How to “Fix” an Underperforming Category
Ok so you dodged a few bullets in the past couple of years. Covid lockdowns are in the rear-view mirror supply chain issues for the most part are yesterday’s news and staffing issues are at least better. Things are going reasonably well as measured by sales increases against last year with customers shopping once again. Back to business as usual right? Time to relax? Fuhgeddaboudit! You’ll have plenty of time to take life easy when you sell or retire. P.T Barnum once said “comfort is the enemy of progress.” If you are too comfortable you might be tempted to stop aiming for improvement and that could be dangerous. I would suggest stepping out of your comfort zone and challenging the status quo. Reviewing your retail operation store by store department by department class by class and vendor by vendor is a wonderful starting point.
If you are like many retailers you have most likely encountered a classification or category that at one time or another was underperforming. In this article I will point out some things to look for that might help you identify and hopefully correct that issue. First off the warning signs of a troubled category must be recognized. Secondly the cause of the problem needs to be determined. Finally a strategy needs to be developed and executed properly in order to fix the underperforming category.
Signs that a Class Might Be in Trouble
Here are a few indicators that should set off some red flags. Things to look for are as follows:
- Sales that are trailing last year for several consecutive months for no apparent reason.
- A decrease in maintained markup.
- No significant receipts of new merchandise in the past few months.
- Excessive markdowns.
- Stock-to-sales ratios begin exceeding plan causing inventory turnover to slow.
If one or any combination of the above is happening the next step is to begin by asking questions.
Questions to Ask
Has anything changed in the months since sales began slumping?
This could pertain to placement in the store vendors or even staffing to name a few.
What are the top sellers in the classification currently?
What are the slow sellers?
How are they being identified and what corrective action has been taken?
How fresh and saleable is the current inventory?
How many vendors are you currently buying from?
Is the selection too broad?
Are the price points right for the intended customer?
Is there any duplication/overlap of products styles colors sizes etc.?
Are any of the products carried in this class available online?
If so are you price competitive?
Is the assortment plan correct for the classification?
If a significant portion of the sales in the category are sold online how does your current shipping policy compare to others?
Are you suddenly competing with your vendor?
If so has this resulted in a loss in sales?
Are your sales associates properly trained?
If you are over-stocked compared to your merchandise plan what can you eliminate?
How much of the product in the class is old?
Over three months? Six months? One year?
Deep Dive into Subclasses
If you determine that there are multiple different items contained in the slumping category a deep dive into the subclasses will be needed to isolate the problem. You might find that there are very fast-turning items in a poorly performing class that are being overshadowed by the poor performance of the rest of the category.
Once you have discovered the problem it’s time to create and execute a strategy.
Create and execute a strategy
Research Influencers
Have someone on the staff or marketing department study the web for influencers in the area to find out what is trending in the category. This should most likely be done by age group: 30-40 40-50 over 50 etc.
Assign a Designated Staff Member
Assign a designated staff member to oversee the category and become the resident expert. This individual will oversee presentation as well as advising the buyer on fast sellers that need reordering as well as slow sellers that need stock balancing and/or markdowns.
Create a Marketing Campaign
Create a marketing campaign to include email blasts and social media content e.g. Instagram reels.
Conduct Vendor Sponsored Clinics
If appropriate conduct vendor sponsored clinics to educate sales associates and customers regarding features advantages and benefits.
Consider Sales Contests
Consider sales contests for a limited time.
Reach Out to Vendors
Reach out to vendors for input assistance display ideas advertising money promotional merchandise and even samples for sales associates if applicable.
Implement and Review Strategy
Once a strategy is created and agreed upon it needs to be implemented. Review your results weekly and tweak your strategy as needed to improve results.
Steps for Improvement
By following the steps outlined above of:
- Identifying the problem
- Determining the cause
- Implementing and monitoring a strategy
The chances of improvement are greatly improved.
Ritchie Sayner
Summary
The article provides a comprehensive approach to addressing underperforming categories in retail operations by identifying warning signs determining causes and executing corrective strategies. It emphasizes the importance of recognizing sales declines adjusting inventory and vendor relations and implementing marketing and staff training initiatives to enhance performance. By systematically reviewing each aspect of the category retailers can significantly improve their chances of success.
“Comfort is the enemy of progress.”
Real-World Examples of Fixing Underperforming Categories
Here are some real-world examples that illustrate how businesses have successfully addressed underperforming categories by identifying the problem determining the cause and implementing effective strategies.
- A retail clothing store noticed a decline in sales for their winter apparel category. By conducting a deep dive into their subclasses they found that while winter jackets were selling well accessories like scarves and gloves were not. They adjusted their inventory to focus more on the popular items ran a targeted marketing campaign highlighting winter jackets and improved sales by 20% within two months.
- A bookstore experienced stagnant sales in their young adult fiction section. They researched trending topics among their target demographic and organized a series of book signings and reading events with popular authors. This strategy not only increased foot traffic but also resulted in a 15% increase in sales in the category.
- An electronics retailer found that their home audio category was underperforming. They reached out to vendors for promotional support and organized in-store demonstrations and workshops. Additionally they trained their sales associates on the latest product features which led to a 25% increase in sales over the next quarter.
