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Defining Twenty-first Century
Merchandising
Benchmark Report: September 2010
Sponsored by:
Written By: Nikki Baird and Paula Rosenblum, Managing Partners
EXECUTIVE SUMMARY After a series of fits and starts, the retail thought process has irrevocably changed. Science-supported process is now core to the merchandising discipline. However, faith in science is not always grounded in an understanding of what it can do (even for the largest retailers), leaving us with some concerns about unrealistic expectations and a backlash later in the decade. To help prevent this backlash and create the most opportunities for success, RSR has defined seven critical tenets stfor 21 century merchandising.
BUSINESS CHALLENGES Continued economic uncertainty has brought new issues to the forefront of retail merchants. Fractured planning processes have been usurped by concerns over underperforming inventory on the one hand, and out-of-stocks on the other as the biggest challenges retailers face in merchandising. Operationally, merchants must learn to work with the supply chain, stores and marketing to insure their strategies are executed in an efficient fashion.
OPPORTUNITIES Integrated planning with cross-functional teams remains a critical opportunity for improving the merchandising process, but price and markdown optimization to improve sell-through have emerged as a way to combat underperforming inventory. Retailers are currently using demand forecasting tools to plan future seasons and adjust in-season. Perhaps most interestingly, we're seeing cross-pollination across retail segments, with those selling Fast Moving Consumer Goods beginning to adopt tools and techniques historically used more frequently by retailers selling General Merchandise and Apparel. This is perhaps the most telling sign of a change in the world of merchandising.
ORGANIZATIONAL INHIBITORS Despite all the signs of change, cultural issues still loom large within the enterprise. Laggards' lack of capital seriously constrains any kind of technology-enabled change. Our retail respondents believe, though, that if their inventory management processes could be improved, and inventory made more accurate, they might be able to move forward more easily.
TECHNOLOGY ENABLERS Integration, most especially between planning, allocation and replenishment, remain the most desirable end-state goal, followed closely by the enablers of merchandise analytics and price and assortment optimization. Retail Winners (those who over-perform in year over year comp store sales) are most interested in attribute-based merchandise planning systems and assortment optimization. Laggards still look to get their fundamental merchandise management systems in order. Retailers selling fast moving consumer goods in particular are looking to invest in a full-range of merchandising technology enablers.
BOOTSTRAP RECOMMENDATIONS stBased on our report findings, RSR recommends 7 core tenets to support 21 century merchandising. 1) Optimization in merchandising spans products, prices and processes, 2) ensure merchants have a solid understanding of their tools, 3) do not tinker with assortments without broad due diligence and review of potential consequences, 4) bring marketing into merchandising planning and executions processes, 5) cross-pollinate tools and techniques across retail segments, 6) make sure shifts in merchandising capabilities are strategic, not just tactical and 7) reduce reliance on merchants as the unique intersection point between consumer insights and product plans.
Table of Contents
EXECUTIVE SUMMARY ..................................................................................................................................... ii SECTION I: OVERVIEW .................................................................................................................................... 1 Nascent Change Becomes Manifest .......................................................................................................... 1 Science Matters a Lot, But Understanding Lags ........................................................................................ 1 Method... [download for more]
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