Pure optimization eventually leads to extinction. Big retailers are always trying to optimize some facet of the resources they have at their disposal. They optimize assortments, optimize marketing budgets, optimize shelf space, optimize inventory, optimize the supply chain… the list goes on and on.
But optimization can be a siren’s song that lures the unwary onto rocks littered with the bones of other failed retailers. How can something typically as beneficial as optimization lead to disaster, you ask? In short, optimization methods are typically backward looking. They use historical performance to recommend the most productive use of scarce resources. But the choices these methods give you and the “answers” they provide are always from the past. Specifically, optimization fails to consider the future. It fails to inject newness and innovation into the equation – the very things that make retail assortments exciting and keep retail brands fresh and relevant. Optimization can make you stale.
That is not to say that optimization isn’t an extremely valuable tool, which, when used properly, can help a retailer balance resources in a way that maximizes sales, profits and traffic. But you must avoid the trap it creates. You must avoid walking a self-fulfilling path to becoming optimally old and outdated. To accomplish this, the savvy retailer must force newness and innovation into the optimization process.
The most traditional way to accomplish this is to assemble a team of true merchants. Not just paper pushers, order takers and report readers, but buyers who know and love the products they sell. Who have a passion for creating great assortments and combining those assortments with great merchandising and marketing to build great brands. Support these merchants with a test-and-learn methodology that allows you to pilot new items or new businesses while minimizing the risks to company performance if they pick a loser. Otherwise, your real risk is behaving like a dinosaur and you know what happened to them.