By Steve Rowen, Managing Partner
9/29/2009
It’s nearly October, 2009, and the US market is still short on cash, short on credit - short on jobs. The one thing we’re not short on is conjecture – “How are retailers prepared for Halloween?” “How will Halloween sales set up the holiday season?” “Once holiday numbers are in, what will that tell us about 2010?” It’s difficult to read, view, or listen to any source of news and information without these questions coming up, and why not? It’s human nature to try to make sense of chaos, and it’s not like there’s historical data to tell us what would “cyclically” happen next.
But at RSR, we don’t really guestimate all that much. What we do is talk to retailers and ask them what their day-to-day looks like, drawing conclusions to their challenges and opportunities en masse. So as it pertains to the near-impossible task of merchandising a store in 2009, we’d rather let them do the talking. The following is from our recently released report, Retail Merchandising: Bucking Down in a Tough Economy, based upon a survey of 90 qualified retailers: 49% come from general merchandise and apparel, 22% from fast moving consumer goods, 24% from hardware/do-it-yourself, and 5% are food and hospitality retailers.
Survival Mode Sets In…
In aggregate, our survey respondents view the opportunities that arise during these difficult times in a much different light than years past.
Last year, 60% of the overall respondent pool ranked localizing assortments through science-based processes as a top-three opportunity, compared to only 38% this year. In 2009, the top two opportunities most valued are 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 permeates the industry: retailers aren’t interested in buying new technologies to better plan merchandise purchases for their stores – the market is too unstable to for any science-based solution to predict. They simply want to balance more human intuition with the science they already have in-house. A different story emerges, however, when we look at the data by performance.
…But Only for the Worst Performers
Laggards’ gut-reactions to tough economic times drive the data above. Below, we have broken out some of the most important data points from that previous set. From here, we can see that Winners are still very much focused on scientific opportunities. It is worth noting that average performing retailers shadow Winners in the value ascribed to each of these opportunities. Laggards, on the other hand, appear to be thrashing, looking for new “magic bullets” to improve performance.
Figure: Laggards Look for Magical New Solutions
Source: RSR Research, September 2009
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 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 we discovered Winners are much more aggressive and pragmatic in targeting their customer communications, promotions and offers. Winners remain much more interested in localizing their product assortments using technology-based solutions, 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 see the same store look and feel in different regions or around the world. Retail Winners recognize this far more than their underperforming peers. We will see how Winners use technology to support understanding their customers in the Technology Enablers section of this report.
Ironically, 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%). This 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. Winners are focused on the “right now” opportunities of technologies that are readily available; laggards hope their salvation solution is right around the corner.
In one final note on the differences of Winners’ and laggards’ perception of opportunities, it is worth calling out that Winners are slightly more interested vendor managed inventory (24% vs. 16% of laggards). From our point of view, this is neither surprising nor discouraged. Given the prevalence of inventory management concerns heading into Holiday 2009, pushing the responsibility for and ownership of inventory back onto a supplier is hardly an ill-advised tactic.
If you would care to read the remainder of the report, it is available for complimentary download by clicking here. Analysis? Yes. Crystal ball? No. As our partner Brian Kilcourse is so fond of quoting, “Just the facts, ma’am.”
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