This was a banner weekend for retailers. According to the National Retail Federation:

• 226 million shoppers were in stores over the weekend.
• They spend $452.4 billion
• They also spent an average of 9.3 percent more over the weekend this year than last year.

The experts are saying that a lot of this activity has to do with pent-up demand from a public tired of the recession, and because most retailers run their best deals for the holidays. According to a Miami field report from Retail Systems Research, stores were open even earlier this year and there were shoppers everywhere; all the big box stores along Biscayne Boulevard were jammed before midnight on Black Friday Eve, with the exception of those like Bed, Bath, & Beyond that didn’t have holiday special promotions. Clearly consumers are looking for bargains this year.

However, Cyber Monday outsold Black Friday. Those looking to beat the shopping crowds have turned to the web for bargains and there was a
boom in online sales. According to a report from IBM Benchmark, online sales were up over 33 percent over last year, and the average online purchase price of $198.26; 2.6 percent higher than last year. Here are some other interesting facts from the IBM report:

• Of all cybershoppers, 1 percent used a mobile device, up 3.9 percent over Cyber Monday 2010
• 6.6 percent of all Cyber Monday purchases were made from mobile devices.
• The Apple iPad generated the largest number of online retails sales.
• Online shopping peaked around 2:00 p.m. ET, the time when most of the retail stores were at their peak as well.

What this highlights is that shoppers are more comfortable than ever with online purchases. This is only the sixth year the experts have
identified “Cyber Monday” as a shopping phenomena and the retail industry has seen a steady increase year over year.

It also points to the rise in the use of handheld devices for shopping. Not only are shoppers going online, but they are using handheld devices for simplicity. This even could mean that some shoppers are going to the retail outlet and, seeing the long checkout line to purchase they can see on the store shelf, they pull out their smart phone or iPad and buy the same product online right then and there.

This poses new challenges for retailers. Clearly, stocking strategies need to be more precise, and merchandising strategies need to find new ways to effectively blend the in-store and online shopping experience. More users are turning online for their shopping, and a lot of them are using mobile devices to make those purchases. Smart retailers will find a way to capitalize on the mobile revolution without sacrificing their in-store sales, or better yet, adjusting their in-store strategies to accommodate customers and the way they want to shop.

What all this will require is a new level of merchandising and point-of-sale intelligence beyond that most retailers are using today. It will require new insights, and new point-of-sale information driven by a new kind of analytics that demonstrate sales performance and customer preference both online and at the retail outlet. That’s why Groupsoft continues to refine GrMAP, our merchandising and assortment planning tool, and why we created GrAPPS to bring that same kind of assortment and merchandising planning power to handheld devices, like the iPad. The objective is to not only help retailers think like their customers, but to enable the same mobile tools so they can act like their customers as well.

As we noted last time, personalization enables retailers to attract and retain more customers, whether at the storefront or online. Effective unit-level merchandising is what enables a more personalized in-store environment, which ultimately drives customer traffic and increases conversion rates. However, retailers have very little visibility at the shelf level. They don’t have a firm grasp of how merchandise process management affects in-store sales, the channel, and customer operations.

Store planograms call for a high number of SKUs to drive customer satisfaction, but that high number of SKUs have a greater impact on the in-store outlet (as opposed to other channels such as online) because they require staging and physical space. Regionalization is having a huge impact as well, as retailers work to determine what customers want in different regions.

According to Aberdeen, the best-in-class retailers are optimizing using three Key Performance Indicators: customer satisfaction, out of stock rate, and improved gross margin performance. The Aberdeen study shows that the best in class have a customer satisfaction rate of 94.3 percent, an out-of-stock rate of 5.5 percent, and an increased profit margin of 17.2 percent. To compare, the laggards at the other end of the spectrum demonstrate a customer satisfaction rate of 81.7 percent, out-of-stock rates of 27.3 percent, and increased profit margin performance of 6.8 percent.

The best in class retailers are most concerned with assembling their SKU assortment to maximize inventory turn. The objective is to
stock and turn as much inventory as possible (remember the retail mantra – “sell, sell, sell”), which requires that you have the right assortment in the right place at the right time – personalization and localization. Since demand forecast accuracy is typically less than 50 percent (48.5 percent on average), you can’t generate an accurate merchandising plan. There is increased pressure for better demand forecast accuracy, and better in-store data for more precise merchandising assortments.

Stock and SKU planning is very tedious and complex, and even more so when the objective is to optimize to the individual store level. This is where enlisting store managers can be a real asset. Store managers have a lot of insight, and you need to be able to utilize that insight. To maximize inventory turns and determine what’s working at the regional level, you need better regional in-store data that you can use to develop better stocking strategies.

Let local intelligence guide your stocking strategies. Allow local stores to make upward or downward inventory or order adjustments to smooth inventory volumes and prevent overstocking or stock-outs. Make sure to arm managers at the store level with the means to capture customer and stocking intelligence and store it centrally for assortment planning. Arm them with handheld devices and preconfigured reports to make them more effective on the “front lines” of stocking management.

By properly aligning local in-store intelligence with your overall stocking strategies, you can increase your SKU count, increase customer
satisfaction, reduce your out-of-stock percentage, and increase overall profits.

You can view the full webcast on “Merchandising Optimization in the Digital Age” here.

Sahir had some valid points to share about the pressures retailers face in the current market climate based on his research. The real market pain points facing retailers fall into four basic categories:

1. Personalization
2. Unit-level merchandising and process management
3. Centralized merchandise data integration
4. Top-down and Bottom-up merchandise planning

Over the next few blog entries, we will talk about each of these challenges in turn, starting with personalization.

For today’s retailer, personalization is what allows retailers to attract more customers, and retain them. And personalization isn’t just for the in-store experience, but it has to cross all retail channels. Customers have
come to expect the same rich, multimedia experience whether they are shopping online or in the store, and they expect that experience to transfer between outlets. However, according to Aberdeen research, of 100 senior retail executives surveyed across various industries – apparel, grocery and department stores – 76 percent of retailers do not possess the technology tools or the business processes to handle multichannel personalization; e.g., they cannot execute web, catalog or special orders from stores.

For the in-store experience, personalization includes identifying customer preferences, merchandising, and promotions, extending right on through to the actual sale and then ongoing customer contact. But then that personalized experience need to expand to other channels, such as catalog or online and even mobile shopping. Consumers have come to expect personalization across all channels, not just online commerce where it’s easier to deliver. Increasing personalization will increase in-store profits, but it also requires and understanding of what impact merchandising is making on the shelf. The Aberdeen research also shows that 27 percent of retailers are looking to add interactive multimedia technology to their stores, such as computer kiosks, to help bring that multichannel experience to the store experience.

Using centralized data gathering and analytics can reveal the impact merchandising is having on personalization on the store shelves. Assortment planning is being driven by personalization, and that means using analytics to reveal customer preferences to dictate local assortment; structuring promotions that drive faster stock replenishment; and better customer connections to build customer loyalty. With the right intelligence, retailers can optimize their in-store SKUs and personalized presentation to minimize their on-site inventory while promoting greater product availability through other channels, such as online. The end result is more efficient use of shelf space while improving the customer experience.

The key is regionalization and mapping stocking strategies to your local demographics. In the next blog entry, we will explore what Sahir and his colleagues have to say about unit-level merchandising for regional storefronts and how more efficient process management can increase sales and margins.

You can view the full webcast on “Merchandising Optimization in the Digital Age” here.

RSR’s fifth annual study of the subject retailers reiterates that the need for speed remains the most frequently cited business challenge driving the need for new BI and Analytics. But while average and laggard performers are concerned that don’t get information quickly enough, most Retail Winners worry that they are unable to react to what it reveals quickly enough. For most retailers, “consumer grade usability” has become the order of the day, as many retailers seek to use “smart” mobile technologies such as the iPhone and iPad in their operations.

The ability to act on customer-critical data in a timely fashion is what keeps smart retailers ahead of their competitors. Even with the best business intelligence, it’s difficult to identify the retailer’s best customers quickly enough to map to their changing needs:

This is problematic, given that most small and mid-sized retailers attempt to differentiate through knowing their customers and the products they prefer. Without a proper BI infrastructure and tools, they may find themselves losing their most important advantage against their larger competitors. When Amazon.com knows your customers’ preferences better than you do, a local retailer is in serious trouble.

The report also notes that retailers need to change the way they access BI. Consumers are ahead of store managers when it comes to data
access, since consumers can get most of their shopping insight from their smart phones. As the report states, “Store Managers and employees must be armed with up-to-date information, and can’t be expected to sit at desks or pore over reports while customers wander around the store, smart phones in hand.” However, a number of vendors (including Groupsoft) are emerging with mobile BI applications that will put vital analytic information at store management’s fingertips while they are on the store floor.

And one of the biggest operational impediments to gathering and applying BI is information silos. Seventy-five percent reported that siloed
information and legacy systems that make it difficult to share information was one of the biggest impediments to delivering next-generation BI capabilities. The retail winners are learning hot to adapt with operational unites that work cohesively together; 25 percent fewer winners cited organizational silos as a significant challenge.

The good news is that more retailers are looking to undertake technology pilot projects. They are working on more pilot projects to demonstrate the real ROI from BI, with strong executive-level sponsorship.

Some of the biggest revelations include the fact that moms are buying direct, and that they are actively looking for deals:

Moms buy direct, most at least annually and 31% at least monthly. Just over half of moms report greater interest in buying direct since becoming mothers, primarily looking for special prices and deals, although many appreciate the ease, immediacy and ability to locate problem-solving products that direct marketing offers. In big numbers, moms are electing into product and retailer emails (83%), rewards programs that use email (77%) and daily deals such as Groupon or Living Social (61%).

Rewards programs seem to be a big hit with working moms, and they are looking for customized deals targeting their family’s needs:

When asked about privacy, 64% of moms either “appreciate that offers are fine-tuned to me and my purchasing“ (29%) or accept some loss of privacy as “a fact of life on the internet” (35%). Furthermore, among moms with a now greater interest in direct marketing, more than half attribute their increased interest to “offers customized to our family” – offers that plainly employ demographic and/or product purchasing data. Responding in verbatim comments to a question about which brands’ communications they like, many moms cite emails and coupons that provide child-developmental information, and offer coupons based on their baby’s age or their own recent household purchases.

At the same time, moms don’t look to social networks like Facebook for shopping ideas. They will “like” products and pay attention to brands they track, but overall they feel that advertising on Facebook is getting out of control. To quote one respondent, “I go to Facebook to socialize, not to shop. When I want to shop, I will go looking for what I want by Googling it or having it delivered to my actual email.” However, recommendations for products seen on Facebook to matter, and 40% of responding moms said they made a purchase based on a Facebook recommendation.

What this survey reveals is that tracking customer shopping habits and developing targeted offers is more important than ever. Customers like busy moms respond to offers relevant to their needs and the needs of their families, and the right offer will bring them to an online storefront, or drive them into the store to make a purchase.

For retailers, this means gathering analytic data at the point of purchase is important. And what’s more revealing is being able to assimilate that POS data into relevant customer profile information that makes it easier to create compelling offers.

As digital marketing continues to evolve, point-of-sale information gathered at the register, combined with shopping demographics and customer profile data, will drive special offers delivered via Shopkick, Groupon, and through social media outlets by Facebook. Analytics enable micromarketing in a new way that will improve consumer loyalty and increase sales.

The network economy is having a profound impact on consumers, vendors, and retail partners. Consumers are increasingly searching the Web for bargains and ordering online. They also are using their handheld devices to scope out deals from location-based services such as Groupon. In turn, retailers are using computer networks to more readily access business-critical information. iPads and handheld devices are being used for in-store research, inventory tracking, and more. And with the growth in popularity of mobile networking devices store managers can access analytics from the corporate ERP system to guide stocking strategies, place the stocking orders, and even track shipments in transit, all from their handheld.

Just as consumers are using their smart phones and handheld devices to lead them to their next shopping experience, retailers are relying on their handhelds to serve up the analytics and data they need to be smarter in their stores. They are using mobile devices to get real-time access to customer views, sales order analytics, and supplier analytics. Using an iPad or handheld device you can get a 360-degree view of the customer, including top customers, lead status, invoice balance, and more. You can assess sales order analytics by category, product, or geography, with comparative information for stocking, such as performance yearly, quarterly, or monthly. Or you can perform supplier analytics to determine the best suppliers for a specific product, which are your high-value products, and who are your top supplier performance.

Plus, having mobile access from the storefront to the enterprise network allows retailers to gather real-time information about customers and send them back to the corporate network from their stores. For example, you can capture sales leads on site, including customer location, and correlate the customer with a sales history from the ERP system to provide better customer service. Or you can generate a sales quote, including delivery information, discount information, and billing approvals. Or you can conduct customer surveys, including audio notes and geotagging, and report the information directly back to headquarters.

And there are routine business approvals, such as purchasing, travel expense, contracts, etc. Even real-time alerts take on a new meaning with the use of a robust enterprise network and wireless access.There is no question that better intelligence drives better profits. Better
connectivity provides better intelligence, which means better customer service and improved profits for everyone on the value chain.

If you are interested in learning more about how better intelligence drives better profits, be sure to join Groupsoft and the Aberdeen Group for a free webinar entitled “Mission-Critical Merchandising and Replenishment: Increasing Customer Traffic, Volume, and Profits” on November 2.