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Curing the 'Magic Bullet Syndrome'

October 7, 2013

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research's weekly analysis on emerging issues facing retailers, presented here for discussion.

There's some good news in our annual merchandising benchmark report, but digging beneath the surface, it's not all sunshine and birds.

When given a laundry list of automated tools and techniques they believe are critical to their retailing success, most survey respondents identified all of them as at least "somewhat important."

Theoretically, people like me, who came out of the IT side of the retail house, should be rejoicing at the new acknowledgement of the value of science. We've waited a long time for a "changing of the guard" from old-line merchants who relied on gut feel and would toss off most computer assists as irrelevant.

But there's a problem. For virtually all modern tools and techniques with the exception of forecasting, retailers didn't say they have a solid understanding. Rather they selected "familiar with the concept" to describe their depth of knowledge regarding tools and techniques. Houston, we have a problem.

I call this phenomenon "Magic Bullet Syndrome" and we see it a lot in our benchmark studies — passion without understanding.

The danger of placing a disproportionate belief in the value of technology without fully understanding it is two-fold:

  1. Dashed expectations when the tool doesn't solve retailers' problems;
  2. The risk of losing touch with the art of merchandising. The art of merchandising is all about product selection. It has nothing to do with "how many" or "when" to buy. It's all about the "what."

We have plenty of data to support the dashed expectations problem. Laggards often report new technologies have not delivered promised benefits. Of course, that leads us to always wonder whether they had inflated expectations. That's why I call it a magic bullet. It is the belief that technology can turn around a failed product mix.

I don't have a lot of hard data about the second part beyond the obvious — customers have cut their purchases of apparel and other broadlines. When the latest electronic gadget is sexier than the latest outfit arriving at a store near you, you know the industry has a problem. Deborah Weinswig, Citi's broadlines retail analyst, believes that's a big part of the reason her coverage area sales have been depressed. Consumers are spending on cars, homes and associated projects and electronics (her "C.H.E.A.P." consumer concept) more than they are on things they will wear because there's not a lot of freshness out there to grab their interest.

And to be really clear, it's not just about fashion. My once favorite grocer just did a remodel that made the aisles wider, but also reduced the amount of inventory in the store by more than 15 percent. Where the heck did the mint chocolate chip ice cream go? What were those merchants thinking?

Obviously I'm a proponent of applying science to merchandising. Still, if you ask our clients, they will tell you they know they'll never supplant the art of picking the right product — the "eye."

Discussion Questions:

Is retail now experiencing an over-reliance on technology when it comes to merchandising? Is the push for lower costs or some other factor causing it? How can technology and "art" be better balanced?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much are retailers relying on technology and marketing more than merchandising to drive sales?

Comments:

The retailer with the most tech toys wins? As long as the marriage of tech, useful and targeted purpose, and people understanding the practical and applicable usage of any tool is in place, then tech has great payback. Where things tend to go off the rails is as RSR has pointed out, there is no single technology/tool that has the possibility of changing and improving everything, the magic bullet. Few innovations are so broad as to be able to satisfy a wide range of use cases successfully, and understanding what technique works where, is key.

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Peter J. Charness, SVP America, Global CMO, TXT Group

Technologist's have been pressing their agenda for years. I love technology and what it can enable. But all too often, technology is viewed as a single entity much like the proverbial hammer that sees every challenge and problem as a nail. What we are experiencing is technology that is disruptive and part of a integrated link in a long chain of processes and workflows.

Whenever technology is being considered, it is imperative to always first answer the questions of what, why and then how. Understanding the retail landscape and what, where, when, why and through whom money flows in the river of commerce is imperative prior to determining what and how technology will improve the process and experience for the digitally empowered consumer begins to balance the scales of the art and science of retail and merchandising.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

Passion for technology today is making merchandising into a basic science and thereby losing the fun and magic in the "art."

A good balance between technology and "art" won't come about soon with the new world of retailing so engrossed in digital world toys and techniques that they do not included some old world "art." Believe it or not, there were grocery stores in the past that did a huge tonnage of volume without even scanning.

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Gene Hoffman, President/CEO, Corporate Strategies International

I'm a huge Paula/RSR fan but I am puzzled by the "IT=science" assumption.

IT runs on software. Software runs on code. And there isn't a single man-made product with a worse quality record than software and code. Check out the term sheet you acknowledged and software developers pretty well tell you it won't work the way it is supposed to.

I've mentioned this before, but let me reiterate that software guru Caspers Jones says the typical application has 750 faults (in my company we assume 1 fault per 1,000 lines of code, others less gracious estimate 15-20). Of those 1/3 or 250 faults can lead to shutting the program down or, more likely, lead to erroneous conclusions. When you hear of "scientific" tests not being replicable, it may not be a difference in the actual results. It could well be because the software processed the data erroneously or at least differently. The net here is no company can truly rely on the results produced by their IT. It is not science at all...if you define 'science' as unarguable truth.

Let me rant on. Most organizations have a dog's breakfast of software programs all mixed in without a clue where they came from or who programmed what into them. And every tweak, every upgrade, every game your kid downloaded on your laptop without you even knowing it adds errors, faults, incompatibilities and confusion to your system. We pride ourselves on storing this 'data' in "the Cloud," capitalizing the word like it was a deity. But we have no idea where this data is actually stored and who has access to it. IMHO - as essential as IT is, it is not science. It's a tool and an unreliable one at that.

Let me be quick to conclude that this does not counter Paula's conclusions that there is a huge 'gap' between retail reality and retail hope. And that 'gap' is best filled with 'gut'.

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Ian Percy, President, The Ian Percy Corporation

I'm a big fan of the balanced approach, having done the technology side of the business. The key reason to use technology is to generate cost savings. As Paula writes, it's easy to abuse. That's why we encourage testing solutions before implementing, whether it's with us and virtual reality or with controlled store tests.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

In our consulting work these days, we often hear the phrase "can't you design a tool for that?" or "can't we automate it?" Everybody wants a technology based solution.

Technology can be a great asset to retail. But there is a tendency to overestimate the value. Technology is often just an enabler, not a solution. Retailers need to fully understand the issue or problem and design a solution that includes a process and training. Even then, there must be an ROI measurement to make sure it's not just an attractive toy.

Incidentally, isn't there an app for that?

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Raymond D. Jones, Managing Director, Dechert-Hampe & Co.

Having been both an IT executive and a merchant for large retailers, I can say definitively that there has always been and always will be a 'magic bullet syndrome', though not necessarily limited to IT. If we just put in this new gadget or get shipping from this vendor, the sky will open and profits will rain down upon us. It is just human nature. It is also empirically incorrect. IT has greatly expanded the reach and abilities of retailers.

In the end, however, it is nothing more than a set of tools, which must be embraced by the organization, learned, and practiced in order to capture their potential. Someone could give me a Stradivarius violin, but that would not guarantee beautiful music.

Bill Emerson, President, Emerson Advisors

There is a classic saying about retail: "It is both an art and science."

While there is no "magic silver bullet" that will do it all, I agree with Paula Rosenblum that there is increasing science to get the "how many," "when," and "where" right.

Regarding getting the "what" right, there are definitely retailers like Nordtrom and Macy's who are using Pinterest, Facebook, Twitter and other social media to engage consumers to indicate what they want, and even vote as to what goes where in store and online.

In an omni-channel world, there is whole new realm of opportunities to plug into and listen to what consumers "really want." And yes, there is technology for that. But, the real key to success is "consumer centric" merchandising over product display marketing.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

I am not sure who moved your ice cream, but can guess that it was a technology USER that was USING the technology vs. LEVERGING the solution.

Some retailers - and many other other specific-market businesses - have problems with the USE vs LEVERAGE issue. Many of today's coolest retailers use technology and really improve their overall businesses - including merchandising. The issue is, what a retailer EXPECTS from the technology can never be gained by just USING it. Technology in its purest form must be leveraged. Why? Use of technology cuts out the human element - the element that created the technology. To gain the most - leverage tech vs use and the gains will be there.

Very heavy thinking for a Monday....but a good sample of this is the GPS device. If you just USE it then you will be lost. Interact with it it and leverage it, and it is a real help. Merchandising is the same - especially planning and forecasting.

Switch grocery stores. When they dump YOUR favs then dump them. Want me to call them for you?

Tom...techie Monday....

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

Boy, do I agree with Bill! How many times has a product manager or president said "let's change our graphics," or logo or rearrange the store? Each time there is an expectation of an increase in sales. The magic bullet syndrome is alive and well and quite detrimental in business and life.

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Gene Detroyer, Professor, Independent

There is no substitution for good old wisdom! If you haven't read Malcolm Gladwell's book, "Blink," you should.

Yes, technology is a great addition and necessary with today's consumer, but it takes wisdom to know what data counts the most, when and where.

Yes, Paula, there is no "magic bullet." The magic of merchandising comes from wisdom applied to technology!

Lee Kent, Let's meet share and succeed in Retail, YourRetailAuthority

I don't think it's so much that retailers "over-rely" on tech, it's that too many bad retailers think tech will make them good retailers...it won't; this is one case where 'Livingston's Law' applies: tech wizardry notwithstanding, ultimately bad retailers do badly, and good retailers do well.

'notcom'

Merchandising technology can be pretty helpful for managing space, assortment, price, promotions and replenishment in fast turning categories. Determining what items and styles to introduce in seasonal categories requires a different kind of expert discipline.

Each has its place in modern retail. Empirical tools should ideally make certain routine, repeat decision processes and operational factors semi-automatic, freeing brainpower for the judgement calls that (still) make merchandising an art.

I think it's the technology vendors who are most in love with data-driven solutions, automated analytics, data modeling and eye-candy dashboards. Retailers are bombarded with publicity and pitches about this stuff, so it's all a bit familiar, but real knowledge is thin.

Right now, retailer practices are lagging behind retail tech. They should be wary of large systems investments that achieve small performance differences.

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James Tenser, Principal, VSN Strategies

When you combine the low cost of computing with the vast amount of data being stored in the cloud it makes absolutely no sense that the merchandising "what" answer remains any sort of mystery.

I think the thing that many people miss is that the real thing driving the new IT capabilities is not "Cloud Computing." Sure cloud computing is a critical component, but the real drivers are all the data collection facilities. Whether it is the TV camera in the parking lot to warn of potential register back-ups or a temperature sensor that ensures fresh product is delivered to the customer, it is the collection of all this new input from a multitude of sources that makes modern merchandising feasible. Very simply, you can use your customers' frequent shopper data to identify them on Facebook (by address, email, or whatever). Now you know how they are likely to react to your promotion or product mix. So using new data sources and cross associating them with old systems can be a lucrative technique.

But merchandising is going virtual. In-store displays are not as important as the thing that brought the consumer to the store. Whether it was the offer online of free technology classes in the store or a fashion show, or a cooking demonstration, the customer needs to be enticed to schlep out to the store. A hot new website that hosts specialized videos and chances to win an afternoon with the latest heartthrob is great merchandising. Which makes you realize what an important part if the process is dedicated to your online shopping cart.

Many consumers have looked at the supply chain as one continuous channel with their decision to buy online or in the store simply a matter of convenience. Brick and Mortar operators need to take the same perspective. They need to understand that the cloud does not just have to hold bits and bytes. By integrating the store experience with the online inventory in some fulfillment center they are able to satisfy the wish for both high demand and more esoteric items.

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Bill Bittner, Principal, BWH Consulting

Successful retailing requires the skillful blending of art, craft and science. Those who seek to reduce it to science, to mathematical modeling and probability, will always be disappointed, and retailers who rely on such technology to be the strategic difference-maker will find themselves lagging behind.

The attitudinal problem can be found in basic terminology. These technologies are marketed as "solutions", when in fact they are merely tools. Like any tools, in the hands of skilled practitioners they can be highly effective, while in others they are merely blunt instruments.

Corporate retailers understand this. But the technology can be seductive. In an industry where margins are thin, and little things mean a lot, the technology seems to afford the opportunity to quantify a lot of little things, in a way that has a big impact.

The technology can provide a lot of data, and maybe in and among all of that data there are valuable pieces of information. But successful retailing stills requires experienced, skillful, intuitive merchants to apply that information in distinctive, meaningful, compelling ways. And that can't be quantified, or modeled.

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Ted Hurlbut, Principal, Hurlbut & Associates

If I were a retail CEO or CIO, I would prioritize merchandise technology investments that enhance and speed communication between the shop floor and the planners and buyers at the head office. While a great eye for product can't be automated, timely insight into what's selling and what consumers are responding to can help the average buying team outperform industry averages.

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Martin Mehalchin, Partner, Lenati, LLC

The challenge I see after implementation of some technologies, is that the implementation is looked at as less than successful, however after investigation, we find that utilization of the app is at 20% or even lower. Fully utilizing the app will tend to drive more positive results.

The balance of art and science in merchandising needs to remain intact. There is still a certain amount of human judgement, based upon real facts, that should be injected into merchandising plans. The balance can be maintained by leveraging effective technology capabilities along with merchants visiting stores four days a week, and working remotely as much as possible, to see the exceptions that happen on the sales floor.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

You can have best in class technology but be the worst-in-class retailer.

Many of these new, great retail instruments are implemented, but aren't playing the same tune. To continue the analogy, many lack the right skilled musicians and almost all lack a great conductor.

So often each is delivering a slightly different approach or is applying a different formula or algorithm, or is applied differently within each category. They end up optimizing for slightly different things.

Unfortunately this plays out in the customers' eyes when they can't see what they need any more or different categories serve different needs for instance.

The key to software working in concert is the customer data and insight foundation on which they should be built. This is not just a technical foundation but includes the right organization design, leadership and rewards.

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Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

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