Category Management & Assortment planning

Transcription

1 Enabling Sustained Business Excellence Category Management & Assortment planning Aartee Roy Senior VP, Retail Industry Consulting KINDUZ Business Consulting

2 KINDUZ Consulting Network Network with Experts from all over the World Download Templates, Checklists, Frameworks for study Access Video Recordings, Blogs of Experts Post Questions and get Answers, Participate in Discussions Lifetime Access 2009 KINDUZ - All rights reserved 2

3 Contents What is a Category? What is Category Management? Key areas of Category Management Identifying Product Groups Space Planning Assortment Planning Visual Merchandising Inventory Management Complete Process Flow

4 What is a Category? A Category is a group of similar or related items which the customer would ideally like to find together in a store. Categories are mainly used as organizational aids to better manage and monitor predefined groups of products.

5 What is Category Management? Right product At right price To right location At right time To meet projected sale Generate required Margin And maintain defined stock cover

6 Key Areas of Category Management. Category Managemnent includes : Space Planning to ensure desired display space. Assortment Planning to facilitate the achievement of required financial objectives. Visual Merchandising to optimize display efficiency and aid walkins/conversions in a store. Inventory Management to ensure required stock cover and avoid being out of stock.

7 Identifying Product Groups Product Groups/Categories should be defined based on the consumer s needs and purchasing habits. Home Decor Lighting Aroma Wall décor Fashion Acc. Jewellery Watches Perfumes Flowers Garden Decorative Acc. Leather Bags. Jute Bags. Travel Bags

8 Cash Till Leather Acc. Perfumes Space Planning Considerations for Layout Decisions : High margin items should be placed in high traffic areas. High demand items should be placed in low traffic areas. Complementary items should be placed near each other. Seasonal needs should be considered. Items needing frequent restocking should be placed near storerooms or cash registers. Larger departments should be placed in lower traffic areas. Impulse items should be placed in closer to billing. Shopping behavior and operational considerations should be recognized. Home Decor Niche Products Jewellery Impulse items

9 Layout Options Straight Floor Plan Geometric Floor Plan Angular Floor Plan Mixed Floor Plan

10 Benefits of Space Planning Inviting store layout improves walkins into the store. Improved circulation space within the store allowing for accessibility to all products. Improved conversion rates by better product visibility and display. Reduction in shrinkage. The store layout can impact the customer s perception of the store s positioning.

11 Assortment Planning Competition Analysis Revenue & Margin Projection Assortment Plan Forecasting/Trends Analysis Demand Planning Customer Analytics Assortment Plan or the Merchandise Mix is rated around the globe as the second most important factor for a store, after its location. The assortment plan defines the revenue stream, impacting not only the top lines and bottom lines but also the working capital locked in inventory.

12 Key Deliverables of an Assortment Plan Required Average Revenue/sft. Required Gross Margin Required Average Ticket size Required Stock cover based on demand forecast Suitable product as per catchment analysis and target customer profile. Based on competition study, merchandise mix should define the store s USP.

13 Assortment Planning Benchmarking Customer Profile Financial Projections Store Layout Input Process Category composition Sub Group Planning Sourcing strategy Pricing strategy Customer & Catchment Centric Assortment Plan which will deliver required financial targets. Output

14 Benchmarking Fashion Boutique Department Stores Volume--- Department Stores Volume +++ Mass Discounters Coupon, Brand Factory Hypermarket Mass Incorrect market positioning results in wasted resources by competing with players that are not the right match. Define your focus market segment, key competitors and identify where YOUR opportunity is.

15 Spending Amount Spending Amount Customer Analytics 3500 Age-wise Spending Power 4000 Category-wise Spend Books Entertainment Toys Stationery Gifts Understanding of customer buying patterns is critical for all retailers. Defining the target customer s buying power, age, category preferences and regional influences can positively impact your top-line

16 Store Layout The store layout clearly defines the stocking capacity of the store and hence enables detailed SKU qty ordering.

17 Category Composition Once the Broad categories are defined, the finer details need to be planned. The above example summary is based on a detailed subgroup level plan, both in terms of space allocation and sale projection.

18 Sub- Category Planning Within a category, shelf displays are planned product wise and supplier/brand wise. Based on past sales experience or market figures, a sales projection is created which confirms the inventory requirement and hence the investment required for the first fill.

19 Sourcing Strategy Based on: Lead-time to store launch Margin requirement Stock availability Working capital availability Highest Margin Lower Margin Lowest Margin Factory Wholesaler/ Importer Distributor Retailer Longest lead-time Shorter lead-time Shortest lead-time

20 Pricing Strategy Purchase terms Whether to buy outright or on consignment? Is it better to get the products as a Shop in Shop? Pricing To what extent will the price be competitive for exclusive products? Should some products carry a promotional discount? Credit Period To what extent can the credit period be renegotiated? Will bigger volumes help in improving the credit period? Returns Will the supplier accept returns of ageing stock? Who will bear logistic cost of returns?

21 Visual Merchandising Visual Merchandising, the art of attracting patrons with visual cues, is central to a retailer s ability to generate sales. Visual Merchandising got its start at the turn of the century, when department stores began using theatrical set design and lighting to create exotic displays. Today, the way the departments are arranged, the location of the escalators, the lighting--all are carefully planned to earn the store more sales per square foot.

22 Store Display Decisions 1. Shelving 2. Hanging 3. Pegging 4. Folding 5. Stacking 6. Dumping 1. Value/fashion image 2. Angles and sightlines 3. Vertical color blocking 1. Fixture Types 2. Merchandise Presentation Planning 3. Selecting Fixtures for Merchandise 4. Visual Merchandising

23 Visual communication

24 Planogramming Inventory Control and merchandise display technique which enables the retailer to maximize shelf space utilization.

25 Planogramming Benefits Improved sales presentations & closure results Increased consumer appeal of product displays Better brand awareness through consistency Improved efficiency of shelf space allocations Improved financial performance of assortments Faster, more accurate replenishments Quicker inventory resets Much better marketing through targeted displays

26 Inventory Management S2 S2 S1 S3 S1 S3 DC1 DC1 Supplier Corporate S4 Supplier Corporate S4 DC 2 S5 DC 2 S5 Inventory in a PUSH system is managed at the corporate level where all buying decisions are made and then pushed to the distribution centers for allocation to stores. S6 Inventory in a PULL system involves store requirements to be consolidated at the corporate level via the DC and then procured. S6

27 Ageing Inventory Liquidation Routes Instore Discounting Tieups with Mass Discounters Transfer to stores where required Return to vendor

28 Complete Process Flow Assortment Planning Sourcing Ordering Delivery to warehouse Delivery to Store Assortment Planning Realign Mix close to Best Sellers Identify Top Performers Monitor Margins Monitor Sales

29 Contacts Aartee Roy Principal Consultant, Retail Vertical Sundeep M Senior Director, Customer Relationships Website: aartee.roy@kinduz.com India Mobile: India Office: US Phone: Website: sundeep.m@kinduz.com India Mobile: India Office: US Phone: KINDUZ - All rights reserved 29