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MERCHANDISE INTELLIGENCE

DAN MITCHELL, RETAIL INDUSTRY GLOBAL PRACTICE

Copyright © 2012, SAS Institute Inc. All rights reserved.Copyright © 2012, SAS Institute Inc. All rights reserved.

KNOWPLAN, OPTIMIZE,

ACT

ENGAGE/

INFLUENCE

SAS RetailLocalization, Personalization….and

Relevance

Customer AnalyticsMerchandise Intelligence

Customer Intelligence

Copyright © 2012, SAS Institute Inc. All rights reserved.Copyright © 2012, SAS Institute Inc. All rights reserved.

SAS RetailMerchandise

Intelligence

• Plan sales strategy across

channels.

• Determine optimal product

mix to achieve targets and

customer expectations.

• Localize product mix.

• Ensure execution is

informed by operational

constraints.

• Merchandise Financial Planning & Store

Planning

• Demand Forecasting

• Assortment Planning/Category

Management

• Store Segmentation & Intelligent

Clustering

• Revenue - Price Optimization

• Allocation/Size OptimizationPLAN, OPTIMIZE,

ACT

Copyright © 2012, SAS Institute Inc. All rights reserved.Copyright © 2012, SAS Institute Inc. All rights reserved.

Merchandise

Intelligence

• Belk

• Sears

• Levi’s

• Canadian Tire

• Macy’s

• JC Penny

• Lord & Taylor

• Overstock.com

• DSW

• Unimarc

• Shoppers Drug Mart

• Wet Seal

• Aeropostale

Net sales, for the Q1 2010 ended November 28, 2009, increased 3.9% to $1.823B from $1.754 B in the Q1 2009. Comparable store sales for the quarter increased 2.4%.

SAS named FDO Strategic Partner of the Year 2009PLAN, OPTIMIZE,

ACT

Proven

Capabilities

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Merchandise Intelligence

ERP CRM EDW Online POSSupply Chain

SocialCampaig

nOthers

Data Mining & Customer Analytics

Demand ForecastingSentiment & Unstructured

Data AnalysisCustomer Profitability

& ForecastingAnalytical

Insights

Merchandise Financial Planning

Assortment Planning

/ Optimization

Demand Planning

Size & Pack Optimization

Advanced Clustering

Space Optimization

Revenue Optimization

Inventory Optimization

Data Quality Data Integration Data Model MetadataData Management

Buying PlanningStore Ops

Logistics MktingReplenis-hment

Cust.Service

Mercha-ndising

Direct Mail

Online MobileCall

CentreStores Kiosks Social Emails

Consistent Customer Experience

SAS Retail Solution FrameworkMarketing & Merchandising

Campaign Management

Real-Time Offer Optimization

Social Media Analytics

Online Customer Behavior

MarketingOptimization

Marketing Mix Optimization

Marketing Resource

Management

Marketing Performance Management

Customer Intelligence

Integrated Merchandising & MarketingCapabilities

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SAS® SIZE / PACK

OPTIMIZATION

THE SHOPPING EXPERIENCE

I want this dress

but they don’t have

my size. I really

wanted to wear it

tonight

I’ll wait; I can

always get my size

on sale

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Understand how sizes are truly demanded

• Lowest intersection product and location

• Continue to plan at the levels done so today

• Optimize Assortments

• Maximize Omni Strategies

• Localize by Size

• Reduce Stock Outs

• Build Customer Satisfaction

• Rapid ROI

• Give Users Time Back

SAS®

SIZE / PACK

OPTIMIZATION

HOW SAS CAN HELP…

Size Profiling Pack Optimization

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SAS® SIZE / PACK

OPTIMIZATIONTHE POWER OF ONE

THE VALUE

Based on $1B Annual Revenue, $25 AUR, 30% MD ppt, 65% ST prior to MD

Net Revenue $ Power of One Net Revenue $s

-1 +1

+$3MAverage Sales Unit

Shift

3 – 8 units

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DSW SIZE OPTIMIZATION

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SAS®

SIZE / PACK

OPTIMIZATIONINTELLIGENCE GATHERED AND CONSUMED

Pack OptimizationSize Profiling

Enables retailers to

automatically convert higher-level plans into

optimized size- and pack/single

recommendations for pre-season orders and in-season allocations

Delivers Value Quickly

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SAS®

SIZE / PACK

OPTIMIZATION ‘FITS’ INTO THE BUSINESS PROCESS

Pre-Season Planning

MerchantsPlanners

Size Analysts

Assortment Planning

MerchantsPlanners

Size Analysts

Supply Chain and Factory Collaboration

Supply ChainSuppliers

Size AnalystsLocations

Purchase Order Creation

MerchandiseOperationsOrder Entry

Allocation / Replenishment

Allocations

Size Profiling Pack Optimization

Decision Making

Insights

ExecutivesMerchantsPlannersSize AnalystsAllocationsRegionsLocations

Product Planning

Product Development

MerchantsSize Analysts

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SAS® SIZE / PACK

OPTIMIZATIONA QUICK BIG WIN TO PREVENT LOST SALES

Drive Financial Results

Improve Size Precision Accuracy

Optimize Assortment Management and

Omni Strategies

Maximize Location Size Precision with

Recommended Packs

Size Profiling Pack Optimization

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SAS MARKDOWN

OPTIMIZATIONOVER INVENTORIED? GOT MARKDOWNS?

Source: http://www.westcoasttrading.com/sites/all/themes/theme530/images/slide1.jpg

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SAS MARKDOWN

OPTIMIZATIONRETAILER’S MARKDOWN CHALLENGES

?Poor Customer Experience?Increased Shrink?

Broken Merchandising

Assortments?Supply Chain Inefficiency?

Loss Margins and Profitability? Space Allocation Concerns?

Markdowns may mean ‘deals’ to your customers, but

what does it mean to your organization?

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MARKDOWN

OPTIMIZATIONWHAT IS MARKDOWN OPTIMIZATION?

Markdown Optimization is simply defined as a solution

that defines the right price, at the right place, at the right

time markdown pricing to drive improvements in margin,

sales, and customer satisfaction

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SAS MARKDOWN

OPTIMIZATION EFFICIENT CLEARANCE STRATEGIES

• Manages markdown recommendations to the store level

• Maintains budgets and margin protection while eliminating inventory

• Monitors inventory at risk to identify areas of opportunities

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A MARKDOWN STRATEGY THAT LEVERAGES…

30% OFF

10% OFF

45%

OFF

1 Coat

10% OFF

45% OFF

...AN OPTIMIZED AND LOCALIZED APPROACH CAN PRODUCE A…

2%Incremental

Margin

Gain for

Total Chain

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SAS IS ABLE TO EFFECTIVELY MARKDOWN PRODUCTS THAT…

FORECAST, LOCALIZE, AND OPTIMIZE DEMAND TO MEET CONSUMERS’

EVER-CHANGING NEEDS!

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SAS®

ASSORTMENT OPTIMIZATION

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WHAT IT IS ASSORTMENT OPTIMIZATION

Assortment Optimization recommends the best

assortment mix based on available shelf space

and your financial objective.

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WHAT DOES IT DO ASSORTMENT OPTIMIZATION

Recommends an assortment mix that reflects how

the customers shop

Finds the best products to carry to meet the

financial objective

Makes the best use of available space to offer

variety while avoiding duplication of like products

Determines optimal inventory for the space

Balances the breadth and depth of an assortment

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Scale assortment to store specific space

Store Specific Shelving

Eligible Assortment

The eligible assortment is

considered the largest possible

planogram with forecasted or

historical performance as a input.

SAS Assortment Optimization then

identifies the best mix of product to

fit store specific fixture

configurations.

SAS ASSORTMENT OPTIMIZATION

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Available Space

AssortmentStore

Specific

Demand

Service

Levels

Critical

Mass

Balance Variety

& Duplication

Presentation

Balance

SKU

Dimensions,

Pack Size

Shelf

Height &

Depth

Clustered

Customer

Segments

Customer

LoyaltyCategory

Role

Financial

Objectives

Attribute

Constraints &

Item

Associations

Unit Quantity

Thousands of

possible choices

& multiple store

configurations

SAS ASSORTMENT OPTIMIZATION

Optimization is required

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Optimally choose the best performing mix of SKUs for specific space

Optimization objective- Maximize financial objectives

Subject to:

Decision variables - describing the actions that can be taken

» Customer Decision Tree, Eligibility list

Constraints- describing the limits of the decision variables

» Item selection requirements: days of supply, consumer loyalty, item relationships, minimum presentation size

» Physical properties: Item and shelf dimensions

Optimization Tasks

» Score each item based on financial objective and occupying linear space.

» Determine inventory requirements based on service level and local demand.

» Calculate product block shape that maximizes shelf space.

» Optimally determine breadth & depth by store considering space trade-offs.

SAS ASSORTMENT OPTIMIZATION

Company Confident ial - For Internal Use Only

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THANK YOU

@DMitchell_

www.sas.com/retail