Welcome to the New World of Merchandising

Retailing is and always has been an inefficient business. Retailers, particularly those that operate large chains, have to predict the desires of fickle consumers, buy and allocate complex sets of merchandise, set the right prices, and offer the right promotions for each individual item. Inevitably, there are gaps between supply and demand, leaving stores holding too much of what customers don't want and too little of what they do. Now, however, a new set of software tools promises to revolutionize the entire merchandising chain. These merchandising optimization systems, as they're called, determine the right quantity, allocation, and price of items to maximize retailers' returns. By applying sophisticated data processing techniques to existing inventory and sales data, they accurately model future patterns of supply and demand at the item and store level. In other words, they turn the art of merchandising into a science. Early users of the new software, such as Gymboree and J.C. Penney, are already reporting promising gains in gross margins in the range of 5% to 10%. Retailers are also seeing significant increases in efficiency: At one chain, for instance, planners' productivity rose 20%. Equally important, retailers are showing improvements in customer satisfaction, as shoppers become more likely to find desired merchandise in stock at fair prices. This article provides retailers with a guide to merchandising optimization systems, explaining how they work and how they change processes at each step of the merchandising chain.

• Marketing strategy
• Economic forecasting
• Web and mobile applications
• Analytics and data science
• Inventory management