10 Important Things “Retail Winners” Know About Technologies, Empowered Consumers & Product Assortment

In their recent Benchmark 2012 retail research report, "Optimizing Assortments to Reinvigorate Retail," RSR Managing Partners Paula Rosenblum and Steve Rowen examine progress made in retail companies over the past year regarding evolving merchandising processes, technology usage, customer empowerment, importance of data analysis and forecasting, having correct assortment planning and product assortment, and understanding the tools and techniques needed to accomplish these things.

What the researchers found in general:

1. The industry’s use of automated tools and techniques continues to rise. Retailers have grown savvier about the tools at their disposal, commensurate with their belief that these tools and techniques will help them grow their business. (Plus, more than 75% of those with annual revenue exceeding US $1 billion report a solid understanding of most tools and techniques).

2. 34% of respondents plan to optimize their assortments against new key customer segments in the coming year. Another 24% plan to include initial price optimization in their processes in 2013, and 22% will incorporate promotion optimization.

3. Retailers are concerned about understanding customer preferences - and about their own ability to respond to those preferences with new ideas about pricing and promotions.

4. The aggregation and analysis of a breadth of omni-channel customer information is now available to the retailers, thanks to advances in hardware usage.

5. Price optimization has been in use at 25% of retailers at all revenue levels EXCEPT the mid-market retailers -- and fully 31% of those respondents report they have no plans to implement this technology.

What do "Retail Winners" know and do that the others don't?

(RSR defines winners as those with sales improvements and sales growth of at least three percent in the past year).

1. "Winners," say the researchers, "tend to do the same things better than the others, do different things, think differently, plan differently, and respond differently."

2. Retail Winners generally excel at finding steps to a goal, as opposed to shooting directly for that goal. For example, while assortment optimization is the goal, Retail Winners perceive more value in the analytics that drive decision-making than making the decision itself.

3. When it comes to business challenges, retail Winners are concerned with: Identifying new ideas and rapid innovation (47%), underperforming inventory (44%), understanding customer preferences (35%), and fractured planning processes (35%).

4. 59% of winners cite the ability to holistically predict the impact of future pricing, assortment, and promotion decisions as their top operational challenge.

5. The largest retailers (over $5 billion in annual revenue) have been using assortment optimization technologies the longest, with 38% implemented for longer than 1 year. Of the Winners, 42% of Winners are already using assortment optimization, 27% of Winners are in the process of implementing it right now, and another 15% have plans to do so next year. By comparison, 39% of lagging retailers have absolutely no plans to incorporate assortment optimization.

6. Operationally, the best performers “know what they don’t know,” and have a generally better understanding of what they need to change to improve their merchandising strategies. Laggards have a much harder time identifying new merchandising ideas quickly, even as they collect a sea of customer information.

7. More Winners have been employing a bottoms-up plan – and for longer – than their average and lagging competitors (52% of Winners have had this process in use for more than a year, vs. average retailers' 19%, and laggards' 29%.

8. Winners are seeking more innovative delivery models, including Software as a Service, Cloud-based, and agile merchandising systems.

9. Winners have fewer problems freeing up capital for new technology purchases (25% vs. average performers at 53% and laggards’ 43%).

10. Winners are more aware of the need to better manage the complexities of their cross-channel merchandising efforts (41% of Winners to laggards’ 29%).

To meet the challenges and lead into the next round, RSR tells retailers to:

*Get Predictive. Predictive forecasting using sophisticated tools is a must for today’s merchant. 

*Get Responsive. Living in exceptionally erratic (economic) times makes the ability to continually re-model and reforecast critical to a successful year. And the omni-channel phenomenon only increases retailers' need to respond and react. 

*Get Automated. Mid-market retailers should use the tools that larger retailers use for merchandise operations support, while retaining the uniqueness of product offerings. That includes newer technology delivery models like hosted services and Software as a Service to minimize up-front costs and accelerate time to value.

*Get Scientific. Retailers need alerts, analysis and aggregation to solve today’s problems. Luckily, says RSR, those tools and techniques are available to us. 

 

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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