Pets at Home is making more money out of less space and with reduced inventory as a result of a macro space optimisation programme deployed in conjunction with Symphony RetailAI.
Presenting at Xcelerate 2019 in Paris last week, Mark Wilkinson, head of space planning at Pets at Home, revealed how the initiative had helped the business deliver the best customer experience across all stores, regardless of size.
With 452 stores, Pets at Home is the UK’s largest pet care retailer with stores now ranging in size from 3,500sq ft to 18,000sq ft. However, a growing portfolio of potential pet care products coupled with a drive for new added value services in-store, including vets and dog grooming, demanded a fresh approach. “We needed to do something different – our inventory investment was increasing but stock turn was decreasing and space for the fastest selling SKUs was being challenged. Replenishment was also becoming more challenging and there was more chance of a poor customer experience due to an empty shelf,” said Wilkinson.
According to Wilkinson, 25% of Pets at Home’s lines were delivering very little return. “In every area of the business we had a tail and we were putting too many SKUs into the mix,” he said.
The retailer also recognised that localisation had a role to play in the product offer. Urban stores, for instance, had fewer dog customers but more customers with cats. In rural locations, meanwhile, “small furries” were less prevalent while aquatics were popular in areas of ethnic diversity.
“We could therefore optimise each store to its own customer base,” Wilkinson told delegates.
In tandem with Symphony RetailAI, Pets at Home began looking at the macro space within its own business. It optimised categories and prepared planograms for a test store and then compared the findings with Symphony RetailAI.
In a scenario where Pets at Home took 20% of the space out of the store to introduce vets and dog grooming, it found the move cost 0.49% in sales, took six man days to compute and for just three scenarios. Symphony RetailAI’s analysis delivered a 2.49% increase in sales, took one man day to compute and covered 20 different scenarios.
If the existing space was maintained, Pets at Home found it could achieve a 2.5% uplift in sales but Symphony found a 12.15% growth opportunity.
“It was too compelling and we had to move forward and convince the business,” Wilkinson recalls.
Once the business had the sign-off on the software it began to build source data in the cloud to create a database to feed Symphony RetailIAI. It also needed to check data and planogram quality and consider how to deal with local initiatives, new products and promotions. It also created optimisation settings.
Wilkinson revealed Pets at Home stopped promotions in some instances since there was no gain and the business was simply giving away margin.
And it provided more days cover on shelf for its store in Guernsey to reduce the number of deliveries required and associated costs.
A pack size rule was introduced to ensure products fitted on shelf and a ‘must sell’ setting for 1,200 lines including 1,000 best sellers and a further 200 demanded by the retailer’s CRM.
The solution was trialed in six mature stores and across three formats: small, medium and large. The optimisation results delivered uplifts in line with Symphony RetailAI’s earlier projections across all formats. According to Wilkinson, 50-75% of the theoretical results were transferable to the planogram build.
To date, Pets at Home has implemented the optimisation programme in 10 stores and it has gone on to influence the retailer’s new store concept, where it releases 20% of space for new in-store experiences. According to Wilkinson, in stores where vets and dog grooming have been introduced, no sales have been lost. And, in stores where the existing space has been maintained, stores have recorded a 3.5% like-for-like sales increase above control performance. Further there has been no negative feedback, Wilkinson added.
Further new experiences are now being explored including a facility to adopt a cat, run in conjunction with the RSPCA; an interactive pet village, which drives footfall by 9%; aquatics centrepiece; education zones for kids; dog wash; an open view dog grooming parlour, The Groom Room; puppy socialisation events plus Vets4Pets.
Wilkinson reported Pets at Home plans to optimise the assortment within the existing space at a further 30-50 stores and introduce the new concept into 15-20 branches. The software will also be introduced into range review planning in order to speed roll out.