Welcome to The Merchant Life where founders, VPs, and C-Suite executives come to seek out valuable merchandising insights.
Speaking of valuable insights…
In this edition, we share our 2022 Merchandising Benchmark Report. We produced this in partnership with Retail Research Systems (RSR) and is sponsored by Cloudera.
As you scroll down, we give you some of our context behind the report, a summary of the highlights, and a link for you to grab a copy.
What is the importance of retail merchandising today?
If recent changes in retail CEO leadership are an indicator, then the answer is: extremely important.
Consider a recent Business Insider article discussing the turmoil in the retail C-suite.
Several points in the article caught our eye:
“Retail being an industry that lives and dies on the vagaries of consumer preference and behavior.”
“Boards will likely opt for CEOs with excellence in basic operations.”
“Chief executives also need experience dealing with customers”
All of these are addressed through exceptional merchandising.
And, exceptional merchants exude key qualities:
1. They know who their customer is. Thus, they know how to serve them with the product they want.
2. They know how to curate a product assortment that drives full-price sales.
3. They have a thorough understanding of the value of the product assortment to the P&L.
Further, merchants have the ability to know their customers so well that they generate demand versus meeting demand.
Therefore, we argue that a “Merchandising Imperative” is needed as new leaders are sought out.
No doubt, the importance of merchandising cannot be understated.
It makes sense then to examine the current state of merchandising and the “hot button” issues that exist.
Hence, our benchmark report.
1 - There is a disconnect between merchandising strategy and in-store execution.
This ranks within the top three challenges identified by retailers. This is an issue of growing concern since at least 2019.
There are multiple reasons why this could be happening.
Regardless of the reason, the disconnect has a clear impact on the customer experience. It also has an impact on the perception of what that experience is from the POV of senior leaders.
2 - Insight Into Inventory.
Name any inventory challenge you want:
Too much of the wrong kind.
Not enough of the right kind.
Inventory levels don’t match customer demand.
Out of Stocks.
And so on.
Retailers have them.
Depending on the category, the specific challenges differ. You’ll see how apparel differs from hard goods, grocery, and furniture in the report.
To underscore the importance of inventory - 11% of respondents in 2019 said getting an accurate picture of their inventory is an issue.
That jumped to 52% in this report.
3 - Where Technology (Can) Make An Impact
Areas of highly important merchandising technology for retailers include:
What does this mean?
The importance of automated replenishment plus a high frequency of in-season reallocation indicates manually overridden replenishment decisions. Further, customer insights are not incorporated to adjust plans. Therefore, products are moved around for future or in-season orders.
The opportunity for technology here is the integration of automatic replenishment, demand planning, and PLM. This must reflect insights and shifts in demand - adjusting reorders and planned assortments based on data to avoid manual intervention.
Finally, markdown and promotional activity are reactions to either buying product that the customer does not want or competitor promotion. This is another signal that customer insights do not inform assortment planning.
Bonus - Speed To Market
5% of respondents agreed that being too slow in getting products to market is a challenge.
However, 34% say their competitors bring products faster to market than they can. Also, 29% struggle to differentiate from competitors when primary consumer drivers are price and availability.
We can only imagine what “innovation” meetings are like:
Credit: Tom Fishburne at www.marketoonist.com We find this to be peculiar as speed to market is exactly what is needed to deliver the newness that customers are looking for.
Since you are itching to read more, download your copy of the benchmark report by clicking here.
Your feedback, thoughts, and comments on the report are important.
Share all of it with us at hello@retailstrategygroup.com.
Retail Strategy Group is heading to PI Apparel Los Angeles. The event takes place from February 28th to March 1st, 2023.
We will participate in multiple sessions including:
A presentation by Raj Dhiman entitled “How to Prevent a Blizzard.” He will discuss the value of preventative actions for brands to improve speed to market and profitability.
Liza Amlani will be in conversation with senior retail leaders. First, with Michelle Bowler (Global Head of Merchandising, Wayfair) to discuss product assortment curation. Second, with Kimberly Lee Minor (CEO, Bumbershoot Group) to discuss the current state of women of color in retail.
The full agenda is found here: https://apparel.pi.tv/events/138/agenda
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We are also looking for your feedback on our content. Please send a note to hello@retailstrategygroup.com to let us know if we hit or missed the mark with Volume 39.