A software package that will?without human intervention--add and remove products based on inventory and item profit margins will be introduced next week by Mercado Software.
"It automatically makes merchandising changes," said Forrester Research Senior Analyst Tamara Mendelsohn. Examples include removing a product when the inventory gets low enough or promoting to a more prominent position a product that delivers a better profit margin. But the system can also change the associated products?such as supplies, batteries or special product-specific cleaners?that the site tries to upsell to the customer.
"There are definitely efficiencies that are ripe to be squeezed out of the process," Mendelsohn said. Why so ripe? A typical retailer today has the systems, personnel and other resources to focus on perhaps 10 percent of its products. If that retailer is able to extend such a focus to the remaining 90 percent of its product line, the potential for increased revenue is vast.
Although Mercado appears to be alone in that space for the moment, that's not likely to last, Mendelsohn said. IBM and CoreMetrics are working on something similar but "the loop is still not closed" between the two companies' products, she said.
One source familiar with the product introduction details said the reason there are likely to be more packages with such automated capabilities in 2007 is less technological and more emotional.
"Three years ago, this concept would have been too futuristic and simply too uncomfortable. Back then, the metrics people were using were not trusted," said the source. "We?ve reached a point now where we have reached that trust factor."
Given that blind trust is not a tool frequently used by senior IT execs, Mercado's package will include several failsafe features, allowing users to require approvals at various intervals, until the company gets comfortable with the software.
Like many such suites, the pricing is customized and complicated, but officials familiar with the rollout plans said Mercado 4 would be priced per-CPU and that "major multichannel retailers" will likely pay somewhere in the $75,000 to $350,000 neighborhood.