Dhimant Bakshi

Topics for DiscussionCategory PlanningOutlet PlanningRange Width PlanningRange PlanningOption ManagementPlanning Process Interaction

Category PlanningDefintion -Sales , Stock and Margin Plans for each

category are determinedObjectives Create Realistic and achievable PlansEnsure Product Potential is realised and Cash Flow /

OTB are managedOutputCat / Subcat level sales, Stock , Margin PlansBuy Value

Outlet PlanningDefinition – Capacity, Sales and expenses for each outlet

by category are plannedObjective – Determine and assortment for each outlet in

order to maximise potentialSet realistic and achievable targetsPlan expenses in order to achieve business surplus

Range Width PlanningDefintion – Average Buy per option and total options for

each Sub cat / Outlet / Grade is calculatedObjective – Plan is made based on Product life cycle and

Depth for each option is arrived at –Robust planning required

Output – Parameters for range planning are arrived at

Range PlanningDefinition – Range for each outlet is developed taking

into account the capacity, OTB, Where the Buy and intake of each option is planned

Objective – Prepare a balanced range for each category in order to exceed customers’ expectations

Option ManagementManagement of Weekly Option performance

Objective – Realising potential of options, Managing Intakes and Stocks in line with the overall category

Output – Managing OTB, WSSI

Store TypesThe store type can be determined by any number of

factors such as geographical location – applicable in India because of the need to stock winter wear in the North – fashionability or store location (e.g. city centre/ provincial/ out of town). The type can also take into account factors such as the demographics in of the catchment area, competition, town economics, shopping mission etc.

 

 

Store TypesThe type is independent of store size and will determine the

assortment content. The assumption is that stores of the same type will be able to sell the same type of merchandise.

 The store type can be product group specific, for example a it

could be a Type A Menswear store but a Type B Ladieswear store depending on the local trading conditions. It is generally not practical to have more than three store types.

Performance DataEvidence supporting a prediction improves confidence

and reduces riskConversely if the market suggests one thing but

performance data proves another you know to proceed with caution

Performance Data Gives you THE FACTS !Performance Data is inconvertible evidence of your

customers preferences

Performance Data

Performance Data is the root of Profitable Decision Making

Category / Outlet / Range Planning & In Season Management are not possible without accurate and timely Performance data

You Can’t act Wisely if you do not have facts

Analysis Performance ApproachWork Down the Hierarchy of InformationStart with a Big PictureUnderstand the detail before making a decisionPrioritise !!!!Eg ; In Outlet Planning

Category Sub Category Option / Attribute SKU

Analysis Performance ApproachFocus on the Cause as well as the Effect If You can find the cause of your performance it can be

replicated / eradicated Concentrate on those areas in your zone of responsibilityConsider All the data

Option A Option B

Sales 100 200

Weeks Cover 5 10

Stock 500 2000

Margin % 30% 50%

Analysis Performance ApproachCompare Relative PerformanceDon’t just look at the absolute performance and compare

it with the other members of peer group to plan and last year data wherever applicable

Check the Exceptions CarefullyExceptional performance can often point to opportunity or

RiskLook For Patterns There may be combinations of factors which consistently

deliver the same results

Analysis Performance ApproachTake External Factors into ConsiderationWere there any distortions to performance as a result of

the weather, competitive activity, Promotions , etcBE ObjectiveAvoid emotional interpretations of the facts at all costs &

Don’t distort analysis to support prejudicesConcentrate on the Big Earners Use 80/20 rule and Focus on the areas that contribute the

most Monitor perfromance of Key Volume lines carefully

Analysis Performance Approach Reference Your Original AssumptionsWhat were the underlying reasons behind a particular

course of action ???Once You have Facts , Act QuicklyThe speed at which you act, to capitalise on opportunities

or to minimise risk – Is often Fundamental to success

Remember that Perspectives DIFFER

Analysis Performance Approach

Cat A Cat B Cat C Total

Plan Act Plan Act Plan Act Plan Act

Outlet 1 120 170 80 350 370

Outlet 2 180 250 170 500 600

Outlet 3 300 420 210 950 930

TOTAL 500 600 800 840 500 460 1900 1900

Analysis Performance – Key MeasuresAll Measures should be analysed against PLAN,

PROJECTIONS and YOY wherever applicablePoor performance against plan doesn’t mean absolute

performance is unacceptable or PoorIt is also important to refer to the assumptions on which

the plan was built

Analysis Performance – Key Measures Sales Volume and ValueActual Sales achieved net of reductionsA Key objective of Performance analysis is to find ways

of increasing both Value and Volume sales without jeopradising Margins – Analyse Full Price, EOSS, promo sales

Stock Volume and ValueStocks held at the outlet , Distribution Centre and TotalObjective is to reduce or maintain Stock levels while

increasing sales and availability

Analysing Performance – Key MeasuresMargin on salesMargin achieved on actual salesMargin on Sales Value = Actual Sales Value Exc Tax – Sales

@ CostMargin on Sales %= Margin on Sales Value / Actual Sales

Value Inc TaxAlthough you would want to see growth in both Value and

Percentage margins – In the end the cash margin achievement is most important

Margin on slaes % Achievable for a given sales value can be increased by reducing mdowns or Incr Intake Margins

Analysing Performance – Key MeasuresGMROI – Gross Margin Return on InvestmentThe Margin on sales represented as a percentage of Total

Cost , GMROI = Margin on Sales / Stock at Cost

Intake MarginThe Margin achieved if the Product is sold at its original

Label PriceIntake Margin % = ( Label Price Exc Tax – Delivered

Cost Prx) / Label PriceIntake Margin % = Intake Margin Value / Buy Value

Analysing Performance – Key MeasuresIntake Margin is a KRA of a BuyerIntake Margin achievement is critical to your ability to

achieve planned Margin on Sales – Under Achievement against plan will put pressure on your markdowns

Look for Opportunitites to Increase intake margin % by reducing the cost Price or Increasing the label Price

Analysing Performance – Key MeasuresStock Cost of MarkdownThe Cost of a Stock revaluation resulting from the price

changesStock Cost of MD Value = ( Current Price – New Price )

* Units in StockStock Cost of MD % = Cost of MD Value / Sales ValueThere are two reasons why cost of MD will be higher than

plannedPlanned Full Price sales were not achievedThe Average Price reduction was higher than Planned

Analysing Performance – Key MeasuresA high cost of MD is not necessarily bad – Compare actual

to plan and check the margin on sales achievementA Markdown that is significantly below the plan is not

necessarily good :If Full Price Sell Thru is also high, Sales Potential may

have been missedIf terminal stocks are high there may be an future MD

problem Markdown % can only be reduced by improving Full Price

sell Through % or decreasing the avg Price reduction %

Analysing Performance – Key MeasuresAverage Rate of SaleAverage rate Unit sales per Option per outlet per week for

all outlets Stocking the OptionRate Of Sale ( ROS ) = Sales Units / Outlets in Stock /

Weeks on saleRate of sale is a key indicator , together with the number

of weeks cover of the demand for a product – Higher the ROS in relation to its NWC the higher the demand

Rate of Sale is a better measure of relative performance than the absolute sales since it accounts for differences in distribution

Analysing Performance – Key MeasuresRate of Sale is a good measure for asessing the potential of

limited distribution trialsRate of Sale comparisons by options within products are

useful to assess if there are colour rather than Product Problems

Where rate of sale is high for a Product across all options you should look at the increasing the number of options ( colours ) in the same product and at trailing similar non – competitive lines

You would generally try to replace products that have a low rate of sale

Analysing Performance – Key MeasuresFULL PRICE SELL THROUGH %The amount of total buy in units that you have sold at a full

price Full Price Sell Through % = Full Price Sales Units / Total

Buy UnitsPlanned Full Price Sell Through will tend to be lower for

higher risk products with shorter product life cyclesIf the actual sell through is high compared to the plan you

may have missed potential – Overall sales would have been higher if you had bought more due to increased markdown sales

Analysing Performance – Key MeasuresNumber of Weeks Cover ( NWC)The Number of weeks current sales represented by the

current stock holdingNWC = Closing Stock / SalesLower the number of weeks cover the harder the stock is

working and the higher the relative demand for the product or category

If NWC is too low there may be missed potential caused by stock outs

If NWC is too high there may be an increased markdown risk

Analysing Performance – Key MeasuresOptimum NWC is determined by comparing relative

performance ; Eg – Option A is performing 10 weeks cvrIf the average is 6 weeks, the option performance is

unacceptableIf the average is 15 weeks, the option performance is doing

wellBUT if there are several options on 4 weeks cover then may

be the average is too high….The average number of weeks cover is the number of weeks

of average sales represented by the average stock holding over a period

Analysing Performance – Key MeasuresForward CoverNumber of weeks of future sales represented by the current

stock holdingUsed in conjunction with the NWC to assess risk – Stock TurnThe number of times throughout the year which your stock

is completely replacedStock Turn = 52 / Average Weeks CoverStock Turn = ( Annual Sales / Sum of Closing Stock) * 52Low NWC = High Stock Turn & Vice Versa

Analysing Performance – Key MeasuresStock Turn is a measure of asset management – Higher

the Stock turn the harder you are working on your assetStock turn will be higher for higher demand and

frequently purchased productsObjective is to increase the stock turn buy decreasing the

average NWC without affecting the availabilityOutlet Trading SurplusMargin Delivered by each outlet after the costsOutlet Trading Surplus = Margin on Sales – Outlet Costs

Analysing Performance – Key MeasuresAvailabilityMeasures whether an option or a SKU is available during

its primary selling phaseAvailability % = ( Avg Actual Stock / Avg Model Stock)%Other Indicators – Sudden increase in NWC, Slow moving

SKU Stocks at the DC , size imbalancesPoor availability generally equates to poor performance or

missed potentialAvailability can be improved by better intake planning ,

better size planning and through Size Balancing

Analysing Performance – Key MeasuresSales ( Margins ) per sq ft per weekThe Sales or margin realised per square foot of selling

space per weekMeasurable at category level or aboveSales ( Margin ) per sq ft = Sales ( Margin ) / sq ft /

WeeksSales and Margin per sq ft is a key indicator of your outlet

productivity and of the productivity of individual category within a outlet

Analysing Performance – Key MeasuresLike to Like ( LTL) performanceLike to like performance is a key indicator of Retail HealthLTL growth represents real growth as opposed to that

delivered by new or refurbished outletsLike to Like outlet is one which has been open in its

present format for at least one trading yearLike to like outlets tend to be the lowest cost to the

business since all set up cost have been incurred – and therefore tend to be the most profitable

LTL growth expectation is your starting point

Analysing Performance – Check ListRange PerformanceAttribute PerformanceRange MixFlow & Volume LinesPromotionsOutlet PerformanceOption Performance – Pricing, Product Life Cycle, Size

performance, Buy Quantity, Timing, Distribution

Analysing Performance Area Concern Indicators Action Point

Range Performance

Were there any range failures?

All Options in a range performed badly

Try to establish the reasons for failure – pricing, timing,fit, colour, etc

Attribute Performance

Are there any attribute failures?

Attributes which perform consistently below average

Check Option performance for contributing factors. Cancel Commitments where possible amend attribute mix in Future ranges

Are there any under potentialised attributes?

Atributes with a NWC or ROS significantly higher than the avg

Check Option performance for contributing factors. Re Buy and balance range where Possible. Amend attribute mix for future ranges

Analysing PerformanceArea Concern Indicators Action Point

Range Mix Was performance distorted by poor mix of products?

Significant variations between attribute sales and stock participation by week

Ensure the learnings are included in future range plans. Re Buy or cancel to balance the range inseason wherever possible

Flow Lines Is the line going to need replacing ?

The Sales trend for the line declining from its norm

Identify & Trial possible replacements

Volume Lines

Have the Key Volume lines for the coming season identified?Are the current volume lines still relevant ?

Good rate of sale & Steady NWC for all options

Selecting new volume lines is very much a matter of judgement

Evolve or repeat existing lines as appropriate

Trial Additional Options of potential new lines

Sub Category PlanIt is summary of your overall expectations from the coming

seasonIt is used to enter the total sales, Markdown & Margin

Protections which will then be phased by week on the WSSIOTB can be taken from the Subcat plan but is always better

that it is taken from WSSIProcess Where reqd enter last years sales dataDeteremine LTL performance based on previous season

data/ trends

Component Calculation Example Shrink Incl

Shrink excl

Shrink Incl

Taxes Deduction Tax Rate 10% 10%

Sales Value As Planned 2,000 2,000

Plan Tax on sls Plan Sls Val * Sls tax% 2,000 * 10% 200 200

Plan Sls exc tax Plan sls val – plan tax on sls 2,000 – 200 1,800 1,800

Plan sls val v LY % (plan sls val/ LY sls Val) – 1

Cost of MD% As Planned 13.6% 13.6%

Plan cost of MD val Sales Val * Cost of MD % 2,000 * 13.8% 272 276

Shrink % Buy Val As Planned 0.0% 1.2%

Plan Buy val (Plan Sls Val+Plan cost of MD val)/ ( 1- shrink %Buy val)

(2,000+276)/(1-1.2%)

2,272 2,304

Plan Shrinkage Val Plan Buy Val–Plan Sls Val-plan MD 2304 -2000-276 0 28

Plan Tax onBuy Val

Plan Buy Val * Sales Tax % 2,304 *10% 227 230

Plan buy Ex TaxVal

Plan Buy-Plan Tax on Buy Val 2,304 – 230 2,045 2,073

Sub Category Plan-CalculationsComponent Calculation Example Shrink

ExclShrink incl

Intake Margin% As Planned 50.0% 50.0%

Plan Intake Margin Val

Plan Buy Val * Plan Intake Margin %

2,304*50% 1,136 1,152

Plan Buy at Cost Val

Plan Buy ex Tax Val-Plan Intake margin val

2,073–1,152 906 927

Plan Margin on Sales %

Plan Margin on Sales Value / Plan Sales Value

879 / 2,000 44.5% 43.9%

Component Calculation Example ( Shrink incl)

Shrink Excl

Shrink Incl

Avg Label Price As Planned 26 25

Plan Buy Units (Plan Buy Val*1000)/Plan Av Label Price

2,304*1000/25 90,880 92,146

Avg Price Redn%

As Planned 40% 40%

Shrinkage %Buy Units

Shrink%of Buy Val/(1-Avg prx redn %)

1.2%/( 1-40%) 0% 2%

Plan Shrinkage Units

Plan Buy Units * Shrinkage % of Buy Units

92,146 * 2.0% 0 1,483

Plan Total Sales Units

Plan Buy Units – Plan Shrinkage Units

92,146 – 1,483 90,880 90,303

FP Sell Thru % As Planned 70.0% 70.0%

Plan FP Sales Units

Plan Buy Units * Plan FP Sell Thru %

92,146 * 70% 63, 516 64,502

Buy Options As Planned 100 100

Avg Total Sales Per Option

Plan Total Sales Units/Plan Buy Options

92,148 / 100 909 921

Avg FP Sales per Option

Plan FP Sales Units / Plan Buy Options

64,502/ 100 636 645

Category WSSIWSSI is the main tool used for Planning and managing

the weekly performance and open to buy for a category

Weekly Sales Stock and IntakePre season used to ensure weekly stock and performance

plans are robust and that sufficient OTB when requiredIn season used to identify the actions needed to ensure

that the sales and margin plans are achievedIdeally operates at sub category / stock identity levelResponsibility of merchandising with inputs from the

buyer

Category WSSIINPUTSHistorical PerformanceOutlet Opening Schedule & Planned sales by weekPromotional PlansInitial Sales and Margin ProjectionsStock GuidelinesOutputSales, Margin, Markdown, Stock and Intake projections

for the week Should be reconciled with Option management

Buy Value to Range Planning

Category WSSI–Stock & IntakeIdeal Intake is the intake required to achieve Target Total

closing stock for a period after sales and markdownsIdeal Intake = Maximum( Target Total Closing Stock –

Act)Projected Opening Stock + sales + Cost of Markdown,0)

Example 1 Example 2

Target Total Closing Stock 1,000 1,000

- Act / Projected Closing Stock 1,250 1,000

+ Sales 200 200

+ Cost of Markdown 0 0

Ideal Intake 0 200

Category WSSI - ExamplesCalculate Ideal Intake

Mens Shirts Wk1 Wk2 Wk3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8

Opening Stock 1550 1510 1795 1720 1520 1750 1720 1590

Sales 250 290 300 350 320 350 450 400

Cost of MD 0 0 0 250 0 0 0 0

Fwd Cover Weeks

4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Target Closing Stocks

1510 1570 1720 1520 1750 1720 1590 1540

Ideal Intake 210 350 450 400 550 320 320 350

Category Performance Grid L/H - High Units but low GM$. Keep the best Skus . Fix

GM$ (renegotiation , selective price increases etc).  L/L - Low GM$ & Low Units. Delist non performers

periodically & Fix the GM$ for the fixable skus.   H/H - High Traffic & High GM$ . Explode the

assortment.  H/L - High GM$ & Low Volume . Keep these SKUs.  H/H - High GMROI & High GMROF . Allocate

maximum space , maintain backups of stocks at store & vendors (never out of stock)

 

Category Performance Grid H/L - High GMROI & Low GMROF innovative space

/fixture planning , faster thruputs in least space

  L/H - Low GMROI High GMROF derisk stocking -

supplier managed inventory , negotiate extended payment cycles & intake margins.

  L/L - Low GMROI & Low GMROF Candidate for

exit , if required keep narrow assortments

Thank you for your time

and

Happy Retailing to all