Over the past few years, merchandising organizations have come to rely on data to drive decisions. 2016 is poised to be the year where analytics, algorithms and data science move to the forefront of retail. Merchandising teams, who will thrive, are seeking to strike a harmonious balance between the science and art of merchandising.

Here are the top four trends that merchants must embrace in order to improve performance and profitability:

Trend #1: Customer-driven data troves and time to action
Not too long ago, there was a limited amount of data available to retailers: sales by geography, by store, by date, by category, margin data, etc. Under such circumstances, merchandising teams made the best decisions they could and had to rely on their “gut instincts” to create a course of action.

However, that has changed radically in the past few years. In fact, nowadays, data is virtually unlimited and constantly changing. As result, data across the retail organization must be combined and analyzed by merchants, marketers, eCommerce, buyers/planners and executives in order to quickly make decisions that will be critical to satisfying customers, maximizing profits and making or exceeding plan.

The abundance and multidirectional status of data in retail create significant roadblocks that prevent merchants from analyzing and taking quick action upon them. If teams don’t have access to a single platform that combines the data, merchandisers must do so themselves or wait for someone else. After combining and analyzing all the data, the correct action to take often remains unclear, if not outdated. Retailers are increasingly looking for solutions to help them mine the rich data troves and take timely action.

Trend #2: Perfecting the art, while embracing the science
In response to trend #1, another trend emerged. There has been an upswing of merchants who can overcome these common drawbacks and leverage information curated from enterprise systems. They are able to swiftly understand the cause of changes, predict financial outcomes of different behaviors and efficiently take action. We call these retail leaders the “Merchant Scientists.”

In 2016, the retail industry demands an analytical skill set far beyond what was traditionally experienced by merchants. Retailers will increasingly separate between the “haves”—those retailers with the data skill sets and an organizational structure in place to take rapid action on their connected data sets, and the “have nots.” Merchant Scientists are empowered by technology and avoid the reporting and analysis bottleneck through confidently making use of comprehensive

platforms to deliver the information they need. They’re no longer confined to the few levers that were typically available —free shipping, promotions, email campaigns. Instead, they can focus on both the art and science of merchandising.

Trend #3: Positioning for data-driven success
An organization positioned to leverage its data must provide tools that enable their merchants to do so. No longer is it just about gathering data. Combining data sets from different sources will lead you to hundreds or thousands of issues. If all you have is combined data, some comparison calculations and trend lines, it will be an exercise in frustration. Merchandising teams need to have access to directional information. They need to be exposed to defined opportunities for action that can be addressed and are aligned with their goals – in addition to presenting the most profitable financial impact. That is called prescriptive analytics; when one is not only informed of an issue, but what can be done to fix it. Before 2016, many retailers were unaware of the agile effects of such analytical capabilities, but that is quickly changing.

To prepare for data-driven success, companies must understand what actions to take in order to make a noticeable difference next week, month, quarter or year – and they need the proper prescriptive analytics tools to connect data and recommend courses of profitable action.

Trend #4: Merchants as innovators and leaders
Today’s successful merchant has committed to owning retail science because they are empowered to leverage it. This merchant plays an increasingly important role in the success of the organization as the lines between marketing, eCommerce and merchandising have blurred.

Data-empowered merchants are uniquely positioned to bring cohesiveness to strategies, advocating for action and dynamic collaboration. Merchants can provide the innovation, experience, teamwork, passion and relationships; the data science tools provide combined data sets, statistics, analysis, correlations and prescribes specific actions derived from the data.

However, merchants need more than predictions to be successful in this scenario, it is imperative to assess prescriptive analytics to understand not only what is happening but how to achieve better financial outcomes. With the proper data science tools at their fingertips, merchants will be armed and able to make well-informed, data-driven strategic decisions that can improve profitability for their enterprise now and for years to come.

This blog is an excerpt from DynamicAction’s new Merchandising Manual 2016, “The New Reality of Retail: How Top Merchants Will Thrive in 2016.” Click here to download a free copy.