According to Joe Skorupa, editor of RIS News and a long-time retail industry expert, for retailers to differentiate themselves within today’s highly competitive marketplace, they must adopt a responsive, customer-centric model for planning and fulfillment. Supply Chain Nation recently sat down with Skorupa as part of our Expert Insights series to get his insights on this topic.
SCN: A basic tenet of your new eBook on retail planning (Think New. Plan Different.) is that retailers have to switch from the traditional push model to a responsive, customer-centric model for planning and fulfillment. That’s a big cultural change. How should retailers approach this?
Skorupa: Switching to a customer-centric model, one that is closer to demand signals than previous models, is really a cultural shift that has been in the making for a number of years. I did some research on this and found that the customer-centric model has been mentioned in literature as an important business strategy since at least the mid-‘90s.
Customer-centricity is a term that is often given lip-service, but not actually followed through on in years past. But today it has really moved beyond the lip-service stage and has become a true actionable, executable strategy that companies are deploying and seeing results. Retailers get the best results when they get closer to demand by examining a number of data sources. You examine historical POS transaction records, not only from your stores, but also from your web and mobile platforms. You add other data sources, such as social media, online behavior and other new sources, and you begin to get a 360-degree view of demand.
There are a number of data sources that retailers have always had available, but many are just now adding them to their databases. These include government sources such as census statistics, demographic data and geographic information. All of these resources increase the ability for retailers to make more accurate merchandise plans and forecasts. We now have the ability to become more accurate in our plans and forecasts, and this in turn enables us to create tightly-defined customer segments and achieve a new level of customer-centricity not possible before.
SCN: Customer-centric retail planning will enable retailers to provide more relevant and personalized assortments and shopping experiences across channels. How will this become a competitive differentiator?
Skorupa: I just completed an as-yet unpublished study examining what attributes retailers collect and tag on customer segment profiles. As you might imagine, they tagged things like purchase behavior, name and address, and email addresses if they have them. Some of the things that have not yet been used commonly in retail, however, are actually readily available and easy to tap. These include geographic and demographic data.
With this information, retailers can do sorting and filtering into customer segments that make sense for merchandisers to create plans and forecasts around specific store clusters and even specific stores. Once you can get to that level you are becoming truly customer-centric. To put it another way, you are becoming more relevant, compelling and engaging to shoppers who are within a five–mile radius or a twenty-five-mile radius of your stores. You’re creating an assortment mix that makes shoppers feel like the store is there for them. That is a very powerful brand experience and it comes from the ability to tap into a customer database that is enriched with new sources of information that you never had before.
When retailers are able to tap into enriched customer profiles and more detailed customer segments, they are able to create a bond with the consumer that drives satisfaction, return visits and loyalty. Ultimately, this becomes a major differentiator in a specific local geographic marketplace.
SCN: The flipside of offering customers personalized assortments is the need to provide seamless fulfillment through popular options such as buy online, pick-up in store. What additional processes and technologies will retailers need to adopt to offer these seamless experiences?
Skorupa: One of the things smart retailers realized right from the start of their omni-channel journey is that to really make it seamless to the customer, a lot of work had to go into backend systems.
For example, if a customer wants to come into a store and pick up an order that he or she had placed online, it is an easy enough process for the retailer to lose a lot of money by doing manual communication, shipping a one-off product from the warehouse to the store in an inefficient manner, and delivering it somewhere to the store for an associate to do a search-and-find mission when the shopper shows up and asks to retrieve it.
What retailers quickly realized is they needed to focus on upgrading their order management system, warehouse management system, and their fulfillment capabilities before they could make direct shipments for customer pick up in an efficient way. To do that, they had to synchronize a number of systems and processes that were currently handled in silos.
Seamless retailing needs to appear effortless to the consumer. It is far from effortless to the retailer, but shoppers shouldn’t know that. If they do, then the retailer risks falling short of expectations and risks losing the customer on the last mile of the path to purchase.
SCN: In your opinion, what are retail winners doing differently in this arena to offer a differentiated experience for their customers?
Skorupa: I was at a conference a number of months ago and there was a presentation by a retailer about his order online / pick-up in-store program and the many backend things that have to take place to make it seamless. At the end of his presentation, the retailer started talking about what happens when the shopper enters the store. The retailer spoke about a process they had set up based on the fact that they knew the shopper was coming in and they knew they had a golden opportunity to create a memorable experience. They knew the shopper was a loyal customer, bonded with the brand, and was looking forward to enjoying the product she was picking up. So they prepared a special message for her that they dropped into the package. And they prepared a special script and scenario for the store associates so that when the shopper arrived for the pick-up, the store associates knew how to greet the shopper and what to say to make it a memorable experience. In other words, they took full opportunity of the shopper visit and created an outstanding customer experience that will lead to future visits and purchases.
I think that is the type of differentiated experience that can only exist if you‘ve done all of the backend consolidation and you have all of the systems and processes in place to make it happen. When you do the backend work, you can add on differentiated services that bring customers back again and again.
SCN: Thank you for your insights, Joe.