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Critical Considerations for Retail Assortment Plans A retailer’s assortment planning process can make or break their selling season (or even their entire fiscal year). If your predictions are inaccurate (or your assortment plan fails to reflect consumer demand) -- you’ll be facing out-of-stocks, markdowns, and unhappy customers all year.  But if you manage to predict consumer demand accurately and plan your assortment accordingly -- you’ll rake in the profits. This is easier said than done. Even if you could predict exactly when (and how) to shrink or expand your assortment on a macro-level, it is a task of herculean complexity to effectively translate this to individual store assortments (especially if you work for a large retailer). Think of the man-hours required to wrestle tens-of-millions of spreadsheet cells into compliance. That’s why many medium and large retailers don’t bother planning so granularly during the pre-season. Their only option may be high-level planning that doesn’t take individual stores, demographics, and constraints into account. Furthermore, there’s no “one-size-fits-all” approach to assortment planning. Your assortment planning process will look very different depending on whether: You sell hardgoods or softgoodsYou have access to an accurate demand forecastYou’re using Excel or a specialized assortment planning softwareEtc. Given the complexity (and variability) of assortment planning, you...

12 February, 2021

Seasonal merchandise planning carries a unique challenge for retailers, as product life cycles are measured in weeks or even days.  This is a problem because retailers plan their inventory months in advance -- having almost no window to react to out-of-stocks or an unexpected up-lift in demand. With seasonal product life-cycles becoming ever shorter, retailers need more strategic and granular ways to plan their seasonal assortments so they can maximize revenue while minimizing markdowns.  Here are 5 powerful ways retailers can optimize seasonal merchandise planning in their business: 1. Account for more variables in your seasonal merchandise planning Planning for seasonal sales has always been a bit of a gamble.  Most retailers lock in their seasonal plans long before the selling season starts. And many seasonal products are new with no sales histories to form the basis of a forecast. This creates uncertainty in merchandise plans, because there are a huge number of factors that will impact your merchandising strategy -- many of which are dynamic, and difficult to predict in advance. Some of these factors include: PricingConsumer preferencesCompetitorsEventsPromotionsVendorsLogisticsetc. To illustrate how just one of these variables can throw your plan into disarray, let’s look at a very common business practice -- vendor bulk discounts.  While potentially profitable, opportunity buys...

07 January, 2021

An effective replenishment plan will drive profit. There is an age old saying, and it goes like this: "you don’t plan to fail, you fail to plan." And what can be easier than planning replenishment? All you need to do is plan to replenish the products that you sell out of. Right? In reality, replenishment planning is a fairly complicated process that has to account for many variables, including logistics routes, timelines, availability, and cost. After all, what good is replenishing inventory if it doesn't arrive on time, is the wrong quantity, or too expensive to make a profit off of? So it is no surprise that retailers are scouring the internet to find how to plan replenishment for their business.  Before we share some best practices that will surely boost your margins, let's make sure we're on the same page. What is replenishment actually, and what makes it so complicated? What is replenishment planning? Simply put, replenishment is the process of re-ordering in-demand inventory that is low or out-of-stock. The purpose of replenishment is to ensure that a retailer has the right quantity of product, at the right location, at the right time to maximize sales and minimize costs. Replenishment planning is the process of figuring...

06 January, 2021

Optimizing your inventory balancing process is key to increasing ROI Even the best-executed assortment strategy can lead to imbalanced inventory levels halfway through the season. An inaccurate forecast, unpredictable changes to consumer preferences, shifts in the competitive landscape, or major economic events can all completely throw your planning and purchasing off-track, leaving you with major inventory distortions despite your best plans. Some stores will be overrun with inventory, while others will struggle to keep up with demand. And this is exactly what happened to many retailers within the last year. So it's no surprise that retailers are beginning to take a serious look at their mid-season inventory balancing practices. But before we dive into the solutions, let us first discuss what inventory balancing actually is, why it's important, and what causes inventory imbalances in the first place. What is inventory balancing? Simply put, inventory balancing is the process of moving excess inventory from one retail location to a retail location where that inventory is in demand. When done right, this process will free up shelf-space and budget for stores with slow-moving inventory, while also quickly (and cost-effectively) restocking stores that can't keep up with demand -- thus increasing sales. Why is unbalanced inventory...

06 January, 2021

Solving Your Out-of-Stock Problem Once and for All While inexperienced retailers may celebrate completely selling out of stock -- retailing professionals know that out-of-stocks can be disastrous for a retail organization, both in the short and long-term. In the short-term, an out-of-stock causes lost sales (you can't sell what you don't have) and disappointed customers. But in the long-term, chronic out-of-stocks become even more insidious. If you are consistently running out-of-stock, several things will begin to happen: Your profit margins will start to decrease. This is because you are not only losing sales (and thus revenue), but are also increasing your costs by having to replenish more frequently. Your reputation among customers will suffer. Would you want to waste your time going to a store that never has what you want in stock?Your competitors will steal sales. If there is demand for your product and someone else is selling it -- customers will flock in their direction. This is why most retailers are doing everything they can to reduce out-of-stocks. And while there is no silver bullet on how to prevent stock-outs, there are some tactics that retailers can use to prevent out-of-stock problems. What is a stock-out? A stock-out happens when there is no...

09 December, 2020

Price optimization and price management are terms that often are used interchangeably, but they are not the same thing. When used properly, both price management and price optimization can substantially affect a retailer’s profitability. So, what exactly is price optimization and why is it so impactful to retailers? This article will give you a distinct understanding of pricing optimization, the challenges and constraints involved in optimizing retail prices, and the price optimization strategies that leading retailers are employing today to stay ahead. What is price optimization for retailers? Before we go any further it is important to make a clear distinction between price management and price optimization: Price optimization is the process of identifying the optimal price point for any given product at any given location that will yield the highest profit. Price management is the process of setting prices, communicating changes through the organization, and updating pricing as things change in the business. You can manage prices without optimizing them, but you run the risk of poor margins, higher costs, and down-stream inventory challenges (markdowns, out-of-stocks, etc.).  You cannot optimize prices without managing them, however. Identifying the optimal price for each product is not enough -- because you also need the process and infrastructure to apply...

20 November, 2020

[vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern"][vc_column][vc_column_text] Reducing inventories is vital to increasing retail profits. More expensive than real estate, merchandising, or even labor -- inventory is the largest investment your company makes. But getting the biggest return on that investment, especially in today’s tough retail environment, requires a more nuanced, data-driven approach to inventory management than most retailers are used to.  Below, we’ll describe 7 guaranteed inventory reduction ideas in some detail. But first, let’s take a look at what reducing inventory really means, and why it matters. Why is it bad to have too much inventory? When a retailer has "too much" inventory, it simply means that there isn't enough demand from consumers for all of the inventory to be sold during the retailing season. This is bad because: Money has been spent on this inventory that could have been spent on more popular products This inventory is taking up shelf-space that could be used for more popular / better selling / more profitable products To get rid of this inventory, it will most likely be sold at massive discount (and potentially, at a net-loss) In short, having "too much" inventory ties up cash flow, prevents retailers from filling shelves with more popular products, and creates a...

08 October, 2020

Why should retailers care about data analytics? It's really quite simple. Today’s retailers are facing a bevy of new challenges, including declining sales, fierce competition from online-only stores, and changing consumer preferences. In the digital age, there are a million things retailers have to stay on top of, and simply not enough time in the day. Yet, despite these challenges, some traditional retailers are managing to grow year-over-year, shredding previous sales records time and time again. The winners are doing something differently -- something that not only helps them survive, but also thrive in this quickly unfolding retail apocalypse. According to McKinsey & Company, the reason some retailers are winning (while others struggle) is advanced analytics. New research says that retailers using advanced analytics outperform the competition by 68% in earnings -- and the disparity is growing exponentially. But what exactly is “advanced analytics,” and how does it differ from regular old Excel analysis? To explain what makes advanced analytics so special, we need to start at the beginning.  What is Retail Data Analytics? Retail data analytics is the process of collecting and studying retail data (like sales, inventory, pricing, etc.) to discover trends, predict outcomes, and make better business decisions. Done well, data analytics allows retailers to...

23 September, 2020

Demand forecasting has become vital to the survival (and growth) of many retailers in the last few years. That's because top-performing retailers simply cannot rely on inaccurate, decades-old approaches to forecasting demand.  In order to optimize their inventory investments and maximize GMROII, today’s retailers need accurate demand forecasts for every SKU in every store. But achieving this level of SKU prediction requires a big data analytics approach to demand forecasting -- designed for the digital era of retailing.  In order to understand how to take full advantage of this new technology, we will first explain what demand forecasting actually is, the most common methods of demand forecasting in retail, key constraints that need to be accounted for, and modern examples of accurate demand forecasting. What is Retail Demand Forecasting? To understand retail demand forecasting, you must first understand demand and forecasting as separate concepts.  Demand is an economics concept that describes the willingness of consumers to purchase a specific product at a specific price. Forecasting is a statistical process that uses existing data to predict future performance. Therefore, demand forecasting is a statistical prediction of the willingness of consumers to purchase specific products, at a specific price, in a specific time frame. Put plainly, if retailers could...

11 September, 2020

For the past few years, retailers have been faced with an exponentially growing gap between industry leaders and laggards. A Mckinsey & Company report shows clearly that those who leverage analytics are outperforming their competition by 68%, and the gap continues to widen exponentially. Source: Mckinsey & Company report Digital transformation in the industry has created additional challenges for retailers to tackle. The traditional approach (which used to be good enough) has now become obsolete. Relying on the ‘good enough’ makes it impossible for a business to survive in the digital age. In today’s landscape, when a new fashion retail trend latches on, companies need to have the ability to make the right decisions quickly. Retailers have found that machine learning and predictive analytics is a game changer which is leaving slow to adapt competitors far behind. So, why is advanced analytics so successful and what is the difference between the traditional approach and this new advanced approach to fashion analytics? Fashion Retail’s Unique Challenges In order to truly understand the benefits of analytics in the fashion industry, we must consider the unique challenges that fashion retailers face. While digital transformation has affected every retailer, fashion retailers are amongst the hardest hit verticals facing specific challenges...

11 September, 2020
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