Retail Assortments Retailing MKTG 6211 Professor Edward Fox Cox School of Business/SMU.
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Transcript of Retail Assortments Retailing MKTG 6211 Professor Edward Fox Cox School of Business/SMU.
Retail AssortmentsRetail Assortments
RetailingMKTG 6211
Professor Edward Fox
Cox School of Business/SMU
Variety and AssortmentWHY IS IT IMPORTANT?
Influences Willingness to Shop the StoreDoes the retailer carry the consumer’s preferred
products?Does the consumer have many product
alternatives?Can the consumer buy all of the goods that she
needs?
Influences Purchases in StoreBrand ChoiceUnplanned Items
Variety and Assortment
For Retailers of Merchandise, Variety and Assortment are Composed of:
Branded ProductsSold at competing retailersBrands have value for consumersLower margin for retailers
Private Label ProductsExclusive to the retailer Higher margins
Variety and AssortmentKEY FACTORS
Profitability of Merchandise Mix
Corporate Philosophy Toward Assortment
Physical Characteristics of Store
Complementary Merchandise
Source: Levy/Weitz
Assortment Plan for Girls’ Jeans
Styles T R A D I T I O N A L
Price levels $20 $20 $35 $35 $45 $45
Fabric Reg denim Stone- Reg denim Stone- Reg denim Stone-composition washed washed washed
Colors Light blue Light blue Light blue Light blue Light blue Light blue
B O O T C U T
Price levels $25 $25 $40 $40
Fabric Reg denim Stone- Reg denim Stone- composition washed washed
Colors Light blue Light blue Light blue Light blue
Indigo Indigo Indigo Indigo
Black Black Black Black
Source: Levy/Weitz
Size Distribution for Traditional $20 Denim Jeans in Light Blue for a Large Store
SIZE
Length 1 2 4 5 6 8 10 12 14
Short 2 4 7 6 8 5 7 4 2 %
9 17 30 26 34 21 30 17 9 units
Medium 2 4 7 5 8 4 6 3 2 %
9 17 30 21 34 17 26 12 9 units
Long 0 2 2 2 3 2 2 1 0 %
0 9 9 9 12 9 9 4 0 unitsTotal 100%
429 units
Source: Levy/Weitz
A productproduct categorycategory is an assortment of items that the customer sees as reasonable substitutes for each other: girls’ apparel, boys’ apparel, infants’ apparel
Variety and Assortment THE PRODUCT CATEGORY
Adapted from Levy/Weitz
CategoryCategory ManagementManagement is the process of managing a retail business with the objective of maximizing the sales and profits of a category
• Objective is to maximize the sales and profits of the entire category, not just a particular brand
• One person is totally responsible for the success or failure of a category
• “Buyers” sometimes called “category managers”
Category CaptainCategory Captain - supplier forms an alliance with a retailer
• Potential problem – It’s like letting a fox into the chicken coop
Variety and Assortment CATEGORY MANAGEMENT
Adapted from Levy/Weitz
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)
SA
LE
S
SA
LE
S
SA
LE
S
SA
LE
S
TIMETIMETIME TIME
Variety and Assortment TYPES OF PRODUCTS
Source: Levy/Weitz
Source: Ad Age 11/27/99
An average family gets 80 – 85% of their needs from 180 SKUs
180 SKUs per Avg. Family
40,000 SKUs inSupermarket
1 Million SKUs
All Channels
Variety and Assortment NEW PRODUCTS
Variety and AssortmentITEM SELECTION
Affects the profitability of the category through:
Utilization of shelf space
Meeting customer needs and preferences inBrandSizeType
Access to supplier’s specialized distribution, deal and markdown funds
Item 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
Item 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/manufacturer shipment costs
Assortment Decision-Making
Assortment Decision-MakingNEW ITEMS
Classification “New” or “Me-Too”
Evaluation Factors
Potential Negative Factors
Accept
or
Reject
- =
Helps Establish Criteria for Acceptance Compare with
Acceptance Criteria
Overall Evaluation
•Consumer Demand•Sales & Trend Analysis•Trade Money•Category Growth
•Packaging Appearance•Package Size
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingCLASSIFICATION
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?
““Me-too” products are evaluated more stringently Me-too” products are evaluated more stringently than “new” products, and must offer other benefits than “new” products, and must offer other benefits
in order to be acceptedin order to be accepted
“New” or “Me-Too”
or
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingEVALUATION FACTORS
Is there strong evidence of consumer demand?
Vendor Money
Sales and Market Analysis
Contribution to Category Growth
Consumer Demand/Demand Generation
Does this product address category sales trends?
How much money does the manufacturer offer up front?
Will this product grow the category?
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingEVALUATION FACTOR IMPORTANCE
Percentage of Evaluation
Other Considerations (Vary) 10%
Vendor Money
Sales and Market Analysis
Contribution to Category Growth
Consumer Demand/Demand Generation
45%
20%
10%
15%
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingPOTENTIAL NEGATIVE FACTORS
Does the product’s packaging look dull, unexciting or unprofessional?
Item Size
Packaging Appearance
Does the item fit on the shelf?
If the item does not fit on the shelf or in the set, If the item does not fit on the shelf or in the set, it will not generally be acceptedit will not generally be accepted
Source: Center for Retail Management, Northwestern University
Assortment 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
Assortment Decision-MakingPRODUCT DELETION
Supplier Recommends
Deletion= Delete
•Logistical & Administrative Costs
•Uniqueness•Item profit•Private label
Sales Analysis
Elimination Factors
Retention Factors -+ =
Delete
or
Retain
PROCESS2
PROCESS1
Source: Center for Retail Management, Northwestern University
Assortment 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 manufacturer’s The category manager accepts the manufacturer’s recommended deletion of its own item without recommended deletion of its own item without
analysisanalysis
Source: Center for Retail Management, Northwestern University
Assortment 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 Items that rank low in sales movement and sales dollars will be considered for deletiondollars will be considered for deletion
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingDELETION – RETENTION FACTORS
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?
Uniqueness Is the item unique in the category?
Item Profitability Is the item particularly profitable among items in the category?
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingDELETION – RETENTION FACTORS
Buyers/category managers are predisposed to keep private label items as compared to branded items
Private Label Is the item a private label?
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingDELETION – ELIMINATION FACTORS
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 item’s profit per square foot of space?
Are there extraordinary costs associated with the item?
Logistical/Administrative Costs
Source: Center for Retail Management, Northwestern University
Assortment Decision-MakingDELETION –FACTOR IMPORTANCE
Percentage ofEvaluation
55%
20%
20%
Logistical/ Administrative Costs
Sales Analysis
Uniqueness & Private Label
Item Profitability 5%
Source: Center for Retail Management, Northwestern University
Assortment 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