The Golden Quarter: Perfect promotions through intelligent merchandising
= Summary: Ed Betts explains why this year’s Golden Quarter will be even tougher than the last and how AI-driven merchandising can help retailers thrive as inflation and interest rates bite hard = 4min read
The 100-day countdown to Christmas is the busiest period in the retail calendar, and unquestionably the most challenging. This year’s Golden Quarter will likely be one of the most difficult in recent memory. Retailers will well know how incredibly difficult the 2022 Golden Quarter was. Although the economic balance has shifted slightly, inflation and interest rates prove it has not necessarily changed for the better.
2022’s prohibitive energy prices forced many retailers to hedge those costs, meaning their delayed bite is now being felt across the industry. Inflation has been volatile, and while the Bank of England expects it to fall to 5% by the year’s end[1], its 2023 peaks have hurt retailers’ razor-thin bottom line. And the Bank of England’s solution to inflation, a dramatic rise in interest rates, leaves consumers squeezed, and even less willing (or able) to spend.
Worse, retailers are not the only ones under pressure. The wholesale market has not yet adjusted to a more manageable level. Supplier prices remain high and while these costs will fall over time, there is no time to waste. Positioning one’s business to succeed despite a potentially painful Golden Quarter demands a new approach, and the agility to make key decisions quickly and with confidence.
The power of promotion
Focusing on the Everyday Low Price (EDLP) strategy which typified 2022’s Golden Quarter is not, in the current circumstances, necessarily a tactic that will suit many retailers. With food price inflation peaking around 17%, GlobalData[2] research suggests that 48% of shoppers have begun to trade down, shifting to discount retailers.
For most, immediately matching the prices of such retailers is unfeasible but retailers can deliver value and attract customers to return through promotions and loyalty card pricing. In a time where many customers’ allegiance is in flux and competition is high, promotions such as loyalty card pricing on the products they desire may be the key to keeping them on board.
Pivoting to create new promotions, though, must be done with the utmost precision and care. Communicating the best promotions to consumers is surrounded by stringent regulations, meaning any promotion’s advertising must be consistent and clear, and they must be planned to be considerate of price establishment periods.
Suppliers must also be in agreement. A late adjustment to Joint Business Plans could leave them unable to meet proposed stock levels or require a renegotiation of terms. Inside a retailer’s walls, any miscalculations made under pressure or a failure to negotiate properly could lead to ‘stunt’ offers falling flat or the wrong levels of stock being ordered.
A new era of algorithmic retailing
Meticulous planning, next-level agility and precise co-ordination are key, then, but these are incredibly difficult to achieve under a traditional retailing model. Aligning every department, supply line, advertisement and product is a time-consuming and labour-heavy task. A chaotic mix of emails, phone calls, spreadsheets, and hurried meetings between multiple departments does not lend itself to the kind of precision that the Golden Quarter demands.
Intelligent merchandising is the modern alternative. By consolidating data and applying AI models, an intelligent approach can replace disparate and loose planning procedures with powerful central planning tools. AI-driven insights can help retail businesses discover new opportunities and spot (or automatically stop) promotion errors before they happen.
Such an approach ensures that every decision made is based on a shared single version of the truth.
This relieves much of the intense pressure of the Golden Quarter and offers room to breathe. Making the most of algorithmic retailing, which employs AI to automate and drive recommendation systems, allows key staff to take a more holistic view knowing that a large part of the planning process is taken care of.
The need to act quickly does not stop at planning promotions in the Golden Quarter. The market fluctuations of recent years prove that retailers must move on from legacy models and employ the agility and insight of intelligent merchandising. Embracing digital transformation today allows retailers to benefit from improved pricing, stronger promotional planning and execution, enhanced supplier relationships, and every other key process improvement that comes along with algorithmic retailing.
Intelligent merchandising is the key which unlocks not only clean passage through the Golden Quarter but, with today’s ever-tightening margins, it also means the ability to react quickly and open the path to greater profit.
[1] https://www.bankofengland.co.uk/explainers/will-inflation-in-the-uk-keep-rising
[2] https://www.globaldata.com
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