Category Management And Assortment Planning Presentation
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Enabling Sustained Business Excellence
Category Management & Assortment planning Aartee Roy Senior VP, Retail Industry Consulting KINDUZ Business Consulting
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
HTTP://NETWORK.KINDUZ.COM/ KINDUZ Consulting Network
• Network with Experts from all over the World • Download Templates, Checklists, Frameworks for study • Access Video Recordings, Blogs of Experts • Post Questions and get Answers, Participate in Discussions • Lifetime Access
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ - All rights reserved
2
Contents
What is a Category ? What is Category Management ? Key areas of Category Management Identifying Product Groups Space Planning Assortment Planning Visual Merchandising Inventory Management Complete Process Flow
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
What is a Category ?
A Category is a group of similar or related items which the customer would ideally like to find together in a store. Categories are mainly used as organizational aids to better manage and monitor predefined groups of products.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
What is Category Management ?
Right product At right price To right location At right time
To meet projected sale Generate required Margin And maintain defined stock cover
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Key Areas of Category Management.
Category Managemnent includes : • Space Planning to ensure desired display space. • Assortment Planning to facilitate the achievement of required financial objectives. • Visual Merchandising to optimize display efficiency and aid walkins/conversions in a store. • Inventory Management to ensure required stock cover and avoid being out of stock.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Identifying Product Groups
Product Groups/Categories should be defined based on the consumer’s needs and purchasing habits.
Home Decor
Lighting Aroma Wall décor
Flowers Garden Decorative Acc.
Fashion Acc.
Jewellery Watches Perfumes Leather Bags. Jute Bags. Travel Bags
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Space Planning
Considerations for Layout Decisions :
Niche Products Perfumes
Leather Acc.
Home Decor
Jewellery Cash Till
High margin items should be placed in high traffic areas. High demand items should be placed in low traffic areas. Complementary items should be placed near each other. Seasonal needs should be considered. Items needing frequent restocking should be placed near storerooms or cash registers. Larger departments should be placed in lower traffic areas. Impulse items should be placed in closer to billing. Shopping behavior and operational considerations should be recognized.
Impulse items
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Layout Options
Straight Floor Plan
Angular Floor Plan
Geometric Floor Plan
Mixed Floor Plan Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Benefits of Space Planning Inviting store layout improves walkins into the store. Improved circulation space within the store allowing for accessibility to all products. Improved conversion rates by better product visibility and display. Reduction in shrinkage. The store layout can impact the customer’s perception of the store’s positioning.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Assortment Planning
Competition Analysis
Revenue & Margin Projection
Assortment Plan
Forecasting/Trends Analysis
Demand Planning Customer Analytics
Assortment Plan or the Merchandise Mix is rated around the globe as the second most important factor for a store, after its location. The assortment plan defines the revenue stream, impacting not only the top lines and bottom lines but also the working capital locked in inventory. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Key Deliverables of an Assortment Plan Required Average Revenue/sft. Required Gross Margin Required Average Ticket size Required Stock cover based on demand forecast Suitable product as per catchment analysis and target customer profile. Based on competition study, merchandise mix should define the store’s USP.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Assortment Planning
Process • • • •
Benchmarking Customer Profile Financial Projections Store Layout
Input
• • • •
Category composition Sub Group Planning Sourcing strategy Pricing strategy
• Customer & Catchment Centric Assortment Plan which will deliver required financial targets.
Output
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Benchmarking Fashion Boutique
Department Stores Volume---
Volume +++ Department Stores
Mass Discounters – Coupon, Brand Factory
Hypermarket Mass
Incorrect market positioning results in wasted resources by competing with players that are not the right match. Define your focus market segment, key competitors and identify where YOUR opportunity is. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Customer Analytics Category-wise Spend
3500
4000
3000
3500
2500
3000 Spending Amount
Spending Amount
Age-wise Spending Power
2000
1500
1000
2500 2000
1500 1000
500
500
0
0 18-25
26-30
31-50
50+
Books
Entertainment
Toys
Stationery
Gifts
Understanding of customer buying patterns is critical for all retailers. Defining the target customer’s buying power, age, category preferences and regional influences can positively impact your top-line
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Store Layout
The store layout clearly defines the stocking capacity of the store and hence enables detailed SKU qty ordering. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Category Composition
Once the Broad categories are defined, the finer details need to be planned. The above example summary is based on a detailed subgroup level plan, both in terms of space allocation and sale projection.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Sub- Category Planning
Within a category, shelf displays are planned product wise and supplier/brand wise. Based on past sales experience or market figures, a sales projection is created which confirms the inventory requirement and hence the investment required for the first fill. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Sourcing Strategy Based on: Lead-time to store launch Margin requirement Stock availability Working capital availability
Highest Margin
Lower Margin
Lowest Margin
Factory
Wholesaler/ Importer
Distributor
Longest lead-time
Shorter lead-time
Retailer
Shortest lead-time
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Pricing Strategy
Purchase terms
Pricing
Credit Period
Returns
• Whether to buy outright or on consignment ? • Is it better to get the products as a Shop in Shop ?
• To what extent will the price be competitive for exclusive products ? • Should some products carry a promotional discount ? • To what extent can the credit period be renegotiated ? • Will bigger volumes help in improving the credit period ? • Will the supplier accept returns of ageing stock ? • Who will bear logistic cost of returns ?
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Visual Merchandising “Visual Merchandising”, the art of attracting patrons with visual cues, is central to a retailer’s ability to generate sales. Visual Merchandising got its start at the turn of the century, when department stores began using theatrical set design and lighting to create exotic displays. Today, the way the departments are arranged, the location of the escalators, the lighting--all are carefully planned to earn the store more sales per square foot.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Store Display Decisions
1. Shelving 2. Hanging 3. Pegging 4. Folding 5. Stacking 6. Dumping
1. Value/fashion image 2. Angles and sightlines 3. Vertical color blocking
1. Fixture Types 2. Merchandise Presentation Planning 3. Selecting Fixtures for Merchandise 4. Visual Merchandising
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Visual communication
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Planogramming
Inventory Control and merchandise display technique which enables the retailer to maximize shelf space utilization. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Planogramming Benefits
Improved sales presentations & closure results Increased consumer appeal of product displays Better brand awareness through consistency Improved efficiency of shelf space allocations Improved financial performance of assortments Faster, more accurate replenishments Quicker inventory resets Much better marketing through targeted displays
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Inventory Management
S2
S2 S1
S1
S3 DC1
Supplier
S3 DC1
Corporate
Supplier
S4
DC 2
Corporate
S4
DC 2
S5
S6
S5
S6
Inventory in a PUSH system is managed at the corporate level where all buying decisions are made and then pushed to the distribution centers for allocation to stores.
Inventory in a PULL system involves store requirements to be consolidated at the corporate level via the DC and then procured.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Ageing Inventory Liquidation Routes
Instore Discounting
Tieups with Mass Discounters
Transfer to stores where required
Return to vendor
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Complete Process Flow
Assortment Planning Sourcing Ordering Delivery to warehouse Delivery to Store
Assortment Planning Realign Mix close to Best Sellers Identify Top Performers
Monitor Margins Monitor Sales
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Contacts
Aartee Roy Principal Consultant, Retail Vertical
Sundeep M Senior Director, Customer Relationships
Website: http://www.kinduz.com/
Website: http://www.kinduz.com/
Email: [email protected]
Email: [email protected]
India Mobile: +91-924685184
India Office: +91-40-40165594 US Phone: +1-312-473-9767
India Mobile: +91-9246085180 India Office: +91-40-40165594 US Phone: + 1-312-473-9767
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ - All rights reserved 29
Category Management & Assortment planning Aartee Roy Senior VP, Retail Industry Consulting KINDUZ Business Consulting
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
HTTP://NETWORK.KINDUZ.COM/ KINDUZ Consulting Network
• Network with Experts from all over the World • Download Templates, Checklists, Frameworks for study • Access Video Recordings, Blogs of Experts • Post Questions and get Answers, Participate in Discussions • Lifetime Access
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ - All rights reserved
2
Contents
What is a Category ? What is Category Management ? Key areas of Category Management Identifying Product Groups Space Planning Assortment Planning Visual Merchandising Inventory Management Complete Process Flow
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
What is a Category ?
A Category is a group of similar or related items which the customer would ideally like to find together in a store. Categories are mainly used as organizational aids to better manage and monitor predefined groups of products.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
What is Category Management ?
Right product At right price To right location At right time
To meet projected sale Generate required Margin And maintain defined stock cover
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Key Areas of Category Management.
Category Managemnent includes : • Space Planning to ensure desired display space. • Assortment Planning to facilitate the achievement of required financial objectives. • Visual Merchandising to optimize display efficiency and aid walkins/conversions in a store. • Inventory Management to ensure required stock cover and avoid being out of stock.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Identifying Product Groups
Product Groups/Categories should be defined based on the consumer’s needs and purchasing habits.
Home Decor
Lighting Aroma Wall décor
Flowers Garden Decorative Acc.
Fashion Acc.
Jewellery Watches Perfumes Leather Bags. Jute Bags. Travel Bags
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Space Planning
Considerations for Layout Decisions :
Niche Products Perfumes
Leather Acc.
Home Decor
Jewellery Cash Till
High margin items should be placed in high traffic areas. High demand items should be placed in low traffic areas. Complementary items should be placed near each other. Seasonal needs should be considered. Items needing frequent restocking should be placed near storerooms or cash registers. Larger departments should be placed in lower traffic areas. Impulse items should be placed in closer to billing. Shopping behavior and operational considerations should be recognized.
Impulse items
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Layout Options
Straight Floor Plan
Angular Floor Plan
Geometric Floor Plan
Mixed Floor Plan Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Benefits of Space Planning Inviting store layout improves walkins into the store. Improved circulation space within the store allowing for accessibility to all products. Improved conversion rates by better product visibility and display. Reduction in shrinkage. The store layout can impact the customer’s perception of the store’s positioning.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Assortment Planning
Competition Analysis
Revenue & Margin Projection
Assortment Plan
Forecasting/Trends Analysis
Demand Planning Customer Analytics
Assortment Plan or the Merchandise Mix is rated around the globe as the second most important factor for a store, after its location. The assortment plan defines the revenue stream, impacting not only the top lines and bottom lines but also the working capital locked in inventory. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Key Deliverables of an Assortment Plan Required Average Revenue/sft. Required Gross Margin Required Average Ticket size Required Stock cover based on demand forecast Suitable product as per catchment analysis and target customer profile. Based on competition study, merchandise mix should define the store’s USP.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Assortment Planning
Process • • • •
Benchmarking Customer Profile Financial Projections Store Layout
Input
• • • •
Category composition Sub Group Planning Sourcing strategy Pricing strategy
• Customer & Catchment Centric Assortment Plan which will deliver required financial targets.
Output
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Benchmarking Fashion Boutique
Department Stores Volume---
Volume +++ Department Stores
Mass Discounters – Coupon, Brand Factory
Hypermarket Mass
Incorrect market positioning results in wasted resources by competing with players that are not the right match. Define your focus market segment, key competitors and identify where YOUR opportunity is. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Customer Analytics Category-wise Spend
3500
4000
3000
3500
2500
3000 Spending Amount
Spending Amount
Age-wise Spending Power
2000
1500
1000
2500 2000
1500 1000
500
500
0
0 18-25
26-30
31-50
50+
Books
Entertainment
Toys
Stationery
Gifts
Understanding of customer buying patterns is critical for all retailers. Defining the target customer’s buying power, age, category preferences and regional influences can positively impact your top-line
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Store Layout
The store layout clearly defines the stocking capacity of the store and hence enables detailed SKU qty ordering. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Category Composition
Once the Broad categories are defined, the finer details need to be planned. The above example summary is based on a detailed subgroup level plan, both in terms of space allocation and sale projection.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Sub- Category Planning
Within a category, shelf displays are planned product wise and supplier/brand wise. Based on past sales experience or market figures, a sales projection is created which confirms the inventory requirement and hence the investment required for the first fill. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Sourcing Strategy Based on: Lead-time to store launch Margin requirement Stock availability Working capital availability
Highest Margin
Lower Margin
Lowest Margin
Factory
Wholesaler/ Importer
Distributor
Longest lead-time
Shorter lead-time
Retailer
Shortest lead-time
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Pricing Strategy
Purchase terms
Pricing
Credit Period
Returns
• Whether to buy outright or on consignment ? • Is it better to get the products as a Shop in Shop ?
• To what extent will the price be competitive for exclusive products ? • Should some products carry a promotional discount ? • To what extent can the credit period be renegotiated ? • Will bigger volumes help in improving the credit period ? • Will the supplier accept returns of ageing stock ? • Who will bear logistic cost of returns ?
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Visual Merchandising “Visual Merchandising”, the art of attracting patrons with visual cues, is central to a retailer’s ability to generate sales. Visual Merchandising got its start at the turn of the century, when department stores began using theatrical set design and lighting to create exotic displays. Today, the way the departments are arranged, the location of the escalators, the lighting--all are carefully planned to earn the store more sales per square foot.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Store Display Decisions
1. Shelving 2. Hanging 3. Pegging 4. Folding 5. Stacking 6. Dumping
1. Value/fashion image 2. Angles and sightlines 3. Vertical color blocking
1. Fixture Types 2. Merchandise Presentation Planning 3. Selecting Fixtures for Merchandise 4. Visual Merchandising
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Visual communication
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Planogramming
Inventory Control and merchandise display technique which enables the retailer to maximize shelf space utilization. Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Planogramming Benefits
Improved sales presentations & closure results Increased consumer appeal of product displays Better brand awareness through consistency Improved efficiency of shelf space allocations Improved financial performance of assortments Faster, more accurate replenishments Quicker inventory resets Much better marketing through targeted displays
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Inventory Management
S2
S2 S1
S1
S3 DC1
Supplier
S3 DC1
Corporate
Supplier
S4
DC 2
Corporate
S4
DC 2
S5
S6
S5
S6
Inventory in a PUSH system is managed at the corporate level where all buying decisions are made and then pushed to the distribution centers for allocation to stores.
Inventory in a PULL system involves store requirements to be consolidated at the corporate level via the DC and then procured.
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Ageing Inventory Liquidation Routes
Instore Discounting
Tieups with Mass Discounters
Transfer to stores where required
Return to vendor
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Complete Process Flow
Assortment Planning Sourcing Ordering Delivery to warehouse Delivery to Store
Assortment Planning Realign Mix close to Best Sellers Identify Top Performers
Monitor Margins Monitor Sales
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ Business Consulting - All rights reserved
Contacts
Aartee Roy Principal Consultant, Retail Vertical
Sundeep M Senior Director, Customer Relationships
Website: http://www.kinduz.com/
Website: http://www.kinduz.com/
Email: [email protected]
Email: [email protected]
India Mobile: +91-924685184
India Office: +91-40-40165594 US Phone: +1-312-473-9767
India Mobile: +91-9246085180 India Office: +91-40-40165594 US Phone: + 1-312-473-9767
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/ © 2009 KINDUZ - All rights reserved 29
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