Personalized Marketing and Merchandising Rule as Digital Commerce and In-Store Shopping Converge

Not All Products Are Created Equal
During the holiday season, retailers go through a lengthy process of ordering inventory and categorizing products. The key lesson that most successful merchants understand is that there are two main classes of products: seasonal and gift giving. And they aren't all created equally.

Retailers look at in-store merchandise mix and evaluate pricing. Marking down a $100 cashmere sweater compared to a $10 ornament factoring in the time it takes for staff to markdown items, profits must be safeguarded.

There are some seasonal gifts that lose their value almost immediately on Dec. 26. Items such as Christmas trees, holiday stockings and ornaments lead holiday merchandise. Retailers like to show consumers that they have a varied assortment, but try not to overstock these items. Many retailers will hold back up to 35 percent of this merchandise to see where items are selling well, then redirect inventory to those shops.

Fresh specialty gourmet food and perishable beverages often have slim profit margins that expire quickly after the holiday. These seasonal delights are perfectly timed to hit shelves for family gatherings around the holidays and New Year's revelry.

For instance, HP Hood uses technology from IBM's Smarter Commerce initiative to manage 150,000 annual shipments of eggnog across 12 processing plants and 22 distribution centers. Nothing can spoil a decadent cup of eggnog faster than transportation delays and missed shipments. After Jan. 1, consumers expect eggnog and other seasonal delights to disappear or be deeply discounted.

Flash Sales Help Uncover Shopping Preferences
More retailers are conducting flash sales to sell their last seasonal merchandise while uncovering consumer preferences. Delivered through email-based promotions and social media sites, flash sales can signal a shopper's interests in specific merchandise categories such as home goods, health and beauty products, electronics, etc.

Privalia, the online leader in fashion "flash sales," with operations in Spain, Germany, Italy, Brazil and Mexico, is expanding its online sales business through mobile and social channels to meet the dynamic needs of its 11 million-plus consumer base. Privalia organizes online flash sales, a phenomenon that offers personalized, limited-time offers to consumers at attractive prices. Single-brand campaigns last between three days to five days. Registered members are invited to shop based on expressed personal preferences.

After Christmas, retailers tend to heavily promote items from the holiday selling season (e.g., toys and sweaters). They expect that they'll be out of stock by February to make way for new merchandise. The key is doing this effectively and as profitably as possible, which means knowing what items to promote or mark down, at what time and by how much. That's where leading retailers are augmenting the art of merchandising with optimization science and analytics.

Wehkamp.nl, Netherland's largest online retailer, uses cloud-based merchandising analytics to manage markdowns and pricing optimization to improve profitability. Employing digital marketing and merchandising technology has resulted in a more personalized shopping experience, while improving profit margins and revenue growth.

Deepest Discounts in February
February may be a short, cold month, but it's when sales are the hottest. After the holidays, retailers know that it's a race to sell out of seasonal items and gifts. They welcome shoppers that come into stores seeking post-holiday discounts with their fists full of gift cards to capture the year-end wallet share.

As retailers close out their holiday merchandise and consider their next steps, early planning is a must. Merchants are looking for new ways to engage their customers one to one, rather than traditional marketing segmentation.

By using technology to optimize prices, promotions and markdowns, and coupons, shopping rewards and loyalty points, merchants can keep sales flowing steadily throughout the year.

Lance Tyson is a retail senior managing consultant at IBM. For more information about omnichannel marketing and merchandising solutions, please visit IBM Enterprise Marketing Management.