It’s time to send your paper planograms packing!

In this episode, One Door CEO Tom Erskine and retail consultant and author Andrew Smith give us the skinny on the history of store merchandising, planograms, and why retailers need to modernize their visual merchandising strategies to create better brand experiences.

Episode 153 of the RETHINK Retail Podcast was recorded on June 30, 2021

TRANSCRIPTION

Julia Raymond Hare:
Hi everyone. We’re here today with Tom Erskine, the CEO of One Door and Andrew Smith, a retail consultant, innovative thinker and author. We’re going to take you back a little bit to the 1970s talking about retail. That’s right, zoom back. Tom, I want you to kick it off. Tell me a little bit about what it was like many years ago as a retail merchandiser in the ’70s.

Tom Erskine:
Yeah. So we’re definitely honoring the ’70s. The retail in the ’70s, you were what? You were a high school student. You were working at Kmart for your summer job. You got in your parents’ Buick Skylark and you put on the AM radio and you headed into the store. In 1971, there was this really cool innovation at Kmart called a planogram. And the planogram was this far out, out of sight thing that Kmart used to figure out where to put products optimally in the stores. And so as a store associate, you would get a paper print out of a planogram or a paper diagram. I guess they really didn’t even have print outs back then, right? Did they have Xerox machines in 1971? I don’t know. Maybe you got a Xerox copy of it. And you went around the store and you set the shelves for your summer job using this diagram.

Tom Erskine:
It was the first time, 1971, Kmart invented the technology of the paper planogram. They were the first ones to figure out that if you optimally placed products in a particular place, in a store, you could sell more. And so they used this way of communicating to their associates. And it was far out, man. It was so different from what everybody else was doing. Yeah. And then you drove home, in your Buick Skylark and I guess went to the Dairy Queen on your way home and got something, but that was your job. That was your summer job.

Julia Raymond Hare:
That was the summer job. And you know the phrase, they say, “Oh, this person peaked in high school or peaked in college.” I think Kmart as an entity, it went from innovating this paper planogram, being the top of the retail food chain, and I think we can all pretty much agree that it peaked back then and no longer continued to blow us away. I think the big connection here that we’re making with One Door is that it’s still happening. People are still back in the ’70s almost, using paper planograms today, which is totally ancient. Can I hear your take on that, Andrew? Are you still seeing this or have you seen this with the retailers you’ve worked with?

Andrew Smith:
Absolutely. Tom was painting the picture and I think the Buick Skylark, that was probably the only thing in that story that doesn’t exist anymore. The Dairy Queen is still here and the paper planogram is certainly still out in circulation. It might not have been faxed. It might have been faxed, I think, instead of Xeroxed, Tom.

Tom Erskine:
Yeah. I thought maybe the fax, the teletype, maybe they-

Andrew Smith:
Wow. There’s like hand-mailed, hand-drawn, who knows? But yeah, so many retailers haven’t innovated in this space. There is a heap to retail. There are so many parts of the process of retail, running a good retail business. Visual merchandising is one really, really big part of that. For whatever reason, it’s kind of been left in the dark ages when it comes to how we do it and how we run it. The teams themselves have gone through ebbs and troughs of being the front of a retail business to then kind of being a operational arm that’s been left to being pulled left, right, and center from all the different parts of the business.

Andrew Smith:
Now as we see that the current trend of retail and what the importance of stores is, and the increased importance of stores, especially when it comes to merchandising, retailing is merchandising at the end of the day. Yet we’re still holding these teams back with these ancient tools. It’s a really scary area that people don’t… It’s not that we’re choosing not to, we’re just cognitively not aware that we should be, or that there are new ways to do it. So, yeah, it’s always exciting when I get to see someone get introduced to something like what One Door and the team do, because they kind of sit there and go, “Man, that’s brilliant. That’s much better than those 47 page PDFs.

Tom Erskine:
Yeah.

Julia Raymond Hare:
47 pages, that blows my mind. Especially because of the last year, it’s the elephant in the room, we still have to talk about all of the change that was enacted by the COVID-19 pandemic, tons of innovation, things rolling out in six weeks that should have probably taken a year or more. Tom, how great of an impact would you say that things like BOPUS and curbside and all of these new delivery models have made on merchandising?

Tom Erskine:
Yeah. Sure, merchandising’s changed a lot. The store has all of a sudden gone from this… Well, the store is a showroom to now the store is a showroom, but it’s also a fulfillment center, and it’s also a place where we might be aggregating items for delivery. It’s remarkable the impact that that has on store teams and their merchandising strategies. Because all of a sudden you imagine you’re designing stores, you’re no longer just designing them for the customer. Now you’re designing them for either the employee trying to fulfill orders or you might also even in grocery, for example, you’re almost… Now you’re designing a store for this new professional shopper, which is this Instacart gig worker that’s trying to figure out the fastest way to fulfill a grocery order. So it totally changes your merchandising strategy.

Tom Erskine:
And not to mention the fact that you’re just dealing with COVID itself. You might not even know what stores are going to be open this week, what store is going to be open next week. So you have to start localizing in a way you never did before. It’s really different, really difficult. And as you said, the thing we see is basically it’s like jammed three years of transformation into like six months. Got to happen now. Can’t wait, got to happen now, just do it, which is good in some ways for retail. Some retailers need the catalyst for transformation.

Julia Raymond Hare:
Yep. In a lot of ways, I think it is good for consumers. And as people plan to head back to stores in the US but also across Europe and the globe, Andrew, you talk a lot about the importance of the brand storytelling, how that’s been lost over the past few years, in some cases, even though there’s been so much discussion of the importance of it. Can you talk a little bit to that and any retailers that have surprised you recently or done a great job?

Andrew Smith:
Yeah. I think the thing that I’ve enjoyed the most is this re-emergence of what a store can actually be. So Tom kind of highlighted a bunch of the reasons why stores are facing this existential crisis and every brand has a very different version of it. So, that existential crisis for a grocer is going to be different to that of an apparel merchandiser or a footwear merchandiser. So, every brand is kind of going through their own version of that same existential crisis, but at the absolute core of it is that the store has a new role to play and consumers are shopping differently obviously. I’m not one to usually clump consumers into one big bucket, but for the sake of this conversation, it’s like, we all want to shop differently. We’ve all learned new skills in the last year. We’ve all experienced different brands that we would have in the last year. So there is going to be this kind of energy and excitement that comes into retail from consumers when the re-emergence happens, depending on your market. And every brand is going to have to go through whatever their existential crisis is from a store’s point of view.

Andrew Smith:
Brand storytelling is the thing that you highlighted there, which is becoming just so incredibly important. And the reason for that is consumers calculation of value is changing. So consumers used to be basically convenience, price, product, proximity, all of those things that we found in our retail textbooks when we all started out in Kmart in the ’70s. But now that has evolved. The Internet’s predominantly solved for convenience and mission shopping in ways that it’s allowing stores the opportunity to stand for something different. So stores, if we think of them as the new billboard, the new way to acquire customers, and we see the proof point, not just in traditional retailers who have evolved and have done a great job of evolving, but also new brands, new direct to consumer brands who have grown up on the internet, who have grown up with fast paced innovation, AB testing, all of this kind of stuff, who are now hit that ceiling, that growth ceiling, that online eventually everyone hits.

Andrew Smith:
Fueling that growth ceiling that online eventually everyone hits and have started opening up stores, have started opening up physicals estates. And they do it in a very different way to the way an incumbent retailer traditionally thought about it, which is transactional.

Andrew Smith:
How do I execute? The native language of retailers is execution. I have a job. Let me come up with the most pristine way to execute that. We maintain margin. Retailers are brilliant at it, the best in probably any industry. But when it comes to innovation and this rapid experimentation and design element, it’s not our first language. So we’ve got two missions coming out of the COVID-19 pandemic. The first one is industrializing all the stuff we built because it’s held together with sticky tape and string, most likely. So making it real and making it more solid. But also changing our business model to be more of this brand storyteller. How do we articulate and connect with consumers whose calculation has shifted to things like, “Do I care about sustainability? Do I care about social values? I care about local and community?” There’s all of these new elements that are forming in the consumer calculation of value that retailers have to be able to respond to.

Julia Raymond Hare:
So Andrew, you spoke a little bit about the need for industrialization to not move away from execution, but blend the two, execution mixed with innovation to really get the results that we’re looking for. And Tom, I want to pass it back to you to dig a little bit more into One Door as a platform. You guys work with some of the world’s biggest brands, like Best Buy, who just blew everyone away over the past year with the things they were able to roll out for consumers. What about visual merchandising? How do you balance the art part of it and the science part? Because it seems like you have to blend the two and it’s really difficult.

Tom Erskine:
Yeah. It is. And so we talked about the ’70s thing, but I guess we never really hit the punchline of our ’70s joke, which is that until our platform came along, until Merchandising Cloud from One Door came along, there really hasn’t been any innovation in how merchandise plans get communicated in literally 50 years. So we’re sort of saying, “Hey, it’s time to retire this old paper planogram and take a more digital approach.” Because as you mentioned, art and science, the art of visual merchandising is phenomenal, but when you’ve got 1,000 stores, the operational execution and actually making that happen across 1,000 stores in a really consistent way where the experience is consistent from store to store and you can localize and you can do all these things, that takes technology.

Tom Erskine:
So what we’re seeing and what Best Buy’s as usual leading the charge on is digitizing this part of the process that has just been hopelessly analog for the last 50 years and sort of seeing the fruits of the ability to move more quickly, experiment in ways you couldn’t experiment before, localized in ways you can localize before, because all of a sudden, you have a digital platform where everybody can be on the same page and all the data’s in the cloud, and it’s all accessible, as opposed to the old days where it was just all done in Excel spreadsheets and PDFs.

Tom Erskine:
They’re a great example of this digitization, of this last mile of the merchandising process that is really going to, I think, transform the ability to become better brand storytellers.

Julia Raymond Hare:
Great. And Tom, are there any clients that you’ve worked with, who you’ve been able to see the progression from the old process to now with One Door? Have they given you any feedback?

Tom Erskine:
Yeah. For sure. We get a lot of anecdotes from field teams. I’ve been doing enterprise software for 25 years longer than I want to admit. And so often, when you implement enterprise software systems, somebody at HQ has a bright idea to implement something, and then the people in the field that actually use it are less impressed. The one thing about the One Door platform that’s so cool is it gets implemented and you literally get anecdotal feedback from people in stores that actually use the product. And they say things like, “Oh my God, my life is so much easier. This is cool. This used to take me four hours. I can now do it in 30 minutes,” or, “I don’t make the same mistakes I used to.” And it’s just so nice as an organization to get that response and validation from, again, not the people that bought the software, but from the people that are actually using the software. And it’s nice. It doesn’t happen every day, but, but it’s so cool here because it does happen here for us, which is fantastic.

Julia Raymond Hare:
Sure. And to take it from four hours to 30 minutes, time is money. That’s amazing. And to hear that kind of testimonial from the people who actually have to use the software is mind-blowing.

Tom Erskine:
Yeah. So, when you think about this process and you think about the demand for localization, we were talking about the idea that retailers increasingly deliver the brand experience. Localization is a big part of that. So retailers have to deliver an experience to a consumer that meets their needs. And one of the customers we worked with was trying to do that. And the old way of doing it was, “Okay. We’re doing a promotion and we have three different types of fixtures. There’s a four-foot, an eight-foot, and a 16-foot. And then there are three languages, and there are four different product combinations that go on those fixtures.”

Tom Erskine:
And so in the old world, they would literally have to create 36 different manual planograms. Let’s say each one takes them an hour to do. So it’s 36 hours just to launch one promotion on one fixture. And so now, it’s a classic example of where computers make life easier. Computers are really good at doing stuff like that over and over. And so now, they do it automatically. In Merchandising Cloud, they create one and the computer figures out the difference between the four, the eight, and the 16, and this one’s in Spanish, and it does all that automatically. So it’s just a massive time savings again for these people.

Julia Raymond Hare:
That is incredible. The biggest takeaway for me is just how much time you can really save by having the computer predict what it needs to do and automate some of that process. And that concept in action, we can see it with Best Buy, who we just spoke about there, one of your clients. What are some challenges that they had to work through, and how have you helped improve their in-store experience across the fleet?

Tom Erskine:
Yeah. Andrew spent a lot of time in stores. And when we first met Andrew, it was obvious we were talking to somebody super passionate about the store experience. I think that the big challenge that a lot of retailers face is that there are folks with passion for merchandising at HQ, and then increasingly in the field, there’s less merchandising expertise in the field than there was even five years ago.

Tom Erskine:
And additionally, our customers and our prospects are coming to us and saying, “We’re spending an incredible amount of time building and learning about what customers want by looking at this incredible amount of data we have.” And so what they are trying to do is become a little bit more prescriptive and ask stores to just follow directions. And so they want stores to follow the plan. And then at the same time, they need to be able to give stores a very accurate picture of what they’re supposed to do because they

Tom Erskine:
It’s a very accurate picture of what they’re supposed to do, because they may not have the merchandising expertise in the stores that they had five years ago. This is a big challenge for them, is solving for that and essentially turning their store teams into merchandising experts, and trying to do that through software.

Tom Erskine:
Andrew, do you see it like that?

Andrew Smith:
Very much so. I was going to say, I’ll build on that with, what we’ve trained most retail store teams on over the last 20 years is, merchandising is nothing other than a performance management metric. Have I passed or have I failed? I don’t get to understand why a decision has been made. I don’t understand why a product is there. I’m just told, put it there, and take a photo, submit it, or some other kind of archaic system of managing performance.

Andrew Smith:
And that’s it. That’s kind of the love affair that retailers on the frontline have with merchandising. And we’ve caused that as an industry, by just the sheer way that we’ve decided that’s how we do it.

Andrew Smith:
Whereas, as I said before, retail is merchandising. And you need to have the buy-in of your store teams around what’s there and why, because it is a reflection of the priorities of your business. If you’re putting a product up, you’re doing it for a reason. It’s either your customers love it, because you’ve got a great product agreement with a partner, because you want to grow a segment. There’s always going to be a reason behind why you want to do something.

Andrew Smith:
And the thing that having visual merchandising teams who sit in this kind of weird position of being ops stores, marketing brand, they’re getting pulled every which direction. And then they’re having to manually produce tons of Excel spreadsheets and PDFs. What chance do they have to be able to communicate the art of what it is they’re doing? They’re just stuck in busy work.

Andrew Smith:
So by elevating the actual role of merchandising to be back towards more of the art form that it is, that we’ve built it up, we’ve learned, over 5,000 years since the Istanbul bazaars, it’s kind of like merchandising is retailing. This is freeing up a team to be able to actually take the science of the data you’ve got, apply the art of branding and brand storytelling to it, send it to store teams, and then open up dialogue to be able to communicate the why, to be able to test and change and adjust things as it needs to, depending on the store’s layout.

Andrew Smith:
It’s just an incredibly smarter way to do it, obviously. And it elevates, to your point, Tom, the idea that the store person is not just the human that’s putting the thing, putting product A on placement B1. I’m involved in the process. I can see it. It’s transparent.

Andrew Smith:
And it does make you take a bit more ownership of the store that you’re working in every day. But also frees you up. The amount of time that obviously this stuff frees up, retail people are energetic people. They’re people people. They love talking and interacting with customers. And the more energy you get to focus on customers, the more better your store’s obviously going to perform.

Andrew Smith:
So it’s an incredible innovation for retail for a number of different reasons, but especially as stores are evolving so much. You have to take the busy work out and put some of the retailing art back in.

Tom Erskine:
I was speaking to a senior leader at a retailer a couple of years ago now, but it was so interesting to me to ask that person, who’s the most important person in your merchandising process?

Tom Erskine:
And for him, he kept focusing on the HQ teams. And it was so interesting to me, because to me, I kept wondering if he was going to eventually realize, man, the store associate’s actually an incredibly important part of the merchandising process.

Tom Erskine:
But I think, a couple of years ago in retail, maybe some people didn’t see it that way. They sort of felt like merchandising was almost like an HQ activity. And then we hit save, and we kind of throw it over the wall to the stores, and they just do what they can. As opposed to really understanding that the merchandising team is this big broad team with thousands of people in the stores, as the front, as kind of the foot soldiers in that merchandising team.

Tom Erskine:
And so I think it’s a really very different perspective now as retail emerges from COVID.

Andrew Smith:
And not only that, they know all the stuff that you’re asking them to do that doesn’t work. The number one advice that I give any retailer I work with is, elevate the dialogue you’re having with your front line teams. They know all the great stuff you do. They know all the things that work. They know all the stupid stuff that you do, and what doesn’t work, what is pointless, what is hidden behind something.

Andrew Smith:
And just opening up dialogue with frontline teams will be providing the number one source of helpful information to any HQ. I hate using HQ. I’ve tried to rename every company I work to start branding themselves as central support, because that’s what it should be in a retail business.

Andrew Smith:
The more dialogue, and information, and insight you can surface up from your frontline teams and hand it to your central support team, the more likely they are, and more successful they’re going to be actually supporting the stores who were the ones who were obviously getting cash in the till.

Julia Raymond Hare:
That’s so important though. I think you’re making a point about the communication and how technology is now supporting it so it really is fed back into the one door platform to be used for the prescriptive nature of what you’re suggesting stores implement.

Julia Raymond Hare:
So it’s full circle. And that didn’t exist even 10 years ago. That was very far behind where we are today. So it’s amazing.

Julia Raymond Hare:
I want to ask you guys, I’ll let Tom take this first, but we talked a lot about the past, we talked about today. I’d like to look into the future a little bit. Where do you see visual merchandising in five to 10 years?

Tom Erskine:
The way we look at it is definitely through an operational lens, or maybe an internal, inside retail looking out lens. I think the perspective I’m going to provide is really that perspective, which is, how does technology transform and shape the way visual merchandising happens at a retailer over the next five to 10 years.

Tom Erskine:
And I think Andrew can give you a much broader answer in terms of where to companies go with visual merchandising.

Tom Erskine:
From our perspective, we’re just at the baby steps of the digital transformation of this process. If you imagine this process as following a technology arc, the first step is just this, what we really refer to as base digitization. And that’s where most of the retailers we work with are. They’re just at a point where they’re realizing, oh my God, if we get all this information in a single repository where everybody can collaborate, everybody can communicate more effectively, it just yields amazing benefits for our company.

Tom Erskine:
And if you just step back far enough, that’s what these retailers are doing realistically. But what then happens is, you start to layer additional benefits and incremental ROI on top of that in meaningful ways as you go forward into the future.

Tom Erskine:
So the next step is then automating processes. Where are there processes along that journey of merchandising? Where are there places where we can take advantage of computing and automation to either take cost out, or improve the experience for associates? And essentially, the example I gave of, 36 planograms down to one, that’s a great example of automation.

Tom Erskine:
There’s no reason why you should be doing that as opposed to having a computer do it for you. And then, the next phase after that, where things get really interesting, is where the technology helps you make better decisions, and in some cases actually just makes better decisions for you.

Tom Erskine:
And not to sound too scary and computers are going to take everybody, there’s going to be plenty of jobs to go around. But there’s no question that in merchandising, there are a lot of places along that process where AI and analytics can really improve the decision-making process and take data-

Tom Erskine:
… Really improve the decision making process, take data, come back from the stores and automatically make decisions about what products should go where, how much of a particular product should be in a particular store. And then even out in the stores, help decision support for associates so that they spend their time doing the most valuable things that they can possibly do for the business.

Tom Erskine:
You’re a store assessor, you come in in the morning, there’s 25 fixtures in the store that need attention, well the software should automatically guide you to work on the most profitable fixtures first. And believe it or not, we’re really not there yet. A lot of retailers are still just trying to get the basic plumbing in place but once you get the plumbing in place, I think it’s remarkable what we’re going to be able to accomplish.

Tom Erskine:
That’s the technology side. That’s the geeky bits and bites part of it.

Andrew Smith:
I was half expecting you to call it the fluffy stuff for a second there.

Tom Erskine:
Oh.

Andrew Smith:
I think you’re absolutely spot-on, though. For most retailers, because we are execution focused, we haven’t built a whole bunch of the plumbing and we kind of rush to the solutions side so I can’t make … Advice number one, I suppose, is before you call Tom … And obviously, you should call Tom … But before you call Tom, do an innovation … internal innovation audit of your own business. Start looking around for built-up grit. When you build a system of processes, you build up a brand, it’s a national byproduct to have some grit in the system. Could be slow approval pathways, too many approval pathways. It could be funding processes that don’t have enough capital going towards experimentation or don’t have a seed-funding element to them. There’s all these little things that innovative, fast-moving brands can do that maybe you can’t, so clean that grit out first because that’ll make the process of implementing stuff, whether it be base digitization or something more advanced, a lot more quick.

Andrew Smith:
But in terms of from a merchandising side, it’s already co-ed base that stores are shifting and thank goodness as an industry we’ve been able to park this retail apocalypse rubbish and focus on it’s just changing. And for every store closing there’s more opening or more changing or more becoming something more interesting. And there’s a few drivers that you need to think about when you’re coming up with what your strategy is for how you use those stores and, as part of that, obviously the merchandising side.

Andrew Smith:
Humans are a pack animal. We’re biologically trained to hangout with others and therefore, the idea of returning to an environment like a store environment is going to be a natural one that anyone … most people, anyway … through COVID-19 is looking forward to; at least some ventures outside of the home. Part number two is increasingly, a huge percentage, particularly in younger demographics but it is happening and increasing across all age groups, people are looking for experiences more than stuff. We can look at that and freak out that maybe that’s a revenue challenge. Actually, it’s an opportunity because if you can think of your physical space as an experimental space … And that doesn’t mean it needs to have camp-level toy engagement and cool things to play with. Experiences can be discovering something new about yourself. It could be discovering some new stream of product that can change your life, be guided through it.

Andrew Smith:
What is the experience that’s related with your brand and what will work to help your customers feel more engaged and more likely to come back through to your brand, both physically and digitally? Those are a couple of the key drivers that you need to take into account. At the absolute core of it is you need to be able to continuously evolve the story that you’re telling within your physical environment and it’s going to continuously be demanding faster … shorter campaign cycles, faster, more regular turnover. How do you get in place what you need to to support your brand team, your merchandising team and your store teams to be able to execute on that constant evolution of the story that you’re telling your customers through your physical space?

Julia Raymond Hare:
Great points both from Tom about the digital baseline that we see today and the significant automation that will take part in five to 10 years from now. And then Andrew, you recapped a lot of good things about bringing it back to the experience. And it sounds like ultimately, the experience and then driving revenue, as always, are really important in retail. Tom, how can our listeners or anyone who watched the video version of this find out more about One Door?

Tom Erskine:
Www.OneDoor.com. O-N-E D-O-O-R. And we are running our 70s campaign so you can come and vote for your favorite music and your favorite 70s playlist. But love to hear from anybody out there. We’re also going to be at NRF in January of 2022, so we can see you there.

Andrew Smith:
Woo!

Julia Raymond Hare:
And Andrew, you recently published a book. Where can our listeners find your book?

Andrew Smith:
All good bookstores online and offline, hopefully. Yeah, the Retail Innovation Reframed. What we wanted to create was something where people can not just understand a bit more of the why we need to look at the internal process, the how of innovation before I go to NRF’s big expo floor and choose what is right for me, but to focus internally a little bit more and how do I remove that friction and make innovation flow more smoothly and quickly through my organization through experimentation and a few other bits and pieces. We’ll call it a how-to guide to remove some of that friction and increase your ability to change.

Julia Raymond Hare:
Great stuff. Tom, Andrew, thank you so much for joining me on the show today and I hope to have you back.

Tom Erskine:
Sounds great.

Andrew Smith:
My pleasure. Thank you very much. Thanks, Tom! Thanks Julia!