Changing the way the Retail Merchant works in an ever more demanding Consumer environment!

Whilst I hear and see endless examples of ‘store innovation’ or ‘360 marketing,’ or variants thereof, one area of business that still seems to have a way to go is the head office, HQ or Support Center. Call it what you will, we still have a fairly comprehensive industry focused on the creation and maintenance of Microsoft Excel spreadsheets.

Some call this shadow IT. Others simply recognize that it forms an absolutely essential part of the business without which the day or week in the life of a typical retail business simply wouldn’t function!

To be fair, it’s not all Excel spreadsheets. Many combine output from long-established data warehouses to create the best action. Some of this is driven by a limited allocation of IT funds and the ‘keeping the lights on’ approach to IT spend of so many retailers today.

The reality is, very few retailers have anything remotely close to the funds required to be as innovative as large web-based market leaders.

My concern with maintaining the ‘status quo’ in many central functions, like Buying & Merchandising, is these teams are at risk of being left behind in their respective businesses by the increasing number of web-based startups who are not curtailed by the same legacy challenges. And the level of disruption from the startup community is only set to increase – this problem is not going away anytime soon! Clearly, it’s not just startups that pose a threat, but it’s harder to predict where the disruption is coming from or will come from.

How can we help Merchants become more efficient? How can we help the good merchants become great and the great merchants become fantastic? How do we ensure that the rookies learn fast and how can we capture the wisdom of the veterans?

We have to look ahead! We have to wake up and reflect on how we better support what many argue is the heart of the machine. This is a foundational element to the success of retailers for the next few years. And whilst I may be pointing out the obvious, the increasing complexities and needs of the end consumer mean this pressure is not going to let up.

McKinsey goes deeper on this complex topic in the article How Analytics and Digital Will Drive Next Generation Retail Merchandising, and it’s well worth a read! A key quote that brings the criticality home to me is, “Against this backdrop, the historical core of every retail organization—namely, the merchandising function—is finding itself at a critical inflection point.”

Moving beyond the depth that McKinsey covers, others reinforce the need for far greater embracing of advanced analytics. According to Bain, “Advanced analytics tools enable them to integrate sources with their financial data in a “data mart” that generates unprecedented transparency and insights on category, shopper and brand dynamics down to the SKU level.”

I’m going to move to an assumption that you accept the logic in my reasoning thus far. So, what does success look like and what are realistic expectations to set since effective expectations management is the key to success?

Success needs to be the implementation of a new set of tools that don’t require the entire backend of your business is re-engineered. It needs to be tools that are easy to learn, in the same way that you don’t need a training manual when you download a new smartphone app. And success is enabled rapidly with tools that can grow with your business without complex integration requirements that will cause CIOs to deprioritize their procurement.

Whilst I’m detailing my ‘wish list,’ I’d like the tools to enable a mix of ‘operational’ data (like sales, inventory, mark-downs, supply chain forecast, etc.) mixed with ‘experience’ data (like why a customer bought or didn’t buy something). I’d like all this to be a national, regional, city, store, Distribution Center, web customer, etc. And I’d like to see this by varying time horizons really quickly. Is this too much to ask?

Success is being able to make rapid decisions and model ‘what if’ without waiting for an overnight report or that spreadsheet guru to come back into the office.

I’ve spent a good deal of time on the conundrum I describe above, and I predict that we are heading for the emergence of purpose-built analytics solutions that combine some form of backend ‘data hub’ with the various data sources. I expect that the demand will be for this to be easily accessible across form factors from smartphone to tablet to laptop and desktop. The pressure will be on to ensure as close to real-time as is cost-effective.

The only questions is, when the ‘laggards’ see the leaders move ahead,  can they react quick enough to catch up?

Whether you agree with me or not, I’d be interested in your point of view.

About Steve Mauchline

Steve Mauchline is a Business Architect in SAP North America’s Presales unit. He helps customers rationalize business capabilities to ensure clear understanding of their customer vision & strategy and provides business capability recommendations to operationalize the future business and operational model. Prior to his current role, Steve spent 10 years with IBM focused on software and services solutions in Retail, Consumer Products and Transport & Travel industries. He spent his formative years working for a large UK Retailer, building his expertise across stores, supply chain, merchandising and business analytics.