Retail Merchandising Analytics

Last week, I spoke with a VP of Merchandising from a large brand. They shared their struggle with increasing average transaction value 💰 Their strategy: Daily sales report analysis to craft promotions and bundles. The goal? Boost transaction value. The result: Smaller purchases, no significant progress 😮 My advice: Dive deeper. Beyond conventional tactics, explore seasonal patterns, basket analysis. Differentiate. Here's the reality 👇 - 2023 has shifted consumer spending habits - Overused discounts are losing impact - Traditional strategies are outdated - Promotions matter, but they're not the complete answer It's time for a new playbook in fashion retail 📕 1. Get Smart with Stock: Look at what sells best in combinations with other articles. Ensure your stores carry these gems in sizes that combine well with other assortment. This way, you are not just selling single items, you are increasing overall transaction value. 2. Match Winners with Demand: Focus on the combos and sizes people love the most. Plan these assortment mixes according to the stores’ demand. Your goal is to have these ready and waiting in the stores that need them. 3. Fill the Gaps Creatively: If some stores are missing combos, get creative. Introduce combinations that not only fill the space but also make you more money where there's a real want for them. We're talking high-margin, demand-driven combinations. Pro Tip When customers can't find what they're looking for within their budget, let's turn that moment into an opportunity. Offer them an exclusive, one-time discount on a higher-priced combo. This strategy not only moves our overstocked, high-margin items but also keeps our profit margin healthy. It's a win-win: customers feel valued with a deal just for them, and we increase the sale's value. Manual methods can't keep pace with today's demands, but the right technology can transform challenges into opportunities. Leverage data, automation, and customer insights for a real change.

Retail marketing is turning from deterministic to probabilistic — here’s the logic: As complexity grows in combinations of data sets and variables in retail, it’s becoming increasingly difficult to use a single number; It’s more accurate to use a range of probable scenarios. This better aligns with how brands view their business. Because of this, I’m seeing CPG brands use high-powered probabilistic models to do scenario planning, forecasting, and marketing attribution/contribution using a range of numbers versus a single number. With this trend, marketing and analytics in retail will become more of an applied statistics profession such as data-science and econometrics versus just a business function. The faster a brand can turn data into actions, the faster the brand will win market share. Here’s a few examples of probabilistic approaches in retail today — 1. Path to purchase from marketing channels to retailers is challenging to measure directly — probabilistic methods such as marketing mix modeling are now used to find causal impact of marketing spend to sales. 2. Automated bid algorithms are turning from if-then deterministic rules, to statistical models that predict new bids with confidence levels based on modeled metrics. 3. Forecasting consumer demand and promotions based on trends, seasonality, and external factors. 4. Geo-lift studies that use statistical methods to measure causal impact of incremental sales on marketing channels.

𝐇𝐞𝐚𝐝, 𝐁𝐞𝐥𝐥𝐲, 𝐓𝐚𝐢𝐥 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐟𝐨𝐫 𝐅𝐞𝐰𝐞𝐫 𝐎𝐩𝐞𝐧-𝐭𝐨-𝐁𝐮𝐲 𝐂𝐨𝐧𝐬𝐭𝐫𝐚𝐢𝐧𝐭𝐬 Over the years, we’ve analyzed merchandise for over 700 different retailers and consistently observed a similar performance distribution. The top-performing products (20%) account for 55% to 60% of category sales, while the bottom 20% contribute just 5%. Understanding this distribution is key to aligning merchandising and supply chain teams. We call this pattern Head, Belly, Tail. Three quick takeaways: 1. Focus on the availability of the Head in every assortment group - they are the fuel of your business. 2. Lean first-time allocation for anything not pre-identified as a Head product. 3. Reduce the Tail from 20% to 10%, but don’t go lower, or you risk compromising sales. By following these principles, retailers can ease OTB constraints, enhance merchandise presentation with fewer compromises, and create a better shopping experience. And with deeper statistical analysis, we can predict in advance which products will be in the Head or the Tail - helping retailers make even smarter assortment decisions.

Category Management: In Retail Market In retail, category management is the process of managing product categories as individual business units to optimize sales, profitability, and customer satisfaction. It involves strategic decisions about product assortment, pricing, shelf placement, and promotions to meet customer needs and business goals. Let's see the measurement, Evaluation, Controlling and Next Action elements of category management :- 📈 Measurement: Key performance indicators (KPIs) for category management in retail include: a) Sales Metrics: Total sales, revenue growth, and sales per square foot. b)Profitability Metrics: Gross margin, category contribution to profit, and profit per product. c) Customer Metrics: Customer basket size, category penetration, and repeat purchases. d) Operational Metrics: Stock turnover rates, on-shelf availability, and inventory levels. 🔍 Evaluation: a) Compare Performance vs. Targets: Assess revenue, profit margins, and customer engagement metrics against goals. b) Market Trends: Analyze consumer behavior, competitor pricing, and seasonal trends. C). Customer Feedback: Collect insights on preferences, product satisfaction, and shopping experiences. d) Product Lifecycle Analysis: Evaluate product relevance, identifying items in the growth, maturity, or decline stages. 🛠️ Controlling: a) Adjust Product Assortment: Remove underperforming items and introduce trending or high-demand products. b) Optimize Inventory: Balance stock levels to avoid shortages or overstocking, ensuring on-shelf availability. c) Pricing and Promotions: Implement dynamic pricing and targeted promotions to boost category sales. d)Supplier Partnerships: Collaborate with suppliers to streamline supply chains, reduce costs, and improve product quality. 🤝 ➡️ Next Steps: a) Category Innovation: Identify emerging trends and introduce new, in-demand products to attract customers. b) Omnichannel Strategies: Integrate category management across physical stores, e-commerce, and mobile apps to create a seamless customer experience. c) Advanced Analytics: Use retail analytics tools to consumer buying patterns and predictive planning. d) Visual Merchandising: Design attractive in-store displays to maximize category visibility and encourage purchases. e) Employee Training: Train retail staff to effectively implement category strategies and enhance customer service. Focusing on these strategies, retailers can improve operational efficiency, boost profitability, and create a better shopping experience for their customers.