Getting assortments right is not a new challenge. Retailers have long struggled with the delicate balance between art and science to figure out the right assortment mix that appeals to not only its most loyal customers, but also new customers, resulting in higher sales, lower inventory costs and an improved shopping experience.
However, within the last few months, several new industry-wide obstacles have presented themselves, throwing a wrench in the way retailers approach assortment planning. Customer traffic in stores has waned, top-line revenue has become more unpredictable and the emergence of off-price sales channels in traditionally less price-sensitive segments like specialty, apparel and luxury have muddied the waters.
The new EKN 2016 Assortment Management & Optimization, sponsored by JustEnough Software, surveyed about 50 North American retailers. While the two predominate challenges standing in the way of perfect assortments are the fact that one in three retailers lack predictive tools to forecast demand and roughly the same percentage are unable to plan assortments around multiple product attributes such as size, color and others, the report offers insight into the current state of assortment management. Here is a high-level summary:
Retail executives and customers cite different reasons for why shoppers buy products from the retailer. From the retailer’s perspective, the top five drivers can be summed up in order of importance as: product quality, overall customer experience in store or online, product range, price and, finally, preferences. In contrast, millennials – arguably the most important consumer demographic at 75 million strong – put a premium on price, followed by discounts and promotions, product availability, staff friendliness and ease of navigating the store, according to EKN’s 2014 Millennial Survey. It’s clear young shoppers are focused on price – much more than retailers have estimated. An enhanced assortment can make the shopping experience more enjoyable for consumers, helping them see past the price tag and making them more loyal to the brand – which, in turn, can result in higher full-priced sales and profits.
Retailers are dogged with the decision to deploy a universal versus local assortment strategy. According to the report, 60% of all assortments are universal or applicable to a broad group of consumers. The reason for that is that 70% of retailers, on average, do mere macro-level geographic customer segmentation to plan targeted product lines and product varieties due to a lack of investment in deeper consumer preference and product affinity insights. This leads to generic assortments that don’t meet the needs of specific shopper tastes and lifestyles. However, adequate investments in local customer insights, category and item analysis and store/channel audits can empower retailers to develop more targeted and localized assortments or product lines and varieties.
Disparate and legacy assortment management do not allow for extensive in-process customer insight input. The EKN 2016 Assortment Management & Optimization survey found that 60% of retailers do not process customer-centric, store-level clustering for omni-channel assortments, leading to lower full-priced sales, inventory turns and sell-through of merchandise. Moreover, one-third of retailers do not have formalized processes to integrate assortment management with allocation execution for stores and other channels.
From a planning and execution perspective, these two big merchandise management pillars of are largely handled separately. It’s no wonder the lack of integration between the two sides is harmful to the business. For instance, the coordination between open-to-buy, category and department-level assortment plans and precise allocation of all SKUs for both promoted and non-promoted items is done too late in the in-season planning process, leading to delayed shipments, out-of-stocks and fulfillment delays. The integration of merchandise financial plans and decisions with assortment strategies is critical to ensure that the retailer’s financial goals meet the product and sales goals location by location and channel by channel.
The bullets above describe the state of assortment management today. In the next blog post, we’ll dive deeper into the top business challenges retailers are facing as it relates to creating assortments that truly differentiate them from the competition and drive sales. You can view the full EKN 2016 Assortment Management & Optimization report here.
NRF recently published its Holiday Planning Playbook for 2016 which includes historical sales data, consumer trends and perspectives, and investments retailers plan to make for the 2016 holiday season. Here are a few takeaways from the report.
Online & Mobile Findings
One in three (35%) consumers made more than half of their holiday purchases online this past holiday season. For six days — on weekends and as Christmas drew closer, according to Adobe — traffic from smartphones surpassed that of desktops; however, despite the heightened emphasis on mobile, online shopping via desktop still brought in the highest transaction size during Holiday 2015. Retailers will continue to try harnessing the runaway power of mobile, optimizing the experience and attempting to spread its impact across all channels.
Retailers focusing on one area must be careful to not lose ground in another. Specific to online, 84% of retailers want to see site conversion rates increase, followed by average daily site traffic (71%).
Consumers expect the same level of information to be available online and in-store. That goes beyond being able to find what they want in terms of products; comparisons, ratings and reviews should be available within bricks-and-mortar. Google reports that 42% of in-store shoppers conduct online research while in-store, and 46% are visiting the retailer’s own app or website.
Retailers find that mobile and online are increasingly considered drivers for the in-store experience. Consistent with that, a third of the retailer respondents to the 2015 Holiday version of the Omnichannel Retail Index survey offered free Wi-Fi in-store during the holidays, compared to just 26% in the summer months. Outside the walls of bricks-and-mortar, individual data collected online is helping create more personalized shopping experiences in-store.
Marketing and Promotions Findings
Free shipping was once a differentiated offer. But now, close to 60% of online transactions include it. So what do consumers respond to? Online-only sales (32%), percentage-off coupons (31%), free standard shipping without conditions (28%) and free shipping upgrades (25%) are all drivers.
Consumers know they missed out by foregoing promotions. A third of the respondents said they would have done well to take more advantage. Additionally, almost one in four (24%) visited a website they shopped on last holiday season through an email promotion.
As for retailers’ investment priorities, search engine marketing is at the top of the list for the coming season. Over nine in 10 retailers (97%) plan to use it in 2016, compared to 88% in 2015 and 75% in 2014. Digital is expected to be a large spend overall. On average, 41% of marketing budgets are dedicated to digital. In terms of promotions, the days ahead will be as much about when the offers are made as what they are for; retailers desire more careful attention to timing for greatest impact. They also desire a greater balance between bricks-and-mortar and digital.
Read the complete article here to find more insights into expectations for the 2016 holiday season and other findings from both the consumer and retailer perspectives.
JustEnough’s Nick Bourland and Keith Whaley recently wrote an article about strategies that retailers can employ in order to create the right balance of building an assortment plan that is visually compelling and draws customers in, while not jeopardizing financial success. It outlines how companies can understand key points in the assortment plan process to determine where art or science should take the lead. Below are strategies recommended in order to attain the right balance and truly marry the art and science of assortment planning.
Dive Deeper Into Your Data
Traditionally, retailers have planned their assortments guided by the structure of their product hierarchies. For many, this is due to the fact that their systems aren’t capable of a more flexible approach, or perhaps their available resources simply aren’t able to analyze at more granular levels. By drilling down deeper into the data, merchandising organizations can hone in on areas of opportunity created by local customer affinity that would have otherwise gone unnoticed.
Reduce the Risk of New Products
Ask a hundred retailers and they’ll all agree – infusing assortments with newness each season is a critical component of their success. The problem is, no matter how great a proposed new product may appear, properly estimating consumer reaction is an ever-moving target. By breaking down financial targets that are typically planned at higher levels of the product hierarchy into more attribute-based or trend-specific categories, retailers can identify areas of focus for core business versus complementary offerings. This helps ensure that precious open-to-buy dollars are allocated to the areas of business in which they will be most impactful and provide the greatest return.
Location, Location, Location
Another key step in finding hidden opportunities is understanding the differences that exist across a business by location. Selling trends can vary widely from one store to the next, even within the same geographical area. Recognizing these differences and then grouping similar stores together allows retailers to localize their assortment offerings without the requirement of planning assortments for every individual store.
Time is of the Essence
The last strategy we offer up for planning with greater insight and precision is understanding the role that time plays in the equation. Being able to grasp historic demand for any timeframe by both product and location enables retailers to see the bigger picture – how assortment breadth and depth should flex across the calendar to closely mirror changes in demand. Christmas and Back to School are no surprise to most retailers, but what about other events that happen at a more local level? The intersection of analytics by product, location and time paints the complete picture of ideal assortment size throughout the year.
Finding the Balance
By digging deeper into customer preferences through historical data analysis, it’s possible to build compelling assortments that achieve financial targets while still allowing merchants and buyers to address emerging trends. Through robust historical data modeling and process flexibility, the JustEnough Assortment Planning solution enables retailers to plan in a manner that feels custom to their specific business needs and yet move forward with confidence, knowing a sound analytical foundation lies beneath every step.
To read the full article, click here.
Find out more about how JustEnough can help you find the perfect balance of art of science in your next assortment. Contact us today.
More than ever, retailers are turning their attention to one of the core aspects of planning: assortment management and optimization. Facing tepid store traffic, unpredictable top-line revenue and the emergence of off-price sales channels in traditionally less price-sensitive segments like specialty, apparel, fashion and luxury, retailers are hard-pressed to integrate their assortments with shopper insights and the overarching planning model for an ever-more consumer-centric approach.
In the latest issue of InDemand, we shared high-level findings from a new JustEnough Software-sponsored survey by EKN of about 50 retailers North American retailers, which revealed two major obstacles that are challenging the industry as a whole:
- First, more than one in three retailers lack predictive tools to forecast customer demand
- Second, about the same percentage are unable to plan assortments around multiple product attributes such as size, color and style, among others
The EKN 2016 Assortment Planning and Localization research highlights strategies and solutions that better support assortment-mix decisions in retail pre-season, in-season and end-of-season. Take a minute to download the free report and view the free infographic to learn more about the steps retailers are taking to combat the above-mentioned challenges and ultimately drive more profitable retail execution – from precision to increased full-priced sell-through of merchandise to reduced dollar markdowns. There’s also a free Assortment Planning & Localization Quickscan Assessment you can take to learn how your organization compares to others in the industry. Learn more here.
JustEnough Software Expansion: Assortment Planning and Price Management
The InDemand newsletter highlights the launch of the latest version of JustEnough Assortment Planning. We continually work with leading retailers and industry experts to ensure users have cutting-edge technology and processes to address trends in the industry – including those revealed in the EKN report. Our enhanced Assortment Planning solution offers:
- Seamless integration with Merchandise Financial Planning for target setting and open-to-buy budget reconciliation, as well as Allocation for executing inventory placement in line with assortment plans
- Rationalization of the assortment width and depth within each cluster across product groupings
- Automatic smart-start creation of a plan for each item in the assortment, including sales, buy, promotional and markdown plans using dynamic clustering and unlimited attributes with plans that automatically adjust for in-season trends
- Time-phased receipt flow with built-in size curve and prepack optimization
- Assortment visualization with the capability to drag and drop images into the assortment and to create and plan placeholders on the fly
In addition to announcing the newest version of JustEnough Assortment Planning, InDemand also spotlights advanced functionality now available in our Price Management solution.
JustEnough Price Management enables users to better manage complete lifecycle pricing – from establishing price strategies to setting initial prices through price adjustments and promotional price changes through to end of life. As a result, retailers can create a more efficient and compliant pricing process that drives sales, improves margins and increases customer loyalty.
New capabilities include:
- More powerful rules and validation engine, which enables users to ensure compliance through creating and enforcing internal and external rules including competitor, rounding, vendor, legal and financial
- New workflow engine, which supports the use of pre-configured best practice workflows or configuration of custom workflows that guide users through the pricing and approval process while also providing complete visibility into price change status so users always know where they are in the process
- Price adjustment integration to facilitate tighter integration of JustEnough Promotion Management to Price Management, which automates the population of promotional prices into the pricing lifecycle reducing planner effort while more importantly ensuring that potential human error is not introduced into the process
To learn more about our industry-leading Assortment Planning and Price Management solutions, contact us today.
And You Won’t Want to Miss…
In addition to the EKN 2016 Assortment Management and Localization report and information about our software expansions, this issue of InDemand also showcases:
- Customer Success: The Crazy Store Gets Serious Results with JustEnough
One of the largest discount variety chains in South Africa with a footprint of about 280 stores, The Crazy Store could no longer support the growth and complexity of its business using a dated and highly customized replenishment solution. The Crazy Store selected JustEnough to help it quickly overhaul its existing replenishment system. After going live on time and on budget, the retailer has benefited from a 20% hike in in-store product availability and double-digit sales growth every year since the implement. Read more here.
- Research Reports: The Future of Retail
A recent Raconteur report, sponsored by JustEnough, found that rapid transformation coupled with changing consumer behavior and digital technology has made predicting what lies ahead increasingly difficult for retailers. Executives need to become more digitally aware and informed to make the right decisions for their business, and retailers also need a better understanding of the customer in real time to enhance personalization and provide a seamless purchase journey across all channels. Read the full report here.
- JustEnough In The News: The Record
“Balancing Customer Appeal and Profit,” a byline penned by Keith Whaley, JustEnough’s Senior Vice President of Retail Strategy, was featured in latest issue of TheRecord – formerly OnWindows Magazine, Microsoft’s premier publication. The article reveals how analytics can help retailers better create visually compelling assortments that drive customer sales and profits. Check it out here.
Also, if you didn’t catch my July 26 blog post, JustEnough was recently recognized by CIOReview as one of 2016’s Most Promising Retail Technology Solution Providers. You can read the JustEnough profile here.
- Thought Leadership: The Case for Customer-Centric Transformation in Merchandising
JustEnough, Kalypso and EKN hosted a webinar to make the case for consumer-centric transformation in merchandising and to lay out “how” organizations can make this shift. Check out the jointly authored articles on our blog below, or watch the on-demand webinar featuring JustEnough’s Peter Leith, EKN’s Sahir Anand and Sonia Parekh of Kalypso here.
We hope enjoy reading the latest installment of InDemand, and click here to subscribe to receive it in your inbox each quarter.
If you watch CNBC and listen to the earnings reports, you know that many retailers seem to be struggling. With store closings and malls appearing to be wastelands, it looks like brick and mortar is holding on to a thread. However, in an interesting Harvard Business Review (HBR) article, the authors point out that this may not be the whole story. According to Census Data, brick and mortar sales accounted for 92.3 percent of retail sales in Q1 of 2016 – and that is two decades after online shopping became a thing.
So what is going on with retail? The HBR article goes on to explain that in order to compete online and offline, retailers have to reinvent themselves. It is becoming increasingly clear that this is about devising retail models that work for people who are making increasing use of a growing array of Internet-connected tools to change how they search, shop and buy. Creative retailers are using the new technologies to innovate just about everything stores do from managing inventory to marketing.
At JustEnough, we help retailers reinvent themselves and guide our clients on paths to a customer-centric model. By knowing how, where and what customers are buying through advanced analytics and customer-centric merchandise planning, retailers can better understand how to frame their business to meet customer demand – online and offline.
Contact us to learn more about how we can help you gain valuable, actionable insights into your customers. To read the full HBR article, click here.