How is assortment planning changing?
"Procurement" or "Assortment planning" is no longer a matter of negotiations and sourcing. With the advent of the DTC movement, more retailers and leveraging new approaches and tools to bring products to market.
Shift in Dynamics
Brands no longer need to be entirely dependent on retailers
In the past, brands and manufacturers were heavily dependent on retailers and distributors in order to bring their products to market.
Today, the dynamics are changing.
If you were an upstart in the past, you had to beg retailers and distributers to carry your products just so you can collect your first $10,000 in sales. There are two unique jobs here; product awareness & attracting customers.
With a budget of <$100 a month, you can potentially reach a global audience with just a website.
Naturally, getting a site up isn't enough. One still has to attract and retain customers to the site.
You could either spend on adverting or diligently work on SEO for a few weeks. Either way, the cost of depending on a 3rd party is drastically reduced.
Owning the Relationship
Aside from the two jobs mentioned above, brands are starting to realize the value of owning the "relationship" with their customers.
"Relationship" can be split into two sub-variables: Sales data + Audience
Unfortunately we still haven't found a formula to quantify the value of "relationships" but we can quantify the value of data and a potential audience.
Here is where the new spiral begins.
Data + Audience
With transactional data and a potential audience on-hand, retailers and brands have shortened the feedback loop between product design, development, sourcing and/or planning.
This advantage compounds.
The "better" products your bring in, the more your audience grows. The more your audience grows, the more your potential customer list grows. The more your potential customer list grows, the more sales you get. The more sales you get, the more cash you have to invest in product...
This is the new spiral.
How will work change?
Well, a conventional procurement management structure is out the door.
An agile work structure will be inevitable. The tighter the feedback cycle, the quicker your advantage compounds.
Siloed assortment planning will be replaced by agile, cross-functional teams that can work with other functions such as category management, product development and supply chain.
The agile process can't succeed without clear objectives. Teams will need to own numbers like sales velocity, category turnover rate and/or category cashflow to tweak and improve performance over time.
Taking a page out of the software engineering playbooks, a VP of Product will need to start instrumenting tools to start measuring and compensating teams based on their performances.
As retailers and brands both race to optimize their procurement and assortment planning functions, new functional tools will have to emerge.
We are a product analytics platform for retailers and brands.
Or, differently put, we are building tools to solve the new processes started above.
We have three bets.
1. An analytics tool that helps merchandisers to figure out which products to bring in, sunset and reorder.
2. A "CRM" equivalent for suppliers (Focused on their products not their contact information)
3. A feedback/survey tool to help procurement teams understand what their shoppers really want.