Case Studies: Aisle-to-Register Inflation OfficeMax, Walnut Creek, CA

Imagine buying a $50,000 car at your friendly dealer's showroom, then getting to the "check-out" counter to find the price had just gone up by almost $4000.00!

On a very much smaller scale, that's what happened at OfficeMax on November 18th. Only an "eagle eye" caught the 7% price increase that took place between the product aisle and the cash register.

Of course, these things happen. The clerk was more than sympathetic, as she put a team of floor people and managers into action - all over 30 cents. A clerk rushed to the product aisle to confirm the price was lower there than in the store's "trusty" computer. A manager was called to "override" the computer to make the price right. Folks in the single check-out line fidgeted as the minutes ticked by - all over a tiny price adjustment.

Let's look at the implications.

First, if you sense that prices always seem to be wrong in the company's favor, you are right. This is because prices tend to increase, rather than the other way around. It is seldom - unless an item is offered on sale - that prices go down. Second, companies tend to revise their cash register computers before making sure their aisle pricing is complete. 

This establishes a universal law of retailing and presents a management challenge. "If we raise prices - and program our computers to reflect this - how can we be certain that price tags at our aisles are accurate?" Some management says "Let's worry about that later - we need the increase!"

Does it matter. You bet! 

Supermarkets learned this - the hard way. They lost customers who didn't trust aisle pricing - and those customers remaining watched like hawks as the scanners ran their check-out tab. With log-jams of complaints, the best big grocers began to make sure the price at the aisle was the only authority that set the price in their check-out computers. 

Now there's an idea. As stock clerks mark the aisle prices - "those" are the numbers that go into the point-of-sale system. Now management can have their computers check to see if what they "wanted" to charge, and if what is shown at the aisle (and the cash register) are in sync. If not - they can make the change - at the aisle. A "small" change in thinking, but it makes a "big" difference in customer service.

Better yet, it prevents jams at the register, store clerks running about to confirm aisle prices, disgruntled customers and that tendency for customers to shop elsewhere. When you examine this simplistic solution - it seems so logical. That's because you are the customer - not management.

Management tends not to trust in employees. But, we think trusting an aisle stock clerk to put the right price on items is a self-fulfilling prophesy. By letting the aisle price be the ultimate authority on what is charged at the register - all sorts of good things happen.  

It is management's tendency to "control."  By "controlling" the price at the register - rather than at the aisle - management is saying "so what" if our aisles don't keep up. We'll fix it if the customer complains. This is an un-enlightened strategy.

Is aisle-based pricing enlightened? Certainly, even though most customers get to the counter and never notice the small inflation. In fact, that nice OfficeMax clerk said I was the first of hundreds who had bought the inflated-price item who had ever even noticed the wrong price. This was a high-volume product - file folders. In spite of this - getting the price right at the aisle rids the company of thousands of errors and negative customer experiences. It also makes the stock-clerks more careful about proper price labeling. How many customers did notice - but didn't want to challenge the price?  

Staples is one of the office-supply companies directly competing with OfficeMax. A Staples executive - citing the reasons for 40% higher profits in their most recent quarter - today noted it didn't come from big "home runs," but from hundreds of "singles" as the company improved its execution. One of their marketing strategies is to attract small business owners - in these times when big business is cutting way back. But, we digress.

With a strategy - like Staples' - to attract small-business owners, customer behavior will change. Small businesses watch every penny, because they put the pennies saved in their "personal" pocket! Fewer of these high-value customers will tolerate Aisle-to-Register inflation.

Let's look at the numbers - and see how OfficeMax has performed over the last 12 months.
With sales of $4.2 billion, the company lost $196 million. Not good!
How about Staples - how did they perform over the same period? With sales of $10.93 billion, the company had profits of $338.5 million - much better. In a call to Staples corporate offices, they indicate that the aisle price is reflected in their cash registers - a good sign.

Our calculations indicate the typical Staples store has monthly sales of $640 thousand, while the typical OfficeMax store comes in much lower, at $357 thousand - about half as great.

It seems for OfficeMax - aisle-to-register inflation - has signaled a much greater issue. Detailed execution.

We are not writing this to indict OfficeMax. The staff was very helpful several times during the visit, and they eventually took care of the pricing issue with an apology. For all we know, this was the only item not priced correctly in the store. We were told during our visit that the aisle price does not drive the cash register price - rather it's the other way around. Of course, they try to have both prices always be the same. With this having been said, we left with the impression it could happen again - and the tendency to be vigilant on return trips.

The point of this case study is customer retention and efficiency - and the fact that these two concepts are not opposed. Making systems work to the benefit of the customer, also makes them work to the benefit of corporate efficiency. 

We suggest you audit your own operations - or enlist our help - to ensure your thinking takes advantage of this. Like the OfficeMax example we've shown, even a small messenger like Aisle-to-Register Inflation may be "your" messenger of opportunities to do far better.

Return to case studies.

If you came to this page from outside the Thompson Group web site. Click here!