BrainTrust Query: How important is localization of assortment to customer centricity?
Many retailers talk about customer-centric initiatives, but are they actually practicing them? It could be argued, for example, that a retailer who bases assortments on enterprise averages can never truly be customer-centric. Most would agree that the average customer and average store do not exist. Consumer buying patterns vary substantially based on variables such as location and customer demographics.
According to a recent Retail Systems Research report titled Holistic Localization: The Value of Integrated Assortment and Space Planning, Paula Rosenblum said, "When it comes to assortments, customer-centric means localized. The old notion of average is no longer adequate, especially for the largest, most geographically disbursed retailers. Just as assortment plans must become more finely tuned and local, physical space allocation must match this granularity to make these assortment plans executable."
However, many retailers are hesitant to incorporate localized assortments because they feel such an initiative will be intrusive to their IT infrastructure. This is especially true for larger retailers who often employ separate planning processes for their merchandising, buying and replenishing departments.
Nonetheless, some leading retailers are generating customer-centric merchandise plans by integrating their assortment and space planning business processes. By using an automated merchandising solution, retailers can utilize store-specific fixture, space and product performance data on a store-by-store basis in order to create merchandise plans that meet localized demand and space requirements. The objective is to ensure the best performing products are always available on the shelf. By implementing this practice, users reporting back to Galleria, a provider of customer-centric merchandising solutions, say they have improved customer satisfaction and optimized inventory.
One retailer synchronizing assortment and space planning processes reported to Galleria an average inventory reduction of 5.37 percent. The bottom line result was $10,029,486 in savings across the enterprise. Another retailer who created customer-centric merchandise plans during a pilot across four categories achieved an average sales increase of 8.80 percent.
Discussion Questions: What is your view on automated merchandising solutions for localizing assortments? Do you agree that assortment and space planning business processes should be synchronized in order to achieve greater customer centricity? Do you have any other recommendations for retailers moving to customer centricity?