The New World of. Assortment Planning. Driving Growth and Expansion with Intelligent Decision-Making SPONSORED BY BRIEF A CSC COMPANY

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1 The New World of Assortment Planning Driving Growth and Expansion with Intelligent Decision-Making SPONSORED BY BRIEF A CSC COMPANY

2 Table of Contents 03 Assortment Planners Face a New Reality 04 Omnichannel Fulfillment & the Assortment Planning Predicament 05 Aligning Assortment Planning & Allocation Strategies With Growth Opportunities Reaching Assortment Relevancy, Speed & Agility Preparing for Planning Success 10 About UXC Eclipse The New World of Assortment Planning 2

3 Assortment Planners Face a New Reality RETAILERS OF ALL TYPES AND SIZES ARE STILL ADAPTING TO THE NEW rules and realities of omnichannel. Although retail sales are expected to grow approximately 4% through the end of 2016, according to Kiplinger, retailers are still tasked to better understand customers and shift their strategies and investments as new trends and preferences emerge. Being agile and quickly adapting to shopper needs remains a significant challenge: 58% of retailers say changing consumer behaviors prevent them from achieving key business goals, according to The State of Retail 2016 Survey. But creating relevant and compelling shopping experiences is a business imperative that impacts all areas of the modern retail organization especially assortment planning executives. 58% of retailers say changing consumer behaviors prevent them from achieving key business goals. Assortment planners help determine which brands and products should be allocated to which stores. These executives also calculate how many SKUs of each merchandise category should be allocated to each location in order to maximize sales and minimize out-of-stocks. But over the past five years, the planning process has grown even more complex. Planners need to consider the preferred brands, items, colors and sizes of local consumers; at the same time, they need to account for purchases made online and fulfilled in stores. These complexities are amplified as retailers grow online and open new stores domestically and internationally. All of the information planners need to succeed is available in the form of data: POS data, e-commerce data, supply chain data, inventory data and even social data. However, retailers are still struggling to take all of these insights, aggregate them and turn them into actionable information for their planners. And the fact remains that most planning systems are disconnected from ERP and sales systems. The visibility and transparency of data (or lack thereof) is causing significant issues, making the planning process extremely difficult in today s fast-moving retail environment. With this brief, we ll uncover the new rules and realities of assortment planning, and illustrate how an integrated ERP solution can empower planners to use this information to make smarter decisions, support business growth and facilitate expansion efforts. The New World of Assortment Planning 3

4 Omnichannel Fulfillment & the Assortment Planning Predicament THE PRIMARY GOAL FOR ANY RETAILER IS TO GET PRODUCTS IN THE hands of customers as quickly and seamlessly as possible. Omnichannel fulfillment options, such as buy online, pick up in-store and buy online, and ship from store, have become must-haves for consumers. Retailers are now using their stores as fulfillment hubs to keep pace. In fact, when asked to rank the importance of specific inventory fulfillment models, 61% of retailers said buy online, pick up in-store was important or very important, according to UXC Eclipse research. But it takes careful planning to implement omnichannel fulfillment successfully. Retailers need to balance getting products to customers quickly and easily, but doing so in a profitable way. - RANDY DAVIDSON, SOLUTIONS Retailers need to balance getting products to customers quickly and easily, but ARCHITECT FOR RETAIL, UXC ECLIPSE doing so in a profitable way, explained Randy Davidson, Solutions Architect for Retail at UXC Eclipse. Retailers need to have in-depth knowledge of store-specific sales and omnichannel orders fulfilled from these locations. From there, retailers need to allocate the right percentage of products to stores in order to keep pace with both store and online demand. This is where Big Data, technology and analytics play a critical role. You want to get products to customers as quickly and seamlessly as possible, but the closest store may not be the best store to fulfill from based on product sell-through, Davidson noted. It s great if I can fulfill an omnichannel order, but I may be hit with operational costs if I need to pull that inventory from another store to meet sell-through needs. It can get very complex in that way. The New World of Assortment Planning 4

5 Aligning Assortment Planning & Allocation Strategies With Growth Opportunities THE ECONOMIC RECESSION IS FAR BEHIND US, BUT CONSUMERS spending behaviors are still volatile. And retailers are taking notice. Consider this: 51% of retailers say decreased consumer spending is inhibiting them from reaching internal revenue and overall business goals, according to UXC Eclipse research. Retailers also know that consumers today can type into a search engine and access thousands of products at a variety of different price points. To reach their business objectives and differentiate in the market place, retailers are focused on expanding their brands internationally in an efficient and cost-effective way. As they expand, however, they need to align their assortment plans with local tastes and customs. 45% of retailers are actively researching merger and acquisition opportunities. Expansion plans and strategies, of course, vary from retailer to retailer. Some companies launch international e-commerce sites to expand into new territories in a more turnkey way. This online expansion approach is top-of-mind for many retailers, as 39% plan to launch e-commerce sites in global markets through It allows businesses to build their international presence and customer base without the added cost of setting up operations and stores in a new country or major market. Other retailers acquire companies to meet growth objectives: 45% of retailers say they are actively researching these opportunities over the next 12 to 24 months, according to UXC Eclipse research. However, there are inevitable challenges that retailers need to face when it s time to integrate their core brand and products with the other. All disparate systems, and mounds of sales and customer data, need to merge into a single, unified system, Davidson noted. The merging retailers also need to answer some important questions around customer experience and brand execution: Should they continue to operate stores as two independent brands, or do they create one holistic brand? The New World of Assortment Planning 5

6 Finally, some retailers are exploring new store formats or are completely revising their brick-and-mortar strategies. For example, 38% of retailers plan to focus on growing their e-commerce business over the next year, while 36% plan to divest stores and 35% plan to decrease square footage in existing stores, as noted in The State of Retail Survey. Smaller or more experiential store formats are great because they create a more immersive experience for consumers. There are challenges, though, because in a smaller format store, retailers need to manage inventory and present assortments to customers in a completely different way. As square footage shrinks, retailers need to take a careful look at how much space they can dedicate to products and merchandising without risking out-of-stocks or overstocks. Regardless of retailers expansion plans or growth strategies, technology is their backbone for success. They need a single system where they can access, analyze and use all data to drive decision-making, Davidson said. If executives, especially planners, need to push and pull data from a slew of different systems, they risk making assortment decisions that will negatively impact the health of their business. WANT TO GET YOUR ASSORTMENT IN SHAPE? START BY ASKING THESE QUESTIONS: Which channels do we use to sell and market products? (Online, e-commerce, social, etc.) Where are our target consumers located? What is their proximity to stores in the area? Do they primarily visit stores or do they tend to order online or buy online, pick up in-store? What brands, product categories, sizes and colors are most popular in the area? When do consumers typically buy these products? Do we see surges during sales events and holidays, or is it more consistent? What type of feedback are they sharing on social media and how will this help us make smarter decisions? What is our product sell-through rate? Do we see any patterns in out-of-stocks? The New World of Assortment Planning 6

7 Reaching Assortment Relevancy, Speed & Agility HISTORICALLY, THE ASSORTMENT PLANNING PROCESS WAS extremely straightforward, according to Boston Retail Partners. The core principles consisted of identify what to sell, to whom to sell it, at what price to sell it and then ensure the product is where it needs to be on time, according to the 2015 Merchandise Planning Survey. Now that consumers expect a seamless experience across all channels, it s becoming even more challenging to plan and manage effectively. Having a fast, easy and unified shopping experience trumps all for today s savvy shoppers. As a result, best-in-class retailers realize that success no longer relies on having hundreds of stores or an extensive product assortment. Instead, they need to guarantee that they have highly tailored and relevant assortments fueled by customer data, preference data, social data and other forms of unstructured feedback. Achieving this level of granularity and relevance means having a comprehensive view of the entire business from the supply chain to distribution centers and store. The business benefits of assortment planning efficiencies: More satisfied customers Better product sell-through Improved margins Increased sales Lower out-of-stocks Assortment planners also need an in-depth view of category profitability, overstocks and under-stocks, high-growth categories and in-demand brands. With these insights, assortment planners can determine how many SKUs for each merchandise category they should put in each store to meet overall demand and maximize sales opportunities. The New World of Assortment Planning 7

8 However, many assortment planners still use Excel as their primary planning tool, so they do not have a comprehensive, single view of data. Moreover, Boston Retail Partners indicates that only 6% of retailers believe their current assortment planning applications are effective. Rather than relying on historical data, planners need to be able to mine and understand data in real time and from the customers perspective, Davidson said. They need a comprehensive system that allows them to better analyze and understand the mounds of data they have quickly and efficiently. Combining historical data with customer preference data, social data and more, assortment experts can then facilitate the planning process and better meet customer expectations even as trends and overall demand shifts. THE MUST-HAVE FEATURES OF A MODERN ASSORTMENT PLANNING & ALLOCATION SOLUTION To successfully keep pace with new consumer trends and remain competitive in the modern retail landscape, retailers need an integrated ERP system that includes intelligent assortment and allocation planning capabilities. A best-in-class solution touts all the functionality you need to craft timely and relevant assortments that capture customer attention, including: Financial planning and forecasting Open-to-buy budget Category management Assortment and space planning Purchasing Store grading Buy plan management Store modeling Allocation Pre-order and purchase validation Pricing and mark-down Replenishment Combined, these features will empower retail organizations to optimize their inventory, better manage financial plans, improve allocation modeling accuracy and increase margins. The New World of Assortment Planning 8

9 Preparing for Planning Success TO SURVIVE AND THRIVE IN 2017 AND BEYOND, retailers need to turn their assortment planning and allocation strategies into a competitive advantage. It is not realistic nor necessary for merchants to try and offer a product assortment as large or diverse as Amazon s. Instead, retailers need to ensure their product assortment resonates with consumers on an intimate level whether they re shopping online or in a store. That means aligning brands, product categories, styles, sizes, color palettes and more, with the wants and needs of target shoppers in all markets they operate. Most of all, retailers need to get allocation right. Assortment may be relevant, but that doesn t mean a thing unless retailers have the right number of SKUs allocated in stores and distribution centers to meet their customers demands. With an integrated ERP solution, retailers can empower their assortment planners with a comprehensive view of the entire business, its products and, most importantly, its customers. A best-in-class ERP solution makes assortment planning and allocation a key function rather than an add-on or disparate system. Planners will then have anytime, anywhere access to historical sales data, behavioral data, preference data and social data. Combining these insights with supply chain and inventory-level data, planners can make smarter, more profitable assortment and allocation decisions helping retailers expand their business by driving sales and building a foundation for future success. The New World of Assortment Planning 9

10 You need more than a one-size-fits-all planning solution. Learn how the Exceed for Retail Suite from UXC Eclipse sets you up for future growth by helping you build the right plan for the right product at the right place, price and time. START PLANNING BETTER & FASTER A CSC COMPANY Microsoft Dynamics Gold Partner UXC Eclipse is the Retail ERP Specialist. The preferred implementation partner for large and complex retail solutions, UXC Eclipse offers business consulting & project management, applications development, corporate performance management and business process management. Speak to UXC Eclipse about how their integrated Microsoft Retail offerings are delivering true omni-channel retailing globally with mobile POS, full e-commerce, retail warehouse management and logistics, BI and analytics, sales/marketing and social listening. Solutions are available on-premise or in the cloud all with a customer retention rate above 97% and delivered to the highest levels of customer service info@uxceclipse.com Retail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels. The Retail TouchPoints network is comprised of a weekly newsletter, special reports, web seminars, exclusive benchmark research, and a content-rich web site featuring daily news updates and multi-media interviews at The Retail TouchPoints team also interacts with social media communities via Facebook, Twitter and LinkedIn info@retailtouchpoints.com