Driving Consumer-Centric Assortments

4/6/2010
Traditional assortment planning begins with budgets, intuition and some financial analysis, but rarely includes consumer preference data. However, research completed by AMR Research in late 2009 identified several key indicators that demonstrate a shift in focus from linear, product-centric assortment management to approaches based on consumer demand. Merchants recognize the need for improved tools to aid in the discovery of consumer preferences and execution of assortments in each store. On a regular basis, retailers strive to identify consumer buying preferences through innovative technologies and increased transparency with a goal of increasing consumer relevance

What's Wrong with This Picture?

Starting with the consumer seems to make perfect sense, right? The challenge in embracing this approach rests with the software applications available in the market today. Many use a linear, top-down financial and product-focused methodology to manage and plan assortments. However, an emerging minority recognizes the opportunities of delivering consumer-centric assortments.

Our research shows that 75% of 150 surveyed retailers believe the most important benefit of improving assortment management is increased profitability. Further, 62% of reporting retailers will replace or supplement their existing applications within the next 24 to 36 months. In the shorter 12 to 24 month timeframe just over 35% will be making purchases. Why has this application space heated up dramatically?

The reason is clear: retailers recognize they must do a better job of delivering assortments customers want to buy. Additionally, it is not enough to get the assortment right. Retailers also must deliver the right size and available quantities to meet the specific needs for the consumers in every store.

Evaluating vendors in this category of software is a complex journey. With over 25 vendors in this space, retailers have depth and breadth to consider. AMR specifically recommends taking the following steps:

  •   Build and review three evaluation categories: feature/function, market penetration, and consumer-centricity.
  •   Obtain a deep understanding of the vendor's intended future state through a detailed roadmap discussion.
  •   Understand the vendor's definition of optimization "these differ from one provider to the next.
  •   Assess the application's usability and adoptability. How quickly will your average merchants and planners adopt the software?
  •   Explore the level of effort required to integrate the products offered by the vendor.
  •   Check references. Take the extra effort to visit with customers of vendors you are considering. Make site visits. Talk with actual users of the system and find out about their experience and satisfaction levels with the software.

The research revealed a strong retailer appetite to improve or replace existing merchandise assortment management tools.  

Finally, the analysis showed an increasing number of software companies offering consumer demand insights and decision optimization. These key enabling capabilities are central to delivering a consumer-centric assortment. We believe winning retailers in this decade will be those that harness consumer insights to make better decisions throughout the merchandising process. 


Kevin Sterneckert is a Research Director with AMR Research. To view the full report including a detailed vendor evaluation scorecard, contact Kevin at [email protected]

 

 

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