While technology and innovation flourish on the consumer side of fashion, inside headquarters, not much has changed in years. As if in a permanent homage to retro, the way in which merchandising and planning groups work and the systems they use have barely evolved from the three-ring binders and green screens of the 1970s. Merchants and planners, many of whom grew up as digital natives, navigate an awkward time warp: They commute from the consumer world to offices that stifle their skills in interpreting and acting on visual, interactive data and tools.
That’s all changing—radically.
Merchants are getting into the technologies their marketing colleagues are using—and they’re pioneering new ways to use these technologies to transform how they work, and how fast, by bringing more clarity than ever before possible to key merchandising and planning decisions.
Last night, your retail buyer rallied friends for dinner via Facebook, made an OpenTable reservation based on Yelp reviews, chose her outfit by querying Pinterest and asked Siri for driving directions. Her life and the way she makes decisions are informed by technology that’s engrained into the way she lives.
But when she arrived at work this morning, those richly designed mobile interfaces, fed by smart, dynamic artificial intelligence learning tools, were absent. Her power to translate real-time data into fast decisions went dormant for the day, and she faced the important task of driving her organization’s assortment performance using analog tools equivalent to the Yellow Pages, rotary-dial phones and rabbit-ear antennas.
The opportunity is significant. While consumers have long since adapted to a more visual, data-driven and connected retail experience, most retailers have been incredibly slow to adapt data mining, predictive analytics and data visualization tools within their organizations, leaving merchants to rely heavily on best guesses and instinct. Further, the information traditionally shared among merchants, planners and vendors doesn’t always translate clearly across stakeholders. Various feeds of visual and analytical insights often interfere with one another, creating static rather than combining into a clear picture.
Pioneering brands and retailers are bringing sustainable growth opportunities into focus by adapting the machine-assisted discovery and decision-making technologies that exist in the consumer space to retail management.
As they do, they are upgrading to high-definition tools with the functionality and intuitive experience employees have come to expect from technology they use in their daily lives. These HD merchandising tools:
- Help employees visualize product and attribute trends
- Guide employees to new discoveries and previously hidden relationships
- Give employees the power to interact and collaborate the way they do in social and consumer spheres
- Connect employees and business partners around the globe in real time to make better, faster decisions together
Consumers buy based on what they see. But in deciding what to offer them, merchants and planners have been stuck in a process that disassociates product appearance from performance. It’s not possible for merchants and planners to fully integrate their respective visual and analytical skills when hot-selling metallic ankle boots are reduced to a spreadsheet cell labeled Style 7035276. Innovative retailers are merging financial science and visual art by incorporating interactive digital product images into planning software and analytical decision processes, rather than wading through SKUs and spreadsheets and then transitioning to product sample rooms.
The days of 1970s-legacied “Monday Morning Reports” filled with rows and charts (even visually striking ones) will finally pass as digital-age performance reporting adapts to reflect our photocentric culture, as illustrated in Exhibit 1. Interactive product imagery that is tied to financial performance metrics is enabling merchants and planners to glean deeper insights quicker by seeing trends instead of drudging through endless rows of data. Statistic-informed visual trend discoveries are driving more compelling assortments and simultaneously forecasting their profitability. These shifts are resulting in measurable performance improvements, including 10% to 20% increases in inventory productivity and up to 15% fewer hard markdowns, through decision-making processes that are 30% to 40% faster.
Merchants and planners used to base decisions on limited information that was often a year old. They now face the opposite problem—relentless streams of desultory data. No human can aggregate, digest and act on such a flood of inputs, leaving merchants and planners humming along to white noise and no better at making decisions than in the past.
The call to action for process designers is to dramatically improve the tools that guide teams to discovery. Fortunately, technology has caught up. Behind-the-scenes data mining now provides automated recommendations to guide merchants’ and planners’ focus to key areas for evaluation, using statistics to correlate product, location and customer attributes with performance and financial metrics. Rather than spending time finding and crunching data that may or may not provide actionable results, merchants and planners now rely on software to data mine and to automatically suggest mathematically intelligent actions. Automation flags business opportunities in real time that might otherwise have been blurred among the static of spreadsheets, report binders and sample racks. (See Exhibit 2.)
This guided interaction with data lets planners focus more on strategy, improve their processes and deliver better recommendations faster. By doing so in the shared language of digital product images, merchants are further able to understand and apply planners’ recommendations on SKU breadth, assortment mix and segmentation. For example, wholesalers can make more informed and easily understood recommendations to retailers regarding pre-season product selection, quantities and allocations, and in-season re-orders, resulting in faster order decisions and fewer missed opportunities.
High-def guidance also helps merchants and planners coordinate with marketing by easily sharing images of real-time top sellers that are available in inventory so the products that anchor the retailer’s home page or catalog cover can be the ones with the most financial potential right now.
Consumers have been conditioned to expect dynamic screen interactions. We hover our cursor over digital images knowing we’ll see additional information. We click photos, and new windows of product details appear focused solely on the selected product—yet it is only now that merchants and planners are leveraging such functionality to make business decisions.
On the planning side, such technology allows access to point-of-sale data that updates, reorganizes and filters images—not codes—on interactive reports. The days of scrolling to spreadsheet cell AC36 for a statistic on Style 7035276 have gone the way of weekly printed television listings, replaced by dynamic images tied to instantly viewable sales data.
On the merchandising side, images that can be dragged and dropped let merchants digitally manipulate assortment plans until an optimal visual and financial mix is achieved, as illustrated in Exhibit 3.
Decision-based analytics, guided recommendations and the more intuitive, shared language of dynamic photos lend themselves to mobile communication in ways spreadsheets and physical samples never could.
In Jan. 2015 at the National Retail Federation’s Big Show, R. B. Harrison, chief omnichannel officer at Macy’s Inc., discussed his approach to evolving Macy’s in parallel with consumers’ changing preferences: “A couple of years ago, we would focus on the desktop environments, and then if we got around to it, we would try to figure out a way to fit it into a smaller format, mobile or not. In the last two years, we’ve shifted all of our primary development to a mobile format. And we’ve built it specific for a phone, specific for a tablet, trying to give a technically relevant experience,” he said.
This strategy for responding to consumers is the strategy that should also be deployed to retail employees. Mobile technology unchains merchants from their desks, allowing them to spend more time visiting stores, competitive shopping, networking with vendors and observing consumers while simultaneously working directly with one another to make critical business decisions.
Accustomed in their personal lives to instant messaging, video calls and group feedback on daily decisions, merchants and planners are now finding the same connectivity at work. (See Exhibit 4.) Taking assortment planning, line reviews and style-outs digital enables teams to better collaborate across geographies and functions, share trends and instantly identify cross-merchandising opportunities. Travel downtime between market appointments is now used to participate in virtual style-out meetings and to remotely approve open-to-buy requests.
Merchants and planners are also incorporating social media insights into their processes. They are crowdsourcing product feedback both internally among colleagues and externally among consumers. They’re using tools to crawl blogs and product reviews for new consumer vernacular. Retailers are using these near-real-time insights to inform product sorting and segmenting for past-season performance hindsighting and future-season planning. This concept of dynamic attributing allows the consumer to drive how products are grouped and reviewed by merchants. It also helps retailers talk to consumers in their language, and merchants and planners should be speaking that same language when planning assortments, reviewing product performance and gleaning insights from past seasons.
“The language that we actually use when marketing comes from language that we hear in our reviews and social media,” Diane Ellis, CEO of The Limited, said in a 2015 NRF Big Show omnichannel panel moderated by Kurt Salmon partner and retired Macy’s CAO Tom Cole. “Many times, we tried to come up with great descriptors for a product—why the fit is great or why a particular style—and it didn’t necessarily resonate with the client. But being able to leverage her testimonials—use the actual customer language about the fit, style, fashion—really was important to her. We can then bring that into our language.”
BENEFITS AND WHERE TO START
Only a handful of companies have started the switch to high-definition merchandising, but it will soon become the standard, and the results are startling. The most public example to date has been Tommy Hilfiger’s announcement of a digital showroom that eliminates the need for samples. “Tommy Hilfiger is sounding the death knell for the physical showroom,” Women’s Wear Daily declared in January. While this is only one aspect of HD merchandising, Tommy Hilfiger says, “The return on investment on a digital showroom is lower than one year, with a cost roughly equivalent to what the company would spend on samples in a 12-month period.”
Other retailers and brands, having liberated the stifled digital natives among their merchants and planners and converted the static and snow of desultory data to profitable, high-def clarity, are achieving sales increases up to 5% and turns improvements up to 20%.
The roadmap to execute this move to high definition varies depending on each organization’s starting point and priorities. Each of the visual, guided, interactive and connected advancements yields incremental business improvements that, when woven together, create a truly revolutionary model fit for today’s digital world.
ARE YOU READY TO TRANSFORM YOUR MERCHANDISING AND PLANNING ORGANIZATION?
We are currently recruiting additional retailers to pilot HD merchandising. The pilot involves:
- Selecting the category and HD merchandising components to pilot
- Conducting the pilot with the selected category
- Measuring tangible benefits
- Outlining a clear ROI and payback period
- Defining the future roadmap
Kurt Salmon has vast experience helping retailers transform their operations into competitive advantage. Because our team is made up of industry experts, we understand that merchandising and planning are at the heart of how retailers and wholesalers meet the needs of their customers. We have delivered over 50 projects focused on merchandising and planning in the past two years to a client list that includes the world’s top retailers as well as smaller emerging chains. Well beyond concepts and theories, our delivery model is anchored in providing measurable and sustainable results.
30 March 2015