Modernizing Merchandizing is the need of the hour

The retail industry has seen significant transformation due to COVID-19 and the unbundling of various functions. However, core merchandizing activities have been slow to change. Pioneering retailers are recognizing the potential and value of merchandizing and driving a paradigm shift in this area. Here are the key imperatives for this transformation:

1. Expanding O2O Influence: The merging of online, offline, and logistics, known as "New Retail" or O2O, requires a unified view across channels. Merchandizing needs to adapt to customers' use of social channels and influencers for education, engagement, and new experiences.

2. Unbundling of Core Retail Functions: Traditional category management has combined various critical activities, resulting in monolithic tools and rigid processes. Digital organizations have shown agility in areas like search, pricing, and promotions through dedicated focus and agile tools, unlocking value and enabling data-driven decision-making.

3. Advancing Speed and Specificity in Planning and Execution: Shorter fashion and trend cycles require category managers to sift through large volumes of data and react quickly. Manual work, multiple data sets, and lack of automation lead to inefficiencies. Improving forecasting and planning requires location-specific forecasts and simulation capabilities.

4. The Merchant of the Future: Category managers need to operate as category owners, leading cross-functional teams to build an agile and scalable ecosystem. Retailers must rethink the merchandizing function and align it with customer experience goals.

5. The Category Explosion: Evolving customer needs have led to an explosion of categories and assortment sizes. Retailers should adopt new operating models and flexible approaches that focus on buying solutions rather than individual products.

Key drivers of change in merchandizing:

● Standardized tools, unified approaches, bots for document management, and exception-driven retailing are key enablers

● Automating workflows and implementing algorithmic retailing improve decision-making and provide consumer insights

● Acknowledging the rise of the "category marketer" persona, marketing and category teams should collaborate to understand customer personas and plan assortment accordingly

● Expelling awkwardness in supplier relationships is crucial for building meaningful partnerships and providing seamless experiences to vendors and suppliers

In conclusion, retailers need to prioritize merchandizing transformation. Unbundling the function, adopting automation and algorithmic retailing, and collaborating across teams and with suppliers will lead to increased differentiation and success in the omnichannel retail ecosystem. The time is now to embark on this journey of merchandizing overhaul.

Authors: Sanjeev Athreya, Head of Retail and Consumer Practice for Thoughtworks in India and Anitha Rajagopalan, Retail Industry Principal for Thoughtworks in India