By David Kudas and Russell Parker, JDA Software
Historically, retailing has been driven by financial seasons (spring/summer and fall/winter) that were usually six-month time-frames. Retailers often constrained their purchasing and assortment decisions around these financially appropriate but customer-agnostic calendars. Customers don’t follow fiscally based seasonality – they shop based on their preferences and fast-changing trends. And in the new consumer-connected retail environment — driven by “always on” shoppers who often make buying decisions based on instant information gathered from multiple sources — first to the floor generates sales through the door.
As such, today’s retailers are beginning to think in terms of consumer-centric seasons and are transitioning their store floors during the year to entice and engage their customers. These new retail “seasons” can last anywhere from four to 13 weeks based on the optimal number of new product introductions, and they can also cross fiscal months and quarters. The key to success is to keep store assortments fresh at the pace that customers’ desire new looks and trends.
Consumer-centric seasons are defined by product lifecycles, from their debut and marketing to promotion and sell through. With an average lifecycle of perhaps six to 10 weeks, products are then replaced by the next season’s product grouping – either in entirety or simply by adding a splash of newness to revitalize the offering. Retailers must consider timing and quantity when determining product refresh details – but as always, the consumer is the barometer and gauge of the “season of opportunity.” For instance, fashion items usually have a lifecycle of from eight to 13 weeks based on time of year and color, pattern and style trends. Seasonal basic items cycle at 26 weeks, while continuity items are available all year. By segmenting product timing, retailers can create continual interest for their customers, ensuring increased store visits through the year. A real-world example is the transformation of Macy’s from a traditional four-season retailer to a reinvigorated lifecycle planning organization that generates change and constant product turnover.
Multiple seasons enable retailers to turn items over faster in hopes of enticing shoppers to return and purchase more often. This strategy requires that merchandise planning is in sync with what’s selling, which is achieved primarily through the assortment planning function. Keeping these two processes in lock step ensures that the strategic and tactical portions of driving the business are aligned.
Capitalizing on localized assortments and maximizing sales and revenue in the area that has the greatest customer propensity to purchase requires store groupings. These store groupings can be based on merchandise department volume and space and/or on geographic and psychographic customer shopping behavior patterns. And in general, with each season having a life of its own, retailers must plan accordingly. A customer-based strategic planning approach has four basic components:
- Determining the number and start/end dates of seasons, through selling-pattern analytics and market trends
- Building customized assortments to reflect the season and localized opportunities
- Reconciling the seasonal plan with the overall financial plan to ensure consistency and flow of product
- Understanding the dedicated product lifecycle in the context of the individual season:
o When to receive it and allocate it
o When to fill into sales
o What desired inventory and sell-through is to make each season profitable
o When and to what degree to mark it down
o When to transition to the next season
Planning requires a dedicated business process of assorting, buying and liquidating for that individual season to optimize both customer experience and profitability. A retailer must reconcile the amount of product it anticipates selling, the expected margin, and the marketing, promotion and inventory velocity with its financial plan in order to be profitable.
Of particular importance is building customized assortments for not only seasonal opportunities, but also for localization. For instance, back-to-school times and needs are different across various geographic regions. While heavy sweaters won’t be big sellers in Texas in August, they may need to be in Minnesota stores. Swimsuits will sell in Florida year-round but not in Maine. By strengthening and refining the assortment planning process to reflect seasonal and localized customer requirements, retailers can realize tangible benefits including increased capital and inventory productivity, improved quality of service, reduced operating costs, revenue growth, and faster process cycle times.
Successful retailers are embracing consumer-centric assortments with timely transitions that are not managed or gauged by a fiscal calendar. They have recognized the necessity of a consumer-centric culture in which their employees understand that there are numerous lifecycles, not just fiscal cycles. They also understand the need to engage customers in more personal ways and give them a reason to come into their stores more than two or three times a year. In leveraging consumer-centric seasons, retailers can delight their customers while optimize sales, inventory investment and profitability.
David Kudas and Russell Parker are directors, strategic services, at JDA Software.