The Candid Voice in Retail Technology: Objective Insights, Pragmatic Advice

The State Of Merchandising – What Winners Know

In our most recent benchmark study on retail merchandising, “Merchandising 2017: The Real And The Unreal”, we had some harsh things to say about the inconsistencies between what retailers talk about and what they actually do in practice.

However, there was one area in particular we found heartening…Retail Winners (those retailers whose comparable sales outperform the average) have both an appreciation and understanding of the value of technology for their retailing success.

For example, 77% of Winners cite Customer Analytics as extremely important to their retailing success vs. 48% of all other respondents. Similarly, 72% cite lifecycle price optimization as extremely important vs. only 36% of all others.

In the past, we’ve been worried that these retailers were viewing technology as a magic bullet, as understanding of technology capabilities significantly lagged enthusiasm. This year, we found a very different situation. While Winners understanding of Customer Analytics still lags enthusiasm, the gap has closed significantly: 67% believe they have a solid understanding of the technology.

We found exact equivalence among Winners in the area of Retail Forecasting. Seventy-four percent rate it extremely important to their retailing success, and an equivalent percentage report a solid understanding of the technology.

Unfortunately, the same cannot be said about lifecycle price optimization. Only 41% of Winners report a solid understanding of the technology. We wonder if this is driven by our current hyper-promotional retailing environment. Retailers know they have to be sharp in their pricing. is breathing down their necks and the holiday season has become a jumble of promotion on top of promotion on top of promotion. These same retailers are pressured to improve sell-through. But the means to do this beyond consistently following the leader seems to have been lost in the shuffle.

Still, overall, the study demonstrates that Winners understand the value of technology, installed it earlier, and are more likely than peers to refresh as it becomes apparent new, and more intelligent technologies come to market.

Beyond this good bit of news remains the elephant in the room: catering to Millennials and the generation that follows. Much to our surprise, the core customer of 48% of our retail respondents is Generation X, and fully 60% report their merchandising leadership also belongs to that generation. Yet the same respondents worry that they don’t have their fingers on the pulse of what their customers want.

This would make sense if we were reading about the ascendancy of Generation X. We’re not. We mostly read about the impact of Millennials, the up-and-coming Generation Z. In the study, 45% of respondents cite understanding customer preferences as a top-three business challenge, and 71% of the largest retailers (annual revenue over $5 billion) believe tailoring their assortments to customer preferences is a top-three opportunity.

This explains the fascination with Customer Analytics, but it really begs the question: if your core customer is different than you think she is, will analytics help you? Or if you’re missing an opportunity, will those analytics be complete and robust?

And, how do we move forward from here? It won’t be long before Generation Z has real money to spend. As an industry, our reaction time really has to improve. I’ve felt for several years that the art of merchandising is getting lost in a sea of commodities and safe bets places in far-flung factories.

Fresh blood and new thinking is needed. Retailers know it, but they seem to have a hard time busting their existing paradigm.

To read the full report, which is rich with charts, figures and insights, go to /research/merchandising-2017-the-real-and-the-unreal or simply click here to access the page. As a reminder, all our research is free to everyone, courtesy of RSR and report sponsors.

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Articles & Opinions February 21, 2017
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