Meanwhile, In Paris...
There’s been a lot of buzz in the community in the last couple of years about the relative value of content-driven conferences (like Shoptalk) vs. expo-driven events (like the Annual NRF event). The RSR team frequently gets asked two questions: “which show(s) should we attend?” and “which show(s) should we participate in?”, and those are tough to answer because it depends on what you are trying to achieve (for tech vendors: To be seen as a “player”? To get solid sales leads? For retailers and analysts: to learn something? To compare notes? To meet other people with challenges similar to yours?).
I’m a content junkie; while it’s always enjoyable to experience new techs first hand, what has always been most important to me throughout my career is to learn from other practitioners about how to get the best out of the available technology solutions. So I tend to gravitate towards technology user conferences, especially if the event features more practitioner and analyst-developed content than product pitches from the sponsoring vendor. Such conferences offer an “all boats rise with the tide” value, bringing retailers together to address challenges that they share in common.
I got just such a chance in March, not at Shoptalk in Las Vegas, but at TXT Retail’s Thinking Retail Symposium in Paris (I know! ‘tough gig – but someone had to do it!!). TXT Retail was recently acquired by Aptos, and its merchandise planning and supply chain solutions are solid additions to the Aptos portfolio, so the new parent company might have been tempted to roll the TXT Retail agenda into its upcoming Aptos Engage event in Las Vegas- but it was wise not to. TXT Retail has a strong base of loyal fashion and luxury retailers, and the merchandisers from its client companies see the event as an opportunity to get together and share best practices with each other – and I get to listen and learn. It’s a win/win!
While there, I had the opportunity to moderate a panel discussion on the subject of “merchandising trends, facts, fictions, and new approaches”. The panel consisted of Drew Snyder, Director of Merchandising Business Capabilities Transformation at REI (an American sporting goods retailer), Umberto Bocca, Worldwide Merchandise Planning Director at Moncler (which sells high-end outerwear, principally in the EMEA and Asia markets), and Andrea Tonello, Merchandise Planning Manager at AW LAB (which offers urban style sportswear and shoes in Italy and Spain, and is now moving to the Eastern European markets). The panel was also joined by Peter Charness, SVP America's for TXT Retail, and David Sheekey, TXT Retail’s Solution Director for Retail Planning. The conversation quickly focused in on a hot topic in today’s retail environment, localizing assortments.
To give this panel discussion some context, I’ll mention that RSR has recently completed a couple of industry benchmarks that highlight both the apparent desire across the entire industry to help make stores more relevant to consumers by (among other tactics) localizing the assortment, and the difficulties associated with actually making that happen. For example, in the soon-to-be published benchmark report, Merchandising And Pricing 2018: Life After The Merchant Prince, we learned that 59% of over-performers (that we call “Retail Winners” in our reports) cite localized assortments as a “very important” capability going forward. But that same group of retailers also identified “managing the complexities of cross-channel merchandising” as their top merchandising challenge. So, even over-performing retailers struggle with the complexities managing the same assortments across different selling channels, before they even consider localizing those assortments.
In another recent study, Location Analytics In Retail: Turning New Data Into New Intelligence, we discovered that 52% Winners want to use location-based intelligence (primarily from customer digital path-to-purchase data from smart mobile devices) to improve localized assortment decisions. But in that same study, we highlighted the biggest inhibitor to accomplishing this objective; for both Retail Winners and all other performers, the #1 inhibitor to localizing the assortment is that “the company’s profitability model is based on standardized assortments and store layouts”. In other words, while retailers know they have to localize their assortments, and understand that the analysis and planning tools available to them make it possible, something far more fundamental is standing in the way- the business model depends on the economies of scale that come from highly standardized assortments bought at volume, with few variations available in the selling environment.
As my RSR partner Paul Rosenblum opined during a recent webinar that we participated in, “retailers are telling us that they are clinging to a profitability model that is basically dying”. When it comes to assortment localization, retailers have to learn how to counter the new costs associated with a such strategy (potentially higher cost-of-goods from smaller and more frequent buys, more handling at both the DC and in the stores, variations in store layouts and presentations). While that’s feasible (RSR has long argued that the magic of both higher service levels in the store and higher turns are achievable with localized assortments – but only with a healthy infusion of state-of-the-art planning and execution systems to support them), retailers clearly still have far to go.
In the panel discussion at the TXT Retail Thinking Retail event, each retailer represented has particular localization requirements. For example, mountain climbing equipment may not be quite the thing at REI’s Chicago store, but it sure is at its flagship Denver Colorado store (which even features a 47-foot hand-sculpted rock climbing wall). Moncler’s Bocca discussed some of the challenges associated with selling the same expensive fashions in Copenhagen vs. Hong Kong. Similarly, AW Lab’s Tonello talked about how his company enables regional planners to make assortment decisions based on the peculiarities of local markets, for example, Rome vs. Prague.
The one point that all three panelists made is that localization happens locally, i.e. at variance with the centralized plan – the same way it’s been done for years (often using spreadsheets). That’s not to say that there are no planning technologies available today to enable more systematic localized assortment planning. For example, the TXT Retail solution provides the capability to profile selling locations (stores or websites) based on the types of customer who shop those locations. The system can then support store assortment planning for selling location (usually store) clusters based on perceived customer preferences.
All the new insights that can be derived from the customer shopping experience- what, where, and how consumers become shoppers, theoretically should help retailers understand how consumers are interacting with the Brand’s value proposition to a greater degree than has ever been possible. Retailers generally agree that new insights created by new data generated by consumers’ digital shopping activities are important in the selling environment, but from an assortment planning perspective, there still isn’t consensus on how those insights can become integrated into the process. That may have to do with the fact that the insights come after the merchandize plan has been set into motion.
Other RSR studies have shown that most retailers want to use sentiment analysis as an input into forecasting as an early warning to sudden changes in demand. The forthcoming Merchandising benchmark recommends reiterative in-season re-forecasting based on perceived changes in demand. For the retailers represented on the panel, it’s the Marketing Department that would see sudden shifts first, which implies that communication between Marketing and Merchandising is a key to success. And that is just what the study emphasizes. According to that study, the #1 way to overcome internal barriers to better merchandising is to foster “better communication and education <between> merchandising, marketing, and channels”.
This point brings me all the way back to how I started. Retailers need to tune the Brand’s value proposition to the consumer by making it highly relevant, attractive, and convenient. That is going to require siloed line-of-business (LOB) organizations like Marketing, Merchandising, Supply Chain, Store Operations, and eCommerce Operations, to actively collaborate as they have never done before.
A good way to foster that kind of collaboration would be for more LOB leaders to attend events like the TXT Retail Thinking Retail Paris Symposium. And so my hope is that in the future, the merchants will bring their peers along with them to hear how other operators are managing their own transition to the new way of retailing.
I’ll want to be there too.