Merchandising: That Perfect Fusion of Art and Science

In retail, the four “R’s” are the key to success – putting the right product, in the right place, at the right time, at the right price. The “buyer” is traditionally the “artist”, applying their intuition and experience to select the “right products” and the planner the analytical “scientist” responsible for profitably placing the right inventory, in the right place, at the right time. But today’s technologically empowered customer expects personalized, differentiated offers no matter where or how they’re shopping, and can go elsewhere in a matter of seconds if these expectations are not met. Retailers can no longer solely rely on the intuition and experience of their buyers or the analytical prowess of their planners – they must drive every merchandising decision based on the behaviors of their most important customers.

JDA recently partnered with research firm EKN to survey retail merchandising executives to gain a better understanding of where the retail industry stands in terms of merchandising maturity. Think of it in terms of Merchandising 1.0, 2.0, and 3.0.

Merchandising 3.0 is the holy grail of the maturity model. Localized and personalized assortments are based on micro customer segments – from both online and store. Reaching this customer-centric level of maturity is vital to retailers’ remaining competitive and profitable.

It’s a long road to maturity, though. Results from “Merchandising 3.0: Why Retailers Need to Find the Perfect Blend of Art + Science to be Relevant to Shoppers,” show that retailers are facing significant challenges in their efforts to advance through these maturity levels. Foremost are a lack of customer focus, disconnects created by functional boundaries, and a lack of meaningful analysis of all the data that’s available to retailers through current technology. And many retailers surveyed fall squarely into Merchandising 1.0 and 2.0.

At the 1.0 maturity level, a retailer functions in a product-centric system. Merchandise plans are based on product categories and pricing is based on historical data. According to survey results, 53 percent of retail executives reported that their business culture is focused on products, not customers, when asked about their organization’s greatest obstacles to achieving customer-centricity.

At level 2.0, a retailer has moved to a cross-channel, or omni-channel, process, where plans are channel-driven and the online and physical stores do not really collaborate. Thirty-two percent of executive respondents reported that their company’s siloed organizational structure – keeping online and physical separated – stands in the way of aligning their business around the shared priority of satisfying customer needs.

So, how can retailers advance to Merchandising 3.0? By changing their focus from product-centricity to customer-centricity. Many are already on their way. According to survey responses, retailers are already redefining their organizational structures to reflect today’s business environment. 53 percent of retailers surveyed have a chief customer experience officer on staff — and another 39 percent will hire one by 2018. The biggest takeaway here, I believe, is that 82 percent of respondents said they will focus on improving the in-store shopping experience for consumers over the next two years without adding store associates.

If you are a retailer facing any of these challenges, JDA can help. Check out the JDA & EKN Merchandising 3.0 eBook, infographic, and animated graphic.  If you want to benchmark your merchandising strategy against the competition, take a look at the EKN/JDA Quickscan.  For more information, read our recent press release, and if you want more help with your retail planning, contact JDA today!



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