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GUEST COMMENT Never forget the customer – why retailers need to get their merchandising right

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by Christina Grzasko

We are in the middle of a retail revolution. Our customers no longer compromise on the products they buy because everything is available at a click of a button. And retailers are getting caught out, left standing with excessive inventory they are constantly marking down by 50-70% because they didn’t read their customer correctly.

Of course the recession isn’t helping but it is clear that it is too simplistic to keep blaming it alone for retail’s ills. John Lewis is doing a great job in bucking it, as are several other well-known and independent retailers. So instead of sitting helplessly on excess stock, the time has come to ask how the successful retailers are achieving it and what can the rest of us do to help ourselves.

The first thing retailers can do is to stop shooting themselves in the foot by running a chaotic back office which consists of 85 spreadsheets and disconnected thinking. There is no excuse for failing to run an integrated, efficient merchandising software package that helps everyone cost and visualise the next stock commitment.

In tandem with this, it is time that retailers got back to knowing their customers properly. Good merchandising software will actually make them do this and apply the knowledge all through the early planning and visualisation. Good back office practice will encourage better customer reflection and involvement. Great merchandisers will know exactly where the balance lies between what the customer will buy and how much the business can profit from this.

The trick always is to sell more stock at full price than is currently happening.

Making the wrong decisions

Currently, as a survey we carried out at Retail Business Technology Expo revealed, retailers are discounting huge amounts of stock to get rid of excess inventory because of overbuying, or purchasing the wrong products. Often the reasons for this are nothing to do with the recession.

Retailers are simply not trading well – they don’t know their customers, they are not confident of how they are going to behave and they are failing to make use of the latest merchandising techniques and software to give them the insight they need to avoid these mistakes.

More than half of retailers, polled for the survey said they typically discount at least 10-24% of their stock. Just 6% said that they used merchandising software to help make their discounting decision. In fact, 28% said they were currently using ‘old school’ Excel spread sheets as a merchandising system.

The survey also found that 19% of retailers are discounting stock to get rid of excess inventory and 31% for reasons of seasonality.

With so many retailers writing down huge amounts of stock it’s clear that many are reading the market poorly and are confused about what their customers are looking for. As a result, they are overbuying, and buying in products that don’t match what their customers want to buy.

Yet, there are ways in which these retailers can turn the situation around and build a positive future. Currently, few are using dedicated merchandising software to address their problems – but, these kinds of solutions can help them make the right purchasing decisions, cut the volume of discounted goods and reduce risks associated with stock buying. Without the right merchandising software it is almost impossible for companies to work out whether they are discounting the right products.

Part of the problem is a lack of real understanding about what merchandising is. Less than half of respondents (43%) polled at the show said that to them, it meant making sure ‘they had the right products in place, at the right time for their customers.’ Nearly a quarter (23%) claimed it was about promotional products and 17% associated it with EPOS technology.

It is worrying that so many retailers see merchandising simply as promoting products. If they think that merchandising is all about the products rather than channelling appropriate customers, they will struggle to understand the market, boost margins and drive up profits.

After all, having the right software in place is key to helping retailers better forecast to make the right buying decisions in matching the profile of customers, targeted merchandising around price point and time of year and the need to have a well-defined product range to match the profile of each individual customer – and avoid the ignominy of having to fire fight with 50-70% mid-season sales.

By concentrating on the core principle of merchandising – engaging closely with the customer – retailers can ride out the economic storm, and prosper, because they will be able to sell the right products to the right markets and sell them in a way that appeals to their prospects.

Ultimately too, by using merchandising software effectively to drive their own business success, retailers will be helping both to pull the whole UK retail sector out of its current slump and to drive the success of the broader UK economy.

Christina Grzasko is managing director at Anya Media.

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