Why Good Assortment Management Means Increased Sales
An often overlooked component of managing the retail fundamentals is good assortment management. Done correctly, it will increase your sales. Done badly, it can lead to category failure.
July 2015 | by Kathryn Maude, Category Director
In travel retail, there is a common misconception that offering more products to shoppers gives them a better experience and that creating an abundant choice is the key to driving sales.
But let’s be clear, when shoppers are faced with too much choice….they DO NOT buy!
Across many categories, brand owners are requested to or are happy to pay for space, for listing brands and for installing brand displays.
Driven by the mechanics of a retailer and brand relationship this is understandable. However in most cases, the consequences of this are often not considered or they are ignored in favour of what is believed to be a better outcome.
Here at CiR, we’ve performed assortment analysis projects across all core categories in most of the leading airports of the world. Our analysis and interrogation reveal some very common themes emerging from every project;
- The assortment size in almost every category is too big and not efficient
- Leading brand space is being squeezed and losing valuable shelf presence
- Product availability is reduced as stock holding of key lines is not sufficient
- Display clarity is impacted and fixtures become difficult to understand
- New listings are based on distribution targets – not a shopper need
- Lost sales as shoppers have too much choice and therefore do not buy
The resulting impact of the above means that categories lose definition and therefore their identity. They become difficult to shop and ultimately lead to shopper disappointment.
In an industry that has been riding-high for many years on the growth of international travel, sales have seen a similar level of growth therefore no alarm bells have rung. But as we face trading in a slightly softer market, managing the basics cannot be overlooked anymore.
The case for success is very clear. Less is more. The answer is quite easy – cut more SKU’s from the range, create cleaner displays and enjoy more shoppers translating into buyers.
The argument for better range management in travel retail is clear. From our analysis we estimate that up to 70% of SKU’s in certain categories in certain stores don't sell a single unit on any given day. This is a potentially scandalous use of space and a huge loss of revenue.
As new products and brand extensions are being continually introduced, it leads to the issue that best-selling brands and products are having their shelf space reduced and spending more time off sale than ever before. This is because rate of sale is outstripping the stock-holding on fixture. In cases like these, neither the retailer, the brand owner or the shopper wins.
Tackling The Issue
Effective assortment management requires an analytical and collaborative approach. It requires a well-considered approach and one that is also shopper-centric. There’s no dark-art to range management and the approach should be quite simple; ensure you maintain variety, decrease duplication and build in appropriate price-tiering.
The answer to getting this right lies in the detailed analysis of EPoS data; understand category trends and then the application and use of related intelligence such as nationality preferences and shopper behaviours.
Through handling large amounts of EPoS data during the last ten years, we’ve honed our approach to assortment optimisation. Typically we would recommend a reduction in the assortment size by at least 15% to 25%. When a new, sleeker and slimmer offer is correctly merchandised, we’ve realised sales growth of up to 8%. In summary, in all cases, this approach has led to an increase in sales.
By implementing the most effective and optimised assortment for a store or category, we’ve proven to deliver the following benefits:-
- Reduced inventory levels and less cash tied up on fixture
- Increased levels of store standards and high impact merchandising standards
- Better availability of all SKU’s in the range
- Increased visibility of key categories and the core brands within them
- Improved shopper navigation
- Increased dwell time in store as shoppers enjoy an improved experience
- Easy to understand displays that are easy to shop and easy to select from
- Up to 8% increases in top line sales
- Happy shoppers!!
Assortment management is something that should be a fundamental part of any category strategy. It should be looked at as one of the most important aspects of achieving a category or brand ambition.
Don’t leave it to chance. Review, analyse, reduce, implement and measure.