Retailers have been laggards in adopting back-office capabilities that could help them move product and make their jobs easier. Specifically, the reliance on Excel and lack of next-generation analytics tools have left the industry working in the dark, with one arm tied behind its proverbial back. As a result, having the information at hand on what to sell, to whom, when, and how is lacking.
A recent RetailWire study, The Beating Heart of Digital Transformation, took the pulse of the industry and determined that the status quo must go! The study, its executive summary, and an expert panel webinar discussion all came to the same conclusion. It is time to step up to new platforms for planning analytics and Business Intelligence (BI) to allow innovative retailers to improve their processes and forecasting.
Here are five signposts, drawing on the RetailWire research/webinar, that will guide you in your digital transformation efforts to focus your time and expertise and succeed in today’s changing retail landscape.
Signpost #1: We are still in the early days of retail planning, analytics, and BI…time to move!
Initial toolsets were aimed at surfacing relevant data rather than providing actionable insights and providing predictive capabilities to help with planning and forecasting. So there have been some applications of BI tools. But now there is room to grow, given that:
- nearly two-thirds, 65%, of retailers believe their use of retail analytics applications is either not sophisticated or still needs developing
- areas that stand to benefit the most from advanced BI tools, such as store operations and merchandising, only had a penetration of about 28%
- sales and CRM stood out for BI adoption rates, with almost 50%of retailers surveyed already using BI in sales
- BI utilization in other business domains – finance, store operations, eCommerce, marketing, IT, HR, and supply chain management – is under 30%.
Signpost #2: The main obstacle to adopting advanced insight and planning tools is Excel (and complacency)
The primary tool used to conduct planning processes across the organization is spreadsheets. Their ubiquity and the ‘we’ve always done it this way’ mindset from retailers make spreadsheets “a primary hurdle to the adoption of advanced planning and analytic tools.”
- Two-thirds of surveyed retailers claimed to be integration proponents but digging deeper revealed that only 10% claim their integration efforts are ‘mature.’
- A minuscule 6.5% of retailers have deployed a dedicated strategic planning solution to drive critical decision-making processes related to “mergers and acquisitions, investments in new facilities, product launches, and supply-chain improvements.“ Two-thirds of retailers admitted to relying on crude spreadsheets for these major initiatives.
- Most retailers, some 70%, were still using spreadsheets as a core tool for FP&A activities.
- Nearly half of surveyed retailers, 45%, standardized their strategic decision-making and financial consolidation with the finance department, while a sizable minority, 35%, used a hybrid, decentralized model.
Signpost #3: Desired outcomes and reality differ, with six key retail functions needing a digital makeover
Legacy, spreadsheet-intensive applications are driving operational planning processes and analytics across six key retail functions. These old-school platforms slow a retailer’s ability to act quickly and agilely. Alarmingly, the levels of which areas still use these more antiquated tools remain high:
- Merchandise financial planning – 77.4%
- Category management – 71%
- Assortment planning – 71%
- Allocations, replenishments, and logistics (i.e. supply chain management) – 64.5%
- Pricing, promotions, and markdowns – 74.2%
- Marketing planning – 74.2%.
When it comes to considering best-of-breed solutions for their planning processes, retailers might be hearing the famous Rolling Stones’ lyrics, “Can’t get no satisfaction,” stuck in their minds. “There is a significant amount of lackluster-to-near dissatisfaction among retailers for using spreadsheets for their retail planning purposes,” according to the RetailWire study. Specific examples include:
- Pricing, promotion, and markdown saw 45% of retailers disappointed with their solutions
- 29% of retailers were satisfied with their solution, leaving the majority dissatisfied
- Overall satisfaction across the six functional areas ranged from 29% – 45%, and ‘highly dissatisfied’ reactions accounted for 16% – 35%.
Signpost #4: All retail functions are earmarked for Digital Transformation 2021/22
So, where do retailers intend on investing hard-earned dollars over the next 12 months to further their digital transformation? Or, to put it another way, which functional areas are next in line for a modern, sophisticated planning and analytics solution? Look at their investment numbers and see if you agree. Where do you want to invest your money?
- Allocation and replenishment: A full half of respondents, at 54.2%, will write cheques for planning, analytics, and BI apps in this area.
- Category management: Boasts a decisive vote of 41.7% for a piece of the corporate budget.
- Assortment planning: Keeping with the ‘full speed ahead on current and future sales,’ 37.5% of dollars are earmarked here.
- Marketing planning: A considerable number at 33% see value in investing in innovative solutions here.
- Pricing, promotions, and markdowns: We also see a pro-sales trend here, with 25% wanting to invest.
- Merchandise financial planning: A healthy 20.8% of retailers are giving investment nods to this function.
- Strategic planning and financial planning: Although important, this function gives way to sales-oriented functions, clocking in with only 8.3% – 12% willing to invest more, at least in 2021.
Signpost #5: Expert opinions show the way to the future
Below are summaries from the gurus of the retail sector. Read on for sage advice and best practice.
Patricia Waldron, Founder, Vision First
- Retailers are changing their perspectives and not just concentrating on the front-end of their digital transformation, affecting the consumer. Now they are looking at the back end, where they will make their most significant investments to affect purchasing and delivery of products to the consumer.
- Merchandise financial planning has been an ignored area. This is the perfect time for retailers to invest in that area because right now, it is important, given the frequency and speed with which one’s industry moves and the need to understand inventory position and match current and anticipated demands.
- Also, factor order delivery and cost so you can determine how to sell at a profit and secure the merchandise.
- I recommend retailers look at advanced analytics and planning tools, especially as new planning tools have new capabilities that help retailers’ model scenarios and connect the organization beyond individual, departmental, or functional silos.
Ricardo Belmar, Retail Transformation Thought Leader, Advisor, & Strategist
- A major benefit of adopting BI, planning, and analytics is that it allows the retailer to embrace distributed workforces and new ways of working, thus fostering more collaboration.
- Spreadsheets cannot accommodate more complex planning and strategic decision-making needs. Instead, you want to take advantage of these more advanced tools that dig deeper into your data, collecting disparate data types that you want to access. These tools are making access to information far more attainable for organizations.
- Enable more people to participate in the decision-making process. This should lead to retailers making better decisions, better planning, forecasting, and better resourcing across each of its functional areas.
- Retailers must understand that they need leadership teams to embrace the notion that silos must not stand since they hinder collaboration. Lead by example.
- Taking the above to a more granular level, look to a designated champion from the executive ranks to lead the collaborative, silo-breaking efforts and get teams to work in the desired manner.
Retailers must embrace digital transformation to survive and prosper in an increasingly complex and stratified market for their wares. Advanced planning and analytics in next-gen software platforms can bring you to the Promised Land.
For more on how to get there, check out my recent blog, Five takeaways from RetailWire’s 2021 Planning & Analytics study.