The Physics of Retail

By Nick Downey

I’m the biggest retail geek on the planet. 

That’s what my staff and many of my clients tell me. And it’s not just because I’ve lived and breathed retail since landing my first post-college job back in 2006. 

Back then, I was the proud holder of a brand-new Bachelor of Science degree in computer engineering from Georgia Tech (Go Jackets!!). And since then, I’ve spent the bulk of my time in product sourcing, merchandising operations and, more recently, space planning. 

If you’re wondering what exactly computer engineers do, you’re not alone. Even my parents wonder. Basically, we’re the ones who create hardware such as computers and software such as MerchLogix’s space planning tools

But more than that, we’re the ones who solve problems. We don’t just do so by the seat of our pants. Instead, we use science (remember I said I have a Bachelor of Science degree) to solve problems.

So what exactly is science? It’s the systematic study of the structure and the behavior of the physical and natural world through observation and experimentation. As you may recall, there are five main branches of science: astronomy, biology, chemistry, geology and physics. 

It’s this last branch—physics, which is the study of matter and energy and the interactions between the two—that has the biggest impact on retail. The reason is because retail is physical: physical stores, physical shelves and physical merchandise.

You also have physical beings—human beings—who are the principal actors in every retail system. And the more stores you have, the more humans you need. 

In fact, the number of humans in any retail system—not just in merchandising, which is really just last 50-feet of supply chain, but also in space planning and store operations—grows geometrically in proportion to store count. 

It’s humans who move your products from your manufacturers to your semis. It’s humans who unload those semis. It’s humans who get those products from the loading dock to your store shelves. And perhaps most importantly, despite claims of automation, we all know it’s humans who ultimately decide assortment, create planograms and validate product correctness. 

It’s also humans who tidy, clean and tend to the appearance of your shelves. Some even take on the up-keep of your stores, replacing burned out lights, fixing broken fixtures and mopping dirty floors. 

There are also the humans who manage your store employees. Plus all the humans who work for your suppliers and for the trucking companies that deliver your merchandise.

So while there’s plenty of talk in retail about automation, it remains humans who are the principal actors in every retail system. And that’s not going to change anytime soon. And while humans power the retail engine, they also continue to be a constraint. Just the way gravity is a constraint when it comes to sending rockets into space.

That’s because humans have to communicate. And as any grade-schooler who has played telephone knows, communication isn’t easy. What’s more, the more people you communicate with, the greater the chance of your message degrading. What starts out as “Call me tomorrow” becomes “I got in a brawl with Tamara.” 

This loss of information that occurs during communication and data transmission is called degradation, and in the case of retailers it is caused by our natural disorder, or more formally entropy …and I believe that retail has more entropy than any other industry. One reason is because of how much inventory we have…thousands of items. 

Another is because of where that inventory is located: throughout hundreds of thousands of square feet in hundreds or thousands of stores and a handful of distribution centers. Another is because of how often we turn over inventory. While that used to be for just two seasons (spring/summer and fall/winter), Fashion Forward Trends reports that are now 22 retail seasons each year. To say nothing of the physical changes to the store to support these initiatives!

No other industry has this much inventory or goes through this much change in a single year. No wonder entropy reigns. And no wonder retail provides the perfect environment for applying the laws of physics to studying, experimenting and solving problems. 

Three key learnings from science that impact retail success

As I mentioned at the outset, the science informs the engineering. Namely, the science points the way to the best-possible solutions, and we as engineers design around those constraints. 

As an engineer-founder (and CEO) of MerchLogix, a company focused exclusively on space planning for today’s retail, those observations drove me to implement the following engineering principles for my team as we set about to solve these problems, correctly. 

Learning #1: Retail software must be available to everyone. Software licensed by the seat makes adding users more costly, creating a disincentive for the very thing retailers need to succeed—and share: information. Our engineering principle behind this is very simple: Humans are the sensors; they provide the information (data).

Learning #2: Retail software must be real-time. Any data that’s not real time is quickly on its way to becoming obsolete. To prove my point, I ran a couple of queries and discovered that the average half-life of data for all MerchLogix customers is just 18 days. That means that the data you capture today has only a 50 percent chance of being accurate in 18 days. Wait another nine days, and the accuracy of that data drops to 25 percent. Four-and-a-half days later, and it plummets to just 13 percent. Our engineering principle behind this is clear – if the data aren’t real time, they better be close.

Learning #3: Retail software must be dynamic. If your software is not designed for change, it will never get you where you want to go. What’s more, if your software can’t instantly align all the team members in all the departments in all your store, what good is it? The engineering principle behind this observation is not unintuitive, but it is critical: The only constant in retail is change, design for it.

The power of physics: The MerchLogix way

So, there is a science to retail after all. But don’t just take our word for it. Get to know us. We’re a crackerjack team of retail scientists, and our lab is a pretty exciting place, if not a bit nerdy. 

To see how our scientific learnings translate into a comprehensive suite of space planning and merchandising solutions that can be used by anyone in your organization, anytime from anywhere, schedule a demo today.

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