Is DBM a Wal-Mart Killer?

Jul 22, 2002

According to Dan Fishback, president and CEO of DemandTec, Wal-Mart has committed heavily to a strategy that favors vendor efficiency over the decisions of merchandising managers. Wal-Mart’s RetailLink system provides suppliers with sales and inventory data to self-manage stock levels. Since the suppliers are effectively responsible for stocking shelves, fewer decisions are made at store level in response to consumer requests.

Writing in Executive Technology, Mr. Fishback believes that Demand-Based Management (DBM) offers retailers a technology-based business model to compete with the world’s largest retailer.

DBM is new model by which consumers drive merchandising decisions. Lower prices or endless bulk-item inventory does not always motivate customers, who express their preferences every day in POS data.

DBM has been replacing traditional hit-or-miss tactics with well-defined strategies that are consistently more than 90 percent accurate for a single item in a single store, says Mr. Fishback. He cites one retailer in New York who recently ran a DBM implementation and found that DBM-optimized scenarios were twice as profitable as their best “human” attempt. Yet what was most important to the retailer was his new understanding of price image, which he used to strengthen the feeling among customers that they are being charged prices they deem as fair.

Moderator Comment: Does current demand based management
technology live up to its promise?

Demand Based Management certainly makes sense in theory.
Whether it works in practice still needs proving. [George
Anderson – Moderator

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