Before you can begin to create a product assortment for the next season, be sure to utilize past performance to learn from “wins”, while also considering “misses”.
Recapping historical sales and margin informs you about what you are up against compared to last year. Most likely the historical is what your financial plans are based on. You will, of course, change up your assortment to reflect trends happening in your business, but it gives you a baseline.
Identify the measurements will need to plan and analyze. It is always a great idea to recap the season as soon as it is done. I strongly believe it is important to not only recap objective results, but also document subjective feedback. This could include insights from customers, stores and other parts of the organization around in stocks, missed sales, competitive events, social media impact, economic factors, etc.
Let’s look at ‘Top 10 Measurements’ to help you build future assortment.
1. # Active/Seasonal Styles
Do you know how many active styles you carry in your assortment? This is an important metric to monitor. Don’t over assort and create an overwhelming experience for your customer. Establish the percentage of your assortment added/edited based on seasonality. Seasonal assortments are typically more difficult to plan, as weather and short selling window may make it more unpredictable. However, the upside is big if you get it right! Bottom line: know your style counts!
2. Sales $ and Units
Need I say more? At the most basic level, retailers are tracking sales dollars and sales units at total and style level. Recapping your top and bottom sellers, along with bucketing sales results in quartiles. For example, 25% of business being done in 10 styles, 50% done in 40 styles, 75% done in 200 styles, etc.
3. Average Dollars and Units/Per Style
This is a very important metric when determining assortment. If your average dollars per style is $10,000 or 1000 units, it could serve as a baseline when you are adding to your assortment. If you spot a new style you feel could produce $5,000 or 500 units, is it worth your time and investment?
4. Margin $ and Rate
Your assortment can drive any level of sales, but what about margin? Margin is what will lead to bottom line profitability. Your basics may bring in a higher daily margin to offset your lower fashion margins. Or the opposite!
5. Average Unit Retail
It is important to know how much your customer is willing to spend (net retail, including any discounts) on average product. Look by category or collection. When introducing new product, you know you can offer a good, better, best assortment, however it may be risky to reach too far above and lose your customer’s attention.
6. Average Inventory $ and Units/Style
This is the inventory investment needed to support sales objectives. Analyze turnover by item to identify missed sales opportunity or overstock situation.
7. Product Mix Type % – Category, Newness
Knowing what percent tops vs. bottoms, knits vs. woven, diet vs. regular drinks, or berry vs. vanilla, etc. is important to know. In some cases, your margins may vary from one to the other, and you will need to make assortment decisions that make your customer AND your bottom line happy. Continue to keep your assortment fresh. I am amazed by a large warehouse retailer, who is always delighting the customer with new, fresh product. Creating a balance of basics, along with creating fresh new introductions, make it a great shopping experience. What a great way to build sales and customer loyalty!
8. Channel Mix % – Sales, Margin, Traffic, Conversion
The shift toward customer interest in online browsing and shopping over the past 5-10 years has forced retailers to think differently about how to assort. Do you offer the same assortment online and in-store? Or is the inventory investment unwise? If the customer is on your website daily, but only in your stores once a month, decide how to offer the right assortment, at the right place, at the right time. This is a balancing act. By analyzing channel sales mix by category, you can make a more informed decision on how much assortment is needed. When your customer is shopping your website daily, you want to offer enough newness and keep them coming back.
9. Sales and Margin by Price Type – Regular/Promotional/Clearance
This is one measurement retailers sometimes struggle with. The importance of knowing what percent of your business is being driven by each price type gives insight into how your customer shops. Do you have specific customers that only shop when you are promotional? Or customers that are clearance shoppers? Maybe you have you seen a shift to more clearance sales over past season. If so, was inventory overstocked? Perhaps you bought into the wrong trends. It is critical to plan for sales by type, as corresponding margins will significantly impact bottom line profitability.
10. Productivity by space
Space is at a premium and you must determine space allocation of your product in stores, online, in marketing vehicles. Decide what is presented on your website homepage and in the front of your stores. Also, develop the sales ‘lift’ by presenting product on the front cover of an ad vs. back cover. For a product that has average sales productivity per style, in order to generate the sales however it may require 25% of floor space to present it properly. While space allocation may vary from store to store, estimating overall sales and margin per square foot will ensure you are best utilizing your real estate.
The importance of analyzing your historical results will allow you to build an assortment you AND your customers will love.
Download the eBook. Learn the Do’s and Don’ts to ensure your retail inventory strategy aligns to your assortment and how to create a retail assortment presentation that’s appealing to customers