I shop at Sprouts every Saturday. Like a good shepherd checking on his flock, I always make it a point to look for the Tieman’s Coffee POP display we made over 9 years ago. Sometimes I have to go out of my way to find it. One week it’s in the coffee aisle, and the next week it might be in a completely different section of the store. Shortly after we made the display, we wrote a mini case study about its remarkable performance. We used baseline data from Tieman’s and shared how the display increased sales 500% (6-fold) over its historical sales when it shared crowded shelf space with other competing brands. The display paid for itself in 9 days, outsold Starbucks 17:1, and generated a 3400% return on investment. So, for each dollar Tieman’s invested in the display, the company received $3400 in profits.
What we didn’t know at the time of the original case study was anything about the potential longevity of the display. While we don’t have access to the last 9 years of sales data, we can only assume that sales have continue to be strong or Sprouts would not have continued the program. If we conservatively assume constant profit margins and no growth in sales from Year 1, the display has generated over a 30,000% return on investment. So, each dollar invested in the display has generated a mind-blowing $30,000 in profit.
The Tieman’s Coffee example embodies so much of what’s important in retail merchandising and so much of what people miss. Let’s start with what most people miss.
Your Display is an Investment. The first thing they miss is that a display is not an expense. It is an investment. From an accounting perspective, yes you may expense the cost of the display in Year 1, but the right mentality is to consider your display an investment, which in turn, should generate a high return on investment. I can count on one hand the number of customers in the last 20 years who have ever mentioned the words “return on investment” or “ROI” in any discussion about a retail display project. It is puzzling why there is so little emphasis on ROI and so little effort to measure it or even measure something as simple as sales lift.
The Impact of Longevity. The second thing people miss is the longevity of a merchandising program. The only time we generally hear about anything related to longevity is when the customer is interested in a corrugated or “temporary display.” Temporary displays are appropriately named since they are designed for in-and-out programs, new product introductions, or promotional campaigns. The emphasis on keeping the display spend reasonable is important to making the economics work since corrugated displays have such a short shelf life. In contrast, permanent displays are designed to last much longer. However, it is rare that customers discuss display longevity objectives or expectations with us. Yet, as shown in the Tieman’s example, longevity has a tremendous multiplicative effect when it comes to high ROI investment. If, for example, you can pay for your display with the profits from the opening order, the economics become much more attractive with each order, and the longer the program stays alive, the higher will be your cumulative high return on investment.
The Importance of Design. The third thing people miss is the priority that inspired design and merchandising effectiveness deserves. Yes, cost is important, and it is a critical component of the ROI equation. But, the design of the display, its merchandising effectiveness, and the ability of the display to generate revenue is what feeds the numerator of the ROI equation and what ultimately determines the overall success and longevity of the display program. The majority of the RFPs we see request pricing for a set of displays that have already been designed, and the focus is a “procurement mentality” where the lowest cost wins. Imagine the difference if brands and retailers started with a design contest where the challenge would be to create the most inspiring displays that have the highest revenue-generating potential. It would be a different conversation.
Let’s return to the Tieman’s example. Among that key factors that contributed to the success of that program and its high return on investment were the following:
- Off-Shelf Merchandising– Tieman’s struggled to compete with bigger, more well-funded, and better-known brands like Starbucks when its product sat should-to-shoulder on the gondola shelves in Sprouts. It wasn’t until it separated itself from the traditional inline coffee category noise that its sales really took off. Simply put, the freestanding display was more noticeable and visually attractive than the inline coffee products. Yes, it required an investment in the display, but as we have seen, the return on investment was well worth it.
We have seen incremental sales lift with so many lesser-known brands by transitioning from on-shelf positioning to off-shelf merchandising with a free-standing display. Buddy Fruits is one example of a company that struggled to compete inline with large national CPG brands. We created the mobile dump bin display shown below which was located in the produce section of grocery stores. Sales took off.
- Mobile Merchandising– Simply adding wheels to the Tieman’s display enabled Sprouts to position the display in many locations throughout the store. In effect, it became both a destination product as well as an impulse purchase. That is, repeat customers would regularly seek out the display to get their Tieman’s fix. But, the display also generated significant impulse sales when customers happened to notice the display at the end of the bulk foods aisle. The mobility of the display also played an important role in its longevity, since new locations for the display always helped to keep things fresh.
- Effective Design– As is the case with so many other successful displays, the Tieman’s display included numerous best-practice design elements. First, it had a small footprint which helped Sprouts maximize sales per square foot- a key metric for retailers. Second, its pre-finished birch plywood construction was built for durability. Even after 9 years of abuse, the display looked great. Third, it featured effective story-telling graphics. As a relatively unknown brand competing against the likes of Starbucks, Tieman’s used graphics to quickly introduce its ultra smooth, flavor-rich, nutrient-dense, and low-in-acid coffee. A single cup of Tieman’s coffee contains 5 times the daily requirement for antioxidant production. The graphics were also designed to be interchangeable, which is another proven way to extend the life of a display.
The Tieman’s display is a success story from which both brands and retailers can learn. It speaks to the importance of inspired design, the benefits of investment vs. cost mentality, and many other financial and non-financial aspects of proven POP display programs.
Jim Hollen is the owner and President of RICH LTD. (www.richltd.com), a 35+ year-old California-based point-of-purchase display, retail store fixture, and merchandising solutions firm which has been named among the Top 50 U.S. POP display companies for 9 consecutive years. A former management consultant with McKinsey & Co. and graduate of Stanford Business School, Jim Hollen has served more than 3000 brands and retailers over more than 20 years and has authored nearly 500 blogs and e-Books on a wide range of topics related to POP displays, store fixtures, and retail merchandising.
Jim has been to China more than 50 times and has worked directly with more than 30 factories in Asia across a broad range of material categories, including metal, wood, acrylic, injection molded and vacuum formed plastic, corrugated, glass, LED lighting, digital media player, and more. Jim Hollen also oversees RICH LTD.’s domestic manufacturing operation and has experience manufacturing, sourcing, and importing from numerous Asian countries as well as Vietnam and Mexico.
His experience working with brands and retailers spans more than 25 industries such as food and beverage, apparel, consumer electronics, cosmetics/beauty, sporting goods, automotive, pet, gifts and souvenirs, toys, wine and spirits, home improvement, jewelry, eyewear, footwear, consumer products, mass market retail, specialty retail, convenience stores, and numerous other product/retailer categories.