8 TODAY JUL-AUG 24
Have you ever found yourself in a situation where you have more than enough inventory on the floor yet seemingly nothing to sell? Perhaps this scenario has happened: you just get another new style but you have no space on the wall or on the selling floor to display it? Better yet you have many different styles and vendors but you seem to quickly run out of the best sizes your customers want. If you have ever experienced any of these situations you most likely have an assortment problem.
Assortment issues can plague a retailer even if they are following the best open-to-buy plan available. How is that possible you ask? Simple an open-to-buy (OTB) is a dollar control planning methodology designed to keep the amount spent on inventory in line with the planned sales for a given store classification and time period. However an OTB does not dictate how much to spend on any given vendor style or size. That is the function of the assortment plan.
Here’s an assortment planning example:
Let’s say you are opening a brand-new store and have a planned inventory of $50000 @ retail in a given classification. Let’s further assume that the average unit price is $200. Simple math shows us we would be able to buy 250 pairs. If we were to buy a 10-pair run of sizes across all vendors and styles equally we could buy 25 styles right? We also have five brands in this class. You have decided to buy the same number of styles from each vendor and only one pair per size so that you can have a larger presentation of styles. Assuming all inventory has arrived by the opening day you have the perfect assortment.
Now here is where the problems begin. This “perfect assortment” only lasts until the first sale is made.
Narrow and Deep
By giving equal weighting to all styles and vendors you miss sales opportunities in the best-selling styles because the key sizes are sold out quickly leaving
Only End Sizes
It takes time and money to get these fast sellers back into the system assuming that they are even available to reorder. Other styles you have selected may not sell as quickly if at all. I call this the “shotgun” approach. The buyer isn’t experienced enough or doesn’t yet trust their judgment so they overbuy the assortment to make sure “everything is covered.”
Experienced buyers don’t buy this way. They know they must have a decent presentation of vendors styles and price points to pique the customer’s interest. They also know that certain styles will most likely be winners. It is these winning styles that should have the key sizes backed up so as not to have broken size runs after the first purchases are made. Their assortment is narrow and deep.
If You Are an Established Store
With SKU history in your POS system you can easily spot the problem. Let’s say your stock turnover goal in a given class is three times annually. In looking over your past performance of style and vendors you find a particular brand turning five times. Initially you might think this is a good thing since faster turns equate to better cash flow and higher sales. Upon further review of the styles however you find stock outs on the best styles that were either never reordered or are not currently available. Conversely there will undoubtedly be other styles with slower sell-throughs that should be stock balanced with the vendor or marked down.
Assortment Planning – The Key to Increased Profits
Ritchie Sayner
A well-curated presentation offers carefully chosen styles and colors with key sizes backed up to anticipate demand.
Published in the July/August 2024 issue of Shoe Retailing Today Copyright © 2024 National Shoe Retailers Association Tucson AZ www.nsra.org. All rights reserved.
Studies have shown that offering more does not generate more sales. The most famous being a study published by psy-
Psychologists Lyengar and Lepper in 2000
What they found was that shoppers were 10 times more likely to purchase jam from a display when the selection was pared down from 24 to 6. Pruning of assortments started one to two years pre-Covid but accelerated during the pandemic. What companies learned supports the Lyengar/Lepper study showing that fewer offerings lead to less customer confusion and fewer markdowns.
Eric O’Toole President of Edgewell’s North America Division
Eric O’Toole said that the pandemic presented “a really valuable stimulus” for reassessing assortment. In O’Toole’s words “A tighter more curated portfolio supports healthy profit management.”
Another Pitfall of Over-Assortment
Initially the problem can be disguised within the OTB plan. Sales and inventory levels might appear to be in decent shape on the merchandise plan initially since you are looking at dollars only. This can quickly change as the most desirable styles and sizes are quickly sold through leaving only the slower less requested merchandise. That is why the seasoned merchant constantly monitors his or her SKU assortment using POS data available.
Displaying an over-assortment also presents problems. In most stores there is only so much room on the wall or the floor or hanging space to display all the styles. If there are too many styles from which to choose the retailer quickly finds him or herself with duplications that lead to increased markdowns and customer confusion.
On the other hand the photo on page 8 shows a well-curated presentation of carefully assorted SKUs offering three different styles and a choice of color options with all key sizes backed up to accommodate anticipated demand.
Assortment Creep
Assortment creep is a term used to describe a condition of inventory buildup that over time slows turnover ties up cash reduces sales volume contributes to old inventory and causes excessive markdowns. Retailers can avoid assort-
Assortment creep can be managed by reminding oneself to buy the best and pass the rest. Having a sound sales and inventory forecast and an accurate open-to-buy plan is a vital first step. Paying closer attention to the assortment plan fine-tunes the process.
Credit: “Is Less Really More?” by Anne D’Innocenzio Associated Press 2/17/24.
Ritchie Sayner is with Advanced Retail Strategies LLC an affiliate of Management One. Sayner’s book Retail Revelations: Strategies for Improving Sales Margins and Turnover (2nd Ed.) is available on Amazon. He can be reached at www.advancedretailstrategies.com.
### Online Competition
9. Competing online with suppliers is a no-win situation. Are your suppliers playing fair?
### After-Sale Support
10. Great warranties and support keep customers happy. Are your suppliers helping you there?
With a simple rating system you can assess each area getting a clear picture of where things stand.
## Unlocking Freedom
The supplier scorecard is more than a piece of paper. It’s freedom in action. By aligning suppliers with your unique promise everything starts to fall into place.
Your shoe store is special. You deserve suppliers that understand what makes your store tick what makes it shine. Implement this scorecard and make sure every part of your business reflects your unique promise.
## Putting It into Action
Now you’ve got a clear picture of what the supplier scorecard looks like but how do you actually use it?
First take a moment to define your unique promise. What makes your shoe store stand out? What do you offer that no one else does? Write it down.
Next sit down with your suppliers. Share your vision your promise. Make it clear what you expect and ask them how they can support you.
Then use the scorecard regularly. Assess your suppliers track their performance and make decisions based on clear straightforward ratings.
## See the Change
Soon you’ll start noticing a difference.
Your Suppliers Will Become True Partners
Your suppliers will become true partners working with you to fulfill your unique promise. They’ll understand what you’re all about and they’ll help you make it happen. (If they don’t it’s the opportunity for you to assign your budget elsewhere.)
Your Customers Will Notice Too
Your customers will notice too. They’ll see that your shoes aren’t just products on a shelf; they’re a part of something bigger something special. They’ll feel the alignment the commitment the passion. And they’ll keep coming back for more.
Ready to Take Control?
Your shoe store deserves the best. And with the supplier scorecard you can make sure it gets exactly that. Why struggle with confusion and misalignment when a simple tool can make everything clear? Why settle for anything less than total harmony between your promise and your suppliers?
Take the first step towards a better more aligned future. You can download a pdf copy of the scorecard to use in your business at: https://simplifyingentrepreneurship.com/supplier. It’s your tool your way to take control.
■ Pete Mohr owns two Shoetopia locations in Canada and spends most of his time coaching business owners to move from operators to owners in their businesses. His podcast Business Owner Breakthrough focuses on quick episodes with actionable steps to move your business forward. Pete can be reached at www.mohr.coach.
Summary
The article discusses the challenges of assortment planning in retail emphasizing that even with a solid open-to-buy plan retailers can face issues such as over-assortment and stockouts of popular sizes and styles. It highlights the importance of a well-curated inventory that focuses on key styles and sizes to maximize sales and minimize markdowns supported by studies showing that fewer offerings can lead to increased sales and reduced customer confusion.
“A tighter more curated portfolio supports healthy profit management.”
Real-World Examples of Assortment Planning
Assortment planning is crucial for retailers to optimize inventory and maximize profits. Here are some real-world examples illustrating the importance of effective assortment planning.
- A fashion retailer noticed frequent stockouts of its best-selling sizes and styles while less popular items were overstocked. By analyzing sales data and adjusting their assortment plan to focus on key styles and sizes they improved stock turnover and reduced markdowns.
- A grocery store implemented a more curated selection of products based on customer preferences reducing the number of SKUs on the shelf. This approach led to increased sales as customers found it easier to make decisions aligning with the findings of the Lyengar and Lepper study.
- An electronics retailer faced issues with assortment creep leading to slow turnover and excessive markdowns. By adopting a narrow and deep assortment strategy focusing on top-performing brands and models they improved cash flow and customer satisfaction.
