Effective Customer Centric
Merchandising Strategy
Steve Olsen
Vice President, Merchandising
Sears Seminar Series
Miller Center for Retailing Education and Research
University of Florida
April 17, 2009
Confidential
Agenda
 U.S. Office Products Industry
 Retail Challenges
 Merchandising Strategy Definition
 Category Management Framework
 Merchandising Strategy Tactics
2
U.S. Office Products Industry
Market is large and growing
CAGR
‘02-’07
Billions
$400
$350
$294B
$302B
$312B
$300
$250
$337B
2.8%
$323B
$331B
Delivery
$117B
Delivery
$120B
Delivery
$122B
3.1%
2.6%
Delivery
$105B
Delivery
$108B
Delivery
$113B
Retail
$189B
Retail
$194B
Retail
$199B
Retail
$206B
Retail
$211B
Retail
$215B
2002
2003
2004
2005
2006
2007
$200
$150
$100
$50
$0
Source: School and Office Products Network – State of the Industry Report 2008 / Office Depot Estimates
3
U.S. Office Products Industry
OSS comprise a small portion of the overall U.S. office supply industry
2007 Total U.S. Office Supplies
Market -- $337B
Other
Contract
Stationers
Specialty Stores
9%
1%
Contract
Specialists
2007 OSS Market Share
20%
ODP
3.4%
21%
10%
O.S.S.
SPLS
4.3%
Independent Dealers
6%
Internet/Direct Sales
Institutional/School Firms
OMX
3%
2% 3%
1%
4% 2%
18%
2.3%
Mass Retailers
Stationery/Gift Stores
Copy/Printing Services
Food/Drug Stores
College/Bookstores
Source: School and Office Products Network – State of the Industry Report 2008 / Office Depot Estimates
4
Note: Figures may not add to 100% due to rounding
Office Depot – Business Overview
•
Office Depot is a leading global provider of office products and services
•
2008 sales of $14.5 billion
•
–
Supplies: 61% of sales
–
Technology: 25% of sales
–
Furniture and Other: 14% of Sales
Multi-channel – stores, catalog, Internet and contract serve business customers of any
size, from small home office to Fortune 500 accounts
–
58% of 2008 sales were not in North American Retail
–
One of the world’s largest e-commerce retailers – $4.8 billion in sales in 2008
Artistree Retail
North American
(42% of 2008 Sales)
• Over 1,200 stores in U.S. and
Canada
• Largest concentration of stores
in California, Florida and Texas
Artistree
N.A. Business
Solutions
(29% of 2008 Sales)
Artistree
International
(29% of 2008 Sales)
• Catalog, contract and e-commerce
• Dedicated sales force works with
medium sized to Fortune 100
customers
• Catalog, contract, e-commerce
and retail
• Sells to customer directly and
through affiliates in 45 countries
outside of North America
• Orders serviced through 20
distribution centers
5
• 35+ websites and over 400 stores
Challenging Times
6
Category Management Methodology
Strategic Levers
 Assortment
Category
Role
 Brand
Management
Growth
Intent
 Pricing
Category
Category
Strategy
Management
Framework
Resource
Allocation
 Space
Planning
 Promotions
Category
Tactics
 Inventory
7
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Merchandising Strategy Tactics
Product
Price
Merchandising
Strategy
Placement
Promotion
Product
 Line Review Process
Price
Product
Merchandising
Strategy
Placement
Promotion
 Style / Function / Design
 Pack Size
 Packaging
 Brand Awareness
 Innovation / Exclusivity
Product Line Review
 Comprehensive process
 Complete merchandising solution
 Market share and Industry trends
 Product quality, innovation, design
and exclusivity
 Willingness to help Office Depot
grow
 Ability to support and service Office
Depot
 Negotiate the best cost/value
relationship
10
Style, Functionality & Pack Size
11
Improved Style, Functionality & Pack Size
12
Packaging
13
Improved Packaging
14
Brand Awareness & Exclusivity
15
Price
 Pricing Strategy
Product
Price
Merchandising
Strategy
Placement
Promotion
 Business Objectives /
Financial Goals
 Competitive Strategy
 Zone / Channel Strategy
 Price Sensitivity
 Retail Prices
Pricing Strategy
 Strategic objectives
 Business objectives /
financial goals
Formulate
Manage
 Category management
framework
Pricing
Strategy
 Customer segment /
profitability objectives
Adjust
 Channel / Store format
Execute
 Competitive positioning by
category / store / region
Monitor
 Price zones
17
Strategic Pricing Process
Corporate
Planning
 Corporate
strategy
 Brand strategy
 Customer
strategy
 Merchandising
strategy
 Financial
plans
+
Department
Strategies
+
 Category role
 Growth
objectives
 Private brand
strategy
 Competitive
strategy
 Financial goals
 Marketing
strategy
 Zone strategy
Business
Rules
+
 Cent ending
 Pack size
 Product family
 Competitive
 Good/Better/Best
 Brand
relationship
Consumer
Price
Sensitivity
 POS data
 Product
attributes
 Insert media
 In-store
promotions
 Clearance
events
 Competitive
data
Prices Aligned with Financial needs and Corporate Goals
18
Setting Retail Prices
Traffic
Destination
Destination
Profit
Convenience
19
Traffic
Placement
 Color / Fashion / Trend
Product
Price
Merchandising
Strategy
Placement
Promotion
 Brand Position
 Assortment Flow /
Adjacencies
 Signage / Messages
 Shopping Experience
Color, Fashion & Trend
21
Improved Color, Fashion & Trend
22
Brand Position & Assortment Flow
23
Improved Brand Position & Assortment Flow
24
Signage & Messages
25
Improved Signage & Messages
26
Shopping Experience
27
Promotion
 Promotional Plan
Product
Price
Merchandising
Strategy
Placement
Promotion
 Print Advertising
 Direct Mail / Email
 Multi-Channel
Promotions
 Loyalty / Sponsorship
Promotional Plan
Q1
Q2
Q3
Direct Mail
Catalog
Email Web Blasts
Online Marketing
Broadcast
In-Store Signage
Worklife Reward Programs
Theme Events
29
Q4
Print Advertising
30
Direct Mail & Email
31
Multi-Channel Promotions
32
Loyalty - Worklife Rewards
33
Sponsorship - NASCAR
 Official office products
partner of NASCAR
 More Fortune 500
companies than any
other sport
 #1 sport in terms of
brand loyalty
 #1 spectator sport
 Relevant to our target
customer
Source:
NASCAR
34
Merchandising Strategy Tactics
Product
Price
Merchandising
Strategy
Placement
Promotion
Summary
 Retail has become a challenging environment and
consumers are harder to predict, satisfy and reach
 A merchandising strategy is critical because it
determines how a company will compete in the
marketplace and build customer loyalty
 Category management principles are foundational to
building a merchandising strategy and improving revenue
and operating margins
 The 4Ps, product, price, placement and promotion, are
critical tactics for an effective customer-centric
merchandising strategy
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