How Merchandising is Affected by Technological Change Report by LoisBetts

HOW

MERCHANDISING IS AFFECTED BY TECHNOLOGICAL CHANGE

BY LOIS BETTS WORD COUNT : 2631

1.0 INTRODUCTION

The key elements of the merchandiser role are demonstrable in the‘ concept to carrier bag process’, particularly the desirable responsibility, skill set and personality attributes. Recently, industry researchers provided contradictory definitions of the merchandiser role, from ‘responsible for setting the financial parameters of a garment range’ (Goworek, 2007 p.26), to ‘total process of stock management’ (Jackson and Shaw, 2001 p.63). Whereas, Varley adds perspective, describing merchandising as being ‘concerned with the quantitative aspects of buying .. responsible for estimating sales, planning deliveries and distribution of goods’ (Varley, 2006 p.39) This implies a lack of uniformity in the merchandiser role, which varies across different organisations with the structure and hierarchy of the merchandising team and the autonomy given to subordinates (Varley, 2006). This report considers the role of the merchandiser within three discrete fashion retail brands: Primark, Ralph Lauren and Amazon and looks at how those brands utilise technology to support their Merchandisers to enhance business and improve customer experience.

The report also considers how the trading environments of two high street retailers use merchandising and environment in stores to attract customers and whether this demonstrates innovation or simply effective marketing. It questions the statement ‘Survival of the most innovative’ comes into play when companies need to create desirability and fascination for customers to attract them in-store (Gage, 2017). 1

Primark is a mass-

market value chain retailer with a mission to “enrich the life of everyone with fashionable clothing regardless of social status.” Convenience and value is paramount, with less focus on the overall

shopping experience. Primark have no transactional website and negligible in-store digital innovation, but this seems to not impair their continued success, which is surprising as around

PR IM

half of Primark’s customers are under 35 (Mitchell, 2013). Research into Merchandising within Primark found two discrete roles: Assistant Merchan-

diser and Merchandiser. The Primark hierarchy consists of five layers, implying that each role

has significant influence on the particular range - the structure being neither flat or tall advocating that employees understand their role completely. This benefits Primark as employees need minimal guidance, thus increasing organisational efficiency (Omar, 1999). Examination of key roles of shows focus on analysis, planning, acquisition, handling and control of merchandise investments (Careers.Primark, 2019). With respect to IT support to the merchandisers, Primark appears to have little in terms of transformational technology such as Artificial Intelligence (AI), Augmented Reality (AR) and Blockchain, to support their Merchandisers. It relies heavily on active social media presence (Facebook, Instagram, Twitter etc.) for promotional opportunities, relying on word of mouth generated by their social media strategy (Gage, 2017). Primark has suffered reputationally from perception of “sweat-shop” clothing manufacture and has introduced a web-based supply chain tool, to audit supplier compliance performance against ethical standards, to support the merchandiser and buyers. Primark’s technology usage is not focused on enhancing customer experience, but to support their teams, including merchandisers, in delivering a high-volume, low-margin, speed-to-market model. Technology is fundamental to this, with high-profile social media Figure 1 - Diagram showing structural heirarchy of Primark (Author, 2019)

informing demand whilst handling and control is supported through global supply-chain management IT Tools.

2.1 RALPH LAUREN A hugely successful clothing brand globally, Ralph Lauren built its status on both its line of luxurious designer clothes and its position as a top marketing designer (The Business of Fashion, 2019). Due to recent declining revenues and loss of brand appeal, Lauren is reducing dependence on retail outlets and now boasts 14,000 products available online, double that of their nearest luxury fashion competitor, Armani (Pearson, 2019). Business of Fashion named Ralph Lauren “the master of Merchandising from the level of collection planning through to visual presentation”, stating they have grasped the art of merchandising by recognising the balance between giving customers not just what they want, but also what they need. Research into the Merchandiser role at Ralph Lauren, established two roles: Associate Merchandiser and Merchandise Admin Assistant (Glassdoor, 2019). Comparison of the roles shows responsibility for enhancing brand identity, planning sales targets and SKU’s, reviewing of post-market recaps and financial analysis. (Glassdoor, 2019). Compared to Primark, Ralph Lauren’s structure is tall and consists of more layers, implying employees are given less autonomy within the organisation with more hierarchy in decision-making (Berman and Evans, 2012). This may lead to more reliable decisions making, higher- efficiency getting product to market and therefore meeting KPI’s. Ralph Lauren have leading-edge technology to support merchandisers and consumers, using cam-eras and beacons to record shoppers entering and leaving a store, and how they navigate it (Peason, 2019). This establshes the most popular, attractive lines and drives layout design to optimise customer experience and revenue. A recent report on New York luxury stores by Contact Lab found Ralph Lauren to be the retailer most successfully incorporating in-store technology. It was the only company surveyed that had implemented smart fitting rooms (Milnes, 2019). These support the Merchandiser decision-making through merging digital technology with in-store retail, recognising items a customer tries on, displaying products in the changing room, showing different colours and sizes plus alternatives and managing lighting and language support to optimise the customer experience. The merchandiser Figure 2 - Diagram showing structural heirarchy of Ralph Lauren (Author, 2019)

receives data on which items are being tried on but not purchased and best conversion rates, allowing smarter merchandising decisions.

Amazon offers a diverse range of products and services to its customers, including apparel. Amazon have the capability to offer e-commerce operations through their online technology, allowing partner fashion companies to benefit from Amazon’s pre-existing brand loyalty (Garden and Profiles, 2019). Amazon have transformed the online shopping experience, but the brand is now advancing into physical retail stores. ‘Go Stores’ combine computer vision and sensor fusion technology to automate the checkout process (Garden and Profiles, 2019). This means that consumers can pick-up items, and

2.2 AMAZON

leave without queuing or checking out, paying automatically via the Amazon Go app. There are nine Amazon Go stores open in the US and plans for thousands more worldwide by 2020 (Garden and Profiles, 2019). Amazon are also seeking to leverage consumer home placement of their Alexa and Echo products to enable customers to find, browse and buy Amazon fashion easily and efficiently, using voice recognition technology – inventing the concept of fashion voice shopping. This adds a new channel to Amazon’s marketing to personalise their customers experience and demonstrations their overall approach to sales: Know your customer very, very well (Garden and Profiles, 2019). The Amazon Go merchandisers primary responsibilities are to “Identify and implement process improvements and opportunities for innovation and simplification in planograms and merchandising.” This implies that for Amazon, technology considerably influences the online Merchandiser role, but they still perform more traditional functions, such as coordinating cross-functional teams and conducting financial analysis. Amazon’s hierarchical structure is similar to Primark’s however it is adapted for their online presence as well as new physical stores (Pegler, 2012). Amazon’s merchandisers use a plethora of transactional and trending data from browsing history, through to transaction data, and customer voice recordings to enables them to make smarter decisions relating to products, placement and trends, to drive increased customer brand engagement.

Figure 3 - Diagram showing structural heirarchy of Amazon (Author, 2019) 4

3.0 ANSOFF’S MATRIX Ansoff’s product growth matrix proposes that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets (Tutor2u, 2019). All three retailer examples are seeking to maintain market share whilst using IT to broaden their appeal to existing and potential customers. Of the three, Amazon are displaying the most aggressive Market Development, Diversification and Product Development characteristics. Primark are seeking to increase market penetration through Social Media, while Ralph Lauren are seeking to improve margins through enhancing their highend shopping customer experience. Amazon in-store strategy presents a higher risk approach because the organisation is moving into markets where it has little experience. However, researchers believe this is a respectable move by Amazon to provide convenience for the customer (Tutor2u, 2019).

Figure 4 - Tutor2U “Ansoff’s Matrix” Avaliable at: https://www.tutor2u.net/business/reference/ans offs-matrix

In conclusion, what has become apparent is that the merchandising roles is that it is as much about finance and science as it is about fashion trend and art (Jackson and Shaw, 2001). For all three retail models, effective merchandising is fundamentally linked to technology to enable faster, smarter decisions to be made, ensuring the right products are in front of the right customers at the right time. Creative implementation of technology to deliver better customer experience, more routes to market and better customer data will be fundamental to the future success of fashion retailing for all three companies.

4.0 TRADING ENVIRONMENTS

Brands need to sell more than just products to consumers, they need to sell the whole shop experience and atmosphere (Morgan and Pegler, 2012). Visual merchandising is the presentation of a store and its merchandise in ways that will seek to attract the attention of potential customers and motivates them to make purchases (Diamond and Diamond, 2011). Brands may be viewed as innovative or traditional. “Traditional customs, beliefs, or methods are ones that have existed for a long time without changing” (Collins Dictionary, 2019). Innovative means “featuring new methods; advanced and original” (Oxford Dictionaries, 2019). Visual Merchandising can often be the initial interface between an organisation and its consumer. The level of innovation experienced in store and within the overall VM can often be indicative of the type of organisation (Choo and Yoon, 2015).

Effective merchandising can be used to set the mood for what customers want to experience when buying: convenience, excitement or romance? Merchandising can be visual, aural or even aromatic and based on themes, colour, season or purely functional (Pegler, 2012).

SP EN CE R ND

Marks & Spencer offers quality fashion, food and homeware.

RK SA

They are perceived to be a traditional brand but state on their website:

“We understand the importance of Inspiration, being In Touch, Integrity &

Innovation and live by these values. Through constant innovation, we make our

5.0

products and tailor the shopping experience to delight customers.” (Global.marksand-

spencer, 2019).

M&S intends to “enhance the customer experience” by providing staff with tablets to provide customers

with detailed product information. (Wood, 2019). With the introduction of in-store wi-fi, M&S hopes customers

will view their website before buying the products in-store. QR codes will also be positioned around stores, allowing customers to view product details by scanning with their devices (Wood, 2019). This shows that M&S consider themselves an innovative brand, butthis potentially cannot be considered true innovation because they are harnessing established technology to simply enhance the shopping experience. It may be innovative for the traditional M&S demographic but is relatively standard across the wider retail marketplace. Figure 5- Store front photographs of Mars and Spencer. Available at: http://corporate.marksandspencer.com/sustaina bility/business-wide

In-store research found that M&S store’s designs are clear and easy to navigate, creating convenience rather than routing customers round the entire store to find what they are looking for (Mintel, 2019). The lay-plan of the store below shows a clear route on the floor plan for shoppers to take. Even though it is seen as a traditional store, their layout can be considered innovative by creating convenience through signage and visual merchandising to attract customers. Conversely, this could be seen as plain common sense, being driven by efficient merchandising and marketing.

A colour-coordinated range at the store entrance attracts customers and draws them further into the store. M&S also introduced ‘The fit and style studio’ in store, differentiating them from their competitors, such as Next and Debenhams. M&S now offer free instore personal styling from advisors, by appointment booked online or in-store (Marks and Spencer, 2019). Through this complimentary service, they are positively segregating themselves in the market by personalising customer service. For a ‘traditional’ store, M&S seem to be offering an enhanced, personalised service and see themselves challenging the true nature of innovation (Global.marksandspencer, 2019). Figure 6 - A group of primary reserach photos inside a Marks and Spencer Store (Author, 2019)

ET CR SE OR IA ’S

Victoria's Secret is a leading specialty retailer of women’s

lingerie, body care, accessories and lounge wear (Lb, 2019). In-store

research at Victoria Secret reveals they have selected the layout to attract

its target consumer, effectively displaying merchandise to represent their brand

image. They use two main types of fixtures; mid-floor and wall. Mid-floor fixtures are

free standing to both display merchandise and lead the shopper around the store (Morgan,

5.1

2008). These are seen on the store lay plan below.

Wall fixtures hold large stock quantities as well as providing a store backdrop. A mixture of these fixtures

creates an inviting and mesmerising store (Diamond and Diamond, 2011). Their layout leads customers around the store so that you must look at all their product like a maze. The stores dark black vs. pink colour contrast is striking and fits in well with the brand image.

Figure 7 - Victoria’s Secret Fashion show 2019 photographs. Available at: https://www.elle.com/culture/celebrities/g 24751220/victorias-secret-fashion-show-2018-looks/

Although the stores are the main brand identity, diversifying with an online store provides an alternative sales channel where partners can make purchases online because they were uncomfortable with the in-store environment. Victoria Secret play their annual iconic fashion show in the store background, portraying a fantasy that creates an enchanted atmosphere when you enter the store (Lb, 2019). Is this iconic brand image seen as innovative? Or is there too similar to other brands on the market and their business plan too simply identified and copied. Victoria Secret certainly displays innovation in their ambitious marketing strategies, including real-time streaming video of its annual fashion show on its online store, internet banner ads, even advertising during the Superbowl, which delivered one million internet hits within the hour. They have successfully integrated these channels, to target customers and drive revenue growth. An example of this is how it segments customers, messaging them based on location and demographic and then co-ordinating the issue of catalogues with e-mails, providing information and offers based on profiling allowing the customer to feel privileged and encourage repeat custom. Figure 8 - A group of primary research photos inside a Victoriaâ&#x20AC;&#x2122;s Secret store (Author, 2019)

6.0 STORE LAY PLANS The pictures show two completely different marketed and merchandised stores, with two different target markets. Superficially M&S defined as traditional, however, stores contain innovative ideas and layouts to attract customers and to differentiate Themselves. Victoria Secret have a distinctive brand identity; however, this can be easily imitated and have nothing new to offer what isnâ&#x20AC;&#x2122;t already on the market (Clark, 2015). So how can one be classed as innovative and one not? Innovation is easily linked with technology so if stores arenâ&#x20AC;&#x2122;t using technology, are they not innovative? All these factors lead to the conclusion that that true innovation cannot be reached.

Figure 9 - Diagram showing the lay plan of two contrasting stores. (Author, 2019)

A SWOT analysis of the lay plans of both Victoria Secret and M&S has been

6.1 SWOT ANALYSIS

carried out below.

Figure 10 - Diagram showing SWOT analysis of Figure 9 lay plans (Author, 2019)

7.0 CONCLUSION Innovation takes place at the intersection of fashion and technology, representing a powerful way to connect consumers to brands while providing distinct shopping and wearing experiences.

Technology offers the fashion industry a robust, consistent ecosystem comprising analytical data, AI, social media and augmented reality to support merchandising, marketing and procurement decision-making. This, in turn can support the retailers, both online and bricks-and-mortar in bringing new fashion to market by providing tools to streamline the supply chain processes and even support fast supplier contracting through Blockchain technology. Amazon are an excellent example where their move to voice interaction between humans and computers moves us to a new form of commerce – conversational which may, over time, remove even the need for buyers to type when making transactions.

On the high street, technology is underpinning the way retailers are interacting with their target market, through dictating the retail environment and influencing the consumers using intelligent marketing solutions to direct customers either through the store or to certain products.

So, is the fashion Industry innovating using technology, or is it simply embracing new technology platforms to enhance the efficiency of their business, leading to increased profitability and a more convenient customer experience? We cannot define ‘innovation’ itself as it depends on perception, especially with fast fashion brands now turning innovation into an expectation.

Therefore, the fashion industry can be seen in some cases as embracing technology in increasing efficiency and speed-to-market with supply chain and vendor management solutions but can also be seen as truly innovative in the use of technology to influence consumers’ purchasing decisions through identifying individuals and their tastes or shopping habits and developing personalised experiences for them. Amazon and Ralph Lauren are at the forefront of this movement, Primark are lagging behind and time will tell whether this may impact their business model.

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