JustEnough recently sponsored research by EKN into the current and future state of merchandise planning and uncovered many windows of opportunity for retailers. Over this and the next several posts, I’ll be sharing short, medium and long term recommendations from the study related to merchandising processes and technology that can help retailers execute on a customer-centric merchandising strategy. I hope you enjoy this series of articles.
Here is part one:
Short Term (0 - 6 months) Medium Term (6 - 12 months) Long Term (1 - 2 years)
Apply a balanced top-down and bottom-up planning approach for seasonal selling by adopting real-time financial forecasts and merchant models. This will help merchants to build potential changes to assortments and see changes on sales and margin in real-time.
Adjust short-term demand forecasts according to buyer persona and customer-segment buying behaivior trends for developing localized assortments that attain full-priced sell-through.
Provide incentives to the merchandising team for increasing full-priced sell-though, inventory turns and lower markdowns rather than open-to-buy (OTB) budget attainment.
The Robin Report recently published an interesting article discussing how stores are the new black. It provided a thought-provoking perspective for me on how omni-channel retailing is being driven by both brick-and-mortar retailers needing to be more digital and e-commerce only retailers needing to open stores because 93% of retail purchases are still made in stores. Maybe neither type of pure-play retailer can survive in the long-run. Is omni-channel the new black?
JustEnough identified early the rise of omni-channel and that’s why our demand-driven retail planning solutions are designed for all types of retailers – whether they reach customers through one channel or many.
Here is a short excerpt from the article and you can read the complete story here.
Terry Lundgren, CEO of Macy’s, borrowed this quote during his opening remarks at the University of Arizona Global Retailing Conference in Tucson back in April, attributing it to NYU-Stern Marketing Professor Scott Galloway, who also happens to be one of the world’s experts in digital marketing.
Calling stores “the new black” is a nod to that old-fashioned expression referring to something that’s come into style. Simply said, it means they are not only not going to be replaced by e-commerce, they will thrive as the “in vogue” standard-bearer for retailing. In fact, even more dramatic than Galloway’s assertion that stores are now in vogue is his prediction that pure-play e-commerce is actually going away.
Bolder still, at a DLD event in Europe earlier this year, Galloway said, “E-commerce companies are either going to open stores or go out of business.” On the other hand, he also said, “(brick-and-mortar) retailers need to be excellent at digital or they will go out of business.” He went on to say, “I also believe that Amazon cannot survive as a pure-play retailer. Stores are the new black in the world of e-commerce. We’ve discovered these incredibly flexible robust warehouses called stores … retailers are not befuddled prey waiting around to be disrupted. They are in fact growing their e-commerce businesses.”
Does this sound familiar? A retailer’s merchandising team is preparing to present their plans to key executives at an assortment-line review meeting. In preparation for the review, the team spends countless hours building their line plans. The team is ready to go and excited for the opportunity to present their carefully crafted plans to the executives.
One of the team leaders kicks off the assortment-line review, painting the picture of product collections that will wow customers and shape the success of the organization. The creative overview creates a buzz of excitement.
Unfortunately what happens next derails the meeting. Following the creative overview, the agenda calls for a review of the financials. Suddenly, all of the momentum and excitement around the creative process redirects into individual styles and individual plans – the very definition of failing to see the forest for the trees. When a high-level meeting devolves into nitpicking individual plans, an organization has been struck by the curse of “future actuals.”
Presenting plans as “future actuals” is the wrong approach. At this stage in the assortment planning process, the plan represents a best guess. Experienced planners understand that the important takeaway isn’t whether a specific item is going to sell a specific number of units per week, but rather how the overall assortment strategy comes together to have the best chance of achieving the financial objectives of the organization.
The planner needs to be able to create guardrails around what can and cannot work and maintain financial responsibility and discipline without letting the “future actuals” syndrome get in the way of actually achieving a healthy sales outcome. Six months before a style is on offer, how much is being invested in the item matters; what it will do the third week of March in a certain store does not.
An assortment planning solution with the proper functionality build around a best practice workflow could enable the strategic vision of the team. We believe teams should focus their efforts on strategies related to what’s important at each step in the process. Here is how the JustEnough solution workflow supports the assortment planning process.
At the beginning of a season, the team needs a starting point. We leverage a blend of plan, financial and historic data to recommend an option count for each grade of store and give the user a sandbox in which to arrive at a style and choice count that they feel confident in using to kick off the plan.
Starting with a universal assortment plan containing all the possible products that can be a part of the assortment, we leverage the power of an integrated system to facilitate the art of assortment planning. This allows the team to put together a compelling assortment with transparency into the financial outcomes of their decisions.
Once the team has a great assortment, we move onto making sure the style buys are as good as possible by managing material and fabric commitments, as well as building clear action roadmaps with trigger dates to ensure that the focus is on the correct level of granularity at the correct time.
Finally, once ready to deploy, the tactical view of the near-term horizon comes into play. The team starts making decisions about individual styles and channels and how best to use the inventory they’ve purchased and the styles they’ve assorted.
There is no crystal ball to assist an organization in planning their business. Developing assortments that deliver results requires a balance between art and science. Yes, the numbers on a piece of paper are important, however what’s more important are the strategies that are developed and executed against in order to set the organization up for success.
Check out the lead article in the most recent issue of JustEnough’s InDemand Newsletter and click here to read the entire newsletter.
Today’s customers have embraced omni-channel shopping and move seamlessly between channels to get what they want, when they want it and at a price they are willing to pay. Couple this with today’s many fulfillment options and customers’ expectations for rapid delivery and you can quickly see how challenging it’s become for retailers to satisfy customer demand while minimizing inventory investment and maximizing margins.
The nature of today’s retail marketplace requires retailers to be nimble and flexible dictating that they take a close look at the processes and systems that move and manage their inventory in order to support new fulfilment strategies such as “ship from store” and “click and collect”. And while there are many factors to consider in supporting this “flexible consumer” environment, the placement and movement of inventory is one of the most important investment areas.
Allocation planning is the primary business process for distributing and positioning inventory, and the complexity created by moving to an omni-channel model is challenging many current allocation solutions. When evaluating a new advanced allocation solution here are some things retailers need to consider.
Capture sales attribution by sales channel. The attribution of sales is a key component in driving optimal stock distribution across the supply chain. The allocation system needs to consider not only where a sale was made, but where the demand was fulfilled from in order to suggest the optimal allocation of future stock.
Customer and location allocation strategies. Focusing on the customer has become an extremely important addition to the traditional product and location focused allocation strategies. Through non-hierarchical attribution, flexible allocation solutions are able to model trends and demand to maximize sales potential through accurate allocation of stock.
Anticipate demand. Retailers can no longer just push out inventory and monitor demand. Today’s market requires insight into near-future demand to drive store allocations. Consuming information about anticipated demand supports projecting orders to stores in the future and supports and accelerates managing goods through the supply chain in an optimal way.
Flexible supply chain configuration. Traditionally supply chains were very linear and fairly straightforward to setup. But today, they must be nimble with inventory able to move forward, backward and sideways to be properly positioned. Configuring modern supply chains requires support for complex rules within the allocation system.
Pre-allocate inventory and cross dock. Inventory needs to flow through the supply chain faster. Retailers can no longer wait for inventory to arrive at D.C.’s before decisions are made to disperse it to stores. They need the capability within their allocation system to pre-allocate inventory from P.O.’s in order to reduce lead time. Utilization of cross docking and pre-packs are additional techniques required to handle supply chain time compression.
Real-time, accurate inventory visibility from P.O. to D.C. to channels. Moving from channel-specific inventory to shared inventory across channels enables retailers to react to variability in where demand occurs. Effectively fulfilling on variable demand requires having complete visibility into inventory at every level of the supply chain.
Inventory sourcing and prioritization. Allocation solutions should support options to source inventory from multiple points within the supply chain in order to reduce lead times to satisfy customer demand across selling channels. Inventory can be sourced direct from suppliers, from in-bound P.O.’s, from D.C. stock and from store stock.
Integration to assortment plan. The integration of the allocation solution to an assortment plan is integral to producing an allocation result that represents the merchandise story in stores and ensures the correct color and sizing choices are available to the customer. The integration of these two solutions also ensures a seamless cut over between planning and execution of an assortment.
JustEnough’s new Strategic Allocation solution has been designed to help retailers plan for and succeed in this dynamic, highly competitive environment. Our solution addresses all of the above allocation and supply chain complexities with flexibility and ease. To learn more about how JustEnough can help your business gain the benefits of strategic allocation, contact us at firstname.lastname@example.org.
Billabong International selected JustEnough’s Merchandise Financial Planning, Demand Forecasting, Inventory Planning, Replenishment Planning and Allocation to help transform its planning and replenishment processes across all its brands worldwide.
Billabong is a global company that is transitioning from planning regionally using manual, spreadsheet-based processes to using one demand planning system globally. JustEnough’s retail planning suite will be rolled out across the action sports company to consolidate, automate and streamline planning across its wholesale, retail and ecommerce channels.
"Creating a true omni-channel experience is one of the seven strategic pillars in our transformation strategy”, said Kadima Longi, CTO, Billabong. “We have high expectations of our strategic partners in line with our approach of undertaking major structural changes once and doing them right. We look forward to working with JustEnough to build an industry leading global planning platform that optimizes our inventory across all our channels.”
“We selected JustEnough as a best-in-class solution to augment our NetSuite ERP system based on its intuitive, easy to use user interface, ability to scale, OnSite and OnCloud deployment options and impressive customer community”, Longi added.
JustEnough will provide a robust and flexible solution enabling Billabong to:
- Increase inventory turns and visibility
- Improve customer service levels while minimizing inventory
- Programmatically move inventory
- Enhance planner productivity with exception-driven planning
“We are very pleased that Billabong selected JustEnough’s retail planning suite to drive greater omni-channel inventory efficiencies across the globe”, said Malcolm Buxton, president and CEO, JustEnough. “JustEnough is providing Billabong a scalable, configurable solution that will enable it to offer a broader and deeper product offering to its customers while controlling inventory.”
NRF recently released its inaugural Retail Holiday Planning Playbook as a guide to help retailers address key questions and issues around the upcoming holiday season. The 2014 holiday season rang up a hefty $616.1 billion in U.S. sales, 4 percent more than the previous year. As such, it’s little surprise that retailers start planning early; last year, more than half of retailers surveyed kicked off their holiday planning in June or earlier.
With Holiday 2014 still fresh in our minds, NRF asked CIOs, CMOs, Loss Prevention, Digital Commerce and Supply Chain executives two questions: What did they learn during Holiday 2014 that they want to change this year, and in what areas are they investing this year to improve holiday operations and results?
Several themes emerged, including the customer’s digital and in-store (or “omnichannel”) experience and the continued evolution of marketing and promotions –– including how mobile increasingly impacts both. Additionally, retailers are tackling operational issues such as consumers’ rising expectations for fast, flexible fulfillment and customer service, as well as adroitly managing the supply chain.
One of the considerations for 2015 is how the move to omnichannel is challenging assortment level allocations. As retailers are increasingly leveraging store inventory to fulfill online orders, old allocation models are often proving inadequate. This is an area where JustEnough is already helping retailers. Our strategic Allocation solution is helping retailers to plan, allocate and replenish inventory across all their channels while at the same time dealing with today’s flexible fulfillment options. Please contact us if you would like learn more about how JustEnough can help you address these challenges.
Check out the full NRF 2015 Retail Holiday Planning Playbook here.
Chain Store Age recently published an interesting article about how physical stores are remaining as crucial today as they were in the pre-industrial even as retail and society enter the true digital age.
Here are three reasons that Chain Store Age found brick-and-mortar stores still being a vital part of any retailer’s omni-channel strategy.
Although home delivery may seem like the ultimate in customer convenience, the store actually remains a highly convenient means for customers to take possession of the products they buy. Leaving a store with a product you just bought offers an immediacy even one-hour delivery cannot match.
In addition, picking up an item bought online in a store often involves less time between purchase and fulfillment than home delivery of online orders, and generally eliminates pesky delivery fees. Other advantages stores offer customers include providing an accurate, real-time look at shelf availability and letting shoppers pick up an item while they are out and about, rather than having to wait at home for it to arrive.
None of this lessens the significant convenience factor of clicking on something online and having it show up on your doorstep, but that is not always the best option for every customer or every purchase.
No matter how accurately a retailer is able to target an online shopper with suggested complementary purchases, there is no better ancillary sales tool than a store full of products customers can see and feel. A quick scan of a store will expose a customer to potentially hundreds or even thousands of products, and merchandisers carefully design layout and shelf assortment to maximize the possibility of ancillary sales.
In addition, stores provide the possibility for customers to discover their own ancillary product needs that no marketer or algorithm could ever predict. An in-store shopper examining the iconic cover art of the classic Rolling Stones album “Sticky Fingers” who is in eyeshot of a jeans display may well realize they need a new pair of denim pants. Try feeding that particular scenario into an online product recommendation database.
For retailers, stores provide valuable nodes in their distribution networks. Fulfilling digital orders from nearby stores reduces the time and expense associated with completing e-commerce transactions. Stores also allow retailers to cluster assortments based on local preferences, leading to lower SKU counts per store as well as reduced over- and understocks, markdowns and returns.
No matter how sophisticated a retailer’s digital strategy is, at the end of the day fulfilling customer orders on a consolidated basis through a store is much more efficient and effective than fulfilling them individually from a warehouse or distribution facility. Economies of scale apply to distribution as much as they do to every other aspect of a retailer’s business.
I recently had an article published in OnWindows magazine and shared some thoughts on why planning promotions has become extraordinarily complex over the last few years, thanks to the ever-evolving retail landscape. And how successful retailers are using centralized systems to eliminate any guesswork and ensure their futures.
Here is the article. I hope you enjoy.
Managing promotions has become one of the biggest headaches facing retailers today. Unfortunately, many organisations take a ‘spray and pray’ approach in which they increase advertising or price change activity, and simply hope for the best. While some promotions may turn out to be successful, others may completely miss the mark – and retailers are prone to making the same mistakes again and again.
One of the biggest mistakes retailers make is not taking the time to understand who the customer is or what it is the customer wants. Even though the amount of customer data has increased exponentially in the past few years, many retailers are still challenged in finding relevance in the data. Because of this issue, promotions often do not produce the expected results.
Effectively interacting with customers is also a big challenge. This area is more complex in today’s environment than that of ten years ago. The number of channels that a consumer can use is growing every day. It is no longer enough to simply have a web presence. A retailer needs to be able to connect with its customers via mobile, Facebook, Twitter, Pinterest, YouTube, Google and many other places. This is why understanding who their customers are is extremely important, so the retailer can focus on the channels that attract their customers, without being spread too thin.
Once the customer is identified and the message is created, having an efficient way of executing those messages is crucial – but is often another area where the retailer falls down. Efficiency, speed and accuracy are the key aspects when executing promotions.
While technology can help with the main challenges outlined above, it is a sad truth that most retailers are still using old systems to solve these problems. This is due to varying factors, including lack of focus on these kind of tools (often tools to resolve supply chain problems take precedence) and a belief that this is an easy problem to solve just by adding resources or enhancing existing systems. In addition, their go-to large technology vendors have not been able to provide adequate tools to solve some of the newer problems.
In light of this, JustEnough has created a centralized solution which allows all departments to plan and publish promotions across all channels down to the consumer level. It is the only enterprise solution available today which combines planning and execution, and is offered either on site or in the cloud.
By linking all departments, activities and channels across the enterprise, and replacing the silo approach, the JustEnough solution enables retailers to increase productivity, make better decisions and improve collaboration. By having the data centralised and the necessary tools to accurately analyse the promotions implemented across different channels and campaigns, retailers can gain insight into their entire promotions process and outcomes, resulting in better promotional planning and results.
JustEnough also offers a Deal Management module, which increases the collaboration between retailers and distributors and helps retailers to make sense of all the offers and take maximum advantage of them to improve results. In addition, the Promotion Management suite operates seamlessly with our Retail Planning suite to include all aspects of merchandise financial planning, assortment planning, allocation and replenishment. By streamlining the entire process with a robust, easy-to-use solution, JustEnough offers retailers an effective way to attract new and existing customers, increase revenues and reduce inventory levels and marketing costs.
Looking ahead, the promotions landscape will only get more complex. Increased competition, more channels, better informed consumers and tighter budgets will put increasing pressure on organisations. With all this in mind, it’s clear that only those retailers with the right tools will be able to protect and ensure their future.
NRF recently released the results of its annual back-to-school survey and the results are good news for retailers. Here is how Kathy Grannis Allen summarized the results for NRF.com.
For the average parent with school and college-age children, summer months can mean free help around the house and family vacations. It can also mean summer camps and babysitters, pool parties and, of course, back-to-school and college shopping.
Last year, our back-to-school survey conducted by Prosper Insights & Analytics found that nearly one-quarter of families were shopping at least two months before school started. Though the ink on this year’s report cards hasn’t even had a chance to dry, many parents are already shopping for the next school year.
We recently polled more than 6,400 adults with children in K-12 and college and found 29 percent of households with school-age kids (6-17) plan to spend more than last year for back to school, compared with nearly 24 percent who said the same thing this time last year. As for college students and their families, nearly three in 10 plan to spend more this summer, up from 23 percent who said they’d be spending more when we asked the same question last year.
Spending Plans For Back to School 2015 Shopping Season
Spending Plans For Back to College 2015 Shopping Season
While this is survey is a mere snapshot in time, the positive uptick in planned spending means that retailers’ back-to-school season — second only to the winter holidays in terms of foot traffic and sales — could bring a welcome boost in sales after a disappointing first half of the year.
Regardless of their spending plans this summer, the economy is still top of mind for some families, especially when it comes to making sure their children have what they need for the school year.
Among those who say the economy will impact their back-to-school and college spending plans, 32 percent of college shoppers plan to comparison shop online to make sure they get the best bang for their buck, up from nearly 28 percent last year. More than 31 percent of school shoppers will compare prices online, compared with nearly 30 percent last year.
By Keith Whaley and Greg Arthur
Imagine you’re playing Texas hold ‘em. At the beginning of a hand, the only things you know are what cards you’re holding, and how many other players are playing the hand. Each time community cards are dealt, your expectation of your odds is updated and you bet accordingly – betting more if you think you have a stronger hand and less if you think you are not likely to win.
But if you were to play poker the way many companies manage their inventory allocations, the betting pattern would be very different. You would blindly bet all of your chips after the first round of cards are dealt, before you have accessed your odds of winning the hand. It doesn’t take a seasoned gambler to understand that this is not exactly a recipe for maximizing winnings.
Betting with Retail Inventory
Think of the hand you are dealt as an inbound shipment of inventory and the chips you bet as the units of that inventory. You and the other players are the allocators that need to make the optimal bids with your chips in order to maximize your winnings. Given you can make better decisions the more information you have, doesn’t it make sense to start by betting just a percentage of your chips until you have more information?
Why go “all in” with your inventory allocations when you can be a more strategic player and place your bets as you learn more? Allocating products or betting on inventory allocations to stores requires utilizing strategies such as product modelling, profiling and size curve management. Additionally, it makes sense to “read” the business or the hand you have been dealt before betting your inventory. Allocating forward weeks of cover against demand enables you to react to the “reads” you’re getting from actual daily/weekly demand.
Also, not all the chips are the same. So just as you have many different types of chip values, you have different items in your inventory. The complexity multiples as you realize you have to place bets for each item. To deal with this complexity, many companies resort to using generic allocation polices. In most cases these generic policies enable the inventory to get allocated and shipped, however the inventory allocations that result are often mediocre bets at best.
A better option maybe to bet your inventory allocations based on individual item strategies rather than generic one-size-fits-all policies. Enabling this type of betting strategy can be accomplished through a system with allocation functionality that is flexible and allocators that can think strategically about placing bets on their inventory.
Betting Strategy is Important
For any product a retailer is stocking, every unit that leaves a distribution center is no different than throwing chips into the pot. Each allocation represents a bet on the sales potential of an item, and those bets need to be based around a strategy that makes sense for the item. Betting too much inventory against initial allocations just to clear the distribution center can be a recipe for a short night at the poker table.
If inventory is positioned incorrectly, the result can be markdowns or costly redistribution expenses. Implementing individual item strategies for allocations can present a significant potential source of profit by having the right products at the right place at the right time.
This is where a tightly integrated planning and execution process can help. Allocators should set their initial alloction plan and stick to it. Only after the player has had the opportunity to read their hand versus the community cards should a deviation occur in their betting strategy. Similarly, a good allocator will only deviate away from their initial strategy after they understand the actual demand patterns occurring in their stores.
Betting Techniques make a difference
Knowing the proper techniques to utilize in inventory management is critical to the overall health of sales and margin for a retailer. Understanding when to use allocation or replenishment techniques can have a significant impact on your inventory ROI. A core product with a six month lifespan and a relatively stable demand level is going to require a much different strategy and technique than a four-week fast fashion item with high upside coupled with extremely high volatility. Not all items are meant to be allocated and not all items are meant to be on forecasted and replenished. Assigning strategies and techniques to items based on anticipated behavior can be an extremely profitable approach.
Learning to place good bets
At JustEnough, we recognize the immense benefit leveraging the computational potential of an allocation system can represent, but also understand the limitations of what software can realistically accomplish. We’ve engineered an allocation solution that lets each user define a strategy for each item, defining the information a machine can’t know, such as what to model a new product on, where the product needs to go and how aggressively the user wants to bet.
At the same time, we take away the need to consider your supply chain on a daily basis, and by defining an exception-driven workflow, make sure that planners can spend as much time as possible improving item-level strategies. And once a strategy has been defined and actual demand signals begin to be recorded, the forecast of each item at a location level is continually updated to ensure you are maximizing sell-through and improving profitability. Now that’s a good bet!