It's no secret that retailers have struggled to corner market share, drive brand loyalty and increase revenue due to changing consumer purchasing behavior. The emergence of new channels, heightened price and promotion sensitivity as a result of an in-flux economy and the rise of a more tech-savvy demographic have also weighed down profitability.
In response, retailers are becoming increasingly consumer centric to ensure that today’s demanding and discerning shoppers find exactly what they are looking for at the right time, in the right location and for the right price. While not a new concept, many have adopted an attribute-based planning approach. This means leveraging store attributes like sales volume, selling space and climate, and product attributes like color, silhouette, fabric, fit and size, to estimate demand for new products and guide their merchandising, forecasting, assortment planning, allocation and replenishment strategies.
Traditional attribute-based planning has proven to be beneficial in many ways: retailers can better anticipate likely demand for new products, gauge how changes in inventory will impact sales, and as a result, create more targeted cross-channel assortments and allocations.
However, there are drawbacks. Here’s an example of how relying solely on store and product attributes can take a toll: A clothing retailer leverages quantitative store and product attributes and, as a result, realizes blue cashmere sweaters performed well last spring in a specific cluster of stores. While helpful, that information alone fails to give the retailer true insight into why that was the case, or if the trend will continue.
This month, JustEnough Software and Capgemini collaborated on an article published in Apparel that focuses on a shift in the way advanced retailers think about their planning processes. Today, organizations are armed with greater access to increasingly granular and more meaningful shopper insights made available through digital commerce and marketing initiatives, customer loyalty programs and transactional data, which can reveal critical insights about a shopper’s lifestyle, aspirations and interests. Dynamic and qualitative in nature, such customer attributes help retailers better understand what drives customers to open their wallets.
Let’s take, for example, a retail chain whose San Diego store sells more cold-weather outerwear than any other across the country. Store attributes suggest that the store should behave like those based in other warm weather climates; yet, customer attributes reveal that shoppers in the area tend to head to higher altitudes to ski on weekends and holidays. Offering an assortment more conducive to its customers’ active lifestyle has helped the store increase sales by providing customers with the products they want and need.
But, zeroing in on the driving characteristics among a retailer’s core customer base and not just the once-in-a-while shopper can be challenging. In the article, we explore strategies to help retailers move toward customer attribute-based planning:
- from combining what they know about their shoppers with their own brand vision to create customer profiles;
- to tapping their e-commerce and marketing teams to better understand where their customers live and what drives them to purchase;
- to gathering information about local culture and product affinity from store managers;
- to testing their customer-attribute theories by rolling out localized assortments to a limited number of stores at first.
Be sure to read the full Apparel article here, and contact us to learn how JustEnough Software and Capgemini can help your organization adopt a customer attribute-based planning model.
In this final blog post highlighting findings from the EKN 2016 Assortment Management and Optimization report, I’ll shed light on the recommendations it offers to help retailers create balanced assortments that drive sales while aligning with financial and merchandising goals.
Sponsored by JustEnough Software and based on survey responses from about 50 North American retailers, the report concludes that for more than one-third of retailers, assortment management is yet to be connected to allocation in a real-time process or at a user level. Roughly the same percentage of retailers cite that their assortment planning process is not integrated with financial and merchandising plans. Additionally, shortcomings related to a lack of accurate demand forecasts, consumer insights and a multi-attribute based planning process hinders the development of precise assortments that boost both traffic and margins.
Retailers can circumvent these challenges by transitioning out of legacy systems, opting instead for a single, unified and integrated merchandising process-based platform guided by four strategic pillars: customer science, digital user interface and experience, integrated workflow and functional collaboration. They can further reduce the silo effect by adopting a series of user-level integrated workflows supported by best-in-class solutions that generate targeted and balanced assortments.
The EKN 2016 Assortment Management and Optimization report offers specific recommendations to help retailers improve their assortment planning and execution process over a short-, medium- and long-term period of time. A few examples include:
- Over the course of the first six months, retailers should set benchmarks and KPIs to measure targeted pre-season and in-season assortment progress – i.e., shorter lead times, on-time orders, inventory accuracy, lower lost sales, higher full-price sell through and reduced markdowns, for example.
- Within the first 12 months, retailers should migrate to a multi-attribute based assortment planning system, enabling them to create attribute-based assortments based on common product specifications (i.e., size, color, styles, etc.) and customer segmentation attributes (i.e., preferences and affinity).
- At the six-month mark, retailers should ensure full functional and organizational integration between merchandise planning, assortment management and allocation for strategic planning. At this time, they should also add a consumer insights module within the merchandise and assortment management system for seamless access to customer behavior data at the end-user level.
- At the halfway point of the transition and through to the end, retailers should use investigative and predictive data insights to identify and resolve gaps in assortments through a phased evaluation of pre-season, in-season and end-of-season assortment plans.
To read the full list of recommendations or to download the EKN Assortment Management and Optimization report, click here. Be sure to check out how JustEnough Assortment Planning fully integrates with an innovative suite of retail planning solutions to help organizations create differentiated, customer-centric assortments that drive sales, reduce markdowns and increase margins.
The new EKN 2016 Assortment Management and Optimization report offers valuable insights about the state of assortment planning. Sponsored by JustEnough Software, the report is based on findings from a survey of about 50 North American retailers. In my last few posts, I touched on the most pressing challenges retailers face in optimizing their assortment planning processes, as well as areas they plan to invest in and capabilities they use or plan to use to realize these goals.
Today, I am going to spotlight the merchandise planning solutions retailers have already adopted and those they are currently upgrading, according to the report. Even among large, well-established brands, the use of legacy applications and spreadsheets to manage key merchandising functions is a fairly common practice. Retailers can address many legacy and traditional planning, assortment and allocation-related integration gaps by adopting a unified and integrated workflow-based platform guided by four strategic pillars: customer science, digital user interface and experience, integrated workflow and functional collaboration.
Visual merchandising, category management and space planning top the list for upgrades for nearly half of the retailers surveyed. More than 40% said they are currently making much-needed upgrades to their ERP-based or best-of-breed demand forecasting, distribution center replenishment and assortment optimization systems as a means to align location-specific financial and profitability plans with assortments that catch the eye of discerning shoppers.
While almost half the retailers surveyed indicate they possess updated systems for allocation, store replenishment, item master, analytics and space management, in reality, there are often large integration gaps between planning and execution applications and related workflows. Additionally, retailers are in the process of overhauling their pricing, promotions, markdown and planogram management technologies due to the fact that a large concentration of legacy or homegrown applications are close to or have reached end-of-life.
The EKN 2016 Assortment Management and Optimization report also found that 62% of retailers deployed their merchandising systems using a licensed on-premise model; however, one-third have adopted SaaS applications and managed-services models. SaaS applications have caught on for their flexible pricing terms and ease of scalability and future upgrades, while managed services offer an alternative for organizations with limited IT resources.
Read the full report here, and keep an eye out for next week's blog post highlighting the recommendations it makes to help retailers improve assortment planning and execution.
A couple of posts ago, we unveiled the top areas in which retailers plan to invest to improve overall business efficiency according to the EKN 2016 Assortment Management and Optimization report. The research, sponsored by JustEnough Software, found that nearly half of the 50 North American retailers surveyed intend to invest in assortment plan visualization in 2016. The second-biggest area of investment is in tools that support better integration of merchandise plans with assortment planning.
The report also evaluated which capabilities retailers most need for deeper integration between core merchandising areas. Currently, two-thirds of the organizations surveyed said integrated processes between assortment planning and allocation is the number-one capability needed for the creation and execution of effective assortments. But for many retailers, such processes are executed in silos instead of via a single, integrated process and platform.
To address this issue, allocation and assortment management teams need to share unit-level insights in real time, and allocation managers must have visibility into multiple, attribute-based plans and product images. Investing in a common platform that facilitates visibility and analysis of assortment information and related allocation plans is critical to ensuring that merchandising teams are able to analyze and summarize assortments by location and align them with allocation and financial targets.
The second most-cited capability retailers use is the integration of merchandise financial planning with assortment development. Yet, nearly 40% said they are currently unable to ensure the integration of merchandise financial planning with assortment development. When done correctly and within a single system, the integration of these two important aspects of retail planning gives retailers visibility throughout the planning process and builds a foundation for better, more informed decision-making.
Both of the above-mentioned approaches lead to decreased lead-times, fewer delayed orders, accurate inventories and a reduction in lost sales.
The EKN 2016 Assortment Management and Optimization report also looked at which capabilities retailers planned to use within the next 12 months to optimize their assortments. The two that topped the list are:
- Reduce end-of-season on-hand inventory and related markdowns through optimum order quantities
- Early order commitments, close to, and in-season adjustments
Both capabilities relate to finalizing assortment buys and managing an optimum order management process with suppliers. The retail industry must also accommodate scenarios where early commitments to the orders are made several weeks or months in advance. However, if a trend in demand shifts, retailers should have the ability to adjust orders either close to the trend taking place, or make in-season adjustments to avoid excess inventory and markdowns.
On next week’s blog post, we’ll cover the top merchandise planning technologies and strategies retailers are deploying to increase operational efficiencies, but check out the full EKN 2016 Assortment Management and Optimization report here.