Boston Retail Partners Annual Merchandising Planning Survey

JustEnough recently sponsored Boston Retail Partners annual research into the current state of the industry around Merchandise Planning which uncovered strategies that retailers can focus on to enable effective planning in today's omni-channel world.

Over this and the next several posts, I'll be sharing the research findings and conclusions. I hope you enjoy this series of articles. Please contact us, if you would like to learn more about how JustEnough solutions are helping leading retailers to successfully plan for their omni-channel operations.

Here is part one:

Introduction

Today's retailers are wrestling with a myriad of business and IT issues. Adding to the already long list, current planning systems are out-of-date and don't effectively address today's requirements for an omni-channel planning environment. Most retailers find their current planning applications are ineffective and can't support the complex analysis required to optimize planning decisions and ultimately meet customer demand. The good news is that most retailers realize this and more than half of retailers are planning to upgrade or replace their planning applications within two years (Exhibit 1).

Exhibit 1: Application Plans


Many existing planning systems were developed and installed in the late 1990s as the Y2K issue forced numerous retailers to update their technology base. Fast-forward twenty years and many retailers are still utilizing those same systems with the same configurations.

Most retailers have at least some planning systems in place but the rapid changes in the industry – as e-commerce and mobile commerce have become mainstream and today's customer expects the ability to shop anywhere at any time – have eclipsed the abilities of these planning systems.

This environment sets the stage for Boston Retail Partners' 2015 Merchandise Planning Benchmark Survey to explore the current state of retail planning and to identify and understand retailers' priorities as they attempt to meet the needs of a 21st century customer while constrained by 20th century technology.

Planning in an omni-channel world

The traditional planning process is conceptually straightforward: identify what to sell, to whom to sell it, at what price to sell it and then ensure the product is where it needs to be on time. This is simple in concept but challenging in execution. With customers looking for a seamless experience across all channels, it becomes even more challenging to plan and manage effectively. Today's consumer demands an omni-channel retail experience offered in real-time, whereby all retail locations – whether physical or virtual – converge to provide a fast, easy, unified shopping experience.

Fortunately, there are technology tools available in the marketplace to support advanced planning that incorporates customer insights and trends, cross-channel integration, competitive information, and real-time data. However, technology is only a part of the solution – to truly offer customers a seamless experience across all channels requires alignment of the organization and processes to support the technology solution.

Step 1: Formalize planning processes

The value added by employing formal planning processes is not going unnoticed in today's retail market. Advances in planning tools support a wide range of merchandising and planning capabilities and have significantly expanded to support the omni-channel model of retail.

Of the retailers surveyed, nearly all have a formalized merchandise planning process (91% vs. 89% last year) (Exhibit 2). Formalized assortment planning processes are also increasing with half the retailers indicating a formal assortment planning process last year and nearly three-quarters this year.

Exhibit 2: Formal Planning Processes


For most retailers, planning is a cyclical endeavor repeating tasks on a weekly, monthly, quarterly and annual basis. These cycles are completed multiple times throughout the planning organization and often independently for various channels – so the e-commerce planning team is often performing the same exercises as the planning team managing brick and mortar.

Pursuing an omni-channel model requires retailers to break out of these duplicated planning cycles and silos to share insights across the enterprise and enable themselves to react to trends in real-time. Initially, retailers must plan sales across channels and allow those forecasts to trickle down to a more granular level. This allows retailers to take advantage of synergies across their business channels and potentially save capital on inventory investments. Retailers should recognize that this requires their inventory to be more flexible as units earmarked for one channel may end up fulfilling sales in another. In season, regular cross-channel meetings allow planners to react to trends and revise strategies to ensure that inventory ends up in the right place, at the right time and at the right price.

Step 2: Align the organization

Retailers are making strides in the integration necessary across the organization to provide customers a seamless experience across channels. The survey revealed increased integration across omni-channel planning with about half of the retailers having already implemented these initiatives (although they need improvement) and many have plans to integrate within two years (Exhibit 3).

Exhibit 3: Omni-Channel Planning Initiatives


Part of breaking down planning silos includes disrupting the traditional alignment of planning teams. Historically, planning teams have been aligned around product categories by channel. Unfortunately, this does not work with the omni-channel model of retail in which sales are planned across the enterprise. It also creates misaligned goals where a planner puts the success of his or her channel ahead of the success of the company as a whole. Further, valuable lessons learned in one channel may not be shared with, and benefit, another. In order to achieve the synergies of omni-channel retail, planning organizations must be realigned, and sometimes consolidated, in order to create a more proactive and nimble organization.

Step 3: Implement the right technology

As mentioned above, many retailers plan to upgrade their applications within the next two years (See Exhibit 1). This year, 63% of retailers are planning to upgrade their merchandise planning application vs. 22% of the respondents last year. This represents a huge increase in planned upgrades and validates the importance of advanced planning tools.

Retailers must invest in modern merchandise planning applications to achieve omni-channel success. The increased complexity of a collection of homegrown and off-the-shelf apps, supplemented with spreadsheets, creates multiple versions of the truth, making it challenging for retailers to remain competitive. Modern omni-channel applications permit retailers to forecast cross-channel demand, while managing pricing, promotion and inventory at a more granular level. This, integrated with predictive analytics and customer insights, creates an environment in which omni-channel planning teams can excel.

Once the improved processes, organization and technology are in place, retailers can focus on the following elements to enable effective planning in an omni-channel world:

  • Seamless channel integration
  • Organizational rationalization
  • Enhanced customer insight
  • Advanced analytics
  • A holistic pricing strategy
  • The right technology tools

In the next article, we'll begin to review these elements.

You can read the complete BRP 2015 Annual Merchandising Planning Report here.