A Retail Audit Is a Mirror

of Your Brand Retail
Performance
Herbert M. Sancianco

Abstract: Companies that have been in business for

so many years and are experiencing a declining sales
trend usually think that their marketing programs are
not working as they should despite the glossy print
­advertisements or catchy television commercials and
the huge advertising budget allocated for this ­purpose.
What such c­ ompanies haven’t done as this is h­ appening
is to do a reality check of their retail presence and
­performance in o ­ rder to determine what is wrong with
their picture at the point of sale. Likewise, they don’t
­really know whether they are ahead of competition
or not.

Keywords: business relationships, competitive

landscape, merchandising visibility, pricing
compliance, supply chain deficiencies, supply gaps,
trade management shortcomings

Retail audits generate valuable data for the market-

ing and sales teams to help them not only rethink
their ­business game plans, but likewise to deeply
­understand on a ­continuing basis the ever-changing
operating e
­ nvironment of each sales channel they are
Herbert M. Sancianco is a Philippine- serving.
based professional marketer honed as What will a retail audit tell the marketer and sales
a business educator, soft skills trainer, management team?
market researcher, brand strategist, There are 10 audit outputs as follows:
and corporate rehabilitator with
over 40 years of experience. He is an
author of three business books on 1. Product availability—the audit will ­establish what
sales promotion, customer service, is the brand’s supply gap in the marketplace. The
and corporate rehabilitation. He just supply gap is an indication of the sales opportunity
finished writing a fourth book on sales
and trade management for FMCG
losses that the company is incurring, which can be
products. He can be contacted at ­associated with the ­declining or stagnant sales ­velocity
marketingpilosopo@yahoo.com. that is being experienced.

© Business Expert Press 978-1-94819-890-5 (2018) Expert Insights

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 A Retail Audit Is a Mirror of Your Brand Retail Performance
The supply gap can be caused by a real
supply deficiency and/or weak sales
­coverage by the sales team or its ­extended
sales distribution stakeholders. Narrowing
the gap equates to rebuilding corporate
commercial success and profitability,
and not to mention increasing market
shares to the detriment of competi-
tion whether it involves a single brand
single company or a multi-brand single
­company condition.
The supply gaps that are left unre-
solved will result into a customer fallout
for the brand. Brand switching will be
rampant and can dictate the downfall of
the brand. That is because the consumer
disappointment over the brand’s inabil-
ity to satisfy their lifestyle need will be
clearly established through research.
2. Pricing landscape—the marketing team
needs to know firsthand how the brand
is being sold out there, given a price list
that they would like the retailer to f­ ollow
or the so-called SRP (suggested retail
price), and how their brand is compared
to its competitors. Realistically, the brand
owner usually tolerates the practice of a
retailer in selling its products at a higher
level given the business reasons some
retailers have for doing so.
However, should the sales report of that
retailer will show a weak sales move-
ment compared to its nearest located
competitor, the marketing team thru its
sales c­ ounterpart will call its attention
and would likely stop selling to that err-
ing retailer if nothing is done to address
the concern.
Modern trade accounts such as the
­supermarkets, particularly the chain-
operated ones, tend to follow the sup-
plier’s SRP guide. Non-chain accounts
largely do not, as they will always exceed
the SRP guide and sometimes to price a
brand by as much as 10 percent more.
There are cases where the bigger pack-
age sizes are sold below the advertised
SRP while the smaller package sizes are
sold above the price guide. The logic here
2 © Business Expert Press 978-1-94819-890-5 (2018)
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is to move more volume for the smaller
package sizes, which in turn will make
up for the smaller profit earned from the
large package sizes.
General trade accounts like the small
community stores and wet market stalls
generally do not follow the supplier SRP
guide as their mark-ups are as high as
50 percent. They usually prefer to sell
the small-sized SKUs (store keeping units)
relative to the price-conscious demo-
graphic market they serve and despite
a good price discount from the supplier.
It will be surprising to note that these
retailer types almost price all of the sup-
plier’s SKUs at the same level since they
feed on the impulse buying behavior and
customer loyalty to the store.
Price distortions likewise occur in sub-
urban and rural areas due to the supply
chain cost, and particularly when an
area distributor is involved.
Hence, the brand’s sales performance
will largely vary by sales channel, type
of retail store and headcount, and their
specific geographical location.
The challenge that is posed by this
reality is immense because either the
brand’s pricing strategy may be e­ rroneous
as it may not have considered the down-
line supply chain system cost-plus fac-
tor, or the retailers themselves have
consciously set what they think should
be their retail price to the target market.
For the first assumption of the downline
supply chain system cost-plus ­factor, the
brand may have to review its net profit
objective in actual value turned over or
the percentage number. A ­retail audit
should be able to establish the competi-
tive landscape in this regard so that the
right management decision can be made
to address the red flag.
Hence, if all other brands are priced at
the same level at the last retail point, the
competitive advantage in selling more
volume will largely be reliant on the
gross profit that the end retailer makes
compared to the brand’s competitors.
Expert Insights
 A Retail Audit Is a Mirror of Your Brand Retail Performance
The sales velocity achieved may not be
solely driven by the brand’s marketing
communication noise.
Brand leaders are usually challenged
by their rival brands who give better
profit margins to the end retailer through
a host of buying and selling incentives
such as on-pack promotions, bonus
packs, and/or product rebate programs
to ­encourage more volume sell-in. Raffle
promotions, on the other hand, accelerate
the sell-out of their stocks, ­particularly
if the prizes being offered are extremely
attractive.
The second assumption of the grass-
roots retailers dictating how much a
brand should be sold is the more b ­ affling
­scenario. Despite a hefty profit that
those retailers earn, they nevertheless
charge a higher price to the dismay of
the brand owners. They somehow seem
to know the price sensitivity limit of
their c­ ustomers relative to their impulse
­buying behavior.
Mind you, in the retail audits I have
conducted, their final price is almost
uniformly applied in all suburban and
rural market areas.
So even if a new brand entrant h­ appens
to be lower priced, many of the grass-
roots retailers will price that cheap brand
almost at par to the market ­leaders,
particularly if that cheap brand has an
­attractive packaging design and has a
noisy integrated marketing communi-
cation program under way.
Many brands affected by this phe-
nomenon have tried with very marginal
success to convince those misbehaving
retailers to see it their way.
There is a catch-22 situation here for
a management decision. If the brand
pulls out from those erring retailers, it
loses as a supply gap is created in favor
of competition. If they don’t act upon the
problem and let it just move along, sales
performance in the affected areas will
have a hard time showing a respectable
growth over time, or none at all.
© Business Expert Press 978-1-94819-890-5 (2018)
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3. Display visibility—this audit point con-
firms what SKUs are available for sale
at the sales channels. Their respective
presence at the shelf will determine the
offtake velocity for each SKU compared
to competition, which may not have an
attractive display. Being unable to display
a particular SKU due to the space issue
creates a sales opportunity loss for that
SKU and a misleading offtake record.
Moreover, the audit will establish whether
the display planogram is being followed
by the merchandising service agency for
the channel outlets concerned—usually
applicable for the modern trade accounts.
Display planograms that are not s­ atisfied
means that the store may lack the c­ omplete
product line that can be ­displayed by
the shelf refiller. This ­condition can be
associated with the ­earlier audit point
establishing the brand’s supply gap in
the channel.
4. Retailer feedback—the retailer’s
­merchandise purchasing officer or the
store owner is a valuable informant for
the brand insofar as knowing how it
stands with the retailer for its income
performance and comparative advantage
against rival brands that the retailer like-
wise sells. A negative feedback should
be a loud-sounding fire alarm bell.
But why should a fire alarm bell even
sound out if corporate relationships are
strong and healthy?
The key ingredient of a good and strong
relationship with an account particu-
larly those classified as key accounts is
the customer service program that the
sales team is imbibed to follow. Some
of the written rules may not sometimes
apply due to the complexity of prop-
erly ­handling the key accounts. Hence,
the corporate sales representative and
his/her manager will have to use other
tactics or strategies that will work and
may not be according to the house rules.
For example, there are salesmen who
(as they are) may be considered or seen
to be close to the owners of a high-value
Expert Insights
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