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The Merchant Life - Volume 38
The End of "End to End"
Happy New Year!
Welcome to The Merchant Life where founders, VPs, and C-Suite executives come to seek out valuable merchandising insights.
As with the January edition of any publication, you would expect to find a list of predictions for the upcoming year as you scroll down.
But, we prefer to eschew casting predictions and instead offer up a new way of thinking to set the tone for the year.
You can call this our “non-prediction edition” of the newsletter.
We take a close look at the retail end-to-end process, what it’s all about and how to innovate on it.
Ending “End to End”
First, let’s draw a simple diagram to show the retail end-to-end process.
Within that process, here are typical things that take place:
The season starts at concept; products are then designed, developed, and assorted until they hit the shop floor and are eventually purchased.
There is seasonal overlap - when one season is coming to a close, another one is concurrently kicked off.
Market feedback (from stores, wholesale accounts, and regional sales teams) drips in to inform future assortments.
Once the product is sold to the customer, visibility into the product journey ends.
But, critical issues can be identified:
First, as multiple seasons are in flight at the same time, reacting to shifts in customer behavior is difficult. If a new season starts as the previous one ends, how does important information from the closing season inform the new one?
Next, market feedback is intended to inform future assortments. The trouble is that either timing or format of that feedback is not standardized. Feedback arrives after assortment lock, pushing out deadlines and hampering speed to market.
Finally, important post-sale information is not brought back to the planning process. This is due to the linear nature of the journey. Once the customer has the product in hand, visibility vanishes. Retailers miss out on information including returns data, call center information, and so on.
Why is this important?
Process innovation is the key to preventing issues with excess inventory and returns. Because better processes will lead to customer-centric product innovation.
To make this a reality, the concept of “retail end-to-end” must come to an end.
Loops Over Lines.
Our approach is simple: tie the ends together.
Instead of a line, use a loop.
The intention is to close the loop and feed vital information back into the product creation process.
What if you want to look at multiple seasons happening concurrently with loops?
Say no more…
With multiple seasons, the analogy is that of gears linked together and turning in unison.
In either diagram, the closed loop indicates a flow of post-sale information back to the start of the season. Visibility into the product journey is no longer lost post-sale.
When this is accomplished, hidden value in various post-sale activities becomes unlocked.
Take resale as an example.
The concept of resale is nothing new (see eBay). What’s new is retailers using resale as a strategic tool and the way resale is facilitated.
If the product journey is linear, then resale is a method to extend the lifetime of the product.
Instead, if the journey is a loop, resale becomes insights.
To illustrate: Lululemon black leggings are abundant on resale platforms. But, the ones with pockets are the ones that sell through. The average price point is $60 across platforms. This type of information is then found across different product categories.
This identifies some specifics of what customers look for and at what price point. Such intel, combined with other info, constructs a complete picture of the customer.
We can apply the same thinking to other post-sale activities and moments. They become sources of insight, not occurrences far off in the distance.
If process changes like this are made, who benefits from these changes, and how?
For the organization, the intention is to prevent excess inventory and the volume of returns. Also, reducing markdowns and increasing full-price sales have an impact on profitability. Finally, innovation in a more customer-centric manner has tangible benefits for brand equity.
CFOs will reduce the time they spend on discounting and markdowns, salvaging profitability. This was prevalent in 2022 due to excess inventory.
For chief merchants and merchant leaders, they will have the cash flow to spend on in-season trends and vital repeat orders. This is far more valuable than the alternative of funding markdowns.
Brand Presidents and VPs can focus on delivering innovative products to market. This way, the brand can produce the newness that the customer desires.
Our idea of ending the end-to-end is an example of process innovation.
It might be helpful to introduce a definition of processes as articulated by Ben Horowitz:
“A process is a formal, well-structured communication vehicle.”
By shifting from lines to loops, this is precisely what is being activated.
Consider what we said earlier about market feedback - the timing and format are not standardized, impacting speed to market.
Formalizing that feedback equates to creating a “well-structured communication vehicle.”
Which in turn, helps accelerate speed to market.
Now, that’s working smart.
Investing in smarter work will help retailers raise the bar for performance this year.
First, Coresight’s Retailistic podcast “End of Year Extravaganza” episode with Liza Amlani and our colleagues Andrew Smith, Ron Thurston, April Sabral, and Nick McHenry is live.
Find it wherever you find your favorite podcast, or just click here: https://lnkd.in/gT9adJAk
Second, we are giving you a heads-up that we are set to release a 2022 Merchandising Benchmark Report. This is a project that we worked on in partnership with Retail Systems Research. There are findings that are valuable to both retailers and retail tech companies alike.
The report is ready for imminent release and we will distribute it to you through The Merchant Life in mid-January.
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