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Scent Marketing

BY CSA STAFF

Retailers are discovering the important role scent can play in the retail environment. Although scent marketing is still an emerging industry, the trend is expected to grow dramatically. Carmine Santandrea, CEO of ScentAndrea, Santa Barbara, Calif., spoke with executive editor Marianne Wilson about branding’s new elixir.

Chain Store Age: How does smell compare to the other human senses?

Carmine Santandrea: The sense of smell is more powerful than any of the other senses because of its ability to appeal to the emotions. All sales promotion must appeal emotionally. Employing an emotional appeal like smell allows shoppers to become immersed in the experience and encourages them to linger longer.

CSA: Why is so much attention being focused on scent marketing?

Santandrea: Because the technology is now easy to use and far less expensive to apply than ever before.

It is also because of the failure of advertising to capture the attention of the consumer as it once did. Scent causes inquiry. In other words, when shoppers smell something appealing, they tend to think: “That smells good…where is the smell coming from?”

CSA: How are retailers using scent marketing?

Santandrea: They are using scents to create a more comfortable, positive and inviting atmosphere. Such an atmosphere not only makes for a better shopping experience, but also tends to create repeat traffic.

CSA: What impact do scents have on allergies?

Santandrea: Iwas just on a panel with the country’s leading authority on scent, Dr. Rachel Herz from Brown University, who said that there is absolutely no evidence of fragrances having anything to do with allergies. And that is because people actually are allergic to the allergens that typically accompany a smell. For instance, someone who is allergic to pine will not have a reaction to a created pine scent because the allergens that grow around pines are not put into the scent. The same is true for people who are allergic to peanuts. There is no peanut in manufactured peanut aroma.

CSA: Are some people turned off by scent marketing?

Santandrea: People either like it or they don’t—and less than 1% do not like it. The 1% can move away from a fragrance that does not appeal to them.

CSA: Have any studies been done on the relationship between scent marketing and sales?

Santandrea: Yes, stores (utilizing scent marketing) have witnessed increases of people staying up to 20% longer on average. We have seen 300% sales increases in particular products.

CSA: How are scents delivered in the store environment?

Santandrea: We think dry-scent delivery, the newest form of delivery, is the only way to go. For the past 40 years, scent was delivered in an oil form, and it was dangerous and messy. Oil does not travel easily and it tends to get all over things. It is difficult to control and can be too strong and unappealing.

Dry scent is far safer and far more controllable. It is time-released and is only released as the surface scent molecules evaporate. Dry scent can be made to deliver a smell in a very precise area and not fill the entire store with one aroma. It will not spill over into other areas and can be made to last from days to months. Less is better with scent.

Also, with dry scent, you don’t have to worry about any oil going into carpeting and other soft surfaces.

CSA: How is dry scent delivered?

Santandrea: Our fragrance material is either a piece of molded or extruded polymers that can be placed on displays or price strips. It radiates the scent a short distance and is noticeable as people walk near it. Or it is made part of a fan delivery system that turns on and off based on the proximity of people in the area. Our fans are very inexpensive and disposable at the end of a promotion or they can be refilled approximately every six weeks. Most are battery operated.

CSA: How important is scent selection?

Santandrea: It’s very important because the scent can become a part of the retailer’s identity, a part of its brand. It has the potential to become the most powerful part of a brand because of the long memory associated with sense of smell. You will often hear people say of a certain fragrance, “I haven’t smelled that since I was a kid,” or “that brings back a fond memory.” It is very powerful stuff for people who want to build a brand in the mind of the consumer.

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Weekly Retail Fix

BY CSA STAFF

THE NEWS: SAM’S REALIGNS STORE-LEVEL MANAGEMENT

BENTONVILLE, ARK. Sam’s Club is changing the management structure in its stores. In the realignment, approximately 250 positions will be eliminated, Wal-Mart Stores announced last week. The company said it’s replacing five lower level management positions at each Sam’s Club location with three new higher level and higher paying assistant manager positions.

“This is not a cost cutting effort. We expect a slight increase in payroll upon completion of this change,” said Sharon Orlopp, senior vp of Sam’s people division.

THE FIX: Differentiation would better help Sam’s

Since Sam’s decided that its refocus on the business customer was too narrow, it has sought to find ways to make its clubs more attractive to primary shoppers, i.e., women. And that’s a pretty tough row to hoe, as Costco has done a pretty good job at satisfying the club customer in general and BJ’s has been going after female shoppers for several years now, with some success.

Having fewer managers with more direct responsibility could create a tighter knit club-level management and shorten lines of responsibility and accountability. Yet, without differentiating the offering, execution isn’t going to overcome all of Sam’s challenges.

That being said, a store-level management realignment might be overlooked at other retailers, but, this being Wal-Mart, everyone has to make a big deal about it. But that’s the price you pay as the big guy on the block.

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Weekly Retail Fix

BY CSA STAFF

THE NEWS: TOYS ‘R’ US EARNINGS GAIN 40.1%

WAYNE, N.J. Toys “R” Us today posted net earnings of $199 million for its critical fourth quarter, which meant it turned a profit for the fiscal year ended Feb. 3. But special charges and gains had an impact on its numbers.

Sales for the previous fiscal annum were $142 million, the difference translating into a net earnings increase of 40.1% year over year. For the last fiscal year, Toys “R” Us posted net earnings of $85 million versus a net loss of $384 million for the previous period.

Operating earnings in the fiscal 2006 fourth quarter gained 53.1% to $571 million versus $373 million for the fourth quarter of fiscal 2005. For the last fiscal year, operating earnings were $649 million versus an operating loss of $142 million for the previous period.

THE FIX: Improved shopper experience ups comps

Of course, any observer has to take into consideration special financial circumstances. Fiscal 2006 operating earnings were positively impacted by $96 million from gains on property sales, slightly offset by restructuring and other charges. In fiscal 2005, operating earnings were negatively impacted by $410 million in costs relating to the merger of the company, as well as $58 million of costs and charges relating to contract settlement fees, restructuring and other charges.

Still, sales were trending up at last year’s end. Net sales gained 15.8% to $5.7 billion. In the full fiscal year, net sales advanced to $13 billion, up 15.2%.

Comparable-store sales for the Toys “R” Us’ U.S. division gained 0.6% in fiscal 2006, and that represents the division’s first comps increase in six years. Comps at Babies “R” Us were up 4.8% and those at Toys “R” Us international were up 2.6% for the fiscal year.

Jerry Storch, chairman and ceo of Toys “R” Us, said the company is “pleased with the strides we made in fiscal 2006 to improve at all levels of the organization and reposition the company for profitable growth over the long term.”

He said the company’s new management team has been focusing on executing a strategy that would turn the retailer into a global toy and baby products authority.

“This translated into higher overall sales, positive comparable-store sales, improved gross margins and strong operating earnings growth for the 2006 fiscal year,” Storch asserted. “The key to our strategy has been improving the customer shopping experience in our stores. We are accomplishing this by delivering a more compelling merchandise selection, better service and a cleaner and more comfortable shopping environment.”

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