By Joe Skorupa
As new mobile and social opportunities join traditional sales channels, the e-commerce and marketing teams have quickly jumped on board, sometimes even before formal business plans were in place. They saw the potential in new shoppers and new technologies. And compared to merchandisers and planners, they were unencumbered from carrying the bulk of the enterprise on their backs. However, getting merchandisers and planners to shift to new methods is the key to success in omni-nomics.
To help retailers solve the challenge of succeeding at omni-nomics, the business of creating sustainable growth drivers in an omni-channel world, RIS hosted a Merchandising and Planning Symposium in mid-April. It was held on April 11 at the Ritz-Carlton Grande Lakes in Orlando, Florida, a day before the 2012 Retail Technology Conference, and attended by 30 retailers. Sponsors for the event were Aprimo and Teradata.
The Evolution of Merchandising
“If the recession didn't kill you,” said Greg Girard in an opening keynote presentation, “then you got religion about analytics, process integrity, organizational alignment, mobile-social-local, supply chain efficiencies, and a 360-dgree worldview of customers. This is the new normal for retailing.”
Girard is program director for merchandise strategies for IDC Retail Insights, and he acknowledged retailers struggle with transparency. “Stores are no longer big boxes,” he said, “they are glass boxes with everything exposed on the Internet.” Shoppers can find everything they need to know about your products, pricing strategy and your local stores, and they can compare all of this information with your competitors.”
This is having a disruptive effect on established retail methods, especially on the store channel, which Girard calls “an information desert.” The solution is to think of stores as websites with omni-channel capabilities. Think of POS as plural, for example, points of sale. Think of changing the concept of customer relationship management to customer experience management.
Integrating Consumer Demand Signals
Buzz is not a business process, noted Terry Donofrio, president of Retail Systems and Services, who conducted the day’s first workshop.
Donofrio set the workshop discussions in motion by making the point that social media, even at this early stage, provides insights into buying habits of shoppers and their reactions to products. It offers retailers the ability to learn more about their shoppers than ever before, and a number of process changes flow from this new ability.
One of the big process changes Donofrio addressed is "the ability to build assortments that are targeted to well defined customer segments as opposed to products.” Another is the ability to move from store clustering to local groupings with common characteristics based on customer segments.
One of the big challenges retailers face with social media is getting the information in a way that merchandisers and planners can use, as in natural language groupings. It also has to be gathered in a digital way that can be imported into business intelligence (BI) tools.
Once social media analytics and insight are embedded in the retail organization they should be incorporated in the earliest phase of the merchandising and planning process.
“The impact of this shift on merchandising and planning is major,” said Donofrio. “It will affect everything from setting merchandise strategy, defining assortment strategy, buying patterns, mix of merchandise, tailoring, fabrics and inventory.”
The workshop split the retailers into manageable groups to discuss the impact of social media on retail process and to identify challenges, solutions and opportunities. Here are some key highlights from retailers during the discussions:
• Every retailer does a post mortem at the end of the season or campaign, so why not use social media to add information about what went right and what went wrong? Use social media to gauge sentiment and add it to the post mortem.
• One idea is to create a new customer insight database that not only includes POS data, but also CRM data and social media data.
• Replenishment is a big component of merchandising and planning, and multi-channel retailing is causing some problems with replenishment that need to be resolved. One of these is that on-hand inventory needs to be separately tracked from committed inventory.
Omni-Channel Strategies and Technologies
The second workshop focused on omni-channel inventory strategies and was led by Sonia Hernandez, associate partner of the Parker Avery Group.
This workshop featured a lively exchange of ideas among retailers at the discussion tables, which was based on the context that Hernandez outlined at the start. The major theme was that omni-channel retailing has major implications for managing and optimizing inventory across channels and ultimately through a common view that better meets consumers' expectations and behaviors.
Another major shift impacting retailers today is the collapsing of the merchandising and marketing departments, which also has significant implications for creating better localized assortments.
“Smart & Final is an example of one retailer that has collapsed the marketing and merchandising departments,” said Hernandez, “and now the marketing director reports to the merchandising director.”
When the retailers were split into discussion groups they came up with following insights about omni-channel merchandising:
• A common inventory has clear benefits, but it is a challenge to get there, because retailers need to move to near real time reporting from overnight batch reporting, and also they need to centralize their order management systems.
• Since not all stores will carry the same product mix in a localized scenario it will become necessary to support online ordering of all products from within the store.
• Using stores as distribution centers could cause some problems, such as “a whack-a-mole situation,” which occurs when one store with slow moving product ships it to another store and then the original store runs out of the product, forcing another store to ship it more product, and then the second store runs out of the product, and so on.
From a merchandising and planning perspective, has anyone become a true omni-channel retailer yet? Feedback from symposium attendees indicates that maybe one or two have achieved it. As for the rest, they are struggling to solve internal problems, although they are clearly taking steps forward on the journey to become successful competitors in the world of omni-nomics.