Special report: Managing the complexities of modern merchandising

Things have changed in the world of merchandising. Driven by the ascendancy of marketing, the proliferation of product information channels, and advances in computing power, merchants can now do in minutes at the push of a button what used to take hours of writing, data entry and manual review.

However, RSR's latest benchmark on merchandising, Modern Merchandising: Managing Complexity with New Tools and Techniques (February 2015), sheds light on a new set of issues that center on organisational siloes vs technical capabilities.

Organisational siloes hamper retailers' merchandising strategies

The ascendancy of marketing in retail in recent years has been documented by RSR and others, and is well-known. The impact of that shift is that "merchant princes" have been upstaged by a new generation of digitally savvy "brand masters".

Not surprisingly, in our merchandising benchmark study, RSR saw a dramatic increase from the prior year's study in the percentage of retailers citing disconnects between the two departments, in addition to the historical friction between Merchandising and Supply Chain (Figure 1).

Figure 1: Businesses Challenges Drive Operational Issues

Image credit: RSR Research February 2015

While some observers may see irony in the power shift (after all, the Merchant Prince certainly had his day), more thoughtful observers will recognise just how big the problem is. Marketing creates the brand promise. In the 21st century, that brand promise is delivered across an ever-growing number of product information channels.

A refresh of core merchandising systems on the horizon

Tangential to the growing influence of marketing in retail, new commercially-available solutions are able to dramatically improve how companies plan and execute. While core merchandising systems are certainly not new, they have historically been either homegrown or very heavily customised commercial applications. Upgrading to a new generation of integrated capabilities is no small task, and requires extensive mapping of processes and business rules. Given the complexities involved, it is significant that in the merchandising benchmark study, almost half of retail respondents are getting ready to undertake this task (Figure 2).

Figure 2: Big changes in central systems

The impetus behind changes to core systems' capabilities is retailers' desire for better integration between planning and execution processes between marketing, merchandising, and supply chain. But while the desire to create a more solid and extensible foundation is important, retailers must also recognise the amount of human process re-engineering work it takes to get this type of job done effectively.

The organisational and process disconnects that plague retailers tend to be intertwined with old and idiosyncratic merchandising systems. The kind of massive change retailers now envision could create the risk of enterprise paralysis. While it would be easy to blame the technology when/if this happens, in fact, pre-existing organisational dysfunction would be the likely culprit.

Moving forward

While the era of five-year enterprise transformations are far behind us, there is no silver bullet to the number of idiosyncratic and undocumented organisational responsibilities and behaviours associated with legacy core merchandising systems.  It will take time to first document the "is", sort out organisational disconnects, and get cross-functional teams to agree upon the "will be" state. Only then will the enterprise be theoretically ready for something new.

As part of that cross-functional effort, merchandising, marketing and supply chain organisations should discuss what kinds of customer data really do add value to the enterprise, and plan accordingly. Retail is no longer about what retailers want to sell, it's about what shoppers want to buy. Customer-focused analytics will help to identify not only what products will sell in what quantity, but also who is likely to buy, when, where – and even why.

That’s the best possible future for merchandising.

Many of the issues addressed in the RSR report will be topics of debate at the Buying & Merchandising Summit 2015, which takes place at London's Cavendish Centre on 22 September. Speakers from Adidas, Cath Kidston, Levi's, Net-a-Porter, Tesco and Topps Tiles – as well as Victoria Plumb chairman George Adams – are among those confirmed for the one-day event, which includes a comprehensive educational conference programme and a valuable opportunity to network with industry peers.

Click below for more information:

RSR Research

Buying & Merchandising Summit 2015