The New Skill Set of Today’s Chief Merchandising Officer
When retail consisted mainly of brick and mortar stores, the role of the chief merchandising officer (CMO) focused almost exclusively on selecting merchandise, designing display strategies and planograms and driving category performance. This role was typically held by people who rose into the role as buyers. That’s because buyers first and foremost excel at spotting the next hottest trend while also having a keen eye on the dollars and cents side of the business.
CMOs traditionally also oversee the process of seasonal merchandise planning and product introductions. If their timing is off, the retailer ends up with markdowns, which impacts margins and profits.
While all these qualities are still expected of today’s CMOs, the digital retail landscape has presented new challenges to making sure retailers are delighting customers at every turn. To keep pace with the demands of digital retail, CMOs must now master the supply chain and operate across the omnichannel platforms of today.
Rather than the trend spotters of the past, today’s CMOs are far more likely to also be number crunchers who understand algorithms, are adept at analyzing data, and know when and where to stock merchandise in order to maximize sales and minimize markdowns.
Take Michelle Gass, Kohl’s new data-savvy CMO. She was previously the company’s head of marketing, where she took a keen interest in using data to drive the company toward more emotional messaging. And Target’s new CMO, Mark Tritton, hired earlier this year from Nordstrom, credits both logic and intuition with his ability to generate results, including reduced lead time, increased sales and better profit margins.
New CMO Skillset
Responding to the demands of the digital retail revolution requires a significant shift in the skill set of today’s CMO — a shift that departs from focusing on in-store merchandising and instead on orchestrating digital engagement with in-store value.
Here are three critical ways the CMO mindset is shifting to keep pace with the today’s consumer-driven, digital world:
1. From product insights to consumer insights
While retailers have always relied on analytics, the focus of the data in today’s digital retail world has shifted from “product-in-the-store” to “consumer-in-the-world.” Now, rather just gathering, analyzing and strategizing to determine what to buy and where to put it, today’s CMOs are more focused on consumers and their wants, needs and tastes. Add to that their browsing patterns, purchase and return histories, demographics and social media use.
And with Forrester Research reporting that 80% of shoppers begin their shopping online (even if they end up making their purchases in stores), it’s no surprise that consumer analytics are driving so many of the decisions today’s CMOs are ultimately responsible for.
2. From narrow channel to expansive platform
Burberry, the venerable British fashion brand, currently reports that approximately 70% of its business is retail and 30% is manufacturing. Five years ago, those numbers were reversed. What changed? Burberry used analytics to build a profile of the quintessential millennial shopper and became laser focused on serving that shopper with what it called its shoppers’ “platform.”
Burberry began with its website, offering up the products it believed — and data showed—millennials would buy. Then, based on online sales, they launched a major reimagining of its retail stores. This new model — shifting from narrow channel to expansive platform —takes into account the shopper’s entire universe, which has grown exponentially in recent years.
That’s one reason why it’s so important for CMOs today to know both merchandising and technology. It’s the best way to give consumers choice, not only in where and when they shop, but also in how fast their purchases are delivered. That means shifting from advanced planning to real-time action based on real-time data. It also means using online sales to inform store offerings, not the other way around.
3. From driving business to delivering real-time results
CMOs have always been tasked with driving business, but traditionally that responsibility was met solely through merchandising. In today’s digital retail world, it is now met through a combination of merchandising, digital engagement and ecommerce. With this comes increased pressure to respond in real-time, transforming CMOs from thoughtful planners to on-the-spot decision-makers.
For an example of just how many quick business decisions and priorities are determined by CMOs, you need look no further than “fast fashion.” At Spanish retailer Zara, fast fashion dramatically shortens how quickly new styles go from fashion runway to Main Street. It also causes new styles and trends to become obsolete in a matter of weeks, leaving a retailer scrambling to keep up.
Unlike many apparel retailers, Zara controls nearly all the steps in its supply chain, which is why the company can outfit its stores with new clothing and accessories in just a week or two while it takes the rest of the industry about six months.
Zara does this by putting its new offerings online and using real-time data sales data. When a design doesn’t sell, it’s dropped. When it does sell, Zara designers immediately extend the line and Zara manufacturers immediately produce and ship it to stores.
Success in the chief merchandising role today requires evolving from a product-first to consumer-first mentality and constant consideration of the various shopping platforms consumers have to choose from.
CMOs who succeed in making these shifts will adapt and compete in digital retailing and deliver the bottom-line results their C-suite peers expect.
Peter Zaballos is senior VP and chief marketing officer at SPS Commerce, which perfects the power of trading partner relationships with a retail cloud services platform. Follow Peter on Twitter at @peterzaballos.
S.O.S.: The Mobile App as a Lifeline for Brick-and-Mortar Retailers
Consumers gravitate towards convenience for the things that they have to do anyway. They want to get to their intended action with the least amount of unnecessary effort. They’ll even change their behavior to do so. Think of mobile deposits: many consumers have made the switch to using their bank’s mobile app to deposit checks, finding it far more convenient than driving to their local branch or ATM.
Tack additional value onto that convenience and consumers change their behavior and adopt new technology solutions that much faster. Uber is a case in-point: Consumers have embraced the ride service because it makes their life easier, enabling them to get from door-to-door cost effectively, without the hassle of dealing with cash, credit cards or receipts. Payment just happens in the background, and receipts are delivered digitally. While neither check-cashing nor hailing a ride are anything new, banks and ride-sharing providers have managed to change consumer behavior in a short period of time and disrupt industries by altering the way consumers’ access their essential services.
Amazon has similarly disrupted the retail space by bringing a streamlined, personalized shopping experience to consumers’ fingertips. Using the Amazon app, Shoppers not only purchase products with one-click from Amazon at a competitive price, but are able to make an informed decision before buying by looking at reviews, product information, relevant product suggestions and customized price discounts. The rise of Amazon has led to the erosion of brick-and-mortar retailers’ revenues and customer-base, a situation that won’t improve until physical retailers offer similar convenience and value.
Many physical retailers are looking to e-commerce for a boost in business and profits. Macy’s announced it will close 100 stores to increase its focus on Internet retail, while Walmart paid $3 billion for Jet.com recently and has scaled back physical store openings. Such initiatives are important and needed, but – the fact is – close to 90% of commerce still happens at physical stores, and retailers cannot afford to ignore their offline business.
Redefining Physical Retail
Physical retail looks a whole lot different than it did ten, or even five years ago. The ubiquity of smartphones has changed shopper behavior, and 90% of consumers now use their smartphone when shopping in-store.
This has led to an alarming trend for retailers – the rise in “showrooming,” wherein the consumer buys from Amazon while standing in a retailer’s physical store. Since Typically, shoppers use the app to scan a product UPC code, which automatically takes them to a product-specific page within the Amazon app to review and buy the item with a single click. A recent survey revealed 10% of purchases made by 831 Amazon shoppers were completed using the Amazon app inside a brick-and-mortar store. This is a major problem for physical retailers, whose conversion rates already sit typically at 2-to-4 out of every 10 shoppers who visit retail locations.
Driving the Mobile App Experience
The above statistics will only get worse if retailers don’t deliver their own -branded app that provides better utility to their shoppers than Amazon. Using this retailer app, a repeat customer should enjoy a personalized and contextual shopping experience, where he receives the most relevant information, offers, and recommendations based on the type of products he is looking for, what type of environments he currently is in, personal preferences and his past buying experience with the retailer.
The shopper should not be fumbling with paper clips, text messages, or emails at the time of purchases to track down the offers he received from a retailer, nor be forced to go to an online site to redeem loyalty points. All of this should happen digitally as part of the retailer mobile app pay experience at the time of checkout, resulting in more business and long-term loyalty for retailers from their customers.
Starbucks offers a great example of a retailer mobile app that is an extremely effective customer relationship tool, especially for repeat customers. The Starbucks app enables customers to not only pay with the app and earn loyalty points for free coffee using Starbucks’ store card, they can pre-order from the app to avoid standing in long lines. By providing convenience and value, Starbucks has lowered payment-processing fees through increased usage of its store card, reduced operational costs due to shorter wait times, and garnered more loyal customers through the delivery of a great experience.
A good retailer mobile app enables merchants to learn the profile and behavior of repeat customers, giving retailers the ability to serve those customers more effectively: The retailer’s app can make the shopper’s trip to a physical store more fun and engaging, with a personalized shopping experience, and the gratification of instant savings through easy redemption of loyalty points, rewards and offers at the time of checkout. By purposefully building an ongoing relationship with customers, retailers drive more frequent visits to stores, increased sales per visit, and improved participation in their loyalty, rewards and offer programs.
Not to mention, retailers improve their bottom line by using their mobile app to drive usage of their preferred payment option, especially by their repeat customers. By steering shoppers toward private label or co-branded payment options, brick-and-mortar retailers reduce transaction fees and drive higher credit card revenue-share from their credit card partner.
Level the Playing Field
For retailers to grow their in-store business, they need to cause disruption by delivering convenience and stronger multiple values via their branded mobile app. They need to be highly attuned to their customer needs and wants, and serve them accordingly – helping shoppers see how the retailer’s price compares to others, providing price-matching, revealing what other buyers have said about a product, showing which colors and sizes are available, and recommending which complementary products they might be interested in. At checkout, retailers need to deliver the “Uber” payment experience integrated with seamless redemption of loyalty, rewards and offers.
To retain loyalty, retailers cannot let their consumer experience be driven and dominated by third party apps. Retailers need to recognize that their branded app is one of their most important strategic and dynamic tools to cause disruption in their own retail business, not only for physical stores but also for online, in-app and other channels.
By delivering consumers compelling utilities in retail-branded mobile apps, merchants are able to control the shopping experience and know their customer behaviors and preferences deeply enough to serve shoppers better and drive sales growth and profitability – ultimately making their mobile app a major savior in competing against a retail industry disruptor, like Amazon.
Mohammad Khan is co-founder and president of OmnyPay, a secure, “retailer pay” white label digital commerce platform that encourages consumers to use their mobile phone for all aspects of their buying journey.
WEBINAR: How to improve—and sustain—store associate performance
Chain Store Age will sponsor a webinar on one of the most important issues facing store retailers: How to give frontline store associates the critical knowledge they need to drive sales and customer satisfaction.
Scheduled for Tuesday, November 15, 2 p.m. – 3p.m. (EST), the presentation will also reveal how best-of-breed retailers are using “associate-first” learning to transform their bottom line. Learn how improving store associate knowledge can dramatically impact such metrics such as dollars per transaction, conversions, onboarding time, shrinkage, safety incidents, customer satisfaction and loyalty.
The webinar, presented by Axonify and At Home, will also highlight the technologies and emerging analytics being used by progressive retailers to enhance associate performance.
Click here to register for the Webinar.