Omni-Channel Merchandising Shares Spotlight With Marketing and IT

RIS THOUGHT LEADERSHIP SERIES
RIS Thought Leadership Series
Omni-Channel Merchandising Shares Spotlight with Marketing and IT
Omni-Channel Merchandising
Shares Spotlight with
Marketing and IT
When retailing was a far more product-centric industry, merchandising
was the principal way a retailer established its brand, its positioning,
and to a large extent its relationship with its customers. But in todays
omni-channel retailing world, its the customers themselves who are defining the relationship with retailers. The move to omni-channel retailing, with store, online, mobile and social channels all viewed and managed as touchpoints within a common shopping/brand experience, has
created new complexities in merchandising. New sources of customer
data, the demand for more accurate forecasts, the need for enterprisewide inventory visibility and the desire to create tailored, localized
product assortments has todays merchants working closely with newly
empowered marketing and IT departments. But while merchandisings
clout within the retailing organization may have diminished, its impact
INSIDE:
3 Applying Insights
Across Channels
4 Unifying Shopping
Experiences
6 Bigger Roles for Marketing
7 Digital Merchandising
Capabilities
on the overall business has in many ways expanded. Even in a customercentric world, products and how they are presented are still basic pillars
of a retailers ongoing success.
In partnership with
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Whats at Stake for Retailers
Even in the distant days when retailers operated in one or, at

most, two channels (i.e. stores and paper catalogs), merchandising was a far from simple process. It encompassed planning,
selecting, distributing and pricing products that the retailer
hoped would appeal to their customers. In a product-centric
industry, merchandising was the principal way a retailer established its brand, its positioning, and to a large extent its
relationship with its customers.
In todays omni-channel retailing world, its the customers themselves who are defining the relationship with retailers. Products themselves are increasingly commoditized, particularly since digital commerce can almost instantly bring an
enormous range of items almost immediately to a shoppers PC,
smartphone or tablet device.
In addition, the move from multi-channel retailing (store and
e-commerce channels operating semi-autonomously, albeit
with numerous cross-channel linkages and synergies) to omnichannel retailing (store, online, mobile and social channels all
viewed and managed as touchpoints within a common shopping/brand experience) has created new complexities in merchandising. For example, retailers must choose whether to make
their entire product line available in all channels or to segment
their offerings, based on the characteristics of each touchpoint
or its place in a non-linear shopping process.
Ideally, retailers will become ever more strategic with their
omni-channel merchandising efforts, says RIS News Group
Editor-in-Chief Joe Skorupa. For example, customers digital commerce searches and the composition of their online
market baskets can show which products are most often purchased together. Identifying these affinity products results in
more cross-selling and upselling, driving higher sales and improving margins. Smart retailers will carry these insights into
the store environment, using signage and shelf placement to
physically link these go-together products for their brick-andmortar customers.
Retailers will also need to become even more adept at using
their digital channels as endless aisles, circumventing the
square footage limitations of brick-and-mortar stores by electronically providing customers with access to their full merchandise lines. An omni-channel approach to merchandising
frees retailers to create unique, memorable in-store experienc-
es, devoting space and resources to product demonstrations,

how-to seminars and other in-person-only solutions without
worrying that they have failed to display every available color,
size or model of a given product, says Skorupa.
Even for retailers with less ambitious plans, its important to
get their merchandising right in all the channels they operate
in. In a recovering economy, precision-based cross-channel
merchandising is being seen as mission critical for addressing selling pressures, customer affinity issues, and higher Gross
Margin Return on Inventory Investment, according to Aberdeen Group retail analyst Sahir Anand.
Ignoring store and channel merchandising inadequacies (with
symptoms such as growing customer dissonance, high markdowns as a result of low full-price sales, and declining profitability) is one of the leading causes of failure/store shutdowns, Anand writes in Mission-Critical Merchandising and
Replenishment, a June 2011 Aberdeen report.
Omni-Channel Choices:
Merchandising decisions now include
choosing which products to offer and promote in store, Web, mobile and emerging social channels, while still providing a
consistent customer experience
Sharing the Spotlight
One result of these converging trends has been that within the
new omni-channel retail organization, merchandisings once
pre-eminent role must now be shared with some co-stars, primarily marketing and information technology.
Marketing departments now have charge of the all-important
storehouse of customer data, collected from an increasing number of touchpoints, thats needed to feed todays merchandising
processes. Marketing also has ownership of the communication
vehicles to reach customers not just through traditional mass
RIS Thought Leadership Series I February 2012 I 2
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Figure 1
Apply Insights Across Channels:

Purchasing affinities revealed by analyzing
online shopping patterns can be applied
in stores to create cross-selling adjacencies and to support context-aware offers
in mobile channels
media but via even more targetable methods, including e-mail,
SMS texts, and fast-emerging location-based and social retailing channels.
The combination of marketing and IT can be powerful. IDC Retail
Insights Greg Girard provides the example of a smartphone- or
shopping buddy-wielding grocery shopper. The retailers loyalty
data indicates she typically buys small pack premium products
and displays a price-inelastic preference for organic produce,
and what the shopper has scanned into her basket depicts the
shopping mission she is on today. With this information in
hand a food retailer should contextualize and present a highmargin upsell or cross-sell shed be delighted to take, Girard
noted in Retail Revenue Management 2.0, August 2011 RIS
News. When she does she is a happy customer with a bigger
basket and a fatter margin for the retailer.
IT not only suffuses todays most effective marketing techniques; its also providing the means for retailers to gain a better understanding of what customers want which is, after all,
one of the basics of merchandising. Recent RIS News research
identified the varied technological tools retailers are using to
sense customer demand. Four in 10 retailer respondents already
have technology to measure store traffic and mobile site/application traffic, as well as the ability to collect real-time, itemlevel sales data across channels.
Nearly as many (38.5%) are monitoring social media for mentions of their company or its products, and a total of 46.1% will
be updating this technology in 2012. (See Figure 1.)
What Does Your Company do to More Accurately

Sense Customer Demand?
Measure website traffic
Monitor promotions with campaign

management tools
76.9%
45.8%
Measure store traffic
40%
Measure mobile site/app traffic
40%
Collect real-time, item-level sales

data across channels
40%
Monitor social media for

company/product mentions
38.5%
Use exception-based reporting

to identify demand spikes/dips
37.5%
16.7%
15.4%
25%
3.8%
3.8%
12.5%
20% 8%12% 20%
8%12% 16%
24%
34.6%
25%
24%
20%
12% 4%
11.5%
20.8%
11.5%
3.8%
12.5%
4.2%
Up-to-date tech in place
Will begin updating in 2013
Updating now
No plans
Will begin updating in 2012
Source: RIS News, November 2011
Retailers are using increasingly sophisticated and

varied tools to sense customer demand in stores and
across channels, but many face challenges in using
this data to execute on their merchandising strategies
(Continued on page 6)
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I nd u s t r y
I nsi g h t
Merchandising Challenge:
Marry Channel-Specific View with
Unified Shopping Experience
Hari Shetty, Vice President and Head of Retail, and Ronojoy Guha, General Manager
and Head of Retail Consulting, Wipro Technologies
Q: Traditionally, merchandising has been a powerful force within the retail organization. Overall, how
is the move toward more omni-channel operations
changing merchandisings role?
HARI SHETTY: The traditional retail model was much more
product-centric, while the new model is more customer engagement-centric. And we do see a huge shift in how merchants
traditionally did their work versus how theyre expected to do
it going forward, a change thats more visible in specialty retailing than in other verticals. One key development is in the
relationship between marketing and merchandising. They had
worked together before, but without close alignment. Now the
relationship between merchandising and marketing has to be
extremely close, to make sure their strategies are aligned to
deliver a unified customer experience. Marketing has established a lot of dominance, and that will continue to increase.
Q: What are some of the specific merchandising-related challenges retailers are facing as they become
more omni-channel in nature?
SHETTY: For most of the customers that we work with, a
big challenge is that historically each of their channels was
operated by a different business unit. On a big-picture level,
integrating these business units and building unified systems
around merchandising whether for forecasting, visibility,
supply chain or logistics has been a key issue. Many people
look at this as a technology issue, but I believe its really
more of an organizational change issue.
RONOJOY GUHA: Lets take the supply chain as an example. Most retailers manage replenishments to the store
and the e-commerce channel separately. This made operating
sense in a multi-channel world, where each channel operated
independently of each other and focused on different capability sets, i.e. store replenishment was built around providing
palletized orders while e-commerce fulfillment was focused
on picking and packing individual orders. In the new omnichannel world, however, retailers will need to focus on building unified supply chain capabilities that can handle both
e-commerce and store demand simultaneously, allowing customers to order, receive and return product regardless of the
channel they use.
In the new era of customer engagement-centricity, the relationship between merchandising and marketing has to be extremely close,
to make sure their strategies are aligned to
deliver a unified customer experience.
Hari Shetty, vice president
and head of retail,
Wipro Technologies
Q: Are there areas where retailers have had some

success in become more omni-channel operators?
GUHA: Yes, we feel inventory visibility is one such area.
While most retailers are still struggling with it, some retailers
have done a great job in providing true inventory visibility,
both online and in stores. When combined with unified forecasting, inventory visibility provides a strong building block
to an omni-channel experience. Without them, things like fulfilling e-commerce orders directly from stores requires a lot of
process and technology work to accomplish. But its important
to note that today, theres no retailer that we could say is offering customers a truly omni-channel experience. Its a work
in progress for almost all retailers.
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I nd u s t r y
I nsi g h t
Q: If thats the case, what are some things retailers

can do to differentiate themselves in the way of providing a customer-friendly omni-channel experience?
SHETTY: From the customers perspective, Id say that a retailers ability to suspend and then resume a transaction at any
point, and in any channel, is key to providing an omni-channel
experience. Whether the suspension occurs to educate the customer or to handle the commerce, fulfillment or service aspects
of a transaction, that ability to suspend and resume in all channels is what shoppers are looking for. Accomplishing this means
integrating across various solution sets and also deciding which
one will be the master in terms of controlling the entire customer
experience, so master data management also becomes an important underlying technology, whether its in terms of item data or
having a unified view of the customer.
Its important to note that today, theres no

retailer that we could say is offering customers a truly omni-channel experience. Its a
work in progress for almost all retailers.
Ronojoy Guha, general manager
and head of retail consulting,
Wipro Technologies
Q: Retailers have tried to forecast what customers will want in making their merchandising decisions. How is the omni-channel trend, and the proliferation of new customer data sources, affecting
these processes?
SHETTY: Some retailers have used their customer relationship
management (CRM) systems as information sources and also for
customer engagement, but were seeing that traditional CRM systems are inadequate for meeting next-generation retailing needs
particularly in the area of customer engagement. In part thats
because CRM systems have depended on collecting customer data
primarily from within the retailers four walls.
We are now seeing the opportunity to use social media listening platforms that provide data from outside those four walls.
Retailers will be able to mix and match this with intelligent data
from within their enterprise to gain deeper insight into effective
customer engagement, acquisition and retention and to translate

those insights into merchandising decisions.
GUHA: Eventually, these social media platforms will be used to
reach out to customers. Today, retailers are just trying to capture
and analyze this information, but eventually they will be more
effective in understanding how their customers behave and be
able to establish a true dialogue with customers through social
retailing networks.
Q: Are there other examples of how retailers can take
advantage of the unique elements of each channel they
operate in? Should they establish channel-specific merchandising strategies?
SHETTY: It is important to take a channel-specific view, while
still unifying the customers buying experience. For instance,
online channels provide global reach and are excellent for information-intensive products as well as being able to compete
on price. In the store, key drivers include product presentation,
creating a memorable shopping experience and using more localized pricing. At this point, the mobile channel is being used
primarily to engage the customer, contextualize their experience
by relating them to the shoppers actions at a point in time and
influencing an impulse buy.
GUHA: The question many retailers are trying to answer is how
they can influence buying behavior in one channel to overlap
with and move into another channel. For example, were working with retail customers on the challenge of trying to convert/
influence buyers who have begun their engagement in the online
channel to carry the shopping experience through to the store,
where they can then be influenced to buy both core and other affinity products. In doing this, the retailer ensures that they manage to keep customers engaged and also influence their overall
market baskets. What this means is that retailers not only need
to understand the contextualization factors for each channel,
they also need to devise strategies for each channel that will
help keep the customer engaged and influence them to migrate
upward on the value curve.
SHETTY: This points out that when we talk about omni-channel operations, its not a single solution or set of capabilities
that retailers need to acquire. Its more about conceptualizing
the new ways of engaging with customers, and using technology and organizational change to adapt to and influence
that relationship.
4/24/12 12:28 PM
motional campaign that is much more successful than originally

anticipated. In addition, inventory visibility is a prerequisite
for the increasing number of retailers that are using all available channels for fulfillment rather than maintaining separate
supply chains for e-commerce and stores.
Figure 2
Top Strategic Merchandising Actions

(Stores vs. non-store channels)
55%
Improve demand forecast accuracy
Create tailored, specific, precision

merchandise assortments
Improve quality of
merchandise presentation
Improve multi-supplier network
64%
39%
18%
39%
18%
18%
27%
Stores
Other Channels
Source: Aberdeen Group, May 2011
Improving forecast accuracy is a higher strategic

priority for non-store channels, while creating tailored,
localized assortments and improving merchandise presentation are more critical in the store environment
(Continued from page 3)
Advanced IT solutions are also critical for what many industry experts identify as a basic building block of omni-channel
merchandising: enterprise-wide inventory visibility, delivered
in real time. Knowing which products are where (e.g. en route
from a supplier, in a distribution center, en route to a store, in
a stores back room, on the shelf or already sold) at any given
time provides retailers with an omni-channel view of the impact
of merchandising decisions that have already been made.
Such visibility also opens the door to adjusting merchandising
execution based on updated forecasts or real-world events, e.g.
transferring product to a store (or channel) conducting a pro-
Sensing customer demand is critical, but retailers must then

use this data to create an accurate demand forecast. Improving
demand forecast accuracy is a top strategic action for 57% of
retailers, according to a May 2011 Aberdeen Group survey, and
its a higher priority for non-store channels than brick-andmortar ones. (See Figure 2.)
0%
27%
Arrive at an optimal mix of 'Standard'
and 'Precision' merchandise
Merchandising Priorities
Another key priority is creating tailored, localized merchandise assortments as a way to meet the needs of specific stores,
customer groups and categories. Such assortments are created
using data analytics-led processes that include purchase histories, demographics, product affinity identification and personalization, in addition to traditional product attributes. Retailers
can also apply store tiering or clustering analysis, creating assortments that go beyond the simple A, B, C store designations that sufficed in the past.
Non-store channels are ahead of brick-and-mortar channels in
the race to localize: only 18% of the former identify creating
tailored assortments as a top strategic action, less than half
Magnify Marketings Role:

Retailers marketing departments
have access both to customer data
and targeted communication vehicles
that are crucial to successful omnichannel merchandising
the 39% for store channels. This is explained by the fact that
non-traditional channel assortments have always been more
personalized as the digital media has features such as site navigation, search, and other ways of capturing customer behavior
data, writes Aberdeens Anand.
4/24/12 12:28 PM
Figure 3
Top Knowledge and Performance Management

Capabilities (Stores vs. non-store channels)
Ability to adjust buy plan and open-to-buy
requirements with short-term shifts in revenue
plan and inventory cost targets
Single, centralized product/merchandise

data or information repository
58%
45%
55%
Improve Inventory Visibility:

Enterprise-wide, real-time inventory visibility provides a high-level view of omnichannel merchandising decisions and
also facilitates faster reactions to new
challenges and opportunities
91%
Generate metric driven reports for evaluating

merchandising's effectiveness
52%
Ability to integrate order management data

(weeks from order to delivery)
with merchandise management system
52%
Interface purchase history and demographic
73%
55%
48%
82%
Stores
Other Channels
Source: Aberdeen Group, May 2011
Non-store channels are far ahead of stores in

achieving a centralized data repository for merchandise data, and have been better able to integrate
customer demographic and purchase data with
merchandise management systems
Some of these gaps are related to the technology-oriented

nature of digital commerce. As noted, the move from multichannel to omni-channel retailing is forcing the store side of
the business to play catch-up in certain key areas. Retailers are
seeing the need to gather all customer data and all merchandise data into centralized locations rather than keeping it in
channel-specific silos.
In addition to being a better fit with the omni-channel retailing model, centralization also opens the door to using todays
faster, less expensive Big Data analytical tools to discover
hidden insights at the intersection of large volumes of customer
and product information.
Digital Merchandising Capabilities
Retailers increasingly understand that the days of the Merchant Prince have passed, and successful merchandising truly
resides in a combination of technology AND the informed opinions of not only merchants, but also marketing, store operations,
e-commerce personnel and other Line of Business executives,
according to Paula Rosenblum and Steve Rowen. (Twenty-first
Century Merchandising Takes Hold, RSR Research, August 2011.)
E-commerce channels also outstrip stores in generating metricdriven reports for evaluating merchandisings effectiveness,
73% to 52%. Theres an even wider gap in the ability to interface purchase history and demographic data with a merchandise
management system: 48% for stores, 82% for non-stores.
All in all, theres a growing recognition that omni-channel merchandising and information technology are already inextricably
linked. In 2010, 24% of retailers responding to an RSR survey
about their merchandising plans for the coming three to five
years said they were moving away from home-grown systems
toward an integrated suite; in 2011 the figure rose to 29%.
There were also increases in those seeking greater integration
between point solutions (27% in 2010, 29% in 2011) and those
seeking more innovative delivery models such as Software as a
Service (16% vs. 19%).
Non-store channels also have the lead over their brick-andmortar brethren in a number of technology-enabled capabilities. Just over half (55%) of store channel respondents have a
single, centralized product/merchandise data repository, compared to 91% of non-store channel respondents. (See Figure 3.)
4/24/12 12:28 PM
Most tellingly, in 2010 nearly one in five (18%) said they had
no merchandising system plans at all in 2010. By 2011 that
figure had dropped to zero. (See Figure 4.)
As the number and type of decisions around merchandising multiply along with new channels and customer touchpoints, and
as executing on those decisions becomes a greater challenge,
retailers will turn to both sophisticated marketing tools and
advanced IT solutions. Merchandisings clout within the retailing organization may have diminished as retailing itself has
changed, but merchandisings impact on the overall business
has in many ways expanded. Even in a customer-centric world,
products and how they are presented are still basic pillars of a
retailers ongoing success.
Figure 4
Merchandising System Plans for the Next 3-5 Years
Localize, Localize, Localize: Apply the

assortment tailoring tools developed in
digital channels to localize merchandise
offerings in brick-and-mortar stores and
other sales channels
A b o u t
27%
29%
16%
19%
Seeking more innovative delivery

models like SaaS
Moving away from home-grown applications
toward point solutions
No plans
29%
Seeking greater integration

between point solutions
Seeking to eradicate the spreadsheet

wherever possible
24%
Moving away from home-grown applications

toward an integrated suite
2010
6%
13%
8%
10%
18%
0%
2011
Source: RSR Research, August 2011
Retailers are increasingly recognizing that

integrated, industry-standard merchandising systems
are a necessity in todays omni-channel environment
W i p r o
Wipro Technologies, the global IT business of Wipro Limited (NYSE:WIT) is a leading Information Technology, Consulting and Outsourcing company, that delivers solutions to enable its clients to do business better. Wipro Technologies delivers winning business outcomes
through its deep industry experience and a 360 degree view of Business through Technology helping clients create successful and
adaptive businesses. A company recognized globally for its comprehensive portfolio of services, a practitioners approach to delivering
innovation and an organization wide commitment to sustainability, Wipro Technologies has over 120,000 employees and clients across
54 countries.
With over 25 years in the global delivery of technology services, Wipro Technologies provides best in class retail solutions for transforming and managing your business through a comprehensive set of offerings in e-business, Stores, Multi-Channel Retailing, Supply Chain,
Merchandising and Analytics/BI for the retail industry. We bring additional value to clients and nurture innovative solution development
through our investments in Centers of Excellence in Supply Chain Planning and Execution; Merchandizing and Pricing, RFID, Pharmacy in
Retail, Store Operations and Data Analytics. For more information, please visit www.wipro.com.
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RIS Thought Leadership Series