Picture a modern-day car factory. Parts are shipped “just in time” for assembly. People and robots work swiftly on the shop floor, reducing the cost to make each vehicle. Not a movement is wasted. Now picture today’s grocery distribution channel. Products are packed carefully on pallets at the warehouse to maximize space in the delivery truck and to make it easier for staff to unpack items in the store. Once in the aisles, however, the system breaks down as employees laboriously take one can out of the box at a time and place it on the shelf. Then repeat–again and again. It’s the equivalent of having those auto workers unpack lug nuts one by one and screw them on with their fingers.
For some retailers, it looks like the “lug nut” approach is on its way out. In its place, they are introducing retail-ready packaging (RRP) that requires minimal unpacking by employees in the aisles.
Retail-ready packaging (RRP) can be as simple as placing a corrugated box of canned soups on the shelf. But true RRP requires extra merchandising finesse and planning
First introduced about five years ago in the U.K., RRP is now making its way to Canada, with Walmart and Loblaw Companies leading the charge. Walmart Canada first tested RRP in its confectionery department, says vice-president of supply chain, Guy McGuffin. It intends to covert another 10 dry-food categories over the next year.
RRP can be as simple as placing a corrugated box of canned soups on the shelf. But true RRP requires extra merchandising finesse and planning in everything from how the boxes are designed, branded and labelled to how they are supposed to be opened by staff.
RRP has already suffered growing pains. Initially in the U.K. each chain had different specifications for packaging, causing headaches for manufacturers, says Lesley McKeever, senior vice-president of industry affairs with Food and Consumer Products of Canada (FCPC). To prevent that from happening here, FCPC and the Canadian Council of Grocery Distributors (CCGD) developed industry-wide standards for RRP. Among them, 22-inch shelf depths for stores to stock cases two deep, says David Wilkes, CCGD’s senior vice-president.
Obviously RRP can help retailers cut down on labour costs. But the advantage to manufacturers isn’t as clear. After all, the cost of redesigning packaging falls to them. Manufacturers are also concerned about what their product will look like still in boxes on the shelf.
The fact that it is Canadian retailers, not Americans, pushing RRP first is another issue. Most manufacturers only do around 10% of their of North American business here “so it’s like the tail wagging the dog,” says McKeever. Still, anticipating the day that U.S. chains adopt RRP, the FCPC and CCGD are working with their counterpart organizations in the U.S. to develop North America-wide standards.
Walmart’s McGuffin believes that will be worth it since brands can benefit from RRP. It improves shopability for consumers, he says, which can result in higher sales. A while back, Walmart’s U.K. subsidiary, Asda, introduced RRP in the frozen pizza category. The pizzas used to lay flat, but with the new packaging they stood up. Customers saw the pizzas’ front cover and Asda sold more of them. “Retail-ready packaging solutions can enable brands to gain greater prominence within the category, which can also help drive sales growth,” agrees Stewart Samuel, senior business analyst with IGD in Vancouver.
IGD, which works in RRP, sometimes takes manufacturer reps into stores to work alongside shelf stockers. The point, says Samuel, is to show them the problems of current shelf replenishment. These include difficulty knowing what’s in the cases and knowing where on the shelf each SKU is supposed to go. Done well, RRP can overcome these issues, he says.
RRP works best for high-volume categories with a “low level of complexity,” says Samuel. That includes canned, bottled and packaged items. These are, after all, the lug nuts of retail. The faster and cheaper they move, the better.