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Let’s assume that things in your store are running pretty smoothly. Sales volume is growing margins are good inventory turnover and cash flow are fine and operating expenses are within average norms. Good job so far—you’ve got the easy stuff done. To fine-tune the operation and maximize the true upside profit potential you must understand and incorporate assortment planning.
What is assortment planning?
Once purchases have been made and merchandise has been delivered and placed on the selling floor the three questions left to be answered are:
Some items will be fashion leaders while other styles will be expected to contribute the bulk of the volume and profit. Assortment planning is a matter of determining before purchase orders are written for an upcoming season exactly what the merchandise selection will consist of how it fits into the store’s markup and profit goals and how it will be presented to customers within price and taste levels. Having vendor classification subclass style size and price point information available for the analysis is vital. And working with a Buying Diamond makes it easier.
What is a “Buying Diamond”?
A Buying Diamond is a visual display of what the store is selling. It is a tool to relate the two main issues always faced in making buying decisions: “Price” and “Taste.” The challenge continually facing the shoe retailer is how to blend the two. “Taste” is generically identified as one of four: “Contemporary” “Updated” “Middle of the Road” and “Conservative.” “Price” is generically identified as “Better” “Moderate” and “Budget.” What is considered as “Better” in one store might be considered “Budget” in another store. The same principle applies to “Taste.”
The Buying Diamond: The First Step in Assortment Planning
“Contemporary” in one operation might be called “Middle of the Road” in another. The Buying Diamond is a visual approach to the planning of the proper merchandise mix. Without such a system in place to plan purchases beyond the dollar open-to-buy a retailer runs the risk of selecting merchandise which may not completely meet the wants and needs of the store’s customers.
In addition an assortment that has not been carefully planned may very well be unbalanced with regard to taste level and price points. Lost sales and excessive markdowns can very easily be the result.
Ritchie Sayner
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Ritchie Sayner
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Elite for Business and Assigning Corresponding Interchange Rates
April 13 2007
- Visa Revisions: Introducing Signature Preferred reward card product and assigning corresponding interchange rates—April 13 2007
- Modifying commercial card interchange rate structure in both the Travel & Entertainment and non-T&E environments and adjusting corresponding interchange fees—April 13 2007
Detailed descriptions of MasterCard and Visa program modifications are available at Chase Paymentech
Visa and MasterCard post interchange rates on their websites at:
Both Chase Paymentech and NSRA staff remain ready to help with any questions members have on these changes. Contact NSRA’s Fred Rothstein at 1-800-673-8446 ext. 314.
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Result of not carefully planning assortment planning.
How Does the Buying Diamond Work?
The basic premise of the Buying Diamond utilizes a grid with the “Taste” components across the top and the “Price” components on the side.
Taste Level
The “Taste Level” portion of the planning process can be viewed as the fashion cycle with the newest looks entering under “Contemporary” on the left then moving to the right and ending up with “Conservative.” Over time fashion moves from left to right as you face the Buying Diamond. A merchant will always want to have some vendors in the upper left area of the diamond. Doing so assures that the retailer is well positioned when trends turn into hot sellers. This type of merchandise is generally purchased in the better price points since the customer looking for it is forward-thinking and usually looking for innovation and technology. If the new looks fail to move the first markdown will generally move the merchandise into an acceptable price point for
Price Points
The “Price Point” section breaks prices into three levels. Usually a store can adequately cover only three price point ranges without confusing its customers and spreading its open-to-buy too thin. As a general rule 20% of the purchases are allocated to “Better” goods 50% to “Moderate” and the remaining 30% to “Budget.”
The middle 50% will achieve the store’s average gross margin the bottom 30% will most likely provide the highest gross margin and the top 20% will most likely be the least profitable. Once the price points have been established the vendors are placed on the chart in the taste/price area most representative to their lines.
A diamond is then super-imposed over the vendor selection. Vendors falling outside of the diamond will undoubtedly not perform as well. The farther away from the diamond a vendor is the more likely higher markdowns will result.
Email for Detail
The Buying Diamond originated with Paul Davidow a veteran retailer and former colleague who has since passed away. He used it very successfully and unselfishly taught it to others. The retailers I work with who use it do so with satisfaction and to their profit.
■ Ritchie Sayner is vice president of business development at RMSA. He will provide a free copy of The Buying Diamond Workbook to NSRA members who email to request one. He can be reached at rsayner@rmsa.com.
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Aetrex 1/4 pg
Pedorthic Newswire
Summary
The article discusses the importance of assortment planning in retail to maximize profit potential emphasizing the role of the Buying Diamond as a tool for balancing price and taste in merchandise selection. Assortment planning helps retailers ensure that their inventory reflects customer preferences and is balanced in terms of taste levels and price points reducing the risk of lost sales and excessive markdowns.
“Without such a system in place to plan purchases beyond the dollar open-to-buy a retailer runs the risk of selecting merchandise which may not completely meet the wants and needs of the store’s customers.”
Real-World Examples of Assortment Planning and Buying Diamond
Assortment planning and the Buying Diamond are essential tools for retailers to optimize their product offerings and meet customer demands effectively. Here are a few examples of how these concepts are applied in real-world scenarios:
- A high-end fashion retailer uses assortment planning to ensure a balanced mix of contemporary and classic styles. By analyzing customer preferences and trends they allocate 20% of their inventory budget to high-fashion contemporary items 50% to mid-range styles and 30% to budget-friendly options aligning with their target market’s taste and price expectations.
- A shoe store chain employs the Buying Diamond to visualize and adjust their product mix. By plotting their vendors on the diamond grid they identify which brands align with their desired taste and price categories ensuring they stock the right balance of trendy moderate and conservative footwear across different price points.
- An electronics retailer uses the Buying Diamond to manage its assortment of gadgets. They categorize products into contemporary updated middle-of-the-road and conservative based on innovation and technology levels ensuring they cater to tech enthusiasts looking for the latest devices while maintaining a stable inventory of reliable budget-friendly options.
