Robert Diamond, Chairman
Five simple but profitable questions every retailer should be asking
- Do you end the season, quarter or month with a significant performance gap between forecast and actual demand?
- Are your prices fully based on customer insights and business goals, or rather tactically driven by considerations about cost and competition?
- Did you invest significantly in promotions and temporary price reductions to clear excess inventory?
- Are your retail forecasts leaving substantial margin value on the table?
- Last, but not least – can you accurately measure the answers to these questions in a way that can guide future trading decisions?
Introduction
Few industries are as brutal as retailing.
The challenges include hyper-competitive multi-channel markets, combined with the complexities of global sourcing within the context of broad ranges that have strong inter-relationships across products, categories and competitors. Additionally, all this is often masked by high volatility in sales data and seasonality at both the macro and micro-levels.
This is the minefield facing retailers who are asked to place forecasting bets an entire season, or at least months, in advance.
While promotions and markdowns – relatively blunt tools – can be used to reduce waste and sell through excess inventory at a hopeful profit, they also create additional complexity in monitoring demand and impacts. At the end of the year, the majority of a retailer’s margin is made – or lost – depending on the size of the gap between forecast and actual demand.
This white paper looks at the ways retailers can improve forecast accuracy and price / promotion decisions. Fixing each of these areas can produce powerful standalone results but, when managed together, the synergy is unstoppable.