By Matt Pillar, chief editor
An RSR analyst expresses concern that merchandising emphasis is skewed too heavily toward Generation X.
A Q&A With Matt Pillar & Paula Rosenblum I Managing Partner, Retail Systems Research
One of the latest reports produced by Retail Systems Research (RSR), Merchandising 2017: The Real And The Unreal, points out that Millennials (ages 16-35) have surpassed Baby Boomers (ages 56-65) as the largest portion of the U.S. population (25 percent). Yet, the report also points out the potentially problematic fact that retailers are fixated on catering to a very different, rarely mentioned group: Generation X, (ages 36-55). In fact, the survey of 108 merchants found that 48 percent of them identify Generation X as the one that best represents their core consumer.
We caught up with Paula Rosenblum of RSR for a dialogue on the current state of personalization and merchandise optimization. Here’s what she had to say.
IRT: Why are we still hung up on Millennials? If 54 percent of retail winners identify “better incorporation of customer segmentation and preferences into the planning process” as a top opportunity for improving merchandising, shouldn’t merchandisers focus on that and let the “generational” chips fall where they may?
Rosenblum: We worry that Millennials are entering their top spending years and are not part of this segmentation. The statement above presumes retailers can “milk” more from their existing customers. But since their customers are generally skewed to Gen X, they may not be doing the right things to attract future generations.
IRT: Broad, rather than personalized, assortments prevail. What do you think is contributing to the breadth of assortment issue? Is it the Amazon effect, causing merchants to try to be all things to all people? Or is it a lack of understanding/deployment/execution of segmentation and personalization tools and technologies?
Rosenblum: It’s the Walmart and Amazon effect for sure. But also, we believe retailers are just having a hard time shifting what they do, especially in stores, to meet the next generation of shoppers.
IRT: Your Merchandising 2017: The Real And The Unreal benchmark report predicts healthy spending on assortment optimization and integrated planning, allocation, and replenishment systems. What do you consider the primary opportunities and benefits of these investments?
Rosenblum: Having the right product in the right place at the right time. That sounds trite, but in an omni-channel world, that’s harder than it used to be. And the more frequently a retailer has to fulfill from another location, the more profit leakage there is.
IRT: Who drives merchandising investment decisions? Who should have a seat at the table, and why?
Rosenblum: Merchants should work with IT to determine the best tools for them. Because supply chain and marketing are impacted by merchandising solutions, giving them a seat at the table is a good idea, but more in an advisory than a decision-making role.
IRT: Fashion and apparel merchants seem to have turned the corner on assortment optimization. Those retailers aside, which segment(s) of retail stand(s) to gain the most from optimizing their assortments, and why?
Rosenblum: I can’t think of a segment that wouldn’t benefit from optimizing their assortment to local tastes. Anything that optimizes merchandise investment and speeds upturn without increasing out-of-stock is a good thing.
Paula Rosenblum, managing partner, Retail Systems Research
In their report, Rosenblum and coauthor Steve Rowen advise merchants to make a concerted effort to determine not just what Millennials mean to you, but also what your brand means to them. “The time for earnest discussion about what this ascendant group wants to buy is not only in order, but it’s also time to consider who within the retail organization is making such decisions,” they write. “Millennials are markedly absent from the merchandising table, and their voice needs to be far better reflected in the discussion.”
The analysts also suggest keeping an eye on the five-year horizon. “Retailers are notoriously somewhat slow to change. The problem is, following closely behind these Millennials are Generation Z, those born after the year 2000,” they write. Five years from now, Generation Z will enter the permanent (rather than transient) workforce. For retailers, this reality begs more agility. “While the past decade has dragged the industry into the world of omni-channel, the next decade will bring changes we can barely predict,” say Rosenblum and Rowen. “Early indications are that even as Millennials seem more interested in experiences than things, Generation Z is more into things than experiences.” To read the full Merchandising 2017: The Real And The Unreal report, visit www.rsrresearch.com.