Customer-Centric Merchandising

By Terry Donofrio
To address localization and customer-centric merchandising, retailers must build a strategy that considers local customer preferences and diversity. They must address the changes in customer demand as well as buying patterns and provide tailored assortments based on local customer needs. To address localization, various tools and techniques are being considered such as: Business Analytics, Advanced Clustering, Forecasting, SKU Rationalization, SKU Eligibility, and Case Pack/Size Optimization.

Methods and Techniques for Localization

The starting point for localization is a sound advanced planning business process based on best practices. The tools and techniques for localization and their application to advanced planning are described below:

Business Analytics/Business Intelligence - Combines analytics, forecasts, metrics, formats and criteria to provide the business intelligence needed for localization. The analytics provide the ability to identify local customer demand, buying patterns, customer trends, diversity, competition and market trends.

Advanced Clustering - Clustering must move to a multi-dimensional profile based on customer preferences and buying habits as well as demographics, store and merchandise characteristics.

Assortment Planning with SKU Rationalization and SKU Eligibility - SKU Rationalization techniques define the value of the items to the assortment and determine those items that should remain. SKU Eligibility also determines the product/store combinations that do not fit into the cluster assignment.

Assortment Planning with Case Pack-Size Optimization- Used to size the assortment based on store/size profiles, determine the best combination of existing case packs and/or apply algorithms to determine the right number of case packs and the case pack definition.    

Space Optimization - Various algorithms are applied to determine the optimum space utilization to fit the local assortment needs. 

Advanced/Intelligent Allocation - Business analytics can be utilized to evaluate the allocation process and the maintenance of local assortments. 

The localization support tools allow retailers to provide customer-driven assortments with adequate choices, without the need for excess inventory. This customer-centric merchandising approach allows understanding and reaction to the changes in the customer's buying habits, preferences and demand while maintaining customer loyalty, improving customer service and giving the customer reasons to return for future purchases.  

To view the complete seven-part Advanced Planning and Optimization series produced by RS&S, please visit www.risnews.com. Terry Donofrio is the president of Retail Systems and Services (RS&S). Donofrio has served the retail industry as a consultant, trainer, lecturer and systems specialist for over 25 years. Donofrio is an industry specialist in Advanced Merchandise Planning methods, procedures, systems and training. He can be reached at tdonofrio@compuserve.com.