“Selling Cells”

How the Battery Category Can Deliver Growth to the International Retailer

Batteries are a unique category. They represent a significant opportunity for multiple retailers, but it must also be said they come with some difficult, but interesting challenges. Here we will look at how the consumer relates to batteries, how they see what happens at store level and what implications all this has for your business. We will also look at the various solutions which have been applied by retailers to mitigate the problems associated with merchandising batteries and what practical steps can be taken to drive sales.

Batteries are a low-interest product for the consumer. The fact they are bought only to make another device work means consumers see them as a grudge purchase. No one likes buying them and no one will ever treat themselves to a nice pack of batteries at the end of a tough day at the office. They are always forgotten. With 65% of sales being unplanned, batteries have been called the “ultimate impulse purchase”.

Regrettably however, retailers can see them as low interest also. Batteries are seldom “core” to a retailer and indeed there is little evidence supporting the idea of a “destination” store for batteries so many do not give it the focus it deserves. This is a mistake: the simple fact is batteries need to be seen to be bought.

Batteries are used by everyone and the demand is growing. The average west-European home has over twenty battery operated products. Demand is “device driven” with growth shown in three discreet areas.

Firstly, in the purchase volume of batteries: average pack size is growing. Twin-packs of AA were a regular feature a few years ago, now they are seldom seen. The norm now is for more than four AA batteries - multi and mega-multi packs of batteries for power-hungry families presumably with armies of robotic toys and TV units bristling with remote controls. Packs with over twenty cells were unheard of five years ago, now they are commonplace.

Secondly devices are moving to be more high tech. The latest features on products like digital cameras, like flashes and LCD screens, drain large amounts of energy in short bursts rather than the older products like torches or radios which slowly drain a battery. This move toward “high-drain” devices offers the opportunity to premiumise the category and trade-up buyers to a better-suited and more profitable offering.

Finally, there is growth in certain sized batteries. It will be of no surprise that however much power battery manufacturers can squeeze into ever smaller cell sizes, device manufacturers will design new and exciting features which will drain that cell faster. The smaller sizes like AAA are enjoying double-digit growth because of MP3 trends. So too are coin-sized batteries, three of which, along with the LR44 and the LR1, account for 80% of all specialist sales. AA, whilst in growth, is flattening, but is still the driver of battery business accounting for some 65% of all battery sales. Larger C, D & 9v are generally in decline.

One noteworthy measure of consistency amongst all these trends is the average battery buyer only purchases batteries a little over twice a year. This is interesting and backs up research which has found that most folk don’t know the price of a pack of batteries.

You won’t need me to tell you retail prices are under increasing pressure and margins are being squeezed as never before. It is likely this will not only continue in the future, but escalate. There is a compelling argument to gain every add-on sale from high margin product lines like batteries possible. And batteries are high profit: in a recent study, the average multiple grocer needed to sell twenty-two bars of chocolate to get the same profit as from a single pack of batteries. Trading consumers up through a range, using premium and super premium alternatives can be effective, as can be offering tempting multi-packs to increase the size of the till-ring.

It would be difficult to think of a single product, FMCG or otherwise, which is sold in a wider variety of outlets. Even mega-brands like Coca-Cola & Levis are not sold in as many types of retailer. They are ubiquitous; and with batteries seemingly sold by everyone, if you don’t sell those batteries, your competitor will.

Visibility is key to selling batteries. Allow me to turn that phrase on its head: if batteries are seen, they are bought.

A global survey showed a typical multi-regional operator will convert between 8% and 15% of shoppers. This is a measure of shoppers who having shopped at a store in a year, purchase batteries from that store. At the top end of this range, support for the category such as promotion and visibility will make the difference. But there are some stellar successes who are leaving the pack behind. What strategy are they taking and how is this driving sales?

Tesco’s in the UK convert 26% through an excellent full-range offering. Specialist, electronic, rechargeable and even watch and hearing aid batteries all give them category authority. People come back. Carrefour converts 36% by using their large stores to support a big main fixture and smaller secondary fixtures around the store in the high-traffic areas.

By any meaningful measure Wal-Mart is the world leading battery selling. Their strategy is simple - and stunningly successful. In essence, they map out store floor plans and position their battery sites such that a shopper will, at any given location in the store see at least one battery location clearly. So whether you’re standing in the middle of the DVD, freezer cabinet or ladies unmentionables aisles, you’ll be able to see them somewhere. Putting batteries over other impulse category lines must have been a leap of faith for someone at the top. They put visibility as the keystone of their results and their results have been jaw-dropping. They convert 51% of shoppers who have bought at their store in a given 12 month period to buy batteries. Remember, this is percentage; the absolute size of Wal Mart has no bearing on the effect.

Batteries are also seasonally driven. December alone is a double-month and with two-thirds of annual sales coming in October through to January, execution in this period is essential. There is an adage in the battery business: you are either planning for Christmas, executing your plans at Christmas, or getting over and reviewing last Christmas. The strongest promotions need to be reserved for alkaline at Christmas on the biggest selling line – typically AA. For the New Year, why not try rechargeable – sales are buoyant for this product range then.

In looking at how to sell batteries there is no room to duck the fear many retailers have that batteries will be stolen. Batteries are indeed a high-value, highly pilfered item. In fact, batteries along with razor blades and condoms are the three most stolen items. Nowadays there are a number of clever and highly effective ways of stopping thieves “sweeping” whole pegs loaded with batteries into an open bag. “Camel-backs” and rocker mechanisms are a cheap and effective deterrent.

Of the cost associated with shipping, say a piece of fruit twenty-thousand kilometres from the dockside in New Zealand to the shelf of a European retailer, fully 95% is spent in the final twenty meters. In other words, getting the product from out of the stockroom an onto the shelf. Amazingly, only 5% of the cost is made up of moving the goods half-way round the world. Batteries are fiddly and difficult to merchandise on pegs. Solutions such as shelf ready shippers, pre-loaded trays, clipstrips and the like can speed up the restocking of batteries and must be considered a serious benefit to the retailers operation.

Given how important execution is in-store, plan-o-gramming and fixture design and placement can be a pretty large topic in of itself. But a recent in-depth study of shopper behaviour sheds considerable light on the viewpoint of the consumer towards the category. Researchers took a hypermarket-chain with a large two meter battery fixture and filmed shoppers. 94% of them did not even notice the fixture – just walked straight past or missed completely. Of the 6% that even made eye-contact with the fixture only 1.2% actually went on to purchase product. What was noticeable was the great deal of time individuals spent in front of the fixture, picking up and looking at the batteries. Remarkably, even when the customer showed active interest in buying batteries (by picking them up) there was still only a one-in-five conversion rate. What is going wrong?

Let me be clear: I am not suggesting that the retailer had the wrong brand or the wrong price-point – all considerations we are used to thinking about, but that is not what the data is saying. I would suggest our shopper is confused. Batteries are a difficult category for the consumer - a very difficult category. By way of an example, let us say you have a toy department in the run up to Christmas selling a range of battery-operated toys. Put yourself in the shoes of a shopper who has just bought a doll. Imagine the questions they must answer before they can buy batteries from you:

Does the toy need batteries?

What size batteries does it take?

How many batteries does it need?

Where are batteries in the store?

Which brand do I trust?

What size is correct for the toy?

What pack quantity do I need?

What is the price?

Are they on promotion?

This “purchasing decision tree” as it is known presents a considerable challenge, but also a significant advantage to the retailer who can simplify the shoppers purchasing decisions for their stores. Simplicity is the key here - too much choice will just turn off a prospective buyer.

Figure One.

So what actually works? Advances in science offer an insight. A separate retinal-scanning study, which allowed us to see what the shopper is truly focussing on, revealed how shoppers behave in front of a fixture. They tend to “read” the fixture like a book: from left to right and from eye-line down towards the floor (see figure one). This gives us the scheme for the best battery plan-o-gram.

Keep your brands running from left to right and your sizes running downwards, with AA at eye-level and the square 9v splitting the similar looking AA & AAA cells.

Brands help, but data shows that there is no such thing as a “must-stock” brand. Pricing is also shown to be an indication of quality. A shopper can look at the colour of an avocado or squeeze the product to sense its condition or ripeness. There is no analogue for ‘squeezing’ batteries – they are designed to be as similar as possible – to within microns. In fact, the retail Buyer makes the purchasing decision and must help the consumer by using price and brands accordingly in their mix.

As contemporary culture surrounds us with more and more portable devices, batteries will become almost omnipresent. We can expect the retailer who builds a category with authority and clarity will have the advantage of satisfying their consumer’s needs and of squeezing every last drop of profit from their battery category well into the future.

Mark Forrest has nine years experience working in the battery market. He has worked for brands like Ever Ready and Energizer and is currently the European Sales & Marketing Manager for Maxell batteries.

forrestm@maxell.eu

© International Trade Publications – April 2005