By James Tenser, Principal of VSN Strategies

In an increasingly global consumer marketplace, where scale and targeting are important means of sustaining market power, the retailer’s enemy is complexity. The finer we cut our consumer insights, the more we must segment merchandising and marketing. The more we segment – by demography, geography, or shopper need state – the larger and more intricate the implementation becomes.

The 200 retail and retail technology industry leaders who gathered here this month in southern Arizona at the 13th annual Global Retailing Conference heard a good deal about local business and its inherent challenges. It started with discussion of the current “My Macy’s” initiative, which pushes merchandising responsibility out to the market level and tailors offerings to local market conditions. There was description of Polo Ralph Lauren’s flagship stores in major cities in the U.S. and worldwide. There was talk about retail intelligence technology, “role-tailored” business applications, and delivering “unique value” to each consumer.

The Global Conference is an annual event sponsored by the Terry J. Lundgren Center for Retailing, at the University of Arizona. The Center is named for the present chairman of Macy’s, who has been personally instrumental in supporting academic programs at the U of A. The conference has been distinguished by its ability to attract some of the retail and consumer products industry’s most powerful and talented executives. This year was no exception.

An all-star roster of speakers included top executives from Macy’s, Microsoft, Sam’s Club, Deloitte, Zapphos, Google, SAP, Inovis, Sears, Polo Ralph Lauren, and more. Their topics ranged from global branding to corporate culture to economics to sustainability, but the discussion frequently touched back to localization and business complexity.

Mr. Lundgren himself set the tone from the first hour, as he related his goals for My Macy’s. No minor challenge for a company that embarked on the assimilation of numerous acquired department store banners in the past several years. Now it’s reversing its polarity by localizing the assortments within its North American stores. The mix of sizes will be tailored “by door,” with Macy’s merchants and planners distributed in 20 districts across the U.S.

“In today’s retail environment, the status quo is perhaps the greatest risk of all,” said Lundgren.

With those words still ringing in attendees’ ears, Carl Steidtmann, the respected Chief Economist at Deloitte Research, delivered some rather grim news about the retail economy: “From December 2000 to date there has been zero growth in retail employment due to operational efficiencies in the supply chain,” he said. Current pressure also makes the business more complex, he added, as retail has become “unbelievably productivity focused and driven.”

“Consumer innovation means huge challenges upstream as it increases fulfillment complexity,” added Sean Feeney, president and CEO of retail technology firm, Inovis. He proposed that winners will offer, “differentiated channel experiences; seamless cross channel transactions; flawless in-store experiences; comprehensive customer insight; and leverage technology to deliver unique value to each consumer.”

Dr. David Ginsberg, vice present of SAP Industry Solutions/Trade Group, discussed how data complexity may be conquered with more sophisticated modeling. But as the science grows more elaborate, the means of accessing useful insights must become more “retail friendly,” he maintained. Markdown optimization for apparel is a crucial decision issue, for example. For companies that think local, depth and timing will vary by store. These decisions may be supported empirically, but tools must also support and extend human judgment.

A similar sentiment came from Jan de Jong, worldwide retail industry solutions manager at Microsoft, who said his company advocates “business intelligence for everyone.” He continued, “It must support decision making at every level, with role-tailored business applications that make user interfaces work better. Retailers need familiar, easy-to-use tools.”

Doug McMillon, president & CEO of Sam’s Club, focused his remarks on how parent company Wal-Mart is addressing environmental sustainability. He observed how the company’s sheer scale has made this imperative. Wal-Mart makes markets when it decides to offer compact fluorescent light bulbs, to cite one recent example. But its green efforts have added more levers to control, greater decision complexity to conquer, in a business that is already vast.

Through the eyes of these and the other speakers, the extended retail consumer products industry may be visualized as one giant optimization model, in constant flux, infernally complex, and continuously accelerating. Performance reports, once requested, arrive too late to support the decisions that are needed now. Real time isn’t good enough. We need same time – decision dashboards that show not only what is happening but what is about to happen.

In a sidebar between sessions, Lundgren later told me he knew some aspects of localization were going to be tough to achieve under the My Macy’s initiative. But, he added, “We know we can begin by managing things we know about, like size assortments, for example, based on preferences of our shoppers in different geographic markets.” Success there might be followed by local adjustments in color palette preferences, fashion-forwardness, and eventually (as the SAP folks might advocate) to the timing and depth of markdowns, by local market or even by store.

Decisions like these can certainly be data-driven and empirically modeled, but the human decision makers cannot reasonably be expected to acquire insights by requesting reports. Business intelligence must be embedded in every-day practices and tools.

Sounds pricey, but as Deloitte’s Stedtmann reminded the audience, winners invest in technology during down markets.

James Tenser is Principal of VSN Strategies, a marketing strategy consulting firm based in Tucson. He may be reached at jtenser@vstorenews.com.