Best Practices for Merchandising Execution

First things first - If you are not following Retailwire, you are missing out a lot!

I was part of an interesting webinar on merchandising execution, hosted by RetailWire. Presented by the CMO of One Door (Boston-based Cloud merchandising software firm), the webinar served as a primer to understand how retailers fare in executing their in-store merchandising practices. Merchandising execution is a critical concept to research on, as it can really serve as a make or break factor in the last mile conversion of a sale. Poor execution would create a disinterested customer who can lose her motivation to buy.

Through this blog, I’d like to share some of the learnings from this discussion, and my point of views.

One Door had evaluated around 250 retailers in the areas of macro-space management, micro-space management, HQ/Store communication, in-store execution and compliance, space analytics within the broader merchandising functional area. Based on these factors, they determined that just 5% of them are at Level 5 (the Best), and around 52% of them are at Level 3 (the average). They then went back to the drawing rooms and found some opportunities for improvement.

Around 80% of the best performing retailers move fast in terms of executing their merchandising directives. They receive at least seven directives every quarter from either their HQ or regional zones. These directives can range from visual presentation, aisle exposure, color placement, advertising images, mannequin placements, accessories, coordinating product placements, and more generally maintaining a list of dos and don’ts. Retailers who are able to execute these directives quickly and effectively are the ones who perform better than most retailers. Remember that this is not specific to apparel retailing segment alone; It is common across segments from chain drug to home improvement.
100% of the best performing retailers localize their assortments. This is a no-brainer when it comes to retail execution. But sadly, this is where 95% of retailers fail. Though it looks like a problem specific to grocery, chain drug and apparel segments, it can be taken to other segments where instead of localization (which doesn’t make sense for say, a Consumer Electronics retailer), retailers should make sure they stock the right merchandise that have great value & less penetration and hence, have the maximum potential for growth.
Across all levels of performers, email is still cited as the primary means of communication between HQ and stores. Though this is leaps better than the previous age where store managers had to sit away from the selling area listening to the HQ, there is still scope for improvement. If we look at the content that gets communicated between HQ and stores, it centers mostly around store briefs, planograms, seasonal updates, localized information etc., The question that needs to be asked is - Is plain text email the right way to communicate these content? Retailers should look at innovative ways such as visual aids, workflow tools etc., to communicate information.
35% of the Retailers do not provide store-specific merchandising guidance and they leave it up to the store associates to interpret the instructions. The merchandising guidance is usually sent to the stores of all clusters and zones. While the guidance may be applicable to certain stores (that have the required fixtures, advertising resources etc.,), there are other stores where this information is not applicable. These stores have to know which information to ignore, and which to adopt. This will obviously delay merchandising compliance in stores. Retailers must look at providing cluster-specific or even store-specific merchandising guidance that will ensure quicker and effective adoption of these guidelines.
While 93% of the retailers have adopted Merchandising accuracy as a KPI, only 36% of them provide financial incentives for the same. Nationwide chains know that a homogenous representation of their stores across regions and zones is critical for their brand identity. Hence, merchandising accuracy is critical for a Retailer. Retailers must look at financial or other types of incentives (emotional, representative) to store associates for ensuring merchandising accuracy.

If we take a step back and look at the big picture, it is all about communication between the HQ and the stores. What do you think? Please leave your thoughts below.

About the Author

Sivakumar Thiyagarajan is a Consultant with the Retail Health and Wellness division. He has been associated with Wipro since 2010, post his MBA. He has worked with major US retailers such as CVS Caremark, Walgreens and Target pharmacy. His interests include writing, documentary filmmaking and travel

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