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Forecasting, Customer Insights Said Key to Merchandising Success

by MarketingCharts staff
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This year, 68% said they have a solid understanding of these tools and techniques, down from 73% last year, but up from 61% in 2010.

Still, retailers are more apt to be confident in their understanding of forecasting than assortment optimization (60%, up from 51% last year), integrated merchandise planning, allocation, and replenishment (53%, down from 59%), promotion optimization (52%, up from 43%), and lifecycle price optimization (33%, unchanged).

Customer Analytics Also Extremely Important

Roughly 7 in 10 retailers also believe customer analytics are extremely important to their merchandising success, with a further one-quarter believing analytics to be somewhat important. This ties into retailers’ perceived business challenges: when asked their top 3 challenges, understanding customer preferences was cited by 37% of respondents, tied with underperforming inventory as the second biggest challenge. General merchandise and apparel (GMA) retailers were 41% more likely than fast moving consumer goods (FMCG) companies to indicate understanding consumer preferences to be a top-3 challenge (41% vs. 29%).

Retailers also see how a better understanding of the customer can help improve their merchandising processes. Half said that better incorporation of customer segmentations and preferences into the planning process was a top-3 most important opportunity for improving their merchandising process. This was the top opportunity, ahead of integrated planning with cross-functional teams and price and markdown optimization to boost sell-through (each at 42%).

Only 21% said that a consistent, accurate and detailed demand forecasting platform was a top-3 opportunity for improvement, presumably because almost 7 in 10 already feel confident in their forecasting.

Top Performers Less Worried About Innovation

Data from RSR’s “2012 Merchandising Report” indicates that 44% of retailers believe that the inability to identify new ideas and innovate quickly on price, promotion and customer preferences is a top-3 business challenge, making this the most commonly-cited challenge. Even so, innovating in the face of large amounts of customer information is less of an operational challenge for retailers with comparable store/channel sales growth of over 3% (“winners”). For these retailers, just 35% said that the inability to identify new ideas quickly in a sea of customer information and execute on these ideas is a top-3 operational challenge they face around their merchandising strategy. By contrast, 57% of “laggards” (with comparable store/channel sales growth of less than 3%) indicated this to be a top-3 operational challenge, making it their top challenge overall.

For winners, the most commonly-cited operational challenge was holistically predicting the impact of future pricing, assortment, and promotional decisions, by 59%.

Other Findings:

  • Winners were 48% more likely than laggards to rate themselves as having a solid understanding of forecasting (74% vs. 50%).
  • Only half of retailers in the mid-market (with annual revenues between $50 million and $999 million) say they have a solid understanding of forecasting.
  • Only 26% of respondents are currently optimizing their assortments against new key customer segments, though 16% are beginning to do so, and 34% plan to next year.
  • Most retailers believe that technology can be very valuable to supporting assortment optimization (68%) and customer segmentation (62%), while roughly half believe it can be very valuable for integrating customer data within merchandise planning.

About the Data: The RSR data is based on an online survey conducted from May-August 2012, which received answers from 96 qualified retail respondents. Among respondents, the selling format breakdown was as follows: FMCG (32%); GMA (66%); and restaurant and leisure (4%). 53% of respondents have their headquarters in the US, and 58% have a retail presence in the US.