Gartner: Retail Assortment Planning Analytics

In the Gartner Blog.   Insightful piece.  An area we worked on for years.  If anything this article over complicates the problem, but it is good to see a more modern approach, with new approaches and data sources.   Following up.  Robert, send me more on this view and I will comment.

Advanced analytics are critical for modern and effective retail assortment planning  by Robert Hetu  

Having just completed publication of the 2017 Critical Capabilities For Retail Assortment Management Applications it’s a great time to reinforce the importance of using new advanced analytic capabilities. Advanced analytics and big data from sources like the Internet of Things (IoT) are enablers of customer-centric assortments as well as effective category planning and management. This year’s research placed special emphasis on provision of advanced analytics as key differentiation for assortment planning and category management solutions. Gartner describes this as “Algorithmic Retailing”.

Algorithmic Retailing

Retailers must transition from Excel-based planning to these more advanced solutions to improve speed and accuracy of planning.  Any advanced solution under consideration should utilize the majority of these capabilities or should be dropped from consideration.   ... ." 

Big Data in Wal-Mart's DNA

Gib Bassett of Teradata sends along a link to an article about Wal-Mart's use of Big Data.  Nice detail that can be instructive to others in this space.  If anyone can  utilize the volume, velocity and variability of Big Data, it is Wal-Mart.  Now as they are more  heavily involved with social media, the need to understand the collection of data that streams at them from the register and online sources.  Lots of Analytical potential for problems like assortment there.  The ability has to be in your 'DNA', so the data and the analytics will be there and ready when you need them.  More here on Big Data.  More on Wal-Mart Technologies.

Shopper Insight

In Retailwire,  IBM/DemandTec sponsors an interesting paper: Shopper Insights: Actionable or Academic?  An overview of a survey on the topic.   Our innovation centers were established in part to fine-tune an understanding of the shopper from a number of different resources.  From our own experimentation, from the knowledge of our consumer researchers, and from leading edge research done by internal and external vendors. DemandTec was an early visitor,  where we talked about the effectiveness of planning promotion and assortment, using analytic methods.    The paper suggests, as we saw early on:

" ... Shopper insights are here to stay, according to RetailWire’s recently conducted study of industry  professionals and practitioners, and are quickly becoming a “must-have” feature of decision-making relative to category management, merchandising, marketing and in-store activities.In particular, shopper insights derived from specific retail accounts are seen as beneficial for fostering strong collaboration between supplier and merchant. Said one respondent: “It is the new currency to drive retailer/manufacturer collaboration to work jointly to improve the business/category.” ... " 

So we clearly saw the early need for learning that was more than academic.  And produced results that could be applied early to our own mix of products and could take our understanding of the consumer, for new products and new initiatives, and combine that with operational retail knowledge.

This paper studies insights from a survey in late 2010:  " ... The study sampled information and opinion from 593 executives and managers.  Supermarket/grocery retail and manufacturer companies were most strongly represented  in the sampling, and nearly half of respondents are in upper management positions. ..." 

Worth reading for its results.  As an excerpt I always like to look at future actions, since my role was always of a futurist and technologist, and this was interesting:

" ... both retailers and suppliers expect that manufacturers will partner relative to shopper insights with more than the number one retailer in a particular market. Indeed, only 2.5 percent of the  total number of survey respondents say that a supplier should only partner with the market leader and  go no further. From the supplier viewpoint, 20 percent answer that going beyond the market leader  should be done to enhance more retail relationships, while 69 percent say that working with more than one retailer in a particular market should certainly be done for relationships, but also for gaining  additional knowledge for HQ planning.... " 

I am incorporating some of this data in a study I am doing.  Please send me any further insights you have.

IBM/DemandTec Assortment Optimization

Early in my career I was given the task of how to optimize assortments under the constraints of the market shelf. On the surface the problem looks easy.  You have a set of possible products you want to place on shelf.  You have the value of each of the products to the manufacturer or retailer expressed by profit or historical demand, you have the constraints of space on the shelf.  You may also have design constraints that tell you what products 'should' be placed next to others based on consumer behavior understanding.   Plus a lot of additional and sometimes subtle constraints.  All this can be expressed mathematically, using well known methods that have been known for a long time.  But it turns out the resulting expression is complex and difficult to solve.   We explored how to do this and found it daunting.  So I was very impressed when I first saw an example of how DemandTec did assortment optimization for retailers.  Their method cuts to the chase to increase profitability for retailers based on historical demand while also including the shopper in the model.  They write:

" ... No more guesswork.  The best assortment for each location. The best assortment is the one shoppers expect to see on your shelves, but also the one that delivers the best profits.  So why make guesses? IBM DemandTec Assortment Optimization offers a collaborative approach for defining localized merchandise assortments through a complete understanding of what drives buying decisions – incorporating shopper demand, space, productivity, and profitability. .... Now you can offer items that meet unique demands or targeted shopper segments.  You'll know exactly which items you can replace or substitute for other items in your portfolio.  Most importantly, you'll understand the implications of various assortments on each customer segment. With one common view of the shopper, their decision trees, and the marginal additional value of each SKU to the equation, manufacturers and retailers can work together more effectively to delight shoppers and build customer loyalty. ... " 

IBM DemandTec for Marketers

From IBM DemandTec, a good view of the need to construct valid shopper segmentation.  Why?  So we can use targeting to make sure the right consumer gets the most influential message.  The link goes to an infographic and further  information on this concept.

New techniques are now available to make it easier to do.  Relationship and social marketing allow the integration of new and precise marketing methods.  Linking this further to marketing mix methods, minimizes   cost to achieve a particular return.  To take this further.   And more at the link:

1. Use advanced science and shopper segmentation to better understand shifts in consumer demand and connect with individuals and segments rather than broad markets. Merchants can now surface those insights right at the point of decision of pricing, promotion and assortment activities. By recognizing that each shopper is unique and responds differently, revolutionary merchandisers can tailor strategies to focus on their most valuable shopper segments – providing differentiation at the shelf and a real path to category growth.

2. Stay relevant with intelligent targeting
Invest in capabilities designed to manage the entire promotion lifecycle – from analytics to deployment. Target promotions not with a broad brush, but by shopper segment through localized and automated ad versioning across virtually all customer touchpoints. An integrated planning environment can keep your marketing counterparts on the same page as your team throughout the planning cycle, translating into greater visibility, improved quality, and ultimately more time to focus on strategic issues.

3. Capture value, measure results
Increase marketing ROI by aligning assortment, price, promotion and marketing decisions in a unified planning environment. A common platform also allows you to work more effectively with your merchandising team counterparts – helping teams to plan for category growth, new shopper attraction and behavioral impact on key shopper segments while allowing you to tailor your marketing investment to achieve financial goals..... "

Wal-Mart and P&G Team for Mobile Shopping

In a unique and novel approach a faux food truck in NYC and Chicago is decorated with QR codes.  Allows the walking shopper to buy an assortment of popular consumer package goods.  Similar to some of the virtual stores reported on here lately in transit passageways. " ... giving residents an opportunity to scan QR codes with their mobile phones to order P&G products from Wal-Mart Stores. Similar QR codes will be on display at bus shelters in Chicago. "People have yet to really adopt buying consumables online," said P&G spokesman Tim Marrin. "We think having free delivery, and getting this message out to urban shoppers who don't have access to Wal-Mart stores, is a great first start."... "
And more from AdAge.

Battling for the Wal-Mart Shelf

4000 new products battle for the Wal-Mart Shelf.  Interesting stats in CGT.  Is this why online ultimately wins?   Though you can see and feel and touch the items in the physical aisle, which you cannot do online.  So is it the sheer assortment online, versus touch and feel in brick-and-mortar?   Many people have found out you can now have it both ways.

" ... After just five days of public voting, Walmart's Get on the Shelf contest has attracted 274,000 total votes as of Sunday, March 11, 2012. This is the first contest of its kind from a major retailer, and the American Idol-style contest gives the top three products an opportunity to win virtual shelf space on Walmart.com. The Grand Prize winner's product will have the opportunity to be sold on Walmart.com and featured on the site's home page, and also get the chance for valuable shelf space in select Walmart stores across the country.... " 

IBM Announces Completion of DemandTec Acquisition

Announced today.  The integration of the DT abilities into IBM's Smarter Commerce effort makes much sense.  Looking forward to see the details of how it will all integrate together.   I have followed DT here since their first presentation to our innovation center in 1999:

" ... IBM Smarter Commerce on Cloud gives companies broader insights about customer merchandising and pricing preferences to better market, sell and deliver their products and services," said Craig Hayman, General Manager of Industry Solutions at IBM. "With IBM and DemandTec, marketing and sales executives in retail, CPG and other industries will be able to deliver the best prices and product mix based on consumer buying trends."

DemandTec delivers cloud-based analytics software to help organizations improve their price, promotion, and product mix within the broad context of enterprise commerce: retail, business-to-consumer, and consumer goods. As a result, companies can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability. By gaining a quick analysis of consumer trends, for example, a category manager at a consumer products company can collaborate with the retailer to understand price elasticity and set a more competitive price point.... "

More Market Apps

Yet another supermarket App, here at Giant Eagle.  Nothing very new.  The usual assortment of promotions, information, coupons and shopping list.  They are easy to develop and provide, and seem to becoming an expectation at least for some shoppers. They do become clutter on the screen.  App bloat?

Research on Social Networks for Business Planning

I reported previously about DemandTec developing collaborative, social networking based interaction for business plans.   They are about to reveal some business research they have sponsored at an Orlando conference.  Will follow with thoughts on that:

" ... The primary research uncovers key industry insights ranging from joint value driven by retailer/manufacturer collaboration to best practices for avoiding trade promotion management pitfalls. The research surveyed leading consumer products manufactures and retailers, and covered critical industry topics including trade promotion management and the retailer perspective on marketplace dynamics.

“We are excited the research findings further demonstrate that a collaborative approach to building business plans delivers significant value for both trading partners,” said Derek Smith, Vice President of Field Marketing at DemandTec. “On the DemandTec network, manufacturers and retailers can collaboratively make promotion, assortment, and pricing decisions to drive win-win strategies.” ... '

Merchandising Across Channels

Good report in RIS News:  " ... This month’s Vendor Landscape focuses on customer-centric merchandising solutions that work not only on the physical store level, but the online and mobile channels as well. These targeted and end-to-end solutions cover merchandise planning, store planning, store clustering, assortment planning, space planning and allocation/replenishment. RIS lists some of the major merchandising vendors and highlights some recent retailer deployments.... ".

I see that my recent correspondent DemandTec is mentioned.  Good overall read.

Accurate ForecastingGiant Food Stores is using the Lifecycle Price Optimization and End-to-End Promotion Management merchandising solutions from DemandTec. Key benefits from the solutions include improving the productivity of its pricing team, better aligning specific pricing actions with its corporate pricing strategy, more accurately forecasted promotions and a streamlined deal management process that improves efficiency and reduces errors. .... Consumer Centric Merchandising and Marketing Part of the DemandTec network, retailers can use the network to plan, evaluate, forecast and execute pricing and assortment strategies and promotion plans, collaborating directly with their trading partners ... Key clients are Target, Ahold and Best Buy.

Viewing Assortment Optimization Through Shopper Decision Trees

I was asked to take a look at DemandTec's new site and provide some commentary on the redesign  and their approaches.  I went quickly to assortment choices and shelf planning, which  are something I had examined very early on in my analytics career.

We were always looking at ways to analytically describe which products should be included in retail and where they should be placed.

It can be analytically described, but the resulting number of combinations are daunting.  We did work in this area for parts of categories, using IBM's behemoth MPSX package,  as early as the late 60's.

When  I arrived much later on I was asked to look at the systems involved.  You could not solve all of the problem, but you could satisfactorily do very useful things for parts of the shelf and aisle. Then use them as building blocks to understand the entire store.

It was understood early on that such planning needed to be done collaboratively.    In particular between humans acting as designers, and computers that could handle the sheer quantity of information involved.  It was also clear that there was a need to have long term design stability, so as to not confuse the shopper and effectively support brand loyalty.

This turned out to be done best my having people adjust the computer generated design. Then re-evaluate the results.   You also needed to think about how the shopper reacted when their favorite item was moved or disappeared. Where would they go?  What was next?  Think of it as a decision tree of choices.  That is what we ultimately considered.

The complete implications of any particular assortment choice was often not considered completely from the perspective of the shopper.

This was where I particularly enjoyed DemandTec's overview, and  their view of  " ... the shopper, their decision trees, and the marginal additional value of each SKU to the equation, manufacturers and retailers can work together more effectively to delight shoppers and build customer loyalty ... ".  

Ultimately it is about the shopper and how they interact with shelf and purchase.  The right assortment produces value for retailer, manufacturer and shopper.

See their overview, and their Assortment optimization brief.

DemandTec and Sam's Club

New from DemandTec.   We explored their capabilities seeking to better understand the relationship between assortment and profitability.   Impressive approaches.

· "        Sam’s Club® has selected DemandTec’s Deal Management software service to enhance its eValues program.  Sam’s Club will use Deal Management to streamline the collaborative presentation, negotiation, reconciliation, and archiving of member offers and supporting supplier funds for the eValues program.  “Our strategy for eValues continues to focus on delivering highly targeted, relevant offers to our members,” said Catherine Corley, Vice President for Membership at Sam's Club.  “Through innovative uses of collaboration on the DemandTec network, we expect to better serve our members.” ....

Exploring Game Dynamics Talk

Gave a talk at Cincinnati Continuousweb last night to about 50 people.  Sponsored and supported by Joshua Johnson of Mindbox Studios. Thanks to all that attended.  Nice assortment of startup and corporate types were there.  The topic was Exploring Game Dynamics.  I reviewed a dozen game style applications that I have been involved in since the 1980s, and my thoughts about how this layer has been evolving in the last few years.  Scott Frondorf showed off his impressive virtual reality training system. Also saw strong interest in the better integration between game dynamics and business intelligence, and thus the ability to readily mine results for quick insights.  Seeking to develop that further. Need to know more about these topics?  Collaborate?  Contact me,  information is in the left column.

Social Media Stats

A large list of social media stats to Kickstart your slidedeck.   Intriguing, though I always worry about the context of such a large and varied assortment. 

DemandTec and Dollar General

It has been a long time since I  took a look at DemandTec for deep analytical applications like revenue management, promotion and assortment optimization.  We looked at their impressive analytical methods shortly after their founding.  Rare direct use of mathematical methods for retail and manufacturing, which paralleled some of our own long-time work in the enterprise.  I see that they are now working with Dollar General.

Science of Retail Analytics

Rccently brought to my attention as part of a study looking at CPG analytics:

Timestar Technologies,  ... helps leading consumer packaged goods companies grow sales at retail with breakthrough analytics that optimize assortment, space, replenishment strategies and price. Timestar’s clients command the #1 or #2 position in their markets by delivering more than great products and powerful brands. Using Timestar analytics, they more precisely align supplier and retailer for unprecedented success .... "

New Science of Retailing: Assortment Planning

Today at UC,  Heard Marshall Fisher talk about work in chapter 2 of his book: The New Science of Retailing: How Analytics are Transforming the Supply Chain and Improving Performance which covers assortment planning.

In the book he covers such diverse product assortments as snack cakes and tire sales.   He positions the  technique as using modeling, estimation and optimization. And of course data gathering.  I would emphasize that there is much of that to do in any analytics project, making sure that the data is clean and gathered under similar the same environmental context.  He also covers what kinds of problems can be solved using this approach.  The optimization he uses is a simple greedy algorithm, implemented by sorting.  In the case of the tire sales, the approach yielded a 6 percent revenue increase.  Impressive results for a relatively simple approach. 

He positions this as Mining Sales Data to Discover 'Home Run'  Products You are Missing.

Overall I found this book to be an excellent outline-style introduction to the use of analytics in the supply chain.

I have heard Marshall Fisher talk several times and have been impressed by the well positioned and yet practical analytics approaches he demonstrates. Worth taking a further look at. See also his Wharton site.

The Retailer: Supply Chain's Last Mile: Workshop May 6

Update: Confirmed Speakers -

Brett Bonner, Director, Research & Development, Kroger Co.
Roger Dattilo, Vice President of Inventory Management for Customer Fulfillment Centers, OfficeMax
Dr. Marshall Fisher, UPS Professor, Professor of Operations and Information Management, Wharton School, University of Pennsylvania
Paris Gogos, Director, The Nielsen Co.
Alex Hase, Vice President of Sales at Retail Solutions
Brian Kirkpatrick, Director North America Product Supply,  Go To Market Operations, P&G
Bob Wilson, Executive Vice President - Business Development & Marketing


Reminder: The event is free, but you MUST preregister to attend. Please RSVP to tricia.burger@uc.edu to preregister.

The Department of Operations & Business Analytics at the University of Cincinnati’s College of Business is pleased to announce its Seventh Annual Workshop on Hot Topics in Supply Chain Analytics, Practice and Technology. This year’s workshop is entitled, “The Retailer: Supply Chain’s Last Mile.”

There continues to be significant challenges and opportunities in managing today’s retail supply chains. This year’s workshop will focus on the interactions between the retailer and upstream members of the supply chain. Retailers are drowning in data but are having a difficult time developing actionable insights.

Join us to hear experts discuss the importance of information and analytics in improving retail performance: forecast accuracy, inventory turns (while reducing out of stocks), assortment planning and pricing optimization. Industry leaders from P&G, Kroger and OfficeMax as well as information providers, such as The Nielsen Co., Market6 and Retail Solutions Inc., will join faculty experts from the University of Cincinnati and the Wharton School (Marshall Fisher, PhD) to discuss the new science of retailing.

The event will be held May 6, 2011, 10AM - 3:30PM with a short reception to follow at the University of Cincinnati’s Carl H. Lindner Hall in Cincinnati, OH. Seats are limited and registration is required. There is no registration fee. Attendees who preregister as of April 29, 2011, will receive the 2010 book The New Science of Retailing: How Analytics are Transforming the Supply Chain and Improving Performance by Marshall Fisher and Ananth Raman.

To register, please contact Tricia Burger, tricia.burger@uc.edu, (513) 556-7140.
 To learn more or for suggested lodging accommodations, please visit http://www.business.uc.edu/SupplyChain/events .

mike.fry@uc.edu
(513) 556 0404
http://www.business.uc.edu/Mike-Fry

The Retailer: Supply Chain's Last Mile

Upcoming, I plan to attend:

The Department of Operations & Business Analytics at the University of Cincinnati’s College of Business is pleased to announce its Seventh Annual Workshop on Hot Topics in Supply Chain Analytics, Practice and Technology. This year’s workshop is entitled, “The Retailer: Supply Chain’s Last Mile.” There continues to be significant challenges and opportunities in managing today’s retail supply chains. This year’s workshop will focus on the interactions between the retailer and upstream members of the supply chain. Retailers are drowning in data but are having a difficult time developing actionable insights.

Join us to hear experts discuss the importance of information and analytics in improving retail performance: forecast accuracy, inventory turns (while reducing out of stocks), assortment planning and pricing optimization. Industry leaders from P&G, Kroger and OfficeMax as well as information providers, such as The Nielsen Co., Market6 and Retail Solutions Inc., will join faculty experts from the University of Cincinnati and the Wharton School (Marshall Fisher, PhD) to discuss the new science of retailing.

The event will be held May 6, 2011, 10AM - 3:30PM at the University of Cincinnati’s Carl H. Lindner Hall in Cincinnati, OH. Seats are limited and registration is required. There is no registration fee. Pre-registrants, as of April 29, 2011, will receive the 2010 book “The New Science of Retailing: How Analytics are Transforming the Supply Chain and Improving Performance” by Marshall Fisher and Ananth Raman.

To register, please contact Tricia Burger, tricia.burger@uc.edu, (513) 556-7140.

To learn more or for suggested lodging accommodations, please visit http://www.business.uc.edu/SupplyChain/events .
____________________________________

Via Uday S. Rao, Associate Professor, Operations and Business Analytics, Email: raous@ucmail.uc.edu
http://www.business.uc.edu/Uday-Rao