1. shopping
2. retail

Sales and Distribution
Sales and Distribution
Use of research and analytics to take
business decisions in Sales and Distribution



Supply and Demand – the twin factors driving sales
Sales and Distribution Strategies
- which Channels / Chains?
- what Assortment
- How to Get Listed
- Opportunities and Costs
Research Measures to assess sales and distribution
- Availability
- Assortment
- Sales / Store
Sales PUSH & Demand PULL
A mouse trap, irrespective of how good it is, won’t sell if consumers can’t find
it. And irrespective of how widely it is distributed, it won’t sell if consumers
don’t like it. It takes both push and pull to succeed in the marketplace.
SALES move due to two interdependent factors

Availability or the number of stores (width) the brand is
distributed.
 Driven by sales force … the PUSH factor
Supply
 Measured by Distribution
 Influenced by Brand Choice

Brand choice (Consumer Preference for brand)
 Driven by marketing … the PULL factor
 Brand equity is indicative of brand choice
 Influenced by Availability
At Coca-Cola and Pepsi roles are split between Bottlers / Brand Owner
Demand
Product availability impacts Brand Choice

Stores playing an increasingly important role in
generating demand
- More Singaporeans visit FairPrice in average week
than watch any particular television program
- In-store activities
raise awareness,
create perceptions,
generate desire and
influence brand
choice
Terry O’Connor (CEO Courts megastore) and Moon Sung‐Hyun (MD Samsung) at launch of Samsung’s 3 D TVs in Singapore
In-store activities impacts Brand Choice
- Displays
- Promotions
- Sampling
- In-store launch
- in-store media
- Mobile
… all the above raise product visibility, enhance
communication and could trigger the desire to
purchase
… impact on brand choice
Example: A Product Launch
60+% aware of brand
• 80+% aware via in-store
• 50% aware via advertising
In-store media – Stopper, Cart and Floor
Digital Signage, touch screen kiosks, use of mobile devices
Interactive Sampling
Demand (brand choice) impacts Product Availability

Consumer pull generates retailer support.
If (turns × earns) is improving …
- more retailers want to list product
- more demand … more shelf space
- more demand ... higher stock turnover

Declining demand.
If (turns x earns) is deteriorating …
- poor stock turnover
- shrink shelf space
- shrink range
- de-list
Components of Sales … width and depth
Width (Availability) = Distribution
% of Stores
The two components are interdependent. As the number of stores distributing a product expands, the stores start to cannibalize one another, adversely affecting the sales per store.
Depth
Sales per Store
Sales = No of stores distributing × Sales per store
Measures for Distribution (PUSH)

Numeric Distribution
- Product presence as % of stores in universe handling product
(but does not reflect on quality of distribution)

Weighted Distribution (weighted on category value sales)
- Product presence as % of where money is spent on that
product category
(reflects quality of distribution … except in cases where new /
growing category or one with few brands)

Weighted Distribution (weighted on All Commodities sales)
- Shows distribution as % of where money is spent on grocery
products. Suited for small, relatively new categories.
(all commodity not a good reflection of distribution of categories like
beer, cigarettes, where the importance of the channels of distribution
differs greatly from the norm)

Out of Stock (in Weighted and Numeric terms)

Stock Cover Days
Measures for Sales / Store (PULL)

Sales Per Point of Weighted Distribution

Share in handlers

Average Sales per Store

Rate of Sale (Adjusted Average Sales per Store)
… in terms of volume, value (cash) and profit
Sales Priorities (Sales Management)
Use of Market Research to progress sales initiatives

Targeting Channels and Chains: Which are the right
channels / chains for your products

Right assortment: Use data to determine
 How many items in each channel?
 Which items in which channel?

Securing retailer support: Use data to get listed

Distribution Opportunities and Costs
Place: Channels and Chains
Using Research to align distribution
Right Channels, Right Chains
Which channels to target? Which chains?

Channels and chains with the high sales density for the product
category or family of products
- FMCG, Consumer Durables, Books, Clothing, Contact Lenses, Fast
Food, Petroleum, Computers … sold in different channels
- FMCG: Cigarettes, Cheese, Bread, Coca-Cola, Shampoo
- Duracell (assortment), Kotex

Outlets that attract the shopper profile the brand wants to target
- range, displays, promotions and in-store communication
- Dove

Where store positioning is aligned with brand positioning
- Premium Designer labels – Paragon,
Mid-range – Robinson’s,
Popular range – John Little
- L’Oreal: Plenitude (Department Stores)
and Garnier (Personal Care Stores)
Mass Market …




Almost every household shops at
FairPrice and with regular
frequency
On an average day 500,000
people visit FairPrice
Generates high viewership and
extensive exposure
Ideal site for family and household
products.
Low Price …
% of All HH’s



Lowest cost structure
- Low overheads
- Limited staff … Low
wages
- Low where rentals
Low price products
Shopper profile skew
- Malays
- Blue collar shoppers
- from middle income
households
- with larger household
size
Gender
Male
Race
Chinese
Female
Malay
Age
Others
15-24
25-34
35 - 39
40 - 49
50 - 65
Household Income
Low (Up to S$2000)
Middle (S$2001-S$6000)
High (Above S$6000)
Not disclosed
Personal Income
Low (Up to S$1000)
Middle (S$1001-S$4000)
High (Above S$4000)
No Income/Others
Occupation
PMEB
Other white collar
Blue Collar
Housewife
Others
Marital Status
Single
Married/others
Household Size
'1-3
'4-5
6+
Personal and Feminine …
% of primary toiletry shoppers
21
13

Young women (15 to 30 yrs) tend to
shop intensely at Watson’s

Most are not household decision
makers … buy for self

They are drawn by promotions,
reasonable prices and wide range

Destination categories include facial
care, and other feminine and personal
care categories
5
2
Female 15-29
Female 30-39
Female 40-49
Female 50+
Personal and exclusive...


Draws young women like Watsons
… but their profile is skewed
towards higher income homes
They are drawn by wide, exclusive
range and variety and not price
Right Assortment
Using Research to prioritize assortment
Right assortment

Brand range is determined by marketing strategy … not sales
strategy

How much of the brand’s range is stocked by a retailer is a function of
several size factors
 Size of the store
 Size and importance of the category
 Size of the brand, importance of each item in its range
 Size of margins ….

Supermarkets stock over 30 items (i.e. SKUs) of Campbell’s soup …
provision stores on average stock less than 5

Ensure that the right items are stocked. Adding items …
 Consumers have more choice within brand … could lead to share gain
 Brand tends to get more facings … greater visibility
… But don’t push a loser. It’ll erode margins, reputation, equity. Too
much choice is not necessarily a good thing

Suppliers compete for space … battle for shelf space
How many products can a retailer cope with?




Retailers have a finite amount of space on shelf
They are faced with a wide selection of brands and
products to stock
Consumers demand that their key brands and products
remain in-stock
But they also demand choice
Need compromises!
The Battle for Shelf Space
Battle for Shelf Space: Example from Pet Foods
B expands range at A’s expense
# of items (SKUs) of Cat Food, Supermarkets
28 28 28 28
27
26
25
24
Brand A
23 23 23 23 23
24 24
23 23 23
23 23 23
22
22
20 20 20
20 20 20 20
19 19
19
Brand B
15 15 15 15 15
16 16 16
15 15
16
23
17
14 14
Brand B’s share of SKUs is up from 35% to 47%
Example from Pet Foods
… Brand B grows 30% by expanding range
Brands Performance
Volume Share (%)
Brands Performance
Volume Growth (%) - MAT 00
29.5
41.6
38.1
36.6
30.1
Y1
Brand A
Brand B
Y2
-2.4
Brand A
Brand B
How many items to stock? Which ones?
Relevant analysis

How many Items?
Average Number of Lines Stocked
 Average # of brands of a category in a store
 Average # of items of a category in a store
 Average # of items of a brand in a store
 Brand’s share of total category items
 Efficiency rate

Which Items?
Prioritise selection of item based on
 Sales Per Point of Weighted Distribution
 Share in handlers
 Average Sales per Store
 Rate of Sale (Adjusted Average Sales per Store)
 Cash Rate of Sale
 Rate of gross profits
Important to remember marketing’s role in determining brand
range, target consumer and target chains
Average Number of Brands Stocked

Flat Screen TVs are available in 90% of stores (Numeric
Distribution) carrying Consumer Durables
- Panasonic is in 60%
- Philips is in 40%
- Sharp is in 80%
- Assume no other brands are stocked

What is the average number of brands stocked?
- Sum of Brands Distribution
60 + 40 + 80 = 180
Product Category Distribution
= 90
Average number of brands is
2
Average Number of Brands/Items Stocked
The average number of brands (in category) stocked
in a store
Sum of Brands Distribution
Product Category Distribution
Average number of Items stocked in a store?
Sum of Items Distribution
Product Category Distribution
Brand’s average range stocked
average number of Items stocked by brand
Average number of a brand’s items stocked in a store
carrying brand
Sum of the Brand’s Item Distribution
Brand Distribution
Brand Distribution
Item Distribution (3 of)
Average # of Items stocked
= 80% …. Width
= 80%, 50%, 70%
= 2.5 … Depth
Average number of items Stocked
(1) Average number of flat screen TVs stocked per store ?
(2) Average number of Sharp TVs stocked where Sharp is listed?
(3) Average number of Panasonic TVs stocked where Panasonic is listed?
Numeric Distribution
Total flat screen TV = 90
Two brands: Panasonic, Sharp
Total Panasonic = 60
Total Sharp = 80
Panasonic model 1 = 55
Panasonic model 2 = 55
Panasonic model 3 = 45
Panasonic model 4 = 45
Panasonic model 5 = 50
Panasonic model 6 = 50
Sharp model 1
Sharp model 2
Sharp model 3
Sharp model 4
Sharp model 5
Sharp model 6
Sharp model 7
Sharp model 8
300
= 30
= 35
= 45
= 45
= 55
= 28
= 45
= 37
320
Average Number of items Stocked

Average Number of items Stocked =
(300 + 320) / 90 = 6.9.

Panasonic
- Efficiency Rate.
- Share of items
: 300 / 60
:5/6
: 300 / 620
=5
= 80.3%
= 48.4%

Sharp
- Efficiency Rate
- Share of items
: 320 / 8
:4/8
: 320 / 620
= 4
= 50%
= 51.6%
So which 7
should the
retailer stock
and why?
Average # of items Stocked
Panasonic
60% Brand
Distribution
80% Brand
Distribution
Sharp
80.3%: 5 out of
6 items Stocked
50%: 4 out of
8 items Stocked
Width
Depth
Width
Depth
Sharp has greater width of distribution whereas Panasonic has greater depth. It
appears that Sharp has greater success in getting listed, whereas Panasonic is
better at securing depth where listed
Portfolio Analysis: What range? Which items to stock?
Which items
should the
retailer stock
and why?
100
Cheeky Cherryade, 14
Weighted Distribution %
95
90
85
Original Sarsi, 14
Outrageous Orange,
18
Ice Cream Soda, 13
80
75
Fruitade, 11
70
Groovy Grape, 11
65
60
Zesty Zappel, 8
55
50
100
120
140
160
180
200
220
SPPD (Litres per point weighted distribution)
240
260
What range? Which items to stock?
Measures for Sales / Store
Prioritise selection of item based on:






Sales Per Point of Weighted Distribution
Share in handlers
Average Sales per Store
Rate of Sale (Adjusted Average Sales per Store)
Cash Rate of Sale
Rate of gross profits
Sales Per Point of Weighted Distribution (SPPD)
Volume Sales
Wtd Distribution
Sales = 10,000 kg
Wtd Distribution = 80%
SPPD = 10,000 / 80 = 125 kg
Example: Distribution & Rate of Sales of variants of a Soft Drink
Which flavours should be better distributed?
Sales
F&N Rainbow: Singapore – Provision Stores
Expand distribution of
Orange and Grape
100
Cheeky
Cherryade, 14
95
Distribution %
90
85
Ice Cream Soda,
13
80
Original Sarsi, 14
Outrageous
Orange, 19
Fruitade
75
70
Zesty Zappel
65
Groovy Grape, 9
60
Sales / Store (Litres per point weighted distribution)
55
50
100
120
140
160
180
200
220
240
260
Weighted Distribution and Share in handlers
Handler = Store distributing product
$ in M
Television sales
$100
Panasonic sells
Panasonic’s value market share is
$ 20
20%
Television sales in stores selling Panasonic
Panasonic’s handler’s share of Television sales
$ 80
80%
(By definition, this is Panasonic’s weighted distribution)
Panasonic’s share in handlers (% value)
= Panasonic’s share in shops selling Panasonic
= $20/$80
= 25%
= (Panasonic’s value share)/(its weighted Distribution)
Share in handlers
Market Share (%value) in shops where product is present



Weighted Distribution (PC) … reflects handlers share
(in value terms) of the PC
Market share (in value) … brand share of PC
Share in handlers =
Market Share (in value)
Weighted Distribution (PC)
PC = Product Category
Average Sales per Store
Volume Sales
# of stores distributing the product
(=Num. Distribution * No. of Stores in Universe)
Sales = 10,000 kg
Numeric Dist = 50 %
# of outlets = 800 in Country
Average Sales = 10,000 / (0.5 x 800)
= 10,000 / 400
= 25 kg per store
Average Sales per Store

Nescafe
- Sold in 2000 outlets
- Average sales per store is 200 kg per month

Maxwell House
- Sold in 100 outlets
- Average sales per store is 300 kg per month
Does this mean that Consumers prefer Maxwell House
to Nescafe?
Average Sales per Store
BUT Nescafe may be selling as much as 1500kg per month in those
stores where Maxwell House is distributed
Average Sales per Store does
not factor in the size of the
stores
- Usually first stores to list a
product are biggest
- As brand distribution expands
Average Sales per Store tends
to drop, because of the effect of
store size
Maxwell House
Sales 300 kg / Store
100
Nescafe Sales = 1500 kg / Store
in these 100 stores
Nescafe: 2000 outlets
Sales 200 kg / Store
Rate of sales – Maxwell House (MH)
(Adjusted Average Sales per Store)
Sales Volume
= 30,000 kg/month
Numerical Distribution
= 5%
Weighted Distribution (PC)
= 50%
# Supermarkets
= 2000
# of Stores x Numeric Distribution = 100 = # of stores distributing MH
# of Stores x Weighted Distribution = 1000 = Equivalent # of stores distributing MH
Rate of Sales =
Volume Sales
Equivalent # of stores distributing the product
Rate of Sales = Sales Volume / (# of Stores x Wtd Dist)
= 30,000 / (2000 x 0.50) = 30 kg/store
Maxwell House sells 30 kg per month per averaged sized store
selling coffee in Supermarkets
Rate of Sales per Store: Nescafe / Maxwell House
Average Sales / Store = 300 units
Numerical Distribution = 5% (100/2000)
Weighted Distribution = 50%
Maxwell House
Adjusted Average Sales / Store
= 30 kg/month
2,000
Store
Average Sales / Store = 200 units
Numerical Distribution = 100%
Weighted Distribution = 100%
Adjusted Average Sales / Store
= 200 kg/month
100
Nescafe Sales in these
100 stores is 1500 / Store
Nescafe
Average sales = 200 / Store
Rate of sales = 200 / Store
Average sales = 300 / Store
Rate of sales = 30 / Store
Rate of Sale – Laptops in Computer Stores
HP Pavilion
153
Dell Inspiron
123
Acer TravelMate
82
Toshiba Dynabook
76
Dell Latitude
64
Fujutsu LifeBook
56
MacBook
49
Dell Precision
46
HP Compaq Notebooks
41
Acer Extensa
39
Dell Studio
33
HP Omnibook
32
Acer Aspire
30
Ranking of competing Brands
Cash Rate of Sale


Production Factories, Purchasing, Logistics,
Forecasting, Marketing ... focus on Volumes (and
specifically unit volume, i.e. # of jars of coffee?
Retailers and Business Managers are more
concerned with MONEY AND PROFIT
(you can bank $5,000 you cannot bank 250
washes of shampoo, or a 63%share)
Product Sales - Who gets how much
Manufacturers and Retailers negotiate on profits / margins not sales values
Selling Price 100 $
Manufacturer’s Costs @ 50%.
$50
Manufacturer’s Profit @ 35%.
$35
Retailer’s Gross Margin @ 10%.
$10
Retailer
Sales Tax @ 5%.
$5
$5
Government
Manufacturer’s
Suppliers, Wages,
other Costs
Manufacturer
Retailer margins lie between 5 and 30% (fmcg). They vary across
categories, brands and retailer. Because of the sensitivities involved,
margins are rarely disclosed
Rate of Gross Profit
Gross Profit generated per store for an item
Rate of Gross Profit = Margin × Cash Rate of Sales












Sales Volume
Price
Sales Value
Numerical Distribution
PC Weighted Distribution
# Supermarkets
Sales per store
Rate of sales
Sales per store ($)
Cash Rate of sales
Margin
Rate of Gross Profit
= 9,000 packs
= $3 per pack
= 27,000 $/month
= 50%
= 75%
= 600
= 9,000/300 = 30 units/store
= 9,000/450 = 20 units/store
= $27,000/300 = $90/store
= $27,000/450 = $60/store
= 35%
= 0.35 x 60 = $ 21 / Store
Rate of sales – Volume vs Cash vs Profit
Shampoos
Rate Of Sale
Feather
Cash Rate Of Sale
Sunsilk
9
45
450
1200
36
(20%)
180
Dove
250
70
Pantene
325
90
thousands of litres
Rate Of Gross Profit
thousands of $
35
(50%
)
18
thousands of $
Rate of Gross Profit for Dove is comparable to that for Sunsilk, despite
much lower Rate of Sales
Securing retailer support
Using Research to gain retailer support
Retailers seek return on inventory. To gain their support suppliers must
demonstrate the potential of their product to outperform competition, or
work with retailers to improve performance (earns × turns).
Example: Using research to list a new brand...
A product distributed in few supermarkets, excluding
FairPrice … seeking distribution at FairPrice
- Current value share in supermarkets ……. 2.5%
- Weighted distribution in supermarkets …... 20%
- So why should FairPrice be interested??
- Share in handlers
… 12.5%
- FairPrice should consider stocking as its selling well in
competing stores
How to get listed
How to convince a retailer that your product deserves listing
Compare your product’s
Share in handlers
Sales per point of distribution
rate of sales
rate of gross profits
with that of competing brands
If your product fares better, you have a case
What about new products or less established brands
that have yet to achieve their potential?
Distribution Opportunities & Costs
Distribution opportunities / costs

What’s the potential extra sales should we expand
distribution?

What’s the cost of out of stocks?

How much stock to maintain in trade? What’s
optimum?

What share of shelf space (forward stock) to target?
What share of shelf space to target?
Stock to sales ratio
Item 1
Item 2
Item 3
Forward
Stock %
5.0
5.0
5.0
Sales %
7.5
5.0
3.5
Ratio
67
100
143
What share of shelf space to target?
Stock to sales ratio
25
20
15
10
5
Share of MARKET
0
0
5
10
15
20
25
What’s the potential gain from expansion in
distribution?

Current Value Sales
= $2,000,000
Current Weighted Distribution = 40%
What’s the potential for gain in sales if brand achieves
perfect distribution?
Potential Additional Sales from Distribution Gains
Need to assess whether it is COST EFFECTIVE to expand distribution
5000
4500
4000
What’s the relationship between sales and distribution?
• Linear?
3500
3000
2500
2000
• Logistic?
• Exponential decay?
Linear
1500
Logistic
1000
Exponential
500
0
0
10
20
30
40
50
60
70
80
90
100
Weighted Distribution
Declining marginal utility (economics)
10% OOS ... What’s the cost?
Universe of stores
Num. Distribution
Number of stores handling
Period sales
Average sales per store
=
500
=
80
=
400
= 100,000
=
250
OOS. Distribution
Number of stores OOS.
Average sales per store
Total lost sales
=
10
=
50
=
250
= 12,500
Assumes:
1. Probability of OOS at any store, at any point in time (during the period
under investigation) is 10%.
2. OOS = lost sales ?? (Sounds conservative …assumes shopper
will not switch stores)
When a consumer cannot find the item she wants,
what she does will depend on her...

Pack or variant loyalty

Brand loyalty

Product loyalty

Store loyalty

Urgency to use
Her response is determined by which of the above is of
greatest importance at the time of purchase
Consumer alternatives





Buy an alternative size / variant of the same brand
Buy a different brand
- supplier loses
Buy from a different store
- Retailer loses
Delay purchase
- Both supplier and retailer could lose
Buy a different category
- supplier loses
Response to Out-of-Stock Situations
Brand Loyalty
High
Low
%
24
6
37
6
61
7
Brand
5
Loyalist
13
91%
22
6
8
11
8
5
6
5
16
4
8
3
Delay buying
Buy other variant
Buy other packsize
Brand
Switcher
3
56
39
53
Liquid Milk
Breakfast
Cereal
67
69
9
Infant Milk
Go to another store
Buy other brand
9
18
Store
16
Switcher
Instant
Noodles
Chocolates
Carbonated
Drink
Source: Nielsen.
Based on a survey
in Singapore in the
late 1990s.
Cost of Out-of-Stock to Retailers
High
Low
9
%
Delay buying
Switch store
7
61
6
6
37
Infant Milk
Liquid Milk
24
22
Breakfast
Cereal
Instant
Noodles
6
4
16
16
Chocolates
Carbonated
Drink
The true cost of poor distribution: retailer

The top 10% of shoppers can account for 30 to
50% of a store’s sales
- These are the people most affected by out of
stocks
If a shopper permanently switches to another store
the cost may be their total spend … from that time
onwards
The true cost of poor distribution: supplier

If a consumer is compelled to try a competitive
brand her brand loyalty may change
An out of stock may lead to the loss of all future
sales to that consumer...