The US-based research firm AMR Research has published three reports covering anticipated retail trends and decisions that will need to be made in 2005, addressing both process and technology decisions involving store operations, demand intelligence, retail planning, RFID technology, the retail supply chain, pricing, and promotion management.
According to Scott Langdoc, vice president of research, the company's studies revealed that the current business environment is creating particular challenges as retailers try to balance priorities that are competing for their attention.
Some of the main challenges for the industry include mega-retailer dominance, the blurring of segments and channels, the effects of increasing online sales on bricks-and-mortar retailers, the shifting focus of customer loyalty toward low-cost, compliance-driven visibility and controls issues, as well as increasing IT costs.
The first report 'Retail Decisions for 2005: Investing in Processes' suggests that retailers will need to:
- Leverage demand data thoroughly
The top priority for retailers in 2005 is to inject insight from all aspects of customer demand into every retail process flow to achieve tighter execution, more accurate forecasting, and a reduction in out-of-stocks - resulting in potential 10% sales and 5% margin growth.
- Better manage and optimise pricing
In 2005, retailers will need to make a decision on revamping how they manage their pricing activities to make integrated, streamlined decisions on pricing strategy, price optimisation, promotion planning, and price execution.
- Enhance supplier collaboration
In 2005 retailers will also need to improve supplier collaboration by investing in a broader range of collaboration activities that support item and promotion synchronisation, joint product development, and supply chain management. Proper product synchronisation alone can drive 3% out of overall supply chain costs (as much as US$1 million in net profit for every US$1 billion in sales).
The second report, 'Retail Technology Decisions for 2005: Time for Tools' says that retailers will also need to:
- Tailor store product assortments to local preferences
A key priority for retailers in 2005 is to tailor local market product assortments in order to best meet local consumer demand. This allows retailers with double-digit sales growth to see up to 10 basis points of incremental margin and 20%-plus inventory reductions when this strategy is adopted.
- Implement science-based allocation and replenishment systems
The software needed for this process is new and has a wide range of pricing, between US$500,000 and US$10 million. Rigorous planning and management is essential to the success of this strategy.
- Invest in PLM for private label products
Product Lifecycle Management (PLM) can help create a more reliable source of supply, reduce inventory, and improve stock for private label products. Less than 10% of all retailers currently use PLM today, which is one of the reasons private-label performance often does not meet expectations.
The third report, 'Next-Generation Store Operations Decisions for 2005: Focus on Employees, Data, and Broadband', says that retailers must also:
- Continue to enhance employee utilisation and morale
On average, retailers turn over nearly 100% of staff each year. Associate attrition can tarnish a brand and impact sales, so retailers need to invest in applications that streamline recruiting, task and workforce management, and knowledge and learning management.
- Share sales and promotion data with suppliers
Without sales and promotion data, suppliers will be unable to deliver the right quantity of the right product to the right store at the right time. Retailers need to build a technology platform that facilitates the sharing of this demand information.
- Implement broadband networks
Retailers need to recentralise store applications - such as workforce management, inventory and order management, and customer data management and marketing - because of lower maintenance costs and more accurate data. Unfortunately, they are unlikely to be able to make such changes without implementing broadband networks at the store level to enhance corporate visibility and control.
The reports can be obtained from AMR Research, which exists to provide research and advice for executives tasked with delivering enhanced business process performance and cost savings with the aid of technology.