The art and science of retail

Apparel retail is a fine blend of art and science. The art of merchandising is what makes this business fresh and exciting, something that is often lost on the inner geek of yours truly. Last week, a senior retail executive noticed my eyes glaze when discussing knits and wovens. She pointed to my shirt, and said, "That's a knit, and you hang them to display"; and she pointed at my sweater and said, "That's a woven, you fold them to display". We had a good laugh, and I realized that even after spending close to a decade with retail data, there are obvious blind-spots in my understanding of the art.

Numbers and data have been the territory of the retail science. But perhaps data visualization, which I believe is as an art form in itself, can bring the science closer to the art. Here is an example of a simple dashboard, created by the fantastic sparklines package by Gareth Watts. There is very little javascript that you have to hand-code: just pass values to this jquery plugin, and you end up with a useful dashboard.

This is where the science of retail can truly sparkle (pun intended). Retail, for that matter, any business, starts with a plan. Success is often defined by how closely you can deliver on the plan. Bullet graphs are very useful in this context. One of the metrics that we measure closely for our clients is the planned versus actual sell through. You do not want to be too far off the plan. If you are beating plan handily, it maybe good for your profit margins, but you may start to end up with empty shelves, because your vendors will not be able to supply fast enough. If you fall too far behind plan, your cash gets tied up in aging inventory, and your business can choke. Forecast Horizon optimization works by constantly updating recommendations that bring you back to plan.

A hammer won't fix your woes

Forecast Horizon is an optimization solutions framework. In other words, unlike a typical optimization software application, Forecast Horizon is geared more towards configurability and customization. Traditional optimization models answer a specific question based on a rigid set of inputs. The model is specialized because it is meant for a specific purpose – like a hammer. Forecast Horizon is adaptable and can be adapted to the needs and complexities of your business – like some wood and a chunk of steel. You could make a hammer, or any number of other things with the wood and steel.

Of course, while chunks of wood and steel are more “configurable” than a hammer, they aren’t terribly useful because few people have the specialized knowledge to work with such raw materials. Forecast Horizon’s purpose is to sit in the sweet spot between the two ends of the scale, and create a sort of “builder’s kit” made up of pre-designed components that can be used as-is or can be extensively reconfigured to suit your needs. Its design provides incredible flexibility while still allowing people who aren’t scientists to understand the science and make powerful decisions.