home and comfortable.And, since space is critical to our ability to generate sales, many departments provide input on how to best use this space.

These departments each have their own ideas about how the stores should use this space. Strategic Marketing is concerned about branding and store image, Buyers are concerned about product placement, Inventory is concerned with stock levels and turnover, Visual Merchandising is concerned about consistency in promotions and displays. Store Planning works with Architects to enforce the implementation of the latest prototype design standards(new store layouts). Retail Operations supports our customers and partners with quality and innovative processes and programs for the company, such as Asset Recovery, consumer relations and Gatekeeping(communication between stores and the Corporate office). Space Planning provides Best Buy with space allocation and evaluation recommendations. Finally, Communications strengthens, promotes, and protects our Best Buy reputation and brand image with internal communications, public, community and investor relations. We really need a means to control our space so that it is used in a consistent manner across 400+ stores.

So, who is going to provide the structure and support for this valuable space; incorporate input from corporate departments and communicate space directives to every store location??

Space Management is the answer!

The mission of this department is READ MISSION STATEMENT

They do this by translating Merchant vision into customer and store reality.

So, what does this mean.lets look at a few of their key responsibilities..

.

Space managements responsibilities involve answering three key questions.1. Where do the products go?In other words, product placement. After the buyers determine which items to carry and the inventory analysts figure the correct quantitywe need to figure out where to place the items in the store. This is an enormous task, given that a typical store has around 50,000 SKUs and most of this stock is reset at least three times per year!

2. How should the products appear?In other words, product presentation. Once we have allocated a space for a product, we need to determine the best way to present the item. Should we use gondolas, peg hooks, racks, shelving, etc??

And finally, the third key question.

How do we best use the space available?

This is really the key overriding question that Space Management tries to answer. It gets to core issues like:Is there a better way to present this product to induce more sales?Could this product be placed in a better location, or adjacent to a different category?Have we allocated enough space to fill demand and turnover, but not too much space so that it constrains our ability to support other products?Have we considered the strategic intent of the product when making space decisions.Would Retail Ops object to the space decisions we make?

Lets look now at the Space Management group

Space Management focuses on the proper allocation of space for each SKU in each store. This group has about 43 employees.The layout analyst answers the question where should the Categories go by using a store floor map. This map is a 2-dimensional top-down representation of a specific store location. The layout analyst is responsible for creating and maintaining these maps using AutoCad software.

Each small block on the map is called a section. A section is a parcel of space that is almost always 4ft in width.

Lets now go to planogramming to fill these sections...

Hard Copy and Intranet provide Fixture, Product, and Signage placement direction to Retail.Intercept software provides assortment analytics to aid Merchants and Inventory in assortment planning process.The planogram analyst answers the question how should the products appear by developing a planogram.

A planogram is a 3D graphical representation showing how products and fixtures are to be displayed in all of the stores (in otherwords, these are typically not store specific).

It provides a detailed look at how each individual section should be arranged, right down to the peghook locations and distance between product facings; left, right, up, and down.(note the far left graphic - it shows the shelving depth and space between shelves).Planogrammers use a software tool called InterCept to create planograms.This one happens to be a 2-section planogram for Audio Tape.

Figuring out how to use space efficiently isnt an easy task. Lets do an exercise to demonstrate

Estimation:For a certain time period, we estimate the relationships between the amounts of space allocated to classes (or subclasses) and the resulting levels of POS gross margin, controlling for the effect of covariates (e.g., demographic variables).Optimization:Given the estimated relationships, we find the space allocation that maximizes total margin. Each class is considered free to vary from its current allocation within the lower and upper bounds that are set prior to the optimization. This particular space allocation is our recommendation. The value of the recommendation is fully dependent on the quality of the estimation. This recommendation includes no change in allocated space for those classes where no clear space-to-margin relationship can be discerned.

Estimation:For a certain time period, we estimate the relationships between the amounts of space allocated to classes (or subclasses) and the resulting levels of POS gross margin, controlling for the effect of covariates (e.g., demographic variables).Optimization:Given the estimated relationships, we find the space allocation that maximizes total margin. Each class is considered free to vary from its current allocation within the lower and upper bounds that are set prior to the optimization. This particular space allocation is our recommendation. The value of the recommendation is fully dependent on the quality of the estimation. This recommendation includes no change in allocated space for those classes where no clear space-to-margin relationship can be discerned.

Estimation:For a certain time period, we estimate the relationships between the amounts of space allocated to classes (or subclasses) and the resulting levels of POS gross margin, controlling for the effect of covariates (e.g., demographic variables).Optimization:Given the estimated relationships, we find the space allocation that maximizes total margin. Each class is considered free to vary from its current allocation within the lower and upper bounds that are set prior to the optimization. This particular space allocation is our recommendation. The value of the recommendation is fully dependent on the quality of the estimation. This recommendation includes no change in allocated space for those classes where no clear space-to-margin relationship can be discerned.

Estimation:For a certain time period, we estimate the relationships between the amounts of space allocated to classes (or subclasses) and the resulting levels of POS gross margin, controlling for the effect of covariates (e.g., demographic variables).Optimization:Given the estimated relationships, we find the space allocation that maximizes total margin. Each class is considered free to vary from its current allocation within the lower and upper bounds that are set prior to the optimization. This particular space allocation is our recommendation. The value of the recommendation is fully dependent on the quality of the estimation. This recommendation includes no change in allocated space for those classes where no clear space-to-margin relationship can be discerned.