The New Merchandising Reality

“The customer is always right” goes the old adage, but for several decades in the past, it did not hold sway with merchandise buyers in retail organizations. Buyers would rely heavily on historical sales data, coupled with their own intuition and personal experience to forecast with some degree of accuracy what to purchase for their customers, and when to have it delivered.

The new retailing reality, however, has altered several factors in the old equation: myriad overlapping channels exist today; plus, customers are more informed and less brand-loyal than ever before. For buyers to base their planning to be more customer-centric rather than product centric, they need to make assortment decisions at a more detailed level, from the data that the consumers themselves supply.

This, in turn implies knowledge of the customer’s preferred path to purchase, including non-transactional data from his/her digital wanderings, outside the physical domain of the store. With this data, the retailer can get the right value proposition in front of the right customer at the right time in each path to purchase.

So, Why Does Customer-Centricity Matter?

Because the voice of the customer is the retailer’s competitive advantage!

If a retailer’s merchandise hasn’t been qualified and quantified to delight shoppers, they’ll not hesitate in taking their business elsewhere, leaving retailers to grapple with huge loss in slow-moving and/or static inventory — and an even greater loss in customer satisfaction and loyalty.

Take for instance, this tale of two customers. One customer is a penny-pinching miser, who hates to shop at full retail price. Always hell-bent upon getting the best price, he browses through a dozen websites to grab the best deals. He shops at your store or your e-commerce site only during store clearance sale or other big sale so that he can save tons of money. The other one is just the opposite. He does not hesitate to shell out a small fortune for the highest quality item (preferably with a really uppity name). To him, the value is about “esteem.” He always makes a trip to the store to touch, feel and truly experience a product before making the final purchase. Which customer would you rather focus your attention on?

Actually, either type is completely fine. But, unless you are honed in on the customer, you cannot figure out how to deliver to them precisely what they value and engage with them at the right point in their path to purchase.

More granular, cross-channel cause and-effect snapshots from your customers’ online, in-store as well as social media interactions are needed to simultaneously understand the complete picture. For instance, what is the kind of clothing and price range that your customer is more inclined towards? Does

he/she like the new line from a competition brand?  Did an online promotion of one item boost sales of another in the store? What customer-centric trends are driving the performance of products within each channel? Is loyalty being rewarded consistently across different retail channels?

Armed with such insights, you can predict by store, location and channel, precisely which product line and product category would achieve the highest sales. You can also closely monitor the success of local promotions, and make adjustments when sales are not meeting expectations.

This kind of merchandise tuning provides a more localized, actionable merchandising plan, which when executed at the channel and store-level alleviates inventory risks significantly and ultimately drives more profitable growth.

Theory vs Reality: At Par or Lagging Behind?

So, it’s established that customer-centric tuning by merchandisers is the need of the hour. But, the key question is: Have they made the same headway with customer-centricity in merchandising as in marketing and customer service? Are today’s retailers processing all the data at their disposal to arrive at more customer-centric merchandising decisions? Well, the answer seems to be a “No”. To put things into perspective, according to EKN 3rd Annual Customer-centric Merchandising study, 2015, lack of customer insights remains the #1 merchandising challenge for today’s retailers.

Most buyers, planners and category managers are still reliant on historical sales by segment to gain insights into shopping behavior. They must access a 360-degree view of the customer. This calls for systems that enable the retailer to improve the precision and level of granularity of planning decisions through analytics and science- a system that allows creation of plans based on customer preferences.

What is the key challenge?

A primary challenge that retailers face today lies in the fact that the information needed to assort merchandise optimally to stores and execute on merchandise plans is often fragmented or broken. It does not reside in one, consolidated place but in multiple, disparate systems that are designed to operate on their own.

As a result, integrating all the data between forecasting, planning and space allocation can be difficult, expensive, and can also cause efficiency issues down the line. Furthermore, channel data silos make it challenging to spot trends early, and often steers business off in the wrong direction, away from what customers really want.

Getting Merchandise Planning Up to Customer-Centric Speed

What is therefore needed is a comprehensive cross-channel platform that can extend support for demand-driven assortments to multiple channels, allowing merchandisers to come up with channel-

specific assortments simultaneously. It is essentially a system that has the ability to plan the entire line across various retail channels, taking into account the uniqueness of customer-centric trends that drive the performance of products within each channel.

Powered by analytics-driven customer insights about shopper behavior both at the macro and local market level, such a platform delivers the ability to track merchandise performance and in-season trends across all channels. You can therefore move beyond just historical sales data and take into account current performance data or forecasts to support data-driven buying and markdown decisions. With continuous demand visibility, it is easier to identify inventory risks earlier and also avoid missed sales opportunities significantly.

Conclusion

With new realities in consumerism, it behooves the retailer to revamp the merchandise planning process by keeping the customer at the center of the equation. While some forward-thinking retailers like Walmart and Nordstrom are already integrating customer insights into various aspects of their merchandising related processes, most retailers still have a long way to go before they unlock the value in that dimension. Shifting to this approach will not only be the right path for retailers going forward, but most likely the only path towards success.

Krittika Banerjee

Krittika Banerjee

Research Analyst at Aspire Systems
Fond of exploring contemporary technical and digital innovations, Krittika is always updated with what is new on this front. She writes about innovation and latest technology trends in various sectors.
Krittika Banerjee