Retailers Confused about Merchandising and ‘Killing their Margins’ on Discounts

A survey completed by Anya Media revealed that retailers are discounting huge amounts of stock to get rid of excess inventory as a result of overbuying, or purchasing the wrong products. And they are failing to make use of the latest merchandising techniques and software to give them the customer insight they need to avoid these mistakes. 

 

More than half of retailers said they typically discount at least 10-24% of their stock. Just 6% said that they used merchandising software to help make their discounting decision. In fact, 28% said they were currently using ‘old school’ Excel spreadsheets as a merchandising system and more than 40% were using electronic point of sale (EPOS) systems, which Anya media believes demonstrates a fundamental misunderstanding of what merchandising is.

 

These are just some of the findings to be drawn from an On-the-Show-Floor Survey, carried out by the online retail agency, Anya Media on the first day of Retail Business Technology Expo 2012. More than 100 senior staff from a range of retail and leisure sectors including clothing, electrical goods, health and beauty and home and DIY were interviewed for the survey.

 

Anya Media believes that while the results are partly due to the downturn, they also result from bad purchasing decisions and confusion about how merchandising can help identify customer needs and deliver the right products to meet them.

 

The survey also found that 19% of retailers are discounting stock to get rid of excess inventory and 31% for reasons of seasonality.

 

“It is worrying that so many retailers are writing down huge amounts of stock,” says Anya Media’s managing director, Christina Grzasko. “Many companies are reading the market poorly and are confused about what their customers are looking for. As a result, they are overbuying, and buying in products that don’t match what their customers actually want to buy.”

 

“Very few are using dedicated merchandising software to address this problem,” she continues. “Yet, these kinds of solutions can help them make the right purchasing decisions, cut the volume of discounted goods and reduce the risk associated with stock buying. Without the right merchandising software it is almost impossible for companies to work out whether they are discounting the right products.”

 

The survey revealed widespread confusion about what merchandising is. Less than half of respondents (43%) said that to them it meant ensuring ‘they had the right products in place at the right time for their customers.’ Nearly a quarter (23%) claimed it was about promotional products and 17% associated it with electronic point of sale technology.

According to Grzasko, “It is worrying that so many retailers equate merchandising with promotional products. If they think that merchandising is all about the products themselves rather than selling the right products to the right customers, they will struggle to understand the market, boost their margins and drive up their profits.”

 

In addition, the survey revealed that some retailers still take the old ‘be your own customer’ saying a little too seriously. 16% said that personal choice helped them decide which products to sell, whilst well under half, 36%, claimed their decision was based on the product matching the profile of their customers and prospects.  And once again, the proportion of respondents using merchandising software to guide their decision was low – at just 8%.

 

Anya believes the right software is key in helping retailers make the right decisions in matching the profile of customers, targeted merchandising around price point and time of year and the need to have a well-defined product range that matches the profile of each individual customer.

 

In addition, the survey revealed that a much greater proportion of respondents (22%) saw inventory management as a key business priority than merchandising (just 16%). Just 17% saw increased consumer intelligence as a critical priority to their business.

 

Grzasko believes, “This demonstrates a level of failure to grasp that retail is fundamentally about what the customer wants. A lack of understanding of this basic retail “truth” will inevitably lead to disappointed customers, excess stock and even more discounting.”

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