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Profits in the Checkout Zone

Essay by review  •  December 10, 2010  •  Essay  •  1,394 Words (6 Pages)  •  1,102 Views

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Top profits in the checkout zone

Productivity per unit area in the impulse buying zone at the checkout is as much as five times higher than in the rest of a store. And every retailer should rely in this zone on the proven sales getters tobacco, chewing gum and sweets, take very good care of these assortments, and present them in well arranged, tidy fashion - this is the upshot of a new EHI study.

wThe sales area of an up-to-date checkout zone is the result of 20 years of continuous, joint optimisation by retailers and manufacturers. Product range and display are so highly developed in this area that as much as five per cent of overall turnover, and an even higher percentage of profits, are generated by goods placed in the checkout area.

For this reason, checkout zone planning requires utmost attention. So if you are into self-scanning solutions with "zero waiting time", if receptacles for those disposable containers carrying deposits take up precious (because scarce) space, if "exotic" articles carrying listing charges threaten tried and tested sales getters, you should always consider the influence these measures have on the sales performance in the checkout zones.

No point in non-food articles

The branded products producers BAT, Ferrero, Langnese and Wrigley commissioned EHI International Retail Network to perform a current product mix analysis. Aim: to investigate the sales, costs and earnings of the checkout zone product range and to draw up an operating result calculation for full-line distributors.

For the three sales outlet types supermarket/small hypermarket (average 1,200 sqm), large hypermarket (2,400 sqm), and superstore (6,700 sqm), nation-wide and across retail chains the checkout assortments were recorded article for article according to turnover, profit and space requirement and grouped into merchandise categories.

The underlying idea was to define the optimal assortment for a checkout zone. Whereas "normal" shopping in the general selling area mostly involves rational, targeted buying, the checkout area is the place for impulse buying. However, if the impulse threshold is to be crossed, the price and the brand must be right. The average prices of articles offered in the checkout areas of the three outlet types examined do not differ significantly. The average prices established were 69 cents for sweets and 93 cents for ice cream, i.e., prices which the buyer does not have to think about for long.

The examined merchandise groups were tobacco products, sweets, ice cream in small packages, small alcoholic drinks and non-foods. An average 263 such articles are placed in the checkout zones of supermarkets; 345 in superstores. In the three outlet types, the number of sweets items ranged between 98 and 108 - more or less identical, which one cannot say for the other merchandise groups (tobacco products, 120 to 168; non-foods, 10 to 28).

As to the non-foods, here the EHI analysts discovered an expensive playground for nonsensical and space-wasting articles. Things which the customer seldom needs he writes down on his shopping list; they are not by any means purchased spontaneously. Examples of such items are razors, condoms and cosmetics.

With an average 13.3 POS terminals in superstores, the net area available for impulse articles is 21 sqm; in hypermarkets the figure is 7.6 sqm and in supermarkets 5.7 sqm, spread over an average 4.7 POS terminals.

The gross turnover generated with checkout zone articles averages 237,000 euros annually in supermarkets, 514,000 euros in hypermarkets, and 669,000 euros in superstores. The comparatively smaller impulse area productivity of superstores can be explained by the closing of terminals at times when there is less customer traffic. The impulse areas at these terminals "go to waste". But even when business is heaviest, with impulse articles the superstores "only" obtain 2.5 times the usual turnover per unit area, while the overall sales (26.8 million euros) of impulse articles at the analysed stores were 4.7 times the normal productivity per unit area. The average total purchase in superstores is higher than at the smaller stores, but the impulse purchases at checkouts are about equal in all store types. The composition of the basic assortment, the package sizes, and the prices also are very similar for the different store sizes.

Tobacco products with 84.2 per cent of turnover and sweets with 11 per cent account for the bulk of sales of the products displayed in checkout zones. Owing to the different tax rates and purchasing terms, the profit shares grow closer together: tobacco, 62 per cent; sweets, 26.7 per cent. As far as profit is concerned, small ice cream packages attain a 4.2 per cent share.

The small alcoholic drinks stood out negatively in the comparison of profits and space requirements. Retailers are advised to reconsider whether today's consumers really expect small alcoholic drinks to be on hand at the checkout the whole year round, or whether this should be limited to special occasions like carnival time.

The absolute sum earned with products from the checkout zone comes to 34,000 euros in supermarkets, 62,500 euros in hypermarkets and 82,000 euros in superstores. These earnings were figured on the basis of net turnover and the cost prices contained in the stores'

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