The Make-or-Break Role of Technology This Holiday Season

The holiday shopping season is fast approaching, and tensions will be high among retailers given the cutthroat nature of this shopping period in particular.  Nine or more months ago, decisions will have been made on the trends to follow, lines to stock, margins and price points, and now those decisions will be tested in the most intense operating quarter of the retail year.

In reality, most retailers have already made or broken the results of this period; they just don’t know how the dice will land.  Those decisions made many months ago will have been informed by intense market analysis, negotiations with suppliers and what they believe to be a clear understanding of customer desires, price sensitivity and their own goals.  Technology will have played a key role in this, analyzing customer behavior, category and general business performance in comparative periods.

However, when it comes to opening the doors on Q4, the role of technology to better influence operational and financial performance over this critical shopping season is less well understood.  The fact is, applying the appropriate technology can save a season, lessen the chances of holding large amounts of stock, and bolster sales and margin performance.

Supporting this is the requirement for data that accurately reflects the business, and is available in as near to real-time as possible.  Realizing that means having “clean” data that is connected across a retailer’s different IT systems, from marketing to finance, sales and warehousing.  It should be possible to see the performance of the business at a high level, but also to drill down into the data to analyze the behavior of customers and the journeys they take online and in-store more granularly.

Customer insight applications, personalized marketing, category management and pricing optimization are all technologies that are critical to effectively managing this critical operational period – and throughout the entire year.  They not only enable retailers to analyze what is happening in the business at any given moment, but they also provide the ability to proactively influence the outcome of a season.  They help retailers understand the different triggers in the business that can be tweaked to affect change, both operational and with regards to customer behavior.

What might these triggers look like?  Some can be focused on the operational needs of the business:  Are we going to miss sell-through targets for seasonal lines? Is there a high demand line that we are not going to have enough stock of?  Do we need to start Return to Vendor negotiations for certain SKUs?  Other triggers relate to external data points; e.g., how is the wider market performing, and what promotional activity is taking place that may impact us?  And finally, how is the customer reacting to the promotional activities we are putting in place?

The challenge for every retailer is how easy is that data to get to, and how much effort does it take for it to be manipulated in a way that allows them to undertake predictive forecasting and model decisions before taking them?  If it takes a week to assemble a dashboard, it is too long.  Debatably, each day lost to preparing analysis is a lost opportunity to improve the performance of the business.

If a retailer is not already proactively leveraging technology to affect the outcome of this shopping season, then the outcome is already decided, for better or for worse — it’s out of their control.  Important to keep in mind, though, is that no technology is a silver bullet.  It requires hard work to get the best from the technology being used, with the right people, processes and corporate culture in place.  It’s critical for retailers to start thinking about how they can have better control of their 2019 seasons now through technology.  If this doesn’t happen, businesses may face another year of being a voyeur to their success or demise, rather than helping to drive positive results from this critical time period – and beyond.

Channie Mize, Partner and Head of Global B2C Industries at Periscope® By McKinsey

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