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Retailer Focus: The Trade-Up Effect

Posted on  | August 19, 2014   Bookmark and Share
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Set your store for more valuable, natural upsells

Studies tell us that the average purchase in the off-premise channel is over $30 and under $19 at grocery. That said, a $6.00 Moscato should be the add-on to the sale, not the whole sale.

How do we get there? How do we get the average cart to reflect a trade up action? Our audience is time starved, hurried, looking at their smart phone and attention-challenged. So with all those obstacles, how do we get them to increase the average cart and trade up into a brand, category or SKU that we control? How do we get them to trade up to higher end wines? How do we get the gross margin to work in our favor and not into the single digits competitive brands? Here is one way how.

Shelf Talk

There is a ton of science to store layout. Where the shopper goes in your space, how you set goods and what shelf they go to is all measured, controlled and organized. If you set your store randomly without any metrics you are absolutely leaving money out there and can miss out on that trade up effect.

The Rosen Retail theory is that people don’t know the name—and additionally are not brand loyal to—any good or service that costs under $6.00. That is a price shopper and price is their driver. Goods and services that have a ring of $10 or higher have a higher “perceived value”. True or False is not important. That gray area—that ring space between $6-$10—is the trade-up effect. That is the space that can make or break a season, weekend or day of sales. Our data all supports this theory.

A $6.00 item is bought by price while other, more costly, items are bought by brand. That said, there is a huge opportunity for trade-up and trade-out of brand and gross margin.

Customers come into the retail channel and tend to ask for wine by varietal and liquor by brand. When the conversation starts like this—“I would like a bottle of Dewar’s”—that is a called product. In the wine world, people come into a retailer and are apt to ask for “a red wine under $10.” When the type of wine varietal is mentioned, that is your indicator that you have a trade-up customer! Let’s tackle it!

That is exactly how the visit happens. Now, how do we get that ambiguous “ask” into a over-$10 item? Or, better yet, how do we get that guest to buy what we want them to, with a wonderful gross margin for us?

Steering The Choice

I always emphasize: When stocking your store or bar/restaurant, have an incredibly large assortment of goods between $8.99-$12.99 retail, that price point delivering 25-30% gross margin. And limit the stock that is $8.00 and under. There is a psychological effect that happens to a customer when faced with choice where the options are clear. That customer chooses higher rather than lower!

By limiting your downward price and gross margin exposure, you eliminate what I like to call “shopper paralysis.” If you set your stores and restaurants like this you will see the ring go up, the gross margin go up and you will see your customer trade into a wine that you have chosen for them, letting your expertise shine through while your lower margin goods fall by the wayside.

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Rosen Retail for Alcohol Beverage offers support to retailers and suppliers alike, having created Supplier Boot Camp and Retailer Boot Camp and other award-winning programs that increase gross margin for retailers and cases sold for suppliers. Brian Rosen can be reached at brian@briandrosen.com.


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