Which merchandising technologies hold the most value?

Discussion
May 14, 2015

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

In our most recent merchandising research, retailers tell us that they are hyper-aware that many of the legacy technologies they’ve been using for years are in dire need of a refresh. However, some very interesting things emerge when we look at just how differently the best performers view merchandising technologies in the first place. It is quite staggering, in fact, just how much more value best performers find in these tools — even the oldest of them — and their ability to help put a relevant product mix in front of the consumer (and at the highest margin possible).

What makes this data all the more compelling is that when compared to the overall response pool, those whose sales are already performing best are the only ones who see the light. Consider the following points as they relate to movement from last year to today:

RSR Highest Valued Tech

Source: RSR Research, February 2015

  • The overall response group’s interest in web analytics is falling off the table (39 percent in aggregate this year compared with 47 percent last year). The fact that 59 percent of "winners" see this as a highly valuable technology set should be a serious wakeup call for average and lagging retailers.
  • The aggregate response pool’s interest in optimization of assortment against key customer segments has also fallen: from 63 percent in 2013 to 51 percent today. Yet winners’ attentiveness to gathering as much information from web activity as possible is climbing every day. This is no happy accident.
  • In fact, of the myriad options we provided, only one has gained favor among the general response pool. Markdown optimization is up to 57 percent among the aggregate from 50 percent last year. But that statistic absolutely pales in comparison to the 79 percent of winners who see markdown optimization as a way to maximize any mistakes that invariably occur within their product mix as being vitally important. For winners, it is the single most valuable tool in their merchandising arsenal.

 

Which merchandise technologies do you see gaining more attention from retailers and why? Which ones are losing appeal?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Two things strike me here. The first is (as is usual for me) a truism of sorts. That those who actually USE the tools they have are the ones who reap the benefit and therefore value the tool more. The second is that seven of the 12 tools valued have to do with price and assortment optimization. Only three directly target increased customer satisfaction."
"I agree with Mark Heckman’s comments about out-of-stocks being important and needing the attention of retailers of FMCG. However, we have been talking about and studying this problem for, what, twenty-five years or more. Sadly, nothing has changed by way of solving or substantially reducing OOS."

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13 Comments on "Which merchandising technologies hold the most value?"


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Dick Seesel
Guest
7 years 10 days ago

I don’t see it on the list, but I’m hearing more about the importance of software that improves localized allocations and assortment planning. “My Macy’s” has been the leader here, and several of its national competitors are playing catch-up. It’s not enough any more to capture regional/climate differences if two stores 10 miles apart appeal to completely different demographic and lifestyle profiles. The advance of this kind of software makes the process less “manual” on the retailer’s part, and might eliminate some of the need for markdown optimization if the goods are getting to the right stores in the first place.

Camille P. Schuster, Ph.D.
Guest
7 years 10 days ago

There is no one technology that will find favor with “retailers.” The technologies that find favor with a particular retailer are the ones that facilitate a one-to-one connection with its consumers. There is no report that will allow retailers to find the magic merchandising tool. Retailers have to find what works with their consumers, and in what parts of the consumers’ journey.

Tom Redd
Guest
7 years 10 days ago

My read on this is that the focus that is growing and will get bigger is assortment planning and all related planning modules or apps. Why? My Macy’s is an example of regionally-tuned and tight merchandise plans. Markdown optimization is always BIG when your planning is WEAKER. Web analytics is shifting into a standard, so not seen as “hot.”

Retailing starts and ends with good, executable and trackable planning that supports all sales channels.

Ian Percy
Guest
7 years 10 days ago
No one does better analysis than the gang at RSR Research. For me it’s a given that when they publish a finding, one pays attention. It may be due to the technology interests consuming me lately, but I immediately go to the implications of the rather sad state of software quality. Yelling a Clinton-inspired “It’s the software stupid!” is hard to resist. There are two problems as retailers (or anyone else) try to use technologies to manage the business: 1. With every technical tool or app you adopt you agree with the manufacturer that it is not warranted to work as advertised. Read the agreement you clicked on and you’ll see what I mean. 2. When you begin to integrate various technical tools/apps you exacerbate the problem by an order of magnitude. Blending faulty software with other faulty software produces little but grief and the likelihood of poor decisions. So don’t totally abandon your intuitive judgement in favor of technology’s judgement just yet. In other words RSR should be warning us: “Do not try this… Read more »
Ben Ball
Guest
7 years 10 days ago

Two things strike me here. The first is (as is usual for me) a truism of sorts. That those who actually USE the tools they have are the ones who reap the benefit and therefore value the tool more.

The second is that seven of the 12 tools valued have to do with price and assortment optimization. Only three directly target increased customer satisfaction. Which tells me that the “winning” retailers are still focused more on doing what retailers have always done — but better — and that we are still struggling with the idea of “consumer marketing” in retail.

Ryan Mathews
Guest
7 years 10 days ago

First of all, this seems to be yet another study that “proves” that not only do smart animals use tools, they use them more effectively than dumb animals.

The only “tool” used more by losers (yup, I said it) than winners was market basket analytics.

So I guess the right answer to the first question is that good retailers use an effective blend of almost all technologies with an emphasis on precision pricing/promotion and supply chain tools. Why? That’s like asking “why” top athletes train harder than couch potatoes. It’s part of the DNA of winners.

If the chart is to be believed, the answer to the second question is “bottoms-up” planning and “market basket analytics” although “web analytics” also appears to be an endangered, or at the very least under-developed, tool as well.

Graeme McVie
Guest
Graeme McVie
7 years 10 days ago
In some regards the response to this question depends on how you define value. I often delineate between identifying value and capturing value and between direct and indirect value. A technology may be able to identify a lot of value but if the retailer cannot execute for some reason then they can’t capture the value. A technology can also provide value in the very direct sense (e.g., how many more dollars can I generate) and the less direct, but oftentimes more important, sense of operational value (e.g., making it easier for a category manager to do their job). Markdown is a significant operational issue: you have a lot of inventory on hand and you need to clear it out to make way for the next lot of inventory so it has to be dealt with, but dealing with varying inventory levels by product at different locations is operationally challenging so a lot of retailers employ a very standard markdown plan with pre-defined markdown discounts at specified periods of time. Operationally this works well but financially… Read more »
Ralph Jacobson
Guest
7 years 10 days ago

Inventory. Inventory. Inventory. Replenishment, promotions, markdown. That is what drives real growth. Optimize those and you’re far down the line. Sure there are literally dozens of other areas once we drill down to the elements of the merchandising processes, however if replenishment is optimized so overstock and out-of-stocks at the point of purchase are minimized (obviously not an easy task since these problems are still pervasive) you set up a replicable process for all retail outlets, online and offline. Promotions need to leverage the very latest technologies. I don’t believe legacy apps here are up to date in today’s environment. Finally, markdowns (I hate the thought of them in the first place) need to be consistent and not something that we “train” the shopper to wait for.

Chris Petersen, PhD
Guest
7 years 10 days ago

Very interesting to see “markdown optimization” at the top … essentially that is one of the old “Ps” … Price.

Apparently retailers in this study did not get the memo on omnichannel. The 4 “Ps” have been replaced by the 4 “Cs” :
– Connections
– Choice
– Curate
– Convenience

While price optimization is always important in retail, merchandising technologies need to start incorporating consumer behavior … realizing that all shopping does NOT take place in store.

Mark Heckman
Guest
7 years 10 days ago

Retailers pragmatically focus upon technologies that provide the biggest attainable, most immediate return. Thus web analytics and the consistently over-hyped market basket analysis are falling by the way-side as their financial benefits have proved to be neither significant or immediate.

What is not on the list, although tacitly included in automated replenishment, is the venerable problem of out-of-stock mitigation. For most high volume, food, drug and mass retailers, merchants understand you cannot sell or even merchandize what is not in the store.

The return on any progress in mitigating out-of-stocks is both significant and immediate. Two things retailers really like!

Gordon Arnold
Guest
7 years 10 days ago

If I were interested in updating merchandising technologies I would prioritize things like what’s in the box, how do I use it, and where do I get the parts I need if they’re not in the box. As for consumables, it is more about content and freshness so I might use large lettering with easy to understand language. Audio visual with reply to consumer phone or email would be a valuable means to open a rapport for a lasting customer relationship.

The old ways aren’t working and perhaps never really did, so why not find out what the consumer wants and just give it to them?

John Karolefski
Guest
7 years 10 days ago

I agree with Mark Heckman’s comments about out-of-stocks being important and needing the attention of retailers of FMCG. However, we have been talking about and studying this problem for, what, twenty-five years or more. Sadly, nothing has changed by way of solving or substantially reducing OOS.

Cathy Hotka
Guest
7 years 10 days ago

This question is all the more important in light of retailers’ omnichannel efforts. It’s one thing to stock a store, and another thing entirely to stock a store that ships orders from the web. The smartest retailers are examining processes and numbers very carefully, and will make adjustments to hold their positions.

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Braintrust
"Two things strike me here. The first is (as is usual for me) a truism of sorts. That those who actually USE the tools they have are the ones who reap the benefit and therefore value the tool more. The second is that seven of the 12 tools valued have to do with price and assortment optimization. Only three directly target increased customer satisfaction."
"I agree with Mark Heckman’s comments about out-of-stocks being important and needing the attention of retailers of FMCG. However, we have been talking about and studying this problem for, what, twenty-five years or more. Sadly, nothing has changed by way of solving or substantially reducing OOS."

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