Title: Retail Assortments
1 Retailing MKTG 3346
Retail Assortments
Professor Edward Fox Cox School of Business/SMU
2Variety and AssortmentWHY IS IT IMPORTANT?
- Influences Willingness to Shop the Store
- Does the retailer carry the consumers preferred
products? - Does the consumer have many product alternatives?
- Can the consumer buy all of the goods that she
needs? - Influences Purchases in Store
- Brand Choice
- Unplanned Items
3Variety and Assortment
- For Retailers of Merchandise, Variety and
Assortment are Composed of - Branded Products
- Sold at competing retailers
- Brands have value for consumers
- Lower margin for retailers
- Private Label Products
- Exclusive to the retailer
- Higher margins
4Variety and AssortmentKEY FACTORS
- Profitability of Merchandise Mix
- Corporate Philosophy Toward Assortment
- Physical Characteristics of Store
- Complementary Merchandise
Source Levy/Weitz
5Assortment Plan for Girls Jeans
Source Levy/Weitz
6Size Distribution for Traditional 20 Denim
Jeans in Light Blue for a Large Store
Source Levy/Weitz
7Variety and Assortment CATEGORY MANAGEMENT
- Category Management is the process of managing a
retail business with the objective of maximizing
the sales and profits of specific categories - Objective is to maximize the sales and profits of
the category, not particular brand(s) - One person is totally responsible for the success
or failure of a category - Buyers sometimes called category managers
- Category Captain - supplier forms an alliance
with a retailer - Potential problem Its like letting a fox into
the chicken coop
Adapted from Levy/Weitz
8Variety and Assortment TYPES OF PRODUCTS
Fad Fashion Staple Seasonal Sales
over many seasons No Yes Yes
Yes Sales of a specific style No No
Yes Yesover many seasons Sales vary
dramatically No Yes No Yesfrom one
season to the next Illustration (Sales against
Time)
Source Levy/Weitz
9Variety and Assortment NEW PRODUCTS
1,000,000 NEW SKUS A YEAR!
All Channels
An average family gets 80 85 of their needs
from 180 SKUs
Source Ad Age 11/27/99
10Variety and AssortmentITEM SELECTION
- Affects the profitability of the category
through - Utilization of shelf space
- Meeting customer needs and preferences in
- Brand
- Size
- Type
- Access to suppliers specialized distribution,
deal and markdown funds
11Item Selection and ProfitabilityREVENUES
- Revenues from adding items
- Ongoing
- Item sales revenues
- Sales in other categories due to customer traffic
drawn in by the new items - On-going promotional funds from the manufacturer
- One time
- Slotting allowances
- New item introductory promotional funds from the
manufacturer
12Item Selection and ProfitabilityCOSTS
- As the number of SKUs in the category increases
Cannibalization Inventory carrying
costs Shelf-space opportunity costs Cost of
warehouse/back room space used Wholesaler/manufact
urer shipment costs
13Assortment Decision-Making
14Assortment Decision-MakingNEW ITEMS
Helps Establish Criteria for Acceptance
Classification New or Me-Too
Compare with Acceptance Criteria
Accept or Reject
Evaluation Factors
Potential Negative Factors
Overall Evaluation
-
- Consumer Demand
- Sales Trend Analysis
- Trade Money
- Category Growth
- Packaging
- Appearance
- Package Size
Source Center for Retail Management,
Northwestern University
15Assortment Decision-MakingCLASSIFICATION
New or Me-Too
- Is the item unique? Is it new to the world?
Does it have some combination of attributes that
no other product offers? - Is the item a line extension? Is it just like
other products on the shelf?
or
Me-too products are evaluated more stringently
than new products, and must offer other
benefits in order to be accepted
Source Center for Retail Management,
Northwestern University
16Assortment Decision-MakingEVALUATION FACTORS
Source Center for Retail Management,
Northwestern University
17Assortment Decision-MakingEVALUATION FACTOR
IMPORTANCE
Percentage of Evaluation
Consumer Demand/Demand Generation
45
Sales and Market Analysis
20
15
Vendor Money
Contribution to Category Growth
10
Other Considerations (Vary)
10
Source Center for Retail Management,
Northwestern University
18Assortment Decision-MakingPOTENTIAL NEGATIVE
FACTORS
If the item does not fit on the shelf or in the
set, it will not generally be accepted
Source Center for Retail Management,
Northwestern University
19Assortment Decision-MakingNEW ITEM SUMMARY
- The key evaluation factors are consumer
demand/demand generation and sales and market
analysis. - Category managers want market-specific
information - Category managers want long-term evidence of
trends - Acceptance criteria for new products differ
across categories depending upon - Classification -- new or me-too?
- Category characteristics (e.g. Is the category
stable or new-product-driven?)
Source Center for Retail Management,
Northwestern University
20Assortment Decision-MakingPRODUCT DELETION
Supplier Recommends Deletion
Delete
Delete or Retain
Sales Analysis
Elimination Factors
Retention Factors
-
- Uniqueness
- Item profit
- Private label
- Logistical Administrative Costs
Source Center for Retail Management,
Northwestern University
21Assortment Decision-MakingDELETION VENDOR
RECOMMENDATION
- Category manager may require that the vendor
delete one of its own items in order to have a
new item accepted. - or
- The vendor (category captain?) may recommend one
of its own items be deleted
The category manager accepts the manufacturers
recommended deletion of its own item without
analysis
Source Center for Retail Management,
Northwestern University
22Assortment Decision-MakingDELETION SALES
ANALYSIS
- How does the item rank in sales movement in the
category/subcategory? - How does the item rank in sales dollars in the
category/subcategory? - Is the category/subcategory growing or shrinking?
Items that rank low in sales movement and sales
dollars will be considered for deletion
Source Center for Retail Management,
Northwestern University
23Assortment Decision-MakingDELETION RETENTION
FACTORS
Is the item unique in the category?
Uniqueness
- Are there other items of the same size, brand,
type, or other attribute? - Does the item have a particularly high gross
margin? Is it tied to some other product which
is profitable?
Is the item particularly profitable among items
in the category?
Item Profitability
Source Center for Retail Management,
Northwestern University
24Assortment Decision-MakingDELETION RETENTION
FACTORS
Is the item a private label?
Private Label
- Buyers/category managers are predisposed to keep
private label items as compared to branded items
Source Center for Retail Management,
Northwestern University
25Assortment Decision-MakingDELETION ELIMINATION
FACTORS
Logistical/Administrative Costs
- Can suppliers be consolidated? Are there any
other efficiencies to be gained by deleting the
item? - Does the item justify its space on the shelf?
Its slot in the warehouse? - Is the item DSD? What is the items profit per
square foot of space? - Are there extraordinary costs associated with the
item?
Source Center for Retail Management,
Northwestern University
26Assortment Decision-MakingDELETION FACTOR
IMPORTANCE
Percentage of Evaluation
55
Sales Analysis
Logistical/ Administrative Costs
20
20
Uniqueness Private Label
5
Item Profitability
Source Center for Retail Management,
Northwestern University
27Assortment Decision-MakingPRODUCT DELETION
SUMMARY
- Some category managers consider only sales
analysis. They always cut the tail, deleting
the slowest moving items. - Uniqueness of the item is not a consideration for
all category managers. - The amount of trade support to the retailer is of
little importance in the deletion decision.
Source Center for Retail Management,
Northwestern University