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Keith Whaley

  13 Oct 2015 • By Keith Whaley in Opinions

  

Dynamic Inventory Allocation

I recently had an article published in OnWindows magazine and shared some thoughts on why today’s omni-channel retailers require dynamic inventory allocation in order to satisfy customer demand while minimizing inventory investment and maximizing margins.

Here is the article. I hope you enjoy.

The nature of today’s operating environment 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’.

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 systems. With this in mind, there are a number of factors which retailers need to consider when evaluating a new advanced allocation solution. The attribution of sales is a key component in driving optimal stock distribution across the supply chain. The allocation system, therefore, 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.

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. Through non-hierarchical attribution, flexible allocation solutions are able to model trends and demand to maximise sales potential through accurate allocation of stock.

Flexible supply chain configuration is also essential. 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.

What’s more, inventory needs to flow through the supply chain faster. Retailers can no longer wait for inventory to arrive at distribution centres before decisions are made to disperse it to stores. They need the capability within their allocation system to pre-allocate inventory from purchase orders in order to reduce lead time. 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.

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 colour 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 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.


Caroline Proctor

  13 Oct 2015 • By Caroline Proctor in Industry News

  

Merchandising Must Have Capabilities for Black Friday

By Sahir Anand, VP Research & Principal Analyst, EKN

Last year, the National Retail Federation (NRF) reported an estimated drop of 11% in Black Friday sales compared to 2013 ($50.9 B in 2014 compared to $57.4 B in 2013). Due to consistently low gas prices and an improving job market this year; consumers appear ready to be lured by retailers again in the hope of access to great new merchandise, wider selections and timely deals and promotions.

In 2014, the industry and consumers cited several reasons for the lackluster performance on Black Friday. The primary reasons included, but were not limited to, early promotions by retailers that made consumers make their purchases prior to Black Friday, lack of attractive door busters and stiff competition from eCommerce players such as Amazon and others.

Black Friday, the weekend after Black Friday and Cyber Monday are like a marathon due to the fact that foot traffic and sales get spread over a several days, rather a single day. Candidly, consumers only care about the eye-catching merchandise and even more tempting promotions from online and brick & mortar retailers.

This begs the question as to why despite retailers employing tactics like merchandising and sales Big Data, sophisticated predictive trend modeling and demand signal repositories, 2014 sales comp predictions came up short. Our analysis shows that it wasn’t as much that the sales comp predictions were off, as much as retail’s lack of preparedness to respond to rapidly shifting consumer. In EKN’s Customer-Centricity: The Holy Grail of Omni-channel Merchandising report sponsored by JustEnough, retailers attribute strong importance to the following three capabilities that can aid their merchandising plans, assortment-mix, and space planning, pricing and promotions management:

  • Timely updates to demand forecasts. As pointed out in the 2015 merchandising benchmark report, without reliable forecasts, on the one hand retailers have to protect themselves against out-of-stocks, backorders and lost sales opportunity cost. On the other hand, in the case of an over-stock or high amount of un-sold stock situation retailers are unnecessarily tying up valuable resources that could be used in more productive ways to serve customers and grow the busi­ness. Developing accurate forecasts, continually updating them, and measuring their accuracy against actual sales offers retailers the greatest opportunities today to maximize their return on inventory or buy plan investment. It is also important to point out that merely using insights from structured transaction data does not address lack of forecast accuracy. Only a fifth of the retailers surveyed currently use unstructured mobile, social, and multi-sensory device data for demand forecasting, merchandise buys, assortment planning, and pricing and promotion optimization. Unstructured data may be difficult to collate and analyze but is often more predictive, insightful and can glean short-term demand shifts and appropriate demand response from retailers.

  • Getting promotions right. During seasonal merchandising, it is critical that retailers and brands don’t start their promotions too early. It is also imperative that the right categories and merchandise is targeted for pricing and promotion changes. For instance, there is little rationale in attempting aggressive seasonal promotions and pricing on top sellers. Instead, retailers can focus on new SKUs, slow-moving SKUs, attachments and basket promotions. 4 in 10 retailers indicate that using dynamic pricing and promotions for effective merchandise disposition (39%) is one of the top 3 merchandising execution capabilities being used by their organization. Dynamic and customer-centric pricing delivers incremental sales of 1 to 3% and incremental gross profits of 2 to 5%, while customer-centric promotions produce incremental sales of 3 to 6% and incremental gross profits of 5 to 10%[1]. Applying promotions based on what-if scenarios and predictive capabilities help retailers develop more effective promotional and pricing plans by time of the day and by store that support tailored and localized assortments and sell through. Developing optimized and synchronized Omni-channel promotions and related messaging is a dire need in today’s Omni-channel retail environment so that there is one view of brand and coordinated share of wallet activities between marketing, merchandising, eCommerce, mobile and customer loyalty/CRM teams.

  • Adjust in-season management based on localized assortment and inventory levels. During Back-To-School, Black Friday and Holiday season retailers need to balance the need for localized and generic assortments. The ideal levels of localized assortments depend on several factors including in-depth store clustering analysis, ability to respond to short-term demand, lifestyle, affinity and preferences of all consumer groups in agile ways. This year a third of retailers indicate problems related to too much generic merchandise and too much on-hand inventory. In recent times, retailers have made efforts to super-segment and develop hierarchies for planned buys, assortments by cluster and type of store, allocation, pricing, and promotions in accordance with consumer and buyer categories such as boomers, millennials, generation Z, soccer moms, etc.. Despite such segmented plans, the inability to react quickly to in-season demand fluctuations based on high or low inventory levels is a problem. The reasons include: high number of back orders, inflexible lead-times, inability to change channel/store campaign execution, need for closer coordination with store operations, marketing and the supplier community who partake in direct drop shipment and vendor-managed inventory allocation/replenishment programs. Therefore, optimizing assortments per short-term demand patterns, pricing, promotions and consumer affinity is critical for ideal sell-through and mid/end-season markdowns.

Please do drop us a comment on this blog and other blogs. We value your comments and suggestions. In our forthcoming blogs on this topic, we will present some more solutions that can solve problems that retailers face. Follow us on Twitter @EKNResearch or @sahiranand.

[1] Customer-centric merchandising – a pipe dream or imminent reality?, Loyalty.com 


Caroline Proctor

  06 Oct 2015 • By Caroline Proctor in Industry News

  

Retailers Value Mobile Commerce

When it comes to selling products online, retailers want to go wherever their customers go. According to the 2015 E-Commerce Benchmark Survey from Boston Retail Partners, close to half (45%) of surveyed retailers indicated that mobile websites are their most important e-commerce capability.

The study also indicates e-commerce remains a major retail growth area, as 85% of retailers expect an increase in 2016 e-commerce website revenue. However, retailers are not approaching e-commerce as a siloed channel. Almost eight in 10 (78%) respondents plan to implement a unified commerce platform that seamlessly operates all commerce channels. More than four in 10 (43%) indicate that a consistent brand experience across channels is essential.

Download the free report here.


Caroline Proctor

  29 Sep 2015 • By Caroline Proctor in Justenough News

  

 Omni-Channel Merchandising Study: Merchandise Technology

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 the fifth and final part:

Recommendations

  Short Term (0 - 6 months)        Medium Term (6 - 12 months)        Long Term (1 - 2 years)

Merchandise Technology

Provide re-forecast and what-if scenario tools to merchandising teams to simulate different seasonal and non-seasonal merchandising campaigns, special promotions, planograms and other execution requirements related to pricing, promotions and micro space management.

Formalize a customer insights knowledge repository for enterprise-wide access that includes a 3-5-year historical internal (retail transaction) and external (competitive) consumer buying trends and data.

Integrate real-time sales data and customer insights into the planning, assortment, allocation, pricing, promotions and replenishment process. Encourage stores and other sales channels to provide direct input for better merchandising planning specific inventory needs and improved sales projections during key selling seasons such as holiday, back-to-school and sales events

Implement a merchandising Big Data strategy by using advanced relational data from transaction, loyalty/rewards, Wi-Fi and mobile data. This will help introduce predictive customer buying insights for internal teams as well as external vendors and brands.

Adopt predictive analytics into the merchandising, assortment planning and rapid replenishment process for top selling seasonal stock keeping units (SKUs). Include causal and cross-category purchase behavior, weather, locational promotions, attachment selling, rapid replenishment and customer loyalty as the first few use cases for creating predictive merchandising insights.

Incorporate a mid to long-term plan for implementing an Internet of Things (IoT) platform strategy that helps utilize store and DC/warehouse sensory device data for improving in-store and DC-based merchandising, picking and replenishment, targeted product information and location-based promotions messaging accuracy.


Caroline Proctor

  25 Sep 2015 • By Caroline Proctor in Industry News

  

The State of Omni-Channel Merchandising [INFOGRAPHIC]

Retail’s consumer-driven transformation brings into focus the need for retailers to develop new capabilities such as pervasive customer insights, integrated and seamless execution across channels, one view of inventory and unified commerce. However, it also highlights the need for transformation within the most core of retail functions: Merchandising. In the new digital and Omni-channel age of retail, merchandising is undergoing several radical transformations.

While retailers are making great strides with customer-centricity in the functional areas of marketing and customer service, merchandising has not made the same progress. This is not surprising as merchandising is about products, and for many retailers it is a big part of their traditionally product-centric approach to business. The move toward customer-centricity will require not just higher levels of coordination, but for many retail organizations dramatic cultural change.

This EKN report lays out findings and analysis from the survey of 100 U.S. based retailers and presents prescriptive recommendations on what should be done to execute on a customer-centric merchandising strategy. The report also outlines best practices, strategies, business processes and technology recommendations to that end.



EKN’s complete report, Customer-Centricity: The Holy Grail of Omni-Channel Merchandising, is available for download here


Caroline Proctor

  22 Sep 2015 • By Caroline Proctor in Justenough News

  

 Omni-Channel Merchandising Study: Pricing, Promotion and Markdowns

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 four:

Recommendations

  Short Term (0 - 6 months)        Medium Term (6 - 12 months)        Long Term (1 - 2 years)

Others (Pricing, Promotion, Markdowns, Space Management etc)

Link merchandise plans, assortment-mix, supply planning, pricing and promotions with upstream product innovation and new product development plans. This can be done by providing internal process visibility and collaboration tools that enable unit-level coordination between merchandising, product development, inventory planning and replenishment teams.

Create a "Merchandising Innovation" executive group that recommends fast track-changes and improvements to customer-centric merchandising for all channels of sales and service.

Integrate all offline and digital merchandising functions (planning, buying, promotions, planograms, space management, replenishment etc.) into a single Omni-channel merchandising department. Offline and online channel merchandise planning and execution responsibility should be directly tied to the overall Omni-channel merchandising success factors.

Use collaborative planning and/or web mobile data sharing platforms with brands and third-party merchandising companies. Identify innovation areas and investments in new product and brand marketing/merchandising programs.


Caroline Proctor

  15 Sep 2015 • By Caroline Proctor in Justenough News

  

 Omni-Channel Merchandising Study: Allocation and Replenishment

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 three:

Recommendations

  Short Term (0 - 6 months)        Medium Term (6 - 12 months)        Long Term (1 - 2 years)

Allocation and Replenishment

Apply rapid and agile replenishment strategies for top selling Omni-channel SKUs by enabling upstream and downstream order and inventory visibility.

Develop rapid replenishment via pop-up distribution centers during busy selling seasons.

Combine fulfillment capabilities at the online and store distribution centers as well as activate real-time direct drop shipment collaboration with supply chain partners.

Closely coordinate store/channel merchandising, marketing, fulfillment and replenishment metrics and KPIs with brands, vendors and suppliers. Encourage direct brand and vendor contribution in store selling replenishment and store merchandising programs.


Caroline Proctor

  08 Sep 2015 • By Caroline Proctor in Justenough News

  

Omni-Channel Merchandising Study: Assortment Optimization Recommendations

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 two:

Recommendations

  Short Term (0 - 6 months)        Medium Term (6 - 12 months)        Long Term (1 - 2 years)

Assortment Optimization

Incorporate merchandising and assortment optimization insights from stores and other channels. Store managers and channel associates must be encouraged to share product insights and buyers/planners must use these field and social insights int he planning and assortment plan process.

Create a micro-assortment and advanced clustering strategy for precision merchandising. Establish assortment localization and advanced store clustering by using local store market category cariance analysis, unit/volume analysis, multiple product/consumer attribites and data related to other local market events including sudden demographic shifts, competitive factors, cannbalization, halo effect and specific revenue per square foot shifts.


Caroline Proctor

  01 Sep 2015 • By Caroline Proctor in Justenough News

  

Omni-Channel Merchandising Study: Merchandise Planning Recommendations

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:

Recommendations

  Short Term (0 - 6 months)        Medium Term (6 - 12 months)        Long Term (1 - 2 years)

Merchandise Planning

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.


Caroline Proctor

  25 Aug 2015 • By Caroline Proctor in Industry News

  

Omni-Channel Retailing Driven From Both Directions

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.”

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