The retail merchandising software market has become increasingly complex over the past decade. Large ERP vendors and retail specialists have blurred the lines between inventory management, merchandising and supply chain management, making the merchandising market appear much more complex than it really is.
In order to help you navigate your software purchase, we've written this buyer’s guide to help you understand the market and know where to begin your research.
Here’s what we’ll cover:
Small and mid-sized retailers can learn a lesson that tier-one retailers have learned the hard way: merchandise planning can and should be a precise science. If not, poor merchandise decisions will usually lead to lost profits. On the most basic level, merchandising software helps retailers plan and execute merchandise operations, including deciding which items to stock, where to stock them, when to promote them and how to price them. It eliminates the guesswork that retailers have been conducting for years, often based on subjective experience and formulas in Excel spreadsheets.
Core features for merchandising systems include pricing engines that help retailers price items based on competitors’ prices, gross profit margins, demand, past sales performance and vendor incentives. Systems also help retailers recognize where given items sell best and under what conditions. Analytical tools help retailers see the impact of their decisions to better plan future merchandising strategies.
Buyers of merchandise management software will essentially have two options: implement a best-of-breed package or a complete retail suite. Best-of-breed buyers will enjoy being able to purchase a merchandising system that exactly matches their needs, while they will face the challenge of integrating it with their existing applications. Integrated suite buyers will like having one, integrated system, while they will face a larger spend and a potentially more complex implementation. The decision will be based largely on retailers’ existing applications, their immediate needs, and their budgets.
Properly implemented merchandise management systems should yield a number of benefits that impact multiple aspects of the enterprise. The most common benefits include the following:
Optimized inventory. Robust analytical tools offer insight into key merchandise decisions, such as: Which items sell the best at which locations? What are the sales rates of items in different seasons? Which inventory mixes and item pairings lead to increased cross-sales? Being able to answer these questions intelligently enables retailers to have the right quantities items on sale at the right time. Cross sales are key sources of profit margin growth as well.
Increased revenue. Due to a better understanding of consumer demand, retailers should be able to maximize revenue by increasing sales of hot-selling items and preventing overstocks of items that move slowly. Integrated item pricing engines help staff price and discount items to leverage buying trends and inventory levels.
Improved efficiency and productivity of staff. Employees in supply chain and merchandising departments should find that formal solutions save them time from performing redundant tasks in Excel and other programs. Having all efforts centralized leads to less wasted time and more effective employees, allowing them them to focus on productive tasks that improve the company.
Improved customer service. Retailers can expect to keep customers happy and keep them returning when they find what they are looking for at the right time. They will also spend less time trying to help find customers out-of-stock or back-ordered items, saving time and reducing buyer frustration.
As with all technology implementations, there are a few potential issues to consider when comparing solutions for retail merchandising. The most common concerns we hear about are related to ease of use and costs. This first risk is a risk common to most enterprise IT implementations. IT purchasers should ensure that the system is not overly complex and should not try to save costs by reducing training. Proper training is essential to merchandise systems and improper training is a large contributor to failed implementations. Like most enterprise systems with robust analytical tools, merchandise systems can be very expensive, but the costs of not having a formal system are very high. Retailers should pay close attention to revenue and profit margin growth after implementing merchandising software to gauge their overall return on investment (ROI). Most enterprise retailers should find that a properly implemented system will lead to a positive ROI.
Various trends impact the retail merchandising solutions market. The primary trends include the following:
The retail merchandising market becomes much less cluttered when buyers approach it with their respective deployment strategies in mind.
|Buyers interested in...||Should evaluate these systems|
|Vendors who offer merchandising only on a best-of-breed basis||JDA|
|Vendors who offer merchandising on a best-of-breed basis AND as part of an integrated suite||SAP, Epicor, Jesta Vision|
|Vendors who offer merchandising only as part of an integrated retail suite||Celerant, Cybex|
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