May you live in interesting times,” so goes the ancient Chinese proverb that some interpret as a curse. In many respects, it may seem like today’s retailers have been living the curse for the last decade. For the last ten years, the most predictable thing for most merchandisers has been how difficult it has become to predict anything. Why? Shopper demand is now influenced by a diverse array of factors with additional competition eroding prices and margins. Additionally, the increasingly realtime nature of demand is making product assortment and allocation challenges almost impossible to predict. Interesting times, indeed. However, for many innovative retailers the curse is opening up a spectrum of new ways to convert the current volatility into today’s opportunity and tomorrow’s revenue growth.
"Future strategy predominantly on e-commerce based selling"
How? Well to begin the most successful merchandisers are looking at the volatility in their supply chains and are making changes tonot only embrace it, but to take advantage of it. If you follow the majority of industry chatter it is easy to believe that most retailers are looking at a channel mix that focuses its future strategy predominantly on e-commerce based selling. Certainly many insightful retailers have spent the recession building their IT infrastructure to support that future which has been a wise tactic. So why today are these same smart retailers now turning their attention back to their brick and mortar stores? Because when it comes to revenue generation, for many traditional retailers, brick and mortar stores continue to be the top dog in their revenue stream. For them, stores are here to stay, but with a twist, the stores are going to continue to merge increasingly with their online channels. There are a couple big reasons driving this.
Online campaigns are driving higher in Store sales
First many retailers are finding that while online marketing is generating online sales, in many cases those same online campaigns are generating up to five times more sales in their physical stores. This means for many top brands their most loyal and valuable customers are interacting with them cross channel; online, in stores, and on their mobile devices. These smart retailers are focusing their energies on finding more ways for customers to engage wherever and whenever they want to. Furthermore they are discovering that globalization requires a mix of everything. Loyalty will be won based on achieving client personalization, everywhere.
MallRats v. 2.0
The next reason is even more surprising to some. It turns out that when it comes to physical retailing everything old is new again. In the latest twist many established online retailers are opening physical stores. What’s the reason for the emergence of the clicks to bricks trend? According to a recent study by the National Retail Federation over 60 percent of 18-25 year olds prefer to shop in stores for clothes and shoes.
Additionally as the economy increasingly comes back retailers that focus on luxury goods realize that bricks and mortar locations offer the high end buyer ways to evaluate the merchandise before purchasing. And a final critical factor, a physical presence allows shoppers to engage both with the brand and with other like-minded shoppers opening up more opportunities to bring them together and encourage them to positively influence the shopping experience based on each other. In a related irony, Pop up stores are increasingly part of the mix. In a 180° shift from a decade ago it’s now harder and more expensive to get noticed online now than it may be with a physical presence.
Thriving vs. Drowning in a Sea of Data
So where does all this leave today’s retailer? On the surface the merchandiser’s jobs are much the same as they have been, however, the omni channel model means that while the job may not have changed the universe they operate in is vastly different. Translating increasing volumes of consumer demand data into meaningful merchandising plans takes a certain amount of boldness. Today’s most successful retailers are using the latest merchandising focused supply chain automation technology to help predict the right assortment, by channel, and by store location. They are utilizing technology that continuously learns and is adaptable to special events and anomalies. Tailoring assortments to finely defined customer segments is the outcome of the increasing amount of demand data that is available.
Retailers are also finding that additional opportunities exist with the supply network itself where merchandisers are making radical changes to their demand response within their allocation and replenishment strategies. Tuning their product mix so that it is immediately responsive to customer demand allows them to have the right product, at the right place, at the right time further aligning their deliverable with customer demand by location.
Leveraging technology that can marry historical data with real-time demand is one way to thrive. In short, finding what is predictable in the unpredictable and dealing with it actionably means increased sell through, reduced mark downs and insulated margins despite intense competition. Certainly when armed with the right tools, today’s retailers are turning what could be a curse into insights that will position them for years of future growth and greater and more meaningful long term engagement with their customers.