THE CONSUMABLES CUSTOMER (GREAT ARTICAL)

[Anonymous]

The Consumables Customer and the Importance of Product Facings
Most in the supplies industry know that printer manufacturers depend on the strong margins of consumables to help produce profitable results. The leader in the industry, HP, reported that 58% of its third-quarter results came from supplies. That is a lot of money considering that HP’s Imaging and Printing Group reported total revenue of $5.9 billion. Supplies are big business with estimates that the worldwide supplies industry will gross $55 billion this year.
Retailers want to ensure that their channel remains the largest sales outlet for supplies. They provide many incentives for customers to shop for their supplies in retail. Retailers attract customers through in-stock guarantees, recycling programs, promotional efforts, customer support, and convenience. These efforts bring customers to the store, but they do not guarantee that the customers can identify the products they need, an equally important part of the sales equation. Product facings help customers easily and quickly locate a product on retail shelves.
The number of times a product appears on the shelf brings strength to any item in retail. Of course, obtaining highly valued retail shelf space can be tricky and expensive. Since selling product in retail is so expensive, manufacturers need to obtain the biggest bang for their buck; that is why having multiple product facings throughout the retail store is important.
Having multiple product facings is like advertising to the customer without a campaign. When a product is faced multiple times within its department, the customer is more able to find it because it pops off the shelf. Additionally, when a product appears outside the consumables aisle, it reminds customers to add the item to their cart.
Current Analysis started tracking the product facings of inkjet consumables in the Dallas market almost a year ago, and the results are quite surprising. The number of house brand product facings is increasing. In addition to new SKUs, retailers are showing multiple product facings of high-volume SKUs. The following chart illustrates the percentages of product facings at the retail stores we visited. The second chart shows the rise in the number of third-party product facings and the subsequent decrease in OEM product facings.

*Data is from a survey of select stores within the Dallas, Texas, market: Best Buy, Circuit City, CompUSA, Costco, Best Buy, Office Depot, OfficeMax, Sam’s Club, Staples, Target, and Wal-Mart.
A majority of the OEM players continue to hold onto their product facings, but Lexmark is losing them to third-party supplies. In December 2004, Lexmark held 13% of the product facings at the retailers surveyed. Since that time, the manufacturer’s number dropped to 9%. Meanwhile Office Depot, OfficeMax, and Staples increased the number of product facings of their respective house brand supplies.
The threat of house brand supplies is going to continue to increase now that retailers have a taste of the profitable results. Their onslaught will change the retail landscape for OEM players. OEMs will have to fight even harder and pay more money for the retail space and product facings.
This is only a sampling of retail product facings. However, if OEMs consider the amount of face time they are losing to customers in one market, they will recognize that the situation is much grander on a national scale.
Consumables customers, like all customers, want to be able to find a product easily and move on with the rest of their shopping experience. Having multiple product facings allows the customer to find the product they need without hassle. More than half the battle of reaching the consumables customer is putting the product on the shelf. Being able to provide multiple product facings in retail is the way to ensure consumables sales.

[Author]

November 7, 2005 at 10:26 AM