In 2007, UK retail sales stood at £265 billion, accounting for one fifth of the country’s economy. I wonder what the figures will be for 2008. In a harsh economic environment, retailers need to work harder than ever. Not only do they have to consider attracting new customers, but also they need to focus on capturing sales from those who walk into their shop, or who visit their online store.
You only have to look at the UK High Street to see that real emphasis has been placed on promotional activity; everything from ‘buy three and get the fourth free’, to various mix and match promotions. There can be no doubting today’s retailers are working hard to lure in new customers through creative marketing, and they are doing this across a range of categories, in order to avoid relying on specific products.
Today’s customers are looking for both value and quality when it comes to selecting the retailer to purchase from. In light of the credit crunch, consumers have begun to look at their budgets, and will be spending more carefully – I believe this trend will continue right up to Christmas 2009 and maybe indefinitely. Therefore, those retailers which successfully encourage the shopper into their store need to make sure they have exactly what the customer is looking for. This will mean the difference between making a sale and not, and perhaps more importantly satisfying the customer.
This climate has made it critical for retailers – of any size – to have the right tools in place, to ensure the stock they have on hand is saleable. Such a system will determine the exact product mix in a store, and not having it will mean a retailer is reliant on manual processes, primarily based on what a specific store did the year before, which could perpetuate less than great performances.
Retailers that don’t plan their store product mix are likely to end up with ‘end’ sizes, for example, lots of extra small or extra large; broken ranges that don’t fit the product line, and which are – ultimately – hard to sell. This will result in shoppers taking their custom elsewhere, and potentially being less likely to return to the store in question. Meanwhile the retailer will channel their efforts into selling the mismatch stock – which is often heavily discounted to further encourage sales.
It is imperative to have the correct balance of merchandise, right down to a product’s size and colour – in order to maximise sales, and to meet valued customer demand. And, retailers need to be able to hold stock that works according to the projected forward sales curve.
In practical terms, 80 per cent of stock should tick over, and the remaining 20 per cent will sell over- or under-plan. Retailers should be able to undertake focused analysis on an exceptional basis, examining the best and worst sellers and reacting accordingly. Having the ability to dynamically project and manage basic merchandise needs and improve customer service levels will ensure a retailer stands out from the competition. And any replenishment tool must have the ability to operate and calculate the needs of a specific store for a given (user defined) period of time.
Planning and replenishment is generally undertaken at head office level, using valuable store input. Their joint purpose is to forecast trends, creating less ‘broken’ ranges and maximising sales. And they make the process more efficient in nature; retailers will have fewer items to mark down and more time to react to profitable sales. At head office level, there will be greater opportunity to analyse valuable data. Overall, I believe that companies using replenishment and planning tools will begin to see a bottom line impact within a six-month timeframe.
During the run up to the busy Christmas period, retailers need to build up their product accurately in a particular store. They have fewer chances to get it right, and – if they haven’t already – then they should be creating their product mix accurately within a particular store.
