Leading companies within apparel retail are those that effectively respond not only to dynamic fashion trends, but also to the evolving ways customers prefer to shop and interact with their brand. New technologies, customization, and multichannel initiatives are priorities for apparel retailers in 2015. Executives who progress and innovate in these key dimensions will gain a distinct competitive advantage.
1. Targeted Customer Outreach
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In 2015, shoppers will increasingly expect personalized offers and apparel retailers will need to leverage a growing volume of customer data to deliver targeted outreach. Many retailers have already begun to opt for more customized messaging over a uniform strategy for large customer segments, recognizing that a one-size-fits-all approach leaves dollars on the table. For example, Vera Bradley recently shifted from deploying a general email campaign to targeting emails based on previous purchases, leading to an increase in browser to purchaser conversion rate.
Running a test for each campaign with a subset of customers can highlight which offer or message is best for each individual. By rapidly testing a variety of marketing messages and outreach frequencies, apparel retailers can identify which characteristics (e.g., income, age, gender) and previous shopping behaviors (e.g., types of products purchased, average basket size, transaction frequency) drive a customer’s response. For instance, a direct mail campaign highlighting a new product line or promotional offer may only generate a profitable response from higher-income customers who disproportionately buy online and have few recent transactions. Informing and personalizing outreach through analysis of customer data creates tremendous opportunity to more effectively engage customers, but also enables retailers to both better manage direct mail budgets and limit offers to customers predicted to respond profitably.
2. Promotional Right-Sizing
Deep discounting has become increasingly prevalent across apparel retailers, intensifying a “race to the bottom” among industry players. Many consumers have been conditioned to delay purchases until items have been discounted, making it difficult to compete without offering promotions earlier in the product lifecycle or more aggressive markdowns later on. Apparel retailers will continue to explore different promotional strategies (e.g., percentage off, bundled promotions, tiered spend, etc.) to improve margin, but will need to do so cautiously to ensure the changes drive both traffic and profitable transactions.
As apparel retailers seek to adjust promotional strategies, they will benefit from leveraging transactional data to understand the true impact of these changes on metrics like basket size and attached sales. By experimenting with different approaches, retailers can identify which promotions drive trade-up and increased basket size without giving away margin. For instance, such a test may indicate that a $10 off a $50 purchase promotion increased both total store transaction volume and transaction size driven by promotion-eligible purchases, while a BOGO promotion for tops did not generate enough incremental purchases to offset margin erosion. Companies that measure consumer response with a transaction lens will succeed in refining their promotional strategies to improve margin.
3. Acceleration Of Cross-Channel Purchasing Services
The majority of shoppers are considered multichannel consumers, making it essential for apparel retailers to continue developing a seamless and consistent experience across mobile, brick-and-mortar, and online interactions. In response, many are integrating consumer touch points by introducing cross-channel capabilities: Common examples include allowing customers to place or pick-up online orders in the store.
As these initiatives are implemented, apparel retailers should integrate performance metrics in each channel to gain an omnichannel view of their effects. Doing so will enable retailers to understand the comprehensive business impact and compare how transaction composition, frequency, and size differs when customers use different purchasing services. This insight can inform the most optimal implementation of the programs. For example, a retailer could discover that an in-store pick-up offering leads to smaller transaction sizes for some stores due to a decline in impulse buys. In this case, the retailer may want to test options for mitigating this effect, for example whether a purchase threshold for the service helps prevent the decrease in units per transaction.
4. Customized In-Store Experience Through Mobile Technologies
In 2015, more apparel retailers will employ in-store technologies that facilitate a more personalized and convenient shopping experience for their customers. Several leading apparel retailers such as Lord & Taylor have already invested in innovative technologies and improved mobile applications that enable direct communication with customers (e.g., product recommendations, reviews, personalized offers, etc.) via mobile push notifications while they shop.
Given that half of consumers indicate the desire to use mobile services while shopping in a store, these capabilities promise to improve customer engagement with the brand and spur incremental purchases. Since customers will be able to navigate the store more easily, companies can potentially rationalize labor hours without hindering sales. As retailers invest in these new technologies, the most successful will be those that experiment with the volume of notifications per visit, message content, and beacon placement to determine the strategies that optimize consumer engagement and drive profitable sales.
5. Adoption Of Inventory Management Technology
While RFID is not new, apparel retailers are beginning to adopt the technology to gain a competitive edge in the “fast fashion” world by utilizing real time inventory data. Zara recently committed to employing RFID chips in each of its stores and has since cited several improvements including more accurate and efficient inventory tracking and faster product replenishment. Retailers can derive even more value from the devices by incorporating the SKU-level location information into their data analytics processes.
Leveraging refined inventory tracking in tandem with transactional data enables retailers to perform new types of insightful analyses. For instance, retailers can respond quickly to purchasing trends by re-allocating excess inventory to stores with higher sell-through rates, maximizing the opportunity and space to sell new products at full price. Further, this data provides more accurate and real-time quantification of previously unreliable information such as shrink, which can be used to quantify the impact of related initiatives. For example, an apparel retailer testing new shrink-reduction methods and technologies can measure the effectiveness of the initiative based on a much clearer and immediate measure of its benefits.
In 2015, consumers will demand a shopping experience that provides appealing personalized offers, and is seamless, convenient, and consistent across channels. As apparel retailers innovate to drive customer engagement and attract new customers, organizations will benefit from using their data to measure the effectiveness of the new initiatives they introduce.
