Wholesalers and merchants must both be more in-tune with their consumers than ever before, in order to succeed in the current retail landscape. This year has changed the way that shoppers discover and purchase product, making it critical for businesses to look forward and develop new strategies.
In today’s webinar from FN, “Winning Product Experiences: How Kohl’s Creates Value with Predictive Analytics and Product Differentiation,” experts from Kohl’s and First Insight discussed just how to adopt this forward-thinking approach. The conversation was moderated by FN deputy editor Sheena Butler-Young and featured Dan Plas, SVP and general manager of accessories, jewelry, footwear & gifting at Kohl’s, and Jim Shea, chief commercial officer of First Insight.
During the discussion, Plas and Shea spoke about the various areas of production and merchandising that can be improved with predictive analytics; the impact of a solution like First Insight on a retailer’s reaction time; and the use of data as a way to inform – not dictate – strategy.
Highlights of the conversation are shared below.
The Importance of Speed in 2020
Dan Plas: Processes are different [now]. By that I mean that they need to move faster. And I think that that’s probably the key element here: as we think about the future and being successful in the future, it’s important for retailers and their supplier partners to move at the speed of the customer. And I tell you, what this pandemic has taught us is that the consumer and her mind and her shopping behaviors are more dynamic and faster than ever. And predictive analytics are going to be a key, essential component, a tool in the toolbox, so to speak, to allow us to move with that same type of speed.
Jim Shea: As you all know, things need to happen quickly in order to be used effectively in the retail market… What’s key here is that our platform applies predictive analytics to the data coming back: feedback that the customers are giving on product. And very quickly, 24 to 72 hours later, the data is available through our software-as-a-service platform on what products to go forward with; which products to eliminate or to reduce the bias on; how to price products correctly based on customer willingness to pay; how much to buy; how to make the right offers to customers; how to promote the products effectively; and who is the best customer for that product. All that data is available very quickly at the speed of retail.
On the Ultimate Purpose of Retail
DP: At Kohl’s, we put the consumer at the beginning, middle and end of everything that we do and every investment that we make. But along with being a consumer-led retail consumer, I view Kohl’s as an innovation company. We are constantly searching for new ways to better serve our consumer and to service hers and her family’s needs. The best thing that we can do is satisfy her need when she invests her time to engage the Kohl’s brand in the products underneath the Kohl’s brand, whether that be digital or in-store. .. What the predictive analytics allows us to do is really have a conversation with the consumer around future product. And that is, I think, goal within retail: how it is that we serve her better with, we’ll call it, ‘more constrained resources.’
JS: As Dan said, one of [Kohl’s’] key pillars is putting the customer at the center of everything that they do and that really drives us at First Insight. That’s, in fact, why First Insight was created. So essentially what we do for Kohl’s, as well as the hundreds of other brands and retailers that we work with, is we enable them to take the voice of their customer – and that’s through multiple mechanisms, it can be through social channels, directed email campaigns, through the Kohl’s CRM system, through third party panels that we access. But it’s direct feedback from customers on product, on experiences, on services.
Collecting Customer Feedback
JS: If you were in Kohl’s loyalty database, you might receive an invitation from Kohl’s that they want to hear from you, our loyal customer. ‘Give us feedback on next season’s footwear,’ in this case. And you click on that and then it would start presenting you with products and we would show you products at different stages, we provide a description of the product. We ask the customer to tell us, what do you think that product’s worth in the marketplace? How do you feel about the product? And then really important, tell us what you like about it and what you don’t like about it. And so this is really important to find out other design elements that you might be able to change in order to make that product perform even better.
DP: We’re going to be more focused in terms of customer choices so that we can deliver that higher level of trip assurance. And this technology allows us to talk to her about the important considerations within the consideration set, whether that’d be product features and benefits, whether that’d be technology, whether that’s color material, whether that’d be just packaging. And pricing – it probably goes without saying, but having the ability to understand what a consumer would pay for a specific set of products is really valuable information.
The Global Picture
JS: At First Insight we work with retailers around the globe and retailers that have stores and consumers in many different locations. The platform, operating in about 40 different languages and currencies, allows consumers to give feedback in their native language and currency and then for all that feedback to be aggregated and presented to the merchant so that they can make a decision on how do I assort by region, by country, that type of thing.
Data as a Tool, Not a Dictator
DP: Sometimes you hear folks talking about being data-led; that will never happen at Kohl’s. First and foremost, we will always be consumer-led. That’s an important and intentional use of the word. But we will be data-informed. And as we think about retail in general, it’s long been considered this beautiful blend of art and science. And now ultimately, as we think about this particular set of data, it’s just better science. That is the way that we think about it – which does not diminish, it frankly enhances the art side of this equation, because it allows us to be more artful in terms of our product selection, in terms of how the product shows up to the consumer and how it is that we market to that particular consumer. … The algorithms won’t pick the product; they won’t tell us exactly how to merchandise it and how to market it. It will just tell us how to do it better.
Refining Assortment Selection with Data
JS: For any retailer or wholesaler, one of their goals is to try to do more with less. If you can sell the same amount or more with a narrower range of SKU styles, that’s a win. And so sometimes it’s just about cutting the tail, the bottom 20% that are unproductive. The challenge is that retailers and brands know what that bottom 20% is in hindsight, when they look back on last season; the hard part is figuring out for next season what are going to be the best performers and specifically the ones that won’t do as well. And so that’s a key part of what we do: help and identify which ones can be cut. One retailer that we work with used First Insight to cut their SKU-count. They wanted to go even deeper, cut it by about 60%. And they did that through two stages of testing: one round of tests at the CAD stage, then they brought fewer products to the sample stage, tested again when those physical samples came in and did another edit. The net result was about 60 percent fewer SKUs, but a 70 percent increase in average sales per SKU per week.
The Right Fit for Footwear
DP: In footwear, there are a couple of key core silhouettes, but some of the beauty and the challenge of the footwear category is that there are so many components. It’s not just that you pick the fabric, you pick the sleeve length and you move on. The number of components within footwear make it more complicated and make it complex. And if you change one of those components on a key item shoe, that can either make you a hero or a zero real quick. And as we think about just testing different components, different technologies, different materials, different outsoles, midsoles etc., that’s really an important part of the analytics that we and I use to enhance and update key items.
A Smoother Wholesale-Retail Relationship
DP: We live, certainly now more than ever, in uncertain times. So any time you can incorporate and set up a higher level of certainty into what it is that you as a wholesale partner are providing to a retailer, there’s added benefit. It increases the confidence. We’ve got several partners that are currently clients of First Insight – Caleres, Under Armour – that already deploy some of the predictive analytics. And that’s part of our market conversation because with our partners we are very careful to share who our consumer is and where it is that we’d like to go with our current, and then our future, consumer base. First insight can help them tailor the predictive analytics to that specific consumer. I think that that’s really powerful as it relates to any relationship, be it with Kohl’s or another retailer.
JS: Because we work with a lot of wholesalers, as well as retailers, what we hear the wholesalers tell us is that it elevates the conversation that they’re having when they go to that sell-in together with the retail buyer. It used to be, ‘hey, let’s look at last season, at historical data, and see what products did in this category and decide what we’re going to do next season based on that. Or let’s just use our intuition to try to decide.’ All of that is important, but this adds a consumer-demand signal into that equation. So objectively, both buyer and seller can sit back and say, ‘what’s the customer saying? What do they value? What products do they want?’ Not even just generally but for the Kohl’s channel specifically. And so that’s the benefit: It makes that conversation a data-informed conversation. Both buyer and seller can make that decision with confidence.