The last decade has shown consumers moving away from ubiquitous and uncreative consumer product design (think of a gray t-shirt with ‘Abercrombie & Fitch’ printed on the front) and rewarding differentiated design and on-trend styling in the market.
The race for little ‘i’ innovation is in full force amongst retailers and Speed to Market is at the center.
Speed to Market is not a new concept in Retail. The headlines made by Zara, H&M and other ‘Fast Fashion’ retailers are too numerous to count. Leading companies across the retail spectrum, from vertical fashion to big-box home improvement, have been chasing efficiencies in the ‘Concept to Consumer’ cycle for 10+ years.
Given the level of focus on improving Speed to Market capabilities, one would expect there to be a proven link between compressing the Concept to Consumer calendar and improved bottom-line financial results. After all, faster is always better, right?
In our experience, even those retailers who manage to shrink their Concept to Consumer cycle by 10 – 20% often do not realize the anticipated financial benefit of increased sales and higher margins.
Retailers who realize the largest value from Speed to Market programs follow two critical success factors.
1. Define the Value
The true benefit of Speed to Market is making key product decisions closer to product launch, and thus improving decision outcomes. While there are certainly internal efficiency gains to be had from a compressed product calendar, the large-scale value is driven from improved Product Design (having the right product) and Merchandising Allocation (being in the right place) decisions:
These two decisions largely determine the eventual success of seasonal assortments (Right Product at the Right Place). Leading class Retailers understand this value proposition very well and have structured their internal processes to best serve decision makers.
The starting point for making an effective decision is having timely information available. This is where Speed to Market comes in: If the Concept to Consumer timeline is reduced by 3 months Design and Allocation decisions are now based on data that is 2-3 months more timely.
Therefore, reducing the Concept to Consumer calendar by 2-3 months means better decisions are made, right? Not quite.
For retailers with a heavy emphasis on seasonal products, there is an additional angle that complicates the value proposition: the time of year the additional data represents is often more important than the duration. In a sense, not all months are created equal in terms of their data value. Here’s an example:
A company is launching a new line of outerwear for the Holiday 2016 season (October 2016 product launch).
Scenario 1: Operating off a 12 month Concept to Consumer calendar, product design decisions are made in October – December 2015, before getting a read on Holiday 2015 sales. By removing 3 months from the calendar, product design begins in January 2016, enabling visibility to the entire Holiday sales period. In this example, the 3-month calendar reduction is extremely valuable.
Scenario 2: Operating off an 18 month Concept to Consumer calendar, product design begins in Spring 2015. Removing 3 months from this calendar moves product design star to Summer 2015. The Product Design team now has access to data collected from April – June of 2015, which will provide minimal insight to Holiday trends. In this example the 3-month calendar reduction has little value.
Fast-fashion retailers have taken this concept to the extreme: if I can cut my calendar all the down to 6 – 12 weeks I can now get reads on sales data and consumer behavior within the season I am selling! But the concept remains consistent across retail segments: link Speed to Market advancements to improved Product Design and Allocation decisions by supplying more timely and relevant data.
2. Ready the Organization
The underlying assumption in the Defining the Value factor is that the Product Design team has the Systems and Processes in place to quickly analyze product performance data, gain relevant insights and incorporate into their decision-making processes.
Far too often this is not the case, and the organization (Design, Merchandising, etc.) is only able to extract minimal value from the additional data. This failure to achieve the target value is often driven by the immaturity of systems and processes.
Speed to Market leaders have dedicated significant resources to create Product Design and Allocation decision-making constructs that maximize efficiency yet demand an appropriate blend of art of science. Beyond this, leading retailers continue to invest in data management processes and analysis tools to ensure that the latest product performance data is made readily available to decision-makers.
The key here is targeted investment based on where the Speed to Market value is coming from. In the case of a big box retailer who primarily buys products from national brands, value will be realized from improved Assortment Allocation decisions (allocation of order quantities across channels and stores locations). In this instance, the retailer should be focused on ensuring the Merchandising organization has the tools, processes and training to rapidly consume the latest sales data, identify valuable trends, and incorporate into inventory allocation models.
Organizational readiness can be summarized by asking one question: If the team is provided more timely and relevant data, will they be able to make significantly better decisions?
Again, Speed to Market is not a new concept, yet it continues to be a capability that sustains a competitive advantage for those retailers who have made it a part of their DNA. Focus on innovation and advancement of big data will continue to separate the winners from the laggards.
For those retailers who are already well into their Speed to Market journey, investment in analytical tools and streamlined decision-making processes will continue to yield significant results.
For those who are not yet reaping the benefits of an advanced Speed to Market program, there are very few ‘secrets’ to enabling Speed to Market. It’s now a matter of Defining the Value and Readying the Organization.