E-commerce and other manifestations of digital technology have flooded retailers with customer data, but only a small number have taken the time to utilize it for purposes other than basic marketing.
A study on “Disrupting the Downturn — Avoiding the Lost Sale Through the Science of Merchandising” by HRC Advisory, the consulting arm of Hilco Global, found a sample of 35 retailers across a variety of sectors inundated with information about their customers but only a handful — 3.2 percent of those responding — using the data in a structured manner to assist in their buying and planning.
They recognize the need to do so. About seven in eight — 87.2 percent — identified the collection and application of data for merchandising purposes would be a priority for them and a significant opportunity to build sales. However, a smaller number, 65.4 percent, are even in the “very early stages” of efforts to better organize the information to support selling across their various sales channels or brands.
“We found that the 3.2 percent using the data for purposes other than marketing qualified as what we would call ‘sophisticated retailers,’” said Farla Efros, executive vice president and chief operating officer of HRC Advisory. “Lots of retailers — it didn’t seem to matter whether they were in apparel or automotive — are going through the trouble to collect the data and they know they have a lot of it and they know it’s stored on some server somewhere, but they’re not sure how clean it all is and they’re not sure how to use it.”
Traditional structures within the retail domain are among the impediments to better sharing of information. “For 88.2 percent of the retailers responding, e-commerce and marketing remain separate silos, and as a result, require significant manual effort to provide the customer with a seamless experience,” the report noted.
Krista Spano, HRC Advisory’s vice president of merchandising and strategy, said, “The process required to get an item ready for sale online and in stores demands a much higher degree of planning and coordination across several areas of the organization in order to make sure all the necessary components related to the item — content, images, inventory location and pricing — are in place….”
HRC points to organizational inflexibility as one trait handicapping efforts to integrate the various silos along with the buying experience, and Efros feels that the growing clamor for a more seamless experience will force change on retailers who might be resistant to it otherwise, as they battle to hold on to market share in a fiercely competitive retail environment that’s more promotional than ever.
“This is the hypodermic needle,” she said of efforts to integrate retail organizations at the same time as shopping experiences. “If you can differentiate the customer experience, you stand a much better chance of avoiding the last resort of price promotion.”
Retailers including Gap Inc. and Macy’s have had good initial results from expanding fulfillment options. Among respondents, 84.5 percent are focusing on enabling new fulfillment options, which have been shown to positively affect conversion and average order value as well as protect sales among existing customers. Among those exploring possibilities for fulfillment, 97 percent are looking into “return to store,” 95 percent into “return to distribution center” and lower numbers — 44 and 33 percent, respectively — for “reserve/buy and pick up in store” and “fulfill from store.”
Right now, according to the study, only about 10 percent of retailers are capable of fulfilling orders from a store and fewer than 15 percent have started to make the changes necessary to reflect the impact of new fulfillment capabilities.