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when brokers can
offer a low cost
merchandising service
The smaller food suppliers seem to swap their own sales force for a broker service, only to go back to a direct force a
few years later. Sometimes they then return to a broker yet again. Brokers naturally present themselves as an effi cient
and experienced alternative. Even large grocery companies sometimes go with a broker service –Kelloggs has just done
that here in Australia. The question that has puzzled many a Sales Director is ‘How can you decide whether a broker
would be less expensive?’ (The question of better I leave to another day!) And why should a broker be able to offer a
better service that is lower in cost?
A couple of years ago I was able to compare the merchandising costs of a number of Australian Foodsuppliers.
These companies differed in size, and indeed differed in the objectives they set for their fi eld force. Nevertheless I was
intrigued to discover that costs can be predicted with relative ease.
The costs of a merchandising service are a function of what is required to be done in store, and the number of stores
that must be attended on an average day. In-store activities can typicallyinclude:
• Recording of your current facings
• Recording your shelf prices
• Recording competitive facings
• Recording competitive prices
• Recording promotional activity
• Recording your out of stocks
• Monitoring promotional compliance
• Building promotional displays
• Erecting display material
• Tidying up shelves
• Reporting and fi xing Shelf Ticket problems
• Removing out of codestock
• Removing damaged stock
• Placing stock on shelf
• Rotating stock to bring older stock forward
• Selling in and effecting minor shelf changes
• Selling in a complete section relay
• Relaying a section
• Selling in secondary displays
• Preselling up-coming promotions
I have deliberately sequenced these with the very basic options fi rst. Some merchandising teams are not required to doany more than record, and these are referred to somewhat derisively as ‘tickers’ by store staff. It is more common for
company staff to be required to erect promotional displays and tidy shelves. Once we get to placing stock or carrying out
stock rotation, merchandisers are beginning to spend quite a bit of time in store. Tickers typically can get into a store
and out in twenty minutes,provided the range is not great. A merchandiser completing most of the activities listed here
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for a company with say 200 SKUs (in the average store) and turning over $500 million a year (in Australia) will be
spending three or four hours in store.
The major suppliers typically are able to operate their sales forces at a much lowerproportional cost than the smaller
supplier. Thus a major supplier may spend 1% or 2% of sales on direct merchandising costs, whereas a small supplier
may battle to contain the same costs to 6% or 7% of sales. The reasons for this are quite simple. Because there is more
work to be done in store for a big supplier, their merchandisers may only call on two to four or fi ve stores a day. The
smallercompany, with a smaller range and fewer facings, because their sales are much lower, will need to make eight to
twelve or fourteen calls a day. This may seem quite reasonable, till you analyse the time spent between stores. At ten
calls a day, the merchandiser will only spend 60% of their time in store. The rest of the time is spent getting to stores.
The merchandiser doing three calls a daywill have to make only two inter-store movements, and quite possibly will walk
between stores. Their time utilisation in store can reach or exceed 90%. The merchandiser from the smaller company
will also have a far bigger territory, with maybe ten times the stores to cover. This also increases travel distances and
travel times, particularly if they are also required to carry out other duties...
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