By: Peter Leith, VP of Product Strategy, JustEnough; and Sonia Parekh, Lead Merchandise Planning Consultant, Kalypso
In our last Blog post – “Making the Case for a Customer-Centric Transformation in Merchandise Planning” - we discussed “why” your organization should embrace customer-centric thinking in planning. In this post, we will layout “how” your organization can make this shift.
The most important thing that everyone within your organization must understand and embrace when mapping out the path to customer-centricity is that it is a multi-dimensional journey. This transformation does not happen overnight, and is truly on-going as the company continues to grow and new strategies are created that must also be customer-centric.
According to retail industry expert Sonia Parekh, Senior Manager at Kalypso, there are six key areas that are necessary to focus on in order to make your organization truly customer-centric – decision making, tasks, organizational structure, skills/people, rewards/recognition and information & systems. In this post, we will break down each area and go through the questions you need to answer as you take your organization through this transformation.
It is crucial you start this journey by taking a look at your merchandising and merchandise planning processes from end to end, and identify the critical points at which the entire team must align and lock down certain decisions in order to move forward. This includes the selection and pricing of the assortment. Typically, these decisions are approached with information about what sold last year, what categories or subcategories are trending and how we need to plan brands to achieve external incentives provided by vendors (like volume discounts, promotional support, etc.).
A customer-centric merchandising group acts very differently. They put the customer first in every decision. Think about your various customer segments and how each responds to different silhouettes, colors, brands, materials, etc. Once this is done, select an assortment that best meets the needs and preferences of your customer.
Also, think about what prices will maximize demand for each customer segment. For example, if you are planning the baby diaper category, you are likely to have a price-driven customer segment – one that wants a diaper that they trust at the lowest price possible. They will have a price ceiling that is lower than the customer segment who will pay more for a diaper that has fun designs or is made of biodegradable materials.
So that leads us to the next question – how do your customers value different brands, materials and product features? For example, how do moms in the Pacific Northwest make decisions around the boots they purchase for their kids? How do these crucial purchase criteria differ from moms in the Midwest or Southeast? Customer-centric merchants and planners take all of this into consideration when making merchandising decisions.
As you change the way decision-making is done, you must also change the actual activities and tasks along with the sequence in which they are performed and perhaps even the organization or team responsible for each one. In a customer-centric merchandising world, you will be developing assortments, considering pricing strategies, planning promotions and allocating product by customer segment. You must ask yourself: how does the work get done today? What does the process look like? If your key decisions change, in what ways may the process need to change?
Start by taking each key decision and define what work needs to get done leading up to that decision. What information do you need to gather, what analysis do you need to do, etc.? How should the work be sequenced? Who needs to own each step? Use the key decisions as your anchor points and chart the course to get from one to the next. This course will become your new process.
3. Organizational Structure
Changes to the structure of your organization will most likely be required in order to enable and reinforce these new processes. This organizational transformation needs to be supported by a robust change management program that includes understanding of your current state, drafting a vision for the future and then putting in place a transformation roadmap with all the training, development and communication necessary to get you there. In the end, you need to be able to confidently answer “yes” to the question - “Does my organization enable the right people to get the job done?”
Thinking about decisions from a customer-centric perspective while creating your optimal organizational structure requires your current team to not only change the way they work, but also build some totally new skills. Start by benchmarking where your people are today. This includes determining what skillsets you currently have in your merchandising and planning group, and then identifying what new skills they need in order to operate in the customer-centric world.
You will also need to do a workload analysis to determine if you have the right headcount in the right places. There will potentially be a need for people to transition from one role to another. This will mean identifying who has the raw capability to make that change and then supporting them through that transition. Once this is complete, build a plan for training and development. Finally, determine if you need to hire additional people who bring customer-centric thinking and can help lead the change.
Lastly, you need lots of communication. Organizational change can cause lots of swirl which impacts productivity and can impact people’s willingness to change. Having a well thought-out communication plan to make sure everyone understands the reason for the change and what the journey looks like is imperative. Don’t leave room for guessing and anxiety.
5. Rewards & Recognition
Once you have the organizational structure and people in place, you can then focus on aligning your processes to include rewards and recognition for customer-centric behavior. Incentives are vital to making long-term changes. At the same time, you want your people to be accountable for the business impact of the change, so best practice is to start by including metrics which tie the customer impact to the business results.
Merchants and planners are very familiar with being held accountable for sales and profitability, but you will need to add things like customer engagement, basket size, shopping frequency and return rates, among others. You can see how movement in customer metrics directly impacts sales and profits, but without holding the team accountable for the customer metrics, they won’t have an incentive to make it their primary focus.
Finally, you should track all customer metrics and report them on a regular basis, making it a point to show everyone in the company that these new metrics are just as important as the typical sales and profit metrics that they are accustomed to seeing.
6. Information & Systems
Information and the systems we use to gather and analyze it are the backbone of a customer-centric organization. They enable all of the planning processes to work accurately and efficiently. In a customer-centric merchandising organization, customer information is gathered on an ongoing basis and analyzed to better understand customer preferences and even to predict their behavior. We have multiple sources of customer information, but the key is to find a way to make it actionable.
In order to truly transform into a customer-centric planning organization, you need to have the right systems in place to capture and analyze data and enable the end-to-end planning process. When looking for a system that will enable a true customer-centric planning organization and process, here are some key considerations and features to look for.
- Predict and Plan for Trends. Your system needs to be able to track and maintain customer data and use that data to segment customers and identify, predict and plan for trends.
- Multi-dimensional Clustering. It's not possible to think about every possible customer. You need a system that can cluster customers using attributes derived from the analysis of customer information. However, in addition to customer attributes you need to consider location attributes. The only way to truly do this is through multi-dimensional clustering across many attributes.
- Define Assortments Around Clusters. Once you have your clusters defined, you need a system that can define assortments within those clusters taking into account the customers that are drawn to those clusters and the demand they are driving.
- Combine Analytical Planning with Visualization. Part of a planner’s job is subjective and requires being able to visualize what the assortment will look like. But this needs to be coupled with analytical planning to determine how customers are expected to respond to the assortment and its related pricing and promotions.
- Attribute-based Planning. Understanding what is driving a trend requires analyzing many attributes. So you need a system that can record as many attributes as possible and attribute them to a low level of detail in order to truly identify what attributes are driving what customer trends.
- Omni-channel Line Planning. You need a system that can plan the entire line across different channels, taking into account the uniqueness of customer-centric trends that are driving the performance of products within each channel.
- Allocate in Line with the Assortment Plan. The success of a great assortment plan depends on the inventory being allocated in line with the plan. Your assortment and allocation systems need to be tightly integrated to ensure that the customer-driven assortments are actually delivered to the customers who are going to shop them.
- Retrend in Season. Nothing ever stays the same, so you need a system that can very quickly identify emerging and changing product trends. The system should automatically retrend and change direction based on analytical analysis. But if the change is too vast, the system should present exceptions to planners so they can make strategic decisions on whether or how to follow a trend.
Time to Get Started
Now that you understand the need for becoming customer-centric in your merchandise planning and have the framework for making the transformation, it's time to get started. We encourage you to partner with the right industry and business process experts and technology vendors who understand your company's specific needs and business strategies and can help you make the shift to truly customer-centric merchandising. To learn more contact us.
According to a new report from The Commerce Department, May retail sales beat expectations for the second month in a row. U.S. retail sales increased 0.5 percent in May after rising by an unrevised 1.3 percent in April, lifting sales 2.5 percent from 2015. These new numbers point to strong demand suggesting economic growth was gaining steam despite a sharp slowdown in job creation.
May retail sales at clothing stores increased 0.8 percent, the largest gain since November. Online retail sales shot up 1.3 percent. Receipts at sporting goods and hobby stores jumped 1.3 percent last month. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have risen 0.9 percent in April. Economists polled by Reuters had forecast both overall retail and core sales gaining 0.3 percent last month.
The fairly strong May retail sales report could see economists raising their second-quarter GDP growth estimates, which are currently around a 2.5 percent annualized rate. The economy grew at a 0.8 percent rate in the first quarter.
Read the entire Reuters article here for more information.
By: Peter Leith, VP of Product Strategy, JustEnough; and Sonia Parekh, Lead Merchandise Planning Consultant, Kalypso
Putting customers’ desires at the forefront of merchandise planning decisions
The trend towards customer-centric thinking within organizations has been underway for nearly a decade, but the emphasis has mainly been in areas like marketing and customer service. As the retail industry continues to grow more hyper-competitive, and the balance of power continues to shift from the retailer to the customer, companies need to focus on customer-centricity in their merchandise planning, just as much as they have in other areas, if they want to survive and, more importantly, thrive. Putting customers first in all aspects of a retail operation – from assortment planning to marketing and merchandising - has become a critical shift that organizations need to make.
Industry experts Sahir Anand, VP of Research and Principle Analyst, EKN; Sonia Parekh, Lead Merchandise Planning Consultant, Kalypso; and Peter Leith, VP of Product Strategy, JustEnough, offer insights and highlight key trends that are occurring in the industry and what that means for retail organizations going forward. These trends all point to the importance of customer-centricity in merchandise planning and the immense importance of having a customer-centric focus at the heart of every process within an organization in order to succeed in today’s retail landscape.
Key Trend #1: Planned Assortment Opportunity Gap
A shift is occurring in customer segments across varied categories and retailers that miss this shift are missing a large opportunity. This “opportunity gap” especially impacts soft lines where lead times can be long, but the cycle time for products can be very short.
This coupled with the fact that consumer spending and confidence is on the rise again has led to the emergence of more customer segments than ever before. Millennials, for example, have immense buying power and expect their desired assortments to be available, which can be completely different product assortments than what other important customer segments desire. These emerging customer segments have and will continue to influence a lot of the assortment mix. A customer-centric merchandise planning organization needs to take into account all of the groups that shop its brand and devise strategies that reach each one.
Key Trend #2: Amazon’s Impact as a Disruptor
Everyone knows Amazon and is impressed by their business strategies and ability to dominate the categories they’re in. However, Amazon is constantly being overlooked by companies as a viable competitor because they don’t have brick and mortar stores. This is a huge mistake because Amazon is a shining example of a successful customer-centric company.
Amazon is a disruptor in multiple areas that affect retail and brand companies and, as a result, is a threat to their business models. Examples of this are Amazon’s rapid expansion of their network for sourcing and procurement in order to expand their product offerings to meet customer needs, their ability to enter and dominate new categories (like apparel) and their ability to build an incredibly strong loyalty program (Amazon Prime). The manner in which they accomplish and dominate each of these areas is astounding and at the fore-front of what the future of the retail industry is going to look like. Their customer-centric strategies enable them to give their customers what they want before they even know they want it and this is something that all retailers – not just eCommerce players – should be paying close attention to.
Key Trend #3: Predictive Analytics
Capturing and properly utilizing the information obtained from predictive analytics will play a significant role in the ability of retailers to embrace customer centricity. This includes the ability to predict customers’ desires and buying patterns, as well as where they shop and why. It is not just causal relationships that are important – all the inventory in the store and all of the assortments have a core relationship with a specific customer segment, type of buyer behavior and type of purchase journey.
The information gained from predictive analytics must influence how retailers approach their strategies for every aspect of their business, such as on-hand inventories and online versus in-store regional assortments. Successful retailers need to employ predictive analytics to map out the customer’s purchase journey and to fully understand the components that drive the customer to the store or website and influence the way they ultimately buy (or don’t buy) a product.
Key Trend #4: Digital
Digital is one of the fastest growing trends influencing customer behavior in retail right now and is ever-evolving. A great example of digital’s relevance as a major trend is last year’s Black Friday when mobile transactions skyrocketed to levels never seen before. The growth of mobile channel transactions in comparison to growth seen in-store and eCommerce is telling – mobile will continue to be a huge avenue in which consumers buy products. Strategies surrounding mobile clearly need to be focused on understanding how customers want to be served.
Key Trend #5: Globalization vs Localization
More and more companies are finding out that their sales are local, but their strategies are becoming global. As retailers are constantly searching for the next way to grow their businesses, it is imperative that they look outwards at growth and expansion. Whether that’s growing through opening stores in new countries, or through digital and other omni-channel avenues, or through international partnerships, the core question remains the same – how can I successfully reach customers in these new areas? Selling locally but acting globally will require a deep understanding of customers in each local market.
Translating Data into an Executable Customer-Centric Strategy
According to a recent EKN survey, 38% of retailers say they find it difficult to plan assortments due to a lack of consumer insights in the merchandising process. The takeaway is that companies are collecting data, but they are either collecting the wrong data, or do not know how to translate the data they have into executable business strategies in their assortments.
Analyzing historical sales by segment to gain insights into the shopping behaviors of those segments is good, but not good enough. Companies must take a 360-degree view of the customer. This means taking into consideration unstructured data.
Knowing the things that influenced consumers to make the purchases they did in-store versus online or on their phones is crucial information that planners and category managers need to understand in order to devise future strategies. This information can translate into the creation of customer-centric strategies in top-down planning, promotions, sales management and overall assortment mix. A 360-degree view of the customer will help companies prioritize where they should put their resources.
Considering the trends referenced above, it is clear that shifting to a customer-centric merchandising approach is not only the right path for retailers going forward, but likely the only path to success. Making that shift, however, will involve a major changes across multiple dimensions of the organization. In Part 2 of this article, we will discuss those dimensions along with the key considerations for driving change.
In a recent thought leadership report from Apparel Magazine, “The Rise of Integrated Reporting and Analytics,” Apparel outlines how companies have begun embracing integrated reporting and analytics for actionable intelligence. Actionable intelligence, traditionally a militaristic term, means to quickly gather, analyze and act on the good, solid information that they need to efficiently manage their companies.
Jill Mazur, senior consultant, WWA Advisors LLC explains that the good news is that whereas accessing data and reporting used to be an extremely painful process, BI and analytical technology is now much more accessible to any user and can provide instantaneous access. This ability to readily grab relevant data and condense it into digestible form should help fashion businesses be more responsive to market trends.
“How can this actionable intelligence, or AI, work in practice? Consider these real life examples: Integrated analytics with predictive capabilities can help an apparel retailer determine the risk for an out-of-stock situation,” explains Sahir Anand, VP & Principal Analyst, EKN Research. “Let’s say a retailer is planning a new marketing campaign, and demand generated by the program is expected to peak in two weeks’ time. If the retailer can predict that some of its stores will run out of a style featured in the campaign by then, it can alert suppliers to bump up stock levels or increase deliveries to particular stores,” says Anand.
Access to better information helps companies move from being reactive to proactive. “With more predictive capabilities, you can make better decisions on what may happen or what is likely to happen, and then companies tend to make better decisions overall,” says Anand.
Read the complete thought leadership report here to find out more about how retailers are discovering actionable intelligence through reporting and analytics.
JustEnough Customer Insights helps retailers to quickly identify trends, causal relationships and opportunities inside large volumes of customer data and then quickly action those insights to improve planning and localize and personalize offers. This transformation from traditional product-centric planning to truly customer-centric planning is critical for retailers hoping to compete for today’s demanding consumers. Contact us to learn more.
At JustEnough we’re focused on helping our clients easily and quickly achieve benefits to ensure they meet their corporate objectives. Case in point – The Melbro Group and its discount variety store retail chain, The Crazy Store.
The Melbro Group’s goal is to make The Crazy Store a preferred shopping destination across its product categories by consistently delivering outstanding value products and pleasurable shopping experiences to its customers. But in order to continue to achieve this, they needed a new replenishment solution that would meet the business’s demands for the efficient ordering, processing and distribution of merchandise to stores.
The company turned to JustEnough’s Demand Forecasting, Inventory Planning and Order Planning & Replenishment solutions. The solutions were implemented on time and on budget and the company has already been leveraging the advanced capabilities of the solutions.
“JustEnough delivered value to our organization within a very short timeframe. Our in-store product availability levels have improved by more than 20% and our company’s age of stock is at the lowest level ever in our history, reducing stock obsolescence, damages and write-off provisions,” explained Miles Norman, merchandise planning director, The Melbro Group. “Our organization’s sales have grown in double digits every year, in a tough and competitive retail trading environment, faced with strong economic headwinds.”
To read the full case study, click here.
Contact us to learn more about how we can help you improve business processes and performance.
EKN Research, RIS News and Consumer Goods Technology recently released a joint study regarding analytics in the industry. The goal of this report was not just to paint a picture of the current state of the industry (technology adoption, investment horizons, collaboration levels), but to uncover characteristics of leaders, highlight areas where a greater focus is required (capability building) and provide a framework that can help guide execution.
The study found that the key areas of focus for retailers are customer insights (profiling/analysis), inventory planning and demand forecasting. It is clear that understanding customers and managing inventory are top requirements and spending must match these priorities in order to make progress.
Retailers note that the challenges to improving their analytic capabilities are limited software toolsets, an intuition-driven culture rather than data-driven culture and an absence of clearly articulated analytics strategy. Given these findings it is clear that retailers see the clear benefits of investing in their own analytics capabilities to support key business goals, but still lack the best practices or strong analytics leadership necessary to guide focused, enterprise-wide investments.
In order to help our customers with their analytics strategy, JustEnough introduced JustEnough Customer Insights in January. Customer Insights helps retailers identify trends, opportunities and causal relationships within their vast amounts of customer data and enables them to act upon those insights quickly and easily. Our solution is integrated across the retail planning process to improve customer loyalty, optimize pricing and promotions and improve the bottom line.
Contact us to learn more about how we can help you gain valuable, actionable insights into your customers. To read the full research article, click here.
According to a new report from the National Retail Federation (NRF), retail sales increased 0.7 percent in April, allaying fears of a consumer falloff. Excluding automobiles, gasoline stations and restaurants, sales rose 0.7 percent over March, according to NRF’s calculations. Overall U.S. retail sales saw an increase of 1.3 percent. “This is reflective of growth in a volatile and disrupted retail industry, where consumer engagement is evolving to reflect both new economic and changing market realities,” said Jack Kleinhenz, NRF Chief Economist.
The report also found that online and other non-store sales increased by 2.1 percent seasonally adjusted over the previous month and 8.6 percent unadjusted year-over-year. Apparel stores saw an increase of 1 percent seasonally adjusted over March and a decrease of 1.1 percent unadjusted over last year.
Other specifics of the report include:
- Sales at general merchandise stores were flat over the previous month and increased 0.4 percent year-over-year.
- Electronics and appliances stores’ sales increased 0.5 percent seasonally adjusted month-to-month and decreased 1.7 percent unadjusted year-over-year.
- Furniture and home furnishings stores’ sales increased 0.7 percent over the previous month and increased 4.5 percent unadjusted over last year.
- Sales at building materials and supplies stores decreased 1 percent over the previous month and increased 5.5 percent unadjusted year-over-year.
- Sporting goods stores’ sales increased 0.2 percent seasonally adjusted month-to-month and 6.5 percent unadjusted year-over-year.
Read the full Monthly Economic Review here to find out more details of NRF’s findings.
Kalypso, a leading innovation consulting firm, interviews leaders in the retail industry about their thoughts on the challenges merchandise planners face today, and what we should be thinking about for tomorrow. This installment highlighted responses from a VP of Merchandise Planning with over 10 years experience in the retail industry.
We’ve highlighted some of the responses below. You can read the full article here.
What current challenges do you see with planning in the retail industry?
Systems are often used as a crutch in planning. Many planners don’t understand the science behind planning and often times plug their numbers into a planning system without understanding how the various components interact or which levers to pull to adjust the plan appropriately.
The different planning functions can also be a challenge. When you’re dealing with merch planning, store planning, allocation planning, etc., there is often confusion about who’s responsible for what. The planning process is usually not methodical or clearly defined. In addition, not every company uses the same terminology when it comes to roles and responsibilities. So a merchandise planner at one company might be planning at the style level, and at another company they are planning at the category level. Moving jobs from one company to another can be challenging because the planner’s skill set might not match up to the new role.
How do you think customer data could best be used to support planning?
It’s not being used enough today. A lot of planners are still relying on historical sales. Customer data can help planners better understand selling trends, how customers behave around peak times, etc. Customer data is also essential when planning for new trends. For instance, if the design and merchant teams want to chase a new trend that has no historical data, planners need to understand the customer needs and shopping patterns to better plan for these new products.
Customer data can also help planners get more intelligent about regional and store variances. Currently, planners typically only look at how regions are performing at a high-level, but they are not digging into why they perform the way they are. Customer data is typically not tied to planning data, so it is really hard to leverage it. At the same time, even if planners had access to customer data, they may not have the time to dig into the information to find key insights.
What do you see as the key benefits of an integrated planning system?
Haven’t seen a truly integrated system in my experience. Most companies are still using multiple planning systems that are not integrated with each other. Ideally, it would be great to have everyone in the planning organization on one system so that they can work together more efficiently and have better visibility cross-functionally.
What is one major change do you see in the near-future of planning in the retail arena?
With retail moving towards omni-channel, the role of planning will change. Companies are evolving and now need to manage multiple business models across their channels and geographies. There is no longer a one-size fits all approach to planning.
Read the full Viewpoints article here to gain more insight into one planner’s perspective, and let us know what you think about merchandise planning in today’s omni-channel environment in our comments section.
At JustEnough, we help leading retailers to merchandise assortments and maximize product inventory across physical and digital channels so products are available when and where shoppers want them – all on a single integrated platform. Contact us to learn more about how we can help you improve your planning processes for success and meet the demands of your customers.
In our latest InDemand Newsletter, we were pleased to announce that Tommy Bahama is now a JustEnough customer. Tommy Bahama is a retailer of casual, men's and women's sportswear and activewear, denim, swimwear, accessories, footwear and a complete home furnishings collection. Its products are available at Macy's, Neiman Marcus, Saks Fifth Avenue, Nordstrom, Lord & Taylor and Belk, along with resort locations around the world. Tommy Bahama operates over 150 company owned retail stores worldwide, 16 of which include a Tommy Bahama restaurant and bar, along with both full-price and outlet eCommerce sites.
Tommy Bahama currently uses Excel to support their retail planning process. They decided to find a vendor partner that could provide exception-based reporting and deliver increased consistency to both planners and executives across their multi-channel environment. We are pleased that they selected JustEnough based on our superior solution for brand owners and our native omni-channel capabilities. They chose an OnCloud license of JustEnough Merchandise Financial Planning, Assortment Planning and Allocation for their Direct-to-Consumer (DTC) retail business.
We are also happy to report that FULLBEAUTY Brands (FBB), the preferred brand portfolio of women’s apparel, shoes and lingerie, along with men’s and home products dedicated to plus sizes, recently completed implementing JustEnough Assortment Planning. Based on the success of that project, they decided to move forward with updating their replenishment system. The FBB team is seeking greater visibility to the demand forecast for their print media vs web channel, an automated approach to forecasting demand with minimal manual intervention and optimized inventory levels. FBB has licensed and will be implementing JustEnough Demand Forecasting, Inventory Planning and Replenishment.
Click here to read the entire InDemand Newsletter
Contact us to learn more.
Personalization is a hot buzzword these days in the retail space. In a recent article, RSR Research explains that in their latest benchmark on Mobility in Retail, they found that retailers recognize deeper customer engagement will drive sales, but still need to make personalization a priority.
Making an offer that is truly personalized, not just a random discount on an unwanted item, is the brass ring in retail. This requires that consumers share more and more details of how they shop, where they shop and why – both of which they are now more than willing to do. Converting that vast amount of data into actionable insights is key to personalization and also a challenge for most.
Those organizations that are focused on making relevant, personalized offers and have the tools to derive actionable insights from their data will be the winners. They will tackle the difficult task of understanding more about their customers and executing personalized offers.
At JustEnough, we understand the challenges of gaining customer insights and effectively acting upon them for better performance. JustEnough Customer Insights does just that – by enabling you to analyze customer behavior, segment and cluster customers to localize and personalize assortments, identify which promotions mobilize your best customers and much more.
Contact us to learn more about how we can help you gain valuable, actionable insights into your customers. To read the full RSR Research article, click here.