Digital technologies have taken a bit longer to penetrate the retail space than they have in other industries such as banking and music, but it’s clear that it’s truly our turn.
Most conversation tends to focus on mostly macro terms: the changing preferences of Gen Z, the “retailpocalypse”, etc. But how are shifts changing the playing field at a role-specific level?
To paint us a picture of the future merchandiser, we reached out to the Regional Supply Chain Manager for the Chalhoub Group, Sébastien Verdier. Verdier has managed merchandising and supply chains in Europe, South and Central America, and now the Middle East, in Dubai.
The Chalhoub Group, for its part, is the largest retail operator in the Middle East. The group has doubled its efforts in terms of digital transformation, giving itself a 900-day deadline (about one year left, at time of print) to totally rewire its operations.
The objective is to transform from a traditional distributor and retailer in the Middle East to a hybrid global retailer, “bringing luxury experiences to the fingertips of customers everywhere” through centralized processes and heavy investments in innovative technologies.
Hi Sébastien, thanks for speaking with us. Your global experience means you must have a lot of perspective on the future of merchandising. But before we get into what’s changing, what would you say are the main concerns of traditional merchandisers?
I would say that traditional merchandisers have two main concerns.
First, there’s the complexity of dealing with the sheer number of SKUs. The Chalhoub Group’s fashion vertical, for example, has 28 brands. Each brand has at least two seasons per year to be bought and distributed every six months. That’s an average of 1 million SKUs per year. We’re always looking for ways to reduce the number of SKUs, but this is a common inventory oversight and distribution pain point.
Another concern for today’s brick and mortar merchandiser is, of course, that of grappling with the major challenges in the age of e-commerce. Some merchandisers were able to see the shift coming and identify new players entering the scene but may not have been able to ride the wave, maintaining their grasp on traditional merchandising methods.
And what about the next three to five years, how do you see these concerns shifting?
I foresee omnichannel solving a lot of problems that traditional supply chain and merchandising managers face. It’ll be the link between brick and mortar and digital channels. And since we’ll have a unified view of stock and distribution, we’ll be able to decide what type of business we’re really doing. Is it digital? Brick and mortar? Subscription-based? A combination?
What specific technologies will have an especially strong impact on merchandisers?
Blockchain, no doubt. As a luxury merchandiser, it’s essential but often quite difficult and time consuming to trace products back to initial suppliers in terms of origin, materials, color, and more. Sometimes there is no other recourse than to base item descriptions on images! Without the right information at the right time, time to market gets delayed.
Blockchain is set to streamline our ability to track items and guarantee authenticity. It will provide the master market data we will use to support back office work. And this work itself will be revolutionized. I say that because blockchain data comes with automated, integrated calculation which is more efficient than relying on basic formulas. Algorithms will bring great returns in terms of sales, gross margin, and financial and operational KPIs.
How will AI and the automation of many retail tasks affect merchandisers?
Traditional merchandisers still do everything manually. There’s often an ERP from which you can extract data, but that’s about as far as automation goes. In fact, a lot is still done through Excel, resting on the sharp eye and experience of people managing them.
But what happens when someone leaves? Skills walk out the door with them. Even if a new person comes in and brings along good ideas, they’re most likely still going to be manual.
The clearest advantages of AI automation are efficiency and all the time it will open up for the team. They’ll spend less time on Excel and more time adding value elsewhere in the company or supply chain. We’ll also see immediate impact since will likely be fewer human errors.
For example, the process of store transfers is normally extremely manual and tedious and can take days to complete. During that time, the team can’t dedicate time to anything else. Working with Nextail allowed us to run the whole store transfer scenario in just half an hour, and it provided just as good, if not better, analysis. The team gained back three days of work, and even more importantly, the luxury of time to actually analyze the data. That’s something we don’t often get to do.
Have the KPIs shifted for merchandisers in today’s climate, or are they fundamentally the same?
I would say that KPIs have remained mostly the same. There are two types: First, final share KPIs (sales, gross margin, profits), which are basic. Then, there are the KPIs related to merchandising operations (stock value, out of stock in store, out of stock in distribution centers, sell-through).
So the KPIs themselves aren’t changing but I would say that the target is shifting to become more efficient, and that’s great, but I think we need to use data and insights we gather from new technology like Nextail, to take the next step.
Retailers are also getting a lot of heat to up their game when it comes to sustainability. How are ethical and environmental considerations impacting merchandisers?
One area in which merchandisers can have a major impact is in reducing the number of air shipments. The nature of luxury in this region, and the fact that we’re stretched thin in terms of timelines, mean we have to do a lot of air shipments, especially to and from Europe and Asia. The Chalhoub Group has asked merchandisers to do as few air shipments as possible in order to be more sustainable.
In fact, the group has made sustainability a major focus of initiatives — going all the way from ensuring the use of solar energy to planting trees and cleaning oceans and beaches — it’s so important, everyone in the community must participate at least once a year in such initiatives!
What shifts have you seen in the nature of distribution, specifically in luxury?
Today’s luxury customers want to try items on before buying but they also want to be able to buy it from wherever they are in the world. Perhaps they go into a store, try something on, but then order it online. We then have two constraints: customers must be able to try items on whenever and wherever, and once they decide to buy it, it must be available in a very short amount of time — and this timeframe keeps getting shorter.
Another shift is the extreme importance of providing a satisfying and personalized customer journey at every touchpoint, in-store or online. In a store, this includes small things like being polite or offering a glass of water. But to provide a truly pleasing experience, you need to take the time to get to know the customers and create a personalized journey. This means knowing their preferences, desires, the industries they prefer to buy from, and other demographic information to deliver them the right products, with the right quality, at the right time.
It’s no secret that business transformation can be an uncomfortable process for staff. How do you motivate staff through periods of enormous change?
One way is offering them training in skills in which we are lacking in different areas of the company and not necessarily just within merchandising. We want staff to see themselves as part of the whole Chalhoub family, feel recognized for adding value to the bigger picture, and develop new skills and grow professionally.
We also want staff to develop new skills within the right structure, which means making sure that the person they report to is dedicated to merchandising and supply chain — basically someone that can act as a mentor and make sure they are walking the right path.
Of course, it’s important to quell fears they may have regarding automation and job elimination. That way, staff will be more confident and champion the introduction of new technologies, understanding the major benefits they pose them. With more pressure than ever to work efficiently, time saved from automation like Nextail means we can focus on strategic tasks instead of mundane data entry work — and that’s a win-win for everybody!
It’s clear that the role of merchandisers is changing as we speed into the future thanks to digital technologies. The Chalhoub group is a great example of a major luxury retailer who has fully embraced the need to rethink the way things have always been done and to dedicate precious time and resources to readying themselves for what’s to come.
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