Retailers need to collaborate with manufacturers to anticipate demand for products featured in consumer magazines and on social networks, argues Wayne Usie, senior vice president of retail, JDA Software
Retailers are entering uncharted territory with consumers – the economy is showing signs of growth while at the same time consumers are demonstrating a reluctance to return to their pre-recession buying habits. Compounding this is the fact consumers are more frequently turning to their mobile devices in stores for quick access to product and pricing information that will help with their buying decisions. That’s why it is imperative for retailers to transform their collaborative relationships with manufacturers, and a great place to start is at the shelf.
Even though retail online sales are growing, in-store sales continue to make up the majority of a retailer’s business, making shelf awareness of critical importance.
In addition to the product and pricing information available from manufacturers and other sources such as magazines and consumer groups, consumers themselves have emerged as key influencers. The continued growth of social networks and their ability to positively or negatively impact buying behaviour requires extreme responsiveness on the part of retailers and their manufacturing partners.
Increasing shelf-level collaboration allows both parties to more quickly maximise financial opportunity or minimise damage driven by the real-time information sharing among consumers. This information sharing occurs in a number of ways, including online product reviews, word-of-mouth discussions and viral campaigns enabled through networking sites such as Facebook, Twitter, YouTube and others.
Furthermore, the increased pace of new product introductions requires visibility into demand signals and a greater knowledge of what is happening at the store level to enable more efficient promotions. It also allows for better on-shelf product availability and assortment offerings tuned to buyer preferences so that manufacturers can get the right amount of the right product to the right location at the right time.
Retailers have traditionally worked closely with manufacturers on broad business issues and to tackle specific distribution problems. Now, emerging retail trends and best practices indicate that many are ready to embrace the concept of the shelf-connected supply chain to build a more focused, effective relationship. Consider:
- Retailers are moving away from the traditional ‘one size fits all’ shelf approach to building regional or cluster-level planograms and instead are embracing local and store-level planograms. By collaborating with manufacturers to develop store-specific assortments and planograms, retailers are better positioned to drive top-line sales and margin growth
- As retailers transition from historical, volume-based promotional planning to forecast, profit-based promotional planning, there is opportunity for collaboration with manufacturing partners to gain joint margin improvements
- Traditional merchandising and selling models are being abandoned by retailers who are adopting vertically integrated operations, creating an ideal environment for jointly managing inventories that are directly aligned and planned from the shelf back
- Retailers are replacing their store and distribution centre replenishment processes and solutions — which are typically disconnected and next-order focused — with multi-echelon, time-phased supply chain planning solutions that optimise product flow through to the shelf. Thus, collaborative and cross-enterprise planning by retailers and manufacturers can reduce overall supply chain and logistics costs and can help deliver margin gains to both parties
- Point-of-sale data, traditionally used for historical data mining and analysis, is now being used by retailers with time-phased planning to drive predictive root-cause analytics. Sharing this next level of information with manufacturers helps retailers increase sales, minimise stock-outs and increase promotional effectiveness
A shelf-connected supply chain focuses on shelf-level data to drive product availability and joint marketing programs. It utilises customised assortments based on customer demographics, store types, events and points in time, and leverages a wider variety of supply chain fulfillment models, enabling a faster and more effective supply chain response. A closer and more collaborative shelf-level relationship between retailers and manufacturers can improve performance, helping to ensure the right products are produced and delivered to the right place at the right price and time.
By connecting with manufacturers at the shelf, retailers can optimise their product mix, decreasing the need for markdowns and price protections. With better collaboration retailers can move beyond sense and respond strategies that minimise loss, to predictive strategies that empower retailers and manufacturers to maximise profits, grow market share and increase customer satisfaction. Enabling a shelf-connected supply chain allows retailers to get even closer to consumers by focusing on the demand signals generated at the shelf.