Three reports recently released by Boston-based AMR Research address the emerging retail trends of 2005, as well as process and technology decisions that retailers will need to make to support their businesses. Collectively titled Decisions 2005, the reports cover store operations, demand intelligence, retail planning, RFID, retail supply chain, pricing and promotion management. According to Scott Langdoc, AMR’s VP of Research, “Key challenges for the industry include: mega-retailer dominance, the blurring of segments and channels, the effects of increasing online sales on brick-and-mortar retailers, the shifting focus of customer loyalty toward low cost, compliance driven visibility and controls issues, as well as increasing IT costs.”
AMR suggests these top priority decisions:
— Leverage demand data thoroughly. Inject insight from all aspects of customer demand into every retail process flow, to achieve tighter execution, more accurate forecasting, and a reduction in out-of-stocks, resulting in potential 10% sales and 5% margin growth.
— Better manage and optimize pricing. Decide to revamp management of pricing activities to make integrated, streamlined decisions on pricing strategy, price optimization, promotion planning, and price execution.
— Enhance supplier collaboration. Invest in a broader range of collaboration activities that support item and promotion synchronization, joint product development, and supply chain management. Proper product synchronization alone can drive 3% out of overall supply chain costs, or as much as $1M in net profit for every $1B in sales.
— Tailor store product assortments to local preferences. Tailor local market product assortments in order to best meet local consumer demand. Retailers with double-digit sales growth can see up to 10 basis points of incremental margin and 20%-plus inventory reductions when this strategy is adopted.
— Implement science-based allocation and replenishment systems. The software needed for this process is new and has a wide range of pricing, between $500K and $10M. Rigorous planning and management is essential to the success of this strategy.
— Invest in PLM for private label products. Product Lifecycle Management (PLM) can help create a more reliable source of supply, reduce inventory, and improve stock for private label products. Less than 10% of all retailers use PLM today, which is one of the reasons private-label performance lacks expectations.
— Continue to enhance employee utilization and morale. On average, retails turn over nearly 100% of staff per year. Associate attrition can tarnish a brand and impact sales, so retailers need to invest in applications that streamline recruiting, task and workforce management as well as knowledge and learning management.
— Share sales and promotion data with suppliers. Without sales and promotion data, suppliers are unable to deliver the right quantities of the right products at the right store. Retailers need to build a technology platform that facilitates the sharing of this demand information.
— Implement broadband networks. Retailers need to recentralize store applications such as workforce management, inventory and order management, and customer data management and marketing because of lower maintenance costs and more accurate data. Unfortunately, they cannot make such changes without implementing broadband networks at the store level to enhance corporate visibility and control.
The three reports were released at the National Retail Federation’s (NRF) conference in New York in January. For more information, visit www.amrresearch.com or www.nrf.com.