During the recent NCA Summer Insights webinar “Checkout Strategies: Driving Shopper Satisfaction & Productivity through Choice.”
Cloeter broke down consumers into five segments based on their lifestyles to look at each type of consumer’s purchasing behavior during their checkout.
On the scale from the healthiest group of consumers to the least, the five segments include “well beings” (most health proactive consumers), “food actives” (mainstream healthy consumers), “fence sitters” (wannabe healthy consumers), “magic bullets” (whenever healthy consumers) and “eat, drink & be merrys” (least health active consumers).
Cloeter has over 20 years' experience of sales and marketing in merchandising. He previously worked for several packaged goods companies as a sales director, including Mars and Coca-Cola.
Why is retail checkout important?
“In total, the US grocery retail checkout contributes to around 1% of total store volume and profit. But it delivers 41% higher profit margin than the rest of the store,” Cloeter said.
“If you put checkout alone as a category, it’s actually the eighth largest category in the store,” he added.
The dollar sales of checkout items have increased by 2.6% compared to the previous year, according to the presentation. The number one category for grocery retailers is carbonated beverages, which is valued at $11bn. However, its dollar sales have decreased by 0.37% compared to last year.
In addition, Cloetter said, according to market research, the average basket size in the US grocery stores is around $31.71. When a consumer buys products from the front end, it will add additional $2.79 to their basket on average.
“That’s putting on top of that $31.71; that’s a 9% increase of that basket size,” he said.
“Not all the retailers are the same. Low-performing retailers sell 12.8 [checkout items] per 100 shoppers, while top-performing retailers sell almost 20.6 items,” Cloeter added.
Impulse Marketing data shows top-performing retailers are converting 24% more shoppers at checkout than average retailers.
“Checkout is not a category that brings people to the store, but it’s definitely the one that adds to the basket size and profitability of a company,” it claims.
Snacks grow faster than any other checkout categories
Among all the checkout items, there are a few categories that drive the majority of the business, Cloeter pointed out, with beverages being the largest sector, followed by candy, including chocolate and non-chocolate products, and magazines. The snacks category, including salty snacks and better-for-you snacks, has the smallest presence on the checkout aisle.
Despite the price increase of candy products in the past few years, candy still sees an 18% share increase at the checkout over the period between 2013 to 2015, according to the data provided during the presentation.
But the “rising star” is snacks, which saw a 57% increase over the same period, dwarfing any other categories, he added.
“Macro snacking trends are driving growth across all segments,” Cloeter added, and with snacks being the fastest growing category at the checkout, “the challenge from a retail standpoint is how we provide that range of choices in a relatively smaller area.”
Put more snacks at checkout aisle with the help of front end innovation
Through data analysis, Impulse Marketing found out that, even though the percentage of people who purchase chocolate and non-chocolate candy products vary depending on the segment of consumers, all segments show a similar percentage (around 56%) when it comes to buying salty snacks during their check out.
Salty snacks itself is a broad segment and includes chips, pretzels, and popcorn. However, alternative snacks, aka better-for-you snacks, like granola bars show the highest percentage of purchase among the “well beings” consumers, Cloeter said.
“When you have additional room in the front end, [snacks] is definitely the segment that has the ability to grow,” he suggested.
Speaking about front end innovation, Cloeter added retailers can put more alternative snacks on the flexible end-caps and “healthier coolers” to further fuel the growth of the checkout business.
What’s surprising is the chocolate category is more appealing to “well beings” consumers than the least healthy ones, according to data presented during the webinar.
“If you try to push chocolate towards a low-income retailer, that’s clearly not a good strategy,” Cloeter said.
Stock all best-selling items at every checkout lane
Cloeter especially warned retailers, who tried to alternate a candy aisle with a non-candy aisle or tried to remove all candy products from the checkout lane, during the Q&A session.
He suggested, “you need to think like your consumer. Once the consumer approaches the checkout, their mentality is to leave the store. They are going to pick a checkout line that they perceive to be the fastest lane to get out of the store.”
“So having the best-selling candy items of all the confectionery range on every checkout aisle is really important, because operationally, you don’t know which lane will be open, you can’t really guess what your customers want.”
Cloeter pointed out stocking 50 to 60 SKUs of confectionery items at the checkout can best capture 82% of the business.