Merchandising is central to any retail organization, but research shows that fashion is significantly underperforming consumer goods peers in this capacity.
RSR, a retail technology research and advisory firm, set out to gauge how retailers are faring on their road to tech-enabled merchandising operations. The “Mastering The Art Of Merchandising In The Technology Age” report, sponsored by software and analytics providers Logility and SAS, found that most of the progress and adjustments seen in retail merchandising today are a direct reflection of growing competition coupled with customer demand.
In the report, the research firm defines “retail winners” as those whose sales figures show consistent positive results relative to “average” or “lagging” peers. More than one quarter (27 percent) of surveyed companies sell clothing, shoes and accessories.
A laser focus on merchandising seems to be linked to higher gross margins, the report shows: 82 percent of winners demonstrate consistent margin growth, higher than the 47 percent of all others that achieved similar results.
Compared to their underperforming peers, winners perceive a lot of value in systems like automated replenishment (76 percent vs. 57 percent), attribute based merchandising systems (68 percent vs. 41 percent) and integrated planning, allocation and replenishment systems (66 percent vs. 47 percent).
“In an age when technology allows every shopper to serve as judge, jury, and executioner, make no mistake: everything matters,” said Steve Rowen, RSR managing partner. “But I’d argue that there’s nothing more important than what a retailer chooses to sell. And the stake for getting that mix right these days are high. More than ever—merchandising matters.”
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Retailers that sell fashion demonstrate an interest in bettering their price and markdown optimization strategies relative to their consumer goods peers (51 percent vs. 36 percent), and RSR noted, “they know full well where they are leaving money on the table.”
But it doesn’t stop there; apparel retailers are twice as interested in mastering their forecasting abilities than consumer goods, the report shows.
Businesses classified as apparel or brand retailers have greater faith in the synergies between their merchandising operations and supply chain than CPG companies. Fewer in the apparel cohort (37 percent) believe there’s “friction” between the two.
Despite today’s emphasis on data and science as the groundwork for running successful enterprises, RSR found that fashion’s favoritism of “design over discipline” remains deeply embedded in many apparel companies. According to the report, apparel retailers lag in their mastery of important merchandising tools that optimize assortments, lifecycle pricing and size forecasting. They’re also not the best when it comes to strategic tools, including integrated planning, allocation and replenishment solutions.
Winners have clear ideas about how they can improve their merchandising processes. Most (53 percent) are trying to figure out superior ways to merge customer segmentation and preferences into their planning. Another 52 percent want to get better at reacting when sales forecasts go off course, while 39 percent believe inventory will see healthier sell-through when they master price and markdown optimization.
“The data in this report shows that while Retail Winners are well-positioned, the majority of all retailers aren’t in such a good place, and are still grappling with the organizational, process, and technology changes needed to enable better merchandising performance,” RSR managing partner Brian Kilcourse, said.