Gartner : Retail Merchandising Experiences a Tectonic Shift That Will Shake It To The Core

Customers have stretched existing retail business models farther and faster than merchandising organizations can support. As they have greater access to technology and more choices about how to conduct the four major customer processes of browsing, transacting, acquiring and consuming, retailers are no longer in the driver's seat. A tectonic shift in retail merchandising is required to transform away from product and toward customer behavior hierarchies. This is long overdue, and retailers have to abandon outdated product hierarchies in favor of customer centricity.

Faster Horses

The famous quote, loosely attributed to Henry Ford, states, "If I had asked people what they wanted, they would have said faster horses." Many have used this over the years as a way to escape incorporating customer feedback into product development and sourcing activities. But what is important about the quote isn't that the customer would have been able to predict the internal combustion engine. Rather, it's an expression of customers' desire to get around faster. "Faster" is an indication of customer needs, desires and behavior.

The future of retail requires a much greater understanding of how to improve customers' lives, and therefore deliver goods, services and experiences that meet their needs and desires. What are the "faster horses" of today? It could be a 10-minute delivery, but it could also be that items are available when needed for Saturday morning breakfast or for a child's birthday party in the park.

Shrinking Zone of Greatest Business Value

At the heart of the challenge is transformation through a detailed understanding of customer behavior, and a seismic shift toward a new merchandising model in which customers, not products, are at the center of merchandising processes. A fundamental driving issue is that retailers increasingly find a tension between what they believe or assume about customers and what the truth is:

In reality, the greatest business value lies where the assumptions about customers line up with the truth of what they are actually seeking. However, as the pace of changing customer expectations accelerates, customers' behavior profiles are morphing much more quickly than merchandising teams can either comprehend or take action on to effectuate pertinent changes.

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In reality, the greatest business value lies where the assumptions about customers line up with the truth of what they are actually seeking. However, as the pace of changing customer expectations accelerates, customers' behavior profiles are morphing much more quickly than merchandising teams can either comprehend or take action on to effectuate pertinent changes.

My latest research drills into the retail merchandising transformation that is required. In the future, product categorization, while still important, must result via thorough analysis of higher-level customer behavioral segmentation. This approach will require significant adoption of automation, analytics and AI as platforms to enable a comprehensive shift toward customer-centric merchandising processes. This new research focuses on 3 key impacts facing all retailers.

Impacts

• If merchandising processes continue to be linear,product-centric and customer-exclusive, they will result directly in lost sales, market-share erosion and failure in the long term.
• The tectonic shift to circular customer-inclusivemerchandising processes will disrupt the merchandising organization as never before, causing many to fail.
• Retailers who are too slow to implement critical AI-led merchandising processes to support the business' transition to customer centricity will not survive.

Gartner clients can learn more about these impacts and our recommendations by downloading the entire research here Retail Merchandising Propels Toward a Once-in-a-Lifetime Transformation