Can You Anticipate the Future of Selling?
The future of selling requires retailers and brands to anticipate customer and channel demand shifts. The problem is companies admit they're not quite ready. According to a recent Forrester study of footwear and apparel brands and retailers, fewer than one-third of brands believe they're fully prepared to act on demand shifts in their market, and less than 10 percent can anticipate those shifts today. These shortcomings result in many scrambling to respond to customers last minute, or worse, losing customers and wasting their inventory.
Retailers and brands are fully aware of the dramatic market changes. Still, they face significant barriers, including restrictive processes, antiquated technology, lack of appropriate skills, ineffectual performance measurement, and an unaligned organizational structure. Of those previously mentioned areas, 75 percent of companies say their tools and technology cannot predict, identify and act on their business environment changes. Even more brands cite issues in their skills and organizational structure.
When examining retailers and brands' anticipatory capabilities, a bleaker picture emerges. Just 9 percent anticipate adjustments for their pricing markdowns and promotions. Five percent anticipate changes for inventory rebuys by adjusting allocations to fulfillment centers, and only 4 percent anticipate shifts for local and channel assortments. As shoppers move more towards omnichannel, the inability to sense and act on customer demand will increasingly impact business results.
Performance suffers when companies fail to incorporate responsive planning and modify their markdown, promotion, allocation, fulfillment and assortment to shifts in consumer demand. Retailers and brands were most likely to state that failing to anticipate demand shifts would negatively impact customer lifetime value, inventory efficiency, promotional effectiveness, and key item availability. Additionally, most companies recognize the damage of disappointing a customer. More than two-thirds worry that they will lose the customer for a few months, if not permanently, from a single incident of not fulfilling an order of a key item. However, the damage of that disappointed customer goes beyond those lost sales. It includes the cost to the brand equity and the reacquisition costs to get that customer back. Additionally, brands must consider how many times they can disappoint a customer before they're lost permanently.
While retailers and brands realize the positive impact of anticipating customer shifts on their business, with more than 75 percent agreeing that it improves margin, they face numerous challenges in their adoption. Brands most frequently list pandemic-related issues followed by limitations in their data and technology to meet their needs in a timely factor. Despite these challenges, companies aren't waiting to embrace new capabilities related to managing pricing, promotions, markdowns, fulfillment or assortments. For instance, 48 percent and 33 percent have adopted promotional planning and customer segmented assortment planning, respectively. In less than two years, nearly all respondents expect to have those. This same pattern holds true for all capabilities listed in the study.
Footwear and apparel retailers and brands face a generational shift in their businesses. Reacting to customer needs isn't sufficient to retain and compete for customers' attention, spend and loyalty. As customer delivery options proliferate, online business increases, and uncertainty reigns, brands must sense and act to changing demand patterns within their pricing, promotion, markdown, fulfillment and assortment. Aware of the challenge ahead of them, brands are planning to invest, but doing so requires technology upgrades, in particular artificial intelligence and machine learning capabilities, along with process updates, skills training and organizational adjustments. Yet the payoff is there. Anticipating customer demand shifts drives near-term revenue, margin and efficiency gains, while setting companies up for the ever-changing future.
Yogesh Kulkarni is the chief operations officer of the merchandising and marketing business unit at antuit.ai. His core expertise is designing, developing and implementing price optimization, promotion and revenue management solutions for retail and consumer products companies. He can be reached at email@example.com.
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