Voice of the Category Manager Survey 2017

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1 Voice of the Category Manager Survey

2 Big data and predictive analytics top the list of investment priorities in the JDA Voice of the Category Manager survey In the Voice of the Category Manager survey, prepared by JDA Software Group Inc., the need to better understand consumer behavior was the prevalent theme expressed among respondents from both the manufacturing and retail sectors, with path to purchase being the No. 1 shopper behavior where respondents indicate they would like more insight. In fact, the behavior of the modern shopper is evolving so rapidly that many companies are having a hard time keeping up. Nearly 70 percent of respondents feel they are behind on leveraging predictive analytics to improve their pricing and merchandising decisions. However, there does seem to be consensus on the path forward. For both manufacturers and retailers, results from the survey show that big data and predictive analytics rank as the No.1 investment priority in the next five years. When it comes to merchandising capabilities, investment in customerdriven data science ranks highest. Additionally, retailers and manufacturers plan to prioritize personalization and localization strategies to better reach the modern shopper this year. Not surprisingly, the ability to automate much of these processes is also a high priority for both retailers and manufacturers. More than half of respondents report a need to leverage automation, in order to do more with less, as the top priority for driving new technology solutions. The survey was conducted in April 2017, with nearly 100 responses from professionals responsible for category management and merchandising activities in North America. Forty-one percent of respondents identified themselves as category managers; other responses included business titles such as director (17 percent), analyst (17 percent), manager (12 percent), operations (8 percent) and merchandising (6 percent). Nearly half of the respondents (49 percent) work for a manufacturing company, of which 78 percent create consumer packaged goods products. Thirty-six percent of the respondents work for a retailer, of which 72 percent are employed at a national retail chain. 2

3 Driving consumer insights with data and analytics The volume and variety of data that companies can access about their consumers shopping preferences and behaviors continues to rise. There has been a growing emphasis on data-driven technologies over the past few years and how those technologies can help companies derive actionable insights from this mountain of consumer data. The ability to leverage these insights to make more informed and localized merchandising decisions is proving to be a competitive advantage to those companies that master it. Yet for many manufacturers and retailers, the survey results reveal that there is still room for improvement when it comes to their analytics processes. Survey respondents indicate that, on average, they are somewhat successful in mining consumer data to generate usable insights. Eighty-one percent of respondents rate their organizations three stars or above (with one star being low and five stars being high) for their ability to successfully mine consumer data to generate usable insights. Yet, less than one-fifth (17 percent) of respondents feel they are highly successful in their ability to mine consumer data to generate usable insights. On a scale from 1 to 5 stars (1 being low and 5 being high), rate how successfully you are able to mine consumer data to generate usable insights: 3

4 Nearly 70 percent of respondents indicate they are behind on leveraging predictive analytics for improved pricing and merchandising, capabilities which are increasingly critical to sustained success in today s customer-centric world. Of those respondents, more manufacturers (83 percent) than retailers (55 percent) feel they are lagging in this area. Additionally, nearly 60 percent of respondents claim they are behind in leveraging geographic and socioeconomic data for targeted promotions and offers. Based on today s customer-centric world, identify the top two processes you feel you are most behind on: Analyzing big data to recognize consumer preferences and demand trends Maintaining loyalty programs/ loyalty retention Predictive analytics for improved pricing and merchandising Leveraging geographic and socio-economic data for targeted promotions/offers The desire, among both retailers and manufacturers, to leverage data and analytics to boost their merchandising, pricing and promotional efforts raises the question: how well do they understand today s modern shopper? It turns out that the top two behaviors survey respondents are most interested in gaining insight into are the modern shopper s path to purchase (67 percent) and price sensitivity (53 percent). Identify the top two shopper behaviors you would like to have more insight into: Path to discovery Path to purchase Product preferences Fulfillment preferences Returns propensity Price sensitivity 4

5 Localizing assortments to reach the modern shopper The modern shopper has changed the game for both retailers and manufacturers. Getting merchandise assortments right the first time is crucial to shopper satisfaction, as well as profitability. In fact, respondents cite personalization and localization (68 percent) and increased development of digital technologies (62 percent) as the top two priorities they plan to implement within the next year to reach the modern shopper. Omnichannel retailing also remains a high priority, with nearly 60 percent of respondents citing it as one of their top two priorities. Within the next year, identify your top two priorities to implement to reach the modern shopper: Increased development of digital technologies Omni-channel retailing Personalization/localization Cloud services Effective assortment localization is dependent on a company s ability to identify the key product attributes or specific characteristics that drive local preferences and demand in each category. But how do companies know if their localization efforts are successful? For 37 percent of respondents, increased sales is their best measurement of success. Increased visibility into stores (21 percent) and improved inventory levels (21 percent) are other metrics that companies use to gauge the success of their localization efforts. Identify your best measurement of success when it comes to localization: There is more collaboration between headquarters and individual stores or regions Stores have more inventory options from headquarters to choose from Headquarters has more visibility into stores and can plan accordingly Better inventory levels and sights into out-of-stock solutions Increased sales 5

6 Compliance is critical Creating customer-centric planograms is only part of the assortment localization process. Making sure those planograms are implemented at the store level is just as critical. In fact, 86 percent of respondents believe that now, more than ever, in-store compliance with planograms is essential for success. While most respondents see the importance of in-store compliance with planograms, 37 percent of respondents report that they do not measure it. In-store compliance with planograms is essential for success, now more than ever. We measure in-store compliance of planograms. 86 % 14 % YES 37 % NO 63 % Forty-seven percent of respondents report that localization has changed how corporate compliance is handled at the individual store level. Of those, 28 percent report that if localization fits within broader corporate compliance rules, individual stores can make their own decisions, whereas 19 percent say that they now provide multiple compliance-approved options from which store managers can choose. Conversely, 53 percent report localization as having no impact on their corporate compliance efforts. Nearly half (48 percent) of respondents report that localization has caused a bigger need for support at the headquarter office. Of those respondents, 87 percent say they have added percent more support. Additionally, companies anticipate that localization efforts will result in more changes to corporate compliance in the next five years. Many respondents predict that stores will need more resources to provide additional options from headquarters (38 percent) and that businesses will begin to break down into smaller regions to allow for local customization (28 percent). Twenty-seven percent expect there to be more flexibility and decision making at the store level. Identify the biggest impact localization will make on corporate compliance in the next five years: There will be more flexibility and decision making at the store level Headquarter office will require additional resources to provide additional options to stores Business will be broken down into smaller regions to allow for customization at the local level Other 6

7 Investment priorities Given the increased focus on localized assortments, many respondents have technology investments top of mind to ease the process. In fact, respondents indicate the No. 1 investment priority in the next five years is big data and predictive analytics (41 percent), followed by investment in customer-driven data science (37 percent). Identify the investment you plan to prioritize your focus on in the next five years: Big data/predictive analytics Automation Augmented reality Customer-driven data science Additionally, the two most popular investments being prioritized for merchandising capabilities are customerdriven data science (58 percent) and business analytics (49 percent). Identify two investments you are prioritizing when it comes to merchandising capabilities: Machine learning Customer-driven data science Non-Excel based assortment solutions Integrated solution technologies Business analytics Joint business planning 7

8 Not surprisingly, the top two priorities behind the need for new technology solutions are automation, with more than half of respondents (53 percent) citing a need to leverage automation to do more with less, as well as the need for consumer insights to support increased localization, dynamic pricing and improved merchandising (48 percent). Identify the top two priorities driving your need for new technology solutions: Leverage automation to do more with less Translation of assortment decisions into executable space plans Make data more accessible to recognize market shifts and demand trends Create highly specific customer segments Consumer insights to support increased localization, dynamic pricing and improved merchandising When it comes to mobile technologies, respondents had varied opinions on which technologies would be most beneficial to their businesses. Twenty-six percent of respondents indicate that augmented reality technology that provides shoppers with personalized information while shopping would be most beneficial. Other technologies deemed useful include the ability for customers to leverage beacon technology (Internet of Things) via mobile for increased self-education on products (25 percent), in-store mapping for easy selfnavigation around stores (21 percent) and location-based mobile coupons (19 percent). When implementing new technologies related to store planning, 46 percent of respondents believe it would take up to six months for their company to adjust to the new technology. Almost 21 percent of respondents believe it would take more than a year for their company to adjust. Nearly two-thirds of respondents (62 percent) feel that adjusting to new store planning policies and procedures would take up to six months. 8

9 The manufacturer s point of view Forty-five percent of manufacturers feel they are successful (4 stars) in their ability to mine consumer data to generate usable insights. The top processes, where manufacturers feel they are lagging, are using predictive analytics for improved pricing and merchandising (83 percent) and leveraging geographic and socio-economic data for targeted promotions and offers (60 percent). When it comes to better understanding the modern shopper, the top two behaviors that manufacturing respondents would like more insight into are path to purchase (73 percent) and price sensitivity (58 percent). While 28 percent of manufacturers find beacon technology for increased self-education on products to be most beneficial for their businesses, no manufacturer plans to prioritize investment in sensor and beacon technology in the next five years. This may be because while those investments have the potential to improve product sales, the investment and installation would need to be undertaken by their retail trading partners. Additionally, while 75 percent of manufacturers claim to be moving away from siloed solutions, only 45 percent of manufacturers plan to prioritize joint business planning when it comes to merchandising capabilities. Although 90 percent of manufacturers see in-store planogram compliance as essential for success, approximately one-third of respondents (33 percent) do not measure it. This may be because retailers have the staff in-store to monitor compliance, whereas manufacturers would have to hire staff to do so. Also, in most cases, this is considered the retailer s responsibility. The retailer s point of view Nearly 42 percent of retailers feel they are somewhat successful (3 stars) in their ability to mine consumer data to generate usable insights. Yet, when asked to identify the top two processes where they are lagging, retailers feel equally behind on analyzing big data to recognize consumer preferences and demand trends (59 percent) and leveraging geographic and socio-economic data for targeted promotions/offers (59 percent). About 55 percent of retailers also feel behind on using predictive analytics for improved pricing and merchandising. When it comes to better understanding the modern shopper, the top two behaviors that retail respondents would like more insight into are path to purchase (62 percent) and price sensitivity (45 percent). Insight into product preferences (44 percent) is also highly sought after by retail respondents. Although 31 percent of retail respondents see augmented reality that provides shoppers with personalized information while shopping to be most beneficial to their businesses, no retailer plans to prioritize their investment focus on augmented reality in the next five years. Additionally, although 59 percent of retailers plan to move away from Excel-based assortment solutions, just 31 percent of retailers are prioritizing non-excel based assortment solutions for their merchandising capabilities. Most retailers (66 percent) state that localization has caused a bigger need for support at the headquarter office, and 89 percent of retailers have added percent of support at the headquarter office in response. About 11 percent of retailers have added between percent more support at the headquarter office. With most retailers (83 percent) stating in-store compliance with planograms as essential for success, more than half of respondents (52 percent) do not measure it. 9

10 Conclusion The JDA Voice of the Category Manager research underscores how much retailers and manufacturers alike are feeling the impact of the modern shopper. Companies are realizing that to succeed in today s highly competitive, omni-channel market, leveraging big data and predictive analytics will not just be necessary, but a requirement. This type of data provides companies with greater insights into their consumers preferences and behaviors, enabling companies to provide more localized assortments and better meet their shoppers needs. Retailers and manufacturers that want to stay on top will need to be able to implement this type of localization at scale and with speed. While this will require some organization-wide changes to policies and procedures, as well as the adoption of technology solutions to help automate processes, it is a necessary evolution for those responsible for merchandising decisions. The success of a company s merchandising strategy, both today and in the future, hinges on how companies leverage these data-driven insights to better serve the modern shopper s ever-changing needs. 10

11 About JDA Software Group, Inc. At JDA, we re fearless leaders. We re the leading provider of end-to-end, integrated retail and supply chain planning and execution solutions for more than 4,000 customers worldwide. Our unique solutions empower our clients to achieve more by optimizing costs, increasing revenue and reducing time to value so they can always deliver on their customer promises. Using JDA, you can plan to deliver. jda.com 11

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