Optimizing Merchandising Energies

We have thousands of products to promote at Zingerman’s. The better we merchandise them, the better sales will be. In my idealized world, we would have the time, money and people to merchandise all actively and equally. But that is not the reality of organizational life. Like most natural resources, those available for merchandising are—and always will be—limited.

We all make decisions on where to invest resources. The better those decisions are, the more effectively we will raise sales. It would be nice to have some perfectly scientific way of making these decisions, an ideal equation or some off-the-shelf-software package that would tell you which items to promote, which to put off, which to advertise and which to leave for later.

At a basic level, I still live with John Wanamaker’s old line, “Half my advertising is a waste of money; I just don’t know which half.” Effective decision-making on where to spend time, money and energy is much more a craft than a science. There is no perfect formula.

I can share the approach we use here. It’s a rough recipe that’s helped us establish solid sales of products that most people would have thought impossible to champion when we started merchandising them.

Products to Invest In

There are four major categories of products (or services) that I’d recommend investing in. These are products that:

1. Differentiate you in the marketplace.

No one needs what we have to sell, and there are dozens (if not hundreds) of competitors who claim to offer products as good as ours. So we showcase items that no one else has. If you know what makes you special, then you can start your merchandising investment.

We have a lot of these items. They’re often products we introduced,specialties we make from scratch, exclusives, or items that bear our own label. The more innovative and special, the more likely we are to get behind it with significant merchandising energies.

These are not necessarily the biggest sellers. Within this category, I look for “productive specialties. These are products or product categories that are not likely to ever hit the top ten sellers list. But they do have meaningful sales levels driven by a loyal clientele who will go a long way—figuratively and/or literally—to get something they like and want.

Anchovies come to mind because people who love them will go to great lengths to get something special. When they learn we stock the best selection of full-flavored, top-quality anchovies, they will come to us for them consistently over time. It’s important to invest merchandising resources in these products because they bring in loyal customers, folks who will buy great anchovies for years to come.

2. Get significant results.

Items in this category have three defining characteristics—we sell alot, they have a modicum of growth potential, and are profitable. When all three characteristics are in a given item, investing in merchandising efforts will bring dollars to the bottom line. These are similar to the blue chips in your stock portfolio; they may not be glamorous but they bring strong, steady and meaningful returns.

This may sound obvious but it is not. Think of it this way: Most of usin leadership roles fall into the trap of spending too much time with problem employees while not spending enough energy on those who are succeeding. We also invest a big share of our merchandising resources into products because they are not selling.

I am not talking about new items that have yet to establish themselves.I am referring to long-time products that we have been merchandising for years but which brought minimal results. A bread we used to bake, a great loaf of traditional Central European rye, comes to mind. Despite its high quality, we sold only a few dozen loaves a week. Because sales were so low, we kept promoting it over and over again. It became clear that, even with a big push, we’d double sales to four dozen loaves a week, at best. By percentage, the increase is huge
but the actual dollar jump was miniscule. One day, the obvious dawned on me. If we ran a promotion on our most popular bread—one that sold thousands instead of dozens of loaves a week at a good margin—even a 50 percent increase in sales was going to have a huge positive impact on sales and profits.

The one caveat: Avoid getting too comfortable with long-time bestsellers. As when buying stocks, you should anticipate which have already crested and are starting to—even if slowly—turn downward. When that happens, it’s time to reallocate and shift merchandising resources into more productive—if less predictable—products.

3. You’re particularly passionate about.

This may not show up in business books, but I’m a big believer in the importance of passion. In the stock market, this would be akin to buying shares in a company whose products you love or a firm whose values match your own. It’s always easier to achieve good results when you’re excited about what you’re selling. The world operates with a deficit of positive passion. When it’s present, customers are drawn to it, staff members want to work with it and sales will go up. If something gets your juices flowing, then get the merchandising work going—make signs that share your passion; get the press to come and interview you; teach
classes; sell your staff; sell your customers and spread the word on what makes this food so special.

4. You believe to be tomorrow’s success stories.

This is the hardest category in which to identify products to invest resources in. Yet, while it’s the least certain of the four areas, it might be the most important. As a comparison, these would be your big growth opportunity stocks. Short-term results will be small if they exist at all; instead, it’s all about forecasting what will make your business special and successful two or three years out. How do you know which products those are? You don’t. You watch the trends, read a lot,ask friends, family and customers. Inquire of industry peers. You check your gut. And, in the end, you make an educated guess.

To successfully invest in this category, you must over-invest based on current sales to get to the profitable future you foresee. The degree of difficulty in the merchandising work—the amount of effort it will take to get the product going—is directly related to the size of the potential returns.

The big “breadwinners were built with steady, persistent, long-term merchandising that took years to pay off. People alter eating and buying habits very slowly. To introduce a new product successfully is likely a two-year project. In six to 12 months we may see some results, but it usually takes a couple of years to get to where you want to be. Years later, if you were right in your “pick, everyone will say that you were a “genius much as people like to hear about the brilliant folks who bought Microsoft stock 15 years ago.

Double Doubles, Triple Doubles and Grand Slams

The more of the four categories that a product can address, the more you should invest merchandising efforts and dollars in it. Ideally, I like to find products that fit at least two (double-doubles), three(triple-doubles), or on occasion even four of the categories (a rare,but exciting, grand slam).

The hand-made artisan cream cheese from our Creamery is a grand slam. It’s a great differentiator. We make it at Zingerman’s Creamery, so it’s not in every store in town nor on every mail order business’ website.The competition is still using industrial, highly processed cream cheese with a one-year shelf-life while we’ve switched to a fresh, handmade,artisan product with a fine, delicate flavor. The cream cheese already makes a solid contribution; we sell a lot of it and it contributes a good margin. I’m very passionate about it—it’s great to have revived a traditional product and to have made such a great leap forward in terms of quality. And, looking to the future, it will become a solid signature item for us—few of our customers will settle for a processed,industrial offering when they have tasted a more flavorful, handmade, organic alternative. (To reinforce my belief, the cream cheese was chosen “best fresh cow’s milk cheese at the American Cheese Society conference last summer.) I’m confident that this hand-made artisan item will be something that our organization will be famous for, like our breads, brownies, sandwiches and service. Hence, the cream cheese is worth a steady long-term investment of merchandising energies.

Balance and Persistence

It takes time, energy and cash to successfully merchandise a product. So it’s vital to keep track of how effectively it sells. If you’re not getting results, go back and reassess your merchandising efforts. Set sales targets and track performance against them. The tracking can be as sophisticated as information from a point-of-sale system or as simple as making tick marks at the cash register or next to the phones whenever you make a sale.

It takes time, energy and cash to successfully merchandise a product. Ultimately, decision-making on resource allocation in the specialty food world remains a craft. Like most every successful investment strategy, it’s most effective when we balance our investments amongst products or services that will provide an effective mix of higher and lower risk, and of long- and short-term returns.