By Steve Rowen, Managing Partner
9/15/2009
We’re currently putting the finishing touches on our annual Merchandising Report, which will release next Wednesday (9/23). In the meantime, we thought it worth sharing one or two findings.
As with all of our work so far in this tough economic year, we’ve seen some vast differences in the approach of how the best performing – and the worst performing - retailers are tackling the core tenets of their businesses: how they staff their stores, how they run their loyalty programs, even how they position their brand. But as it pertains to merchandising, inventory is the name of the game. As an example, here’s a data point from the opportunities section of the coming report, where we asked retailers to identify the best opportunities to overcome current business challenges.
Last year, top honors went to localizing assortments through science-based processes (60% of the overall pool ranked is has having a lot of opportunity compared an anemic 38% this year - more on that in a moment.) Instead, in 2009, the top two opportunities that are most valued to our overall pool are both process-oriented: integrated planning with cross-functional teams (up slightly from 55% last year), and improving the ability to adjust to deviations from sales forecasts (56%). At first blush, it would appear from these data points that survival-mode thinking has permeated the industry: retailers aren’t interested in buying new technologies to better merchandise their stores – the market is too unstable to for any science-based solution to predict. They simply want to extract more human intuition from the small amounts of science that they already have in-house.
This story completely changes, however, when viewed by retailer size – and even more so – by performance.
When viewed by performance, we see that laggards’ gut-reactions to tough economic times completely skewed all of the previous statistics. Below, we have broken out some of the most important data points from that previous chart, and see that Winners are still very much focused on the scientific opportunities that exist.
Only laggards eschew the power of science-based localized promotions (32%). For Retail Winners (67%), there is no greater opportunity in tough times than localizing the promotions offered to their existing customer base. This sentiment was echoed in our recent report on customer loyalty, CRM and Loyalty 2009: Increasing Relevance to Drive Customer Demand, where Winners were discovered to be much more aggressive in the targeted nature of their customer communications, promotions and offers. Winners are also much more interested in localizing the assortments of products offered in stores via technology-based solutions (43% vs. 26%), demonstrating the enhanced focus they continue to place on the customer. Customers are not all the same, do not all want the same products, and do not all want to shop the same stores from sea to shining sea, and Retail Winners recognize this at a far greater level than do their underperforming peers. We will see much more of Winners’ customer-understanding principle in the Technology Enablers section of this report.
In a point of irony, laggards cite the opportunity to market on a one-to-one basis at a much higher rate than do Retail Winners (68% vs. 38%, respectively). This begs the question, how can one aspire to attain one of the most difficult aspects of retail – true one-to-one, customer-centric marketing – without incorporating the necessary tools and processes (such as localized promotions and goods) to make it feasible? It is a classic case of laggards wishing to grab the brass ring, without regard to the work and tools required to even reach for it.
This trend continues in the perceived opportunity that social networks provide: laggards see great opportunity (47%), while Winners remain cautiously optimistic (29%). What plays out is further proof that laggards latch onto new technologies as the impending cure for all that ails them. While all of us agree that the coming dawn of social networks will one day change the face of how customers shop, few retailers have yet figured out how to monetize social networks - in any capacity. Winners are focused on the right now opportunities of technologies that are readily available; laggards hope their salvation solution is right around the corner.
Again, the report will be available in its entirety next week, and we certainly look forward to providing our findings. In net, there certainly won’t be any shortage of lessons that can be taken from the best practices Retail Winners are currently using – after all, it’d be nice to have even a little more good news come January than we expect right now – even if sales were up a little in August.
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