Retailers are facing “promotional fatigue” and are looking to better target their offer to consumers through a “360-degree” understanding of their needs, according to software company Aldata.
Speaking about the group’s 2011 Global Retail CIO Survey, Aldata vice president of customer support Mark Croxton told just-food today (24 March) that the shift is a reaction to efforts by “everybody to increase price competition in the market” at the start of the global economic crisis.
Aldata, which provides technology solutions to optmise supplier to consumer businesses, has been running the CIO Survey for three years, and Croxton said that it has really noticed the shift away from promotional management and towards gaining a “real insight” into consumer behaviour.
Croxton said retail promotions are at “unheard of levels”. Research conducted by the company around Christmas found that consumers had a “negative impression of promotions” and that “they didn’t understand the pricing proposition behind it” and that they often ended up wasting food.
He said that it is “very difficult” for retailers to guarantee promotional product availability, that it is “the hardest part of the supply chain to manage”, and that consumers are “less and less sympathetic to that”.
“If they [consumers] go into a store and they’re [retailers] are out of stock of an item, they blame the retailer. And they don’t buy a substitute item. So retailers are losing sales and losing customer satisfaction by confusing them with promotions,” said Croxton.
Croxton said that retailers’ IT spend for the next three years is now firmly focused on building a “360 degree” view of the customer and what they want. “The retailers have now realised they are wasting money, and at risk of upsetting customers, are not actually providing promotions that the customer actually values”.
“We think its the retailer working out ‘we’re not going to keep blasting the market with promotions, that are potentially wasting us money, and not exactly delighting my customer and find out what they want and make sure I deliver that’, both in an efficient way, both from inventory and a transportation mechanism”.
He said that as the cost of raw materials and diesel dramatically increases, demand forecasting and and transport management are becoming the other two key priorities for IT investment in the coming years in order to optimise stock and reduce transport and wastage costs.