Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Enabling Sustained Business Excellence
Aartee Roy
Senior VP, Retail Industry Consulting
KINDUZ Business Consulting
Category Management & Assortment planning
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Identifying Product Groups
Product Groups/Categories should be defined based on the
consumer’s needs and purchasing habits.
Lighting
Aroma
Wall décor
Flowers
Garden
Decorative Acc.
Home Decor Jewellery
Watches
Perfumes
Leather Bags.
Jute Bags.
Travel Bags
Fashion Acc.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Space Planning
Considerations for Layout
Decisions :
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.
Home Decor
Leat
her
Acc
.
Niche Products
Jewellery
Per
fum
es
Cas
h T
ill
Impulse items
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Layout Options
Straight Floor Plan
Angular Floor Plan Mixed Floor Plan
Geometric Floor Plan
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Assortment Planning
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.
Revenue & Margin Projection Forecasting/Trends AnalysisAssortment Plan
Competition Analysis
Demand Planning
Customer Analytics
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Assortment Planning
• Benchmarking
• Customer Profile
• Financial Projections
• Store Layout
Input
• Category composition
• Sub Group Planning
• Sourcing strategy
• Pricing strategy
Process • Customer & Catchment Centric Assortment Plan which will deliver required financial targets.
Output
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Benchmarking
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.
Volume---
Mass
Volume +++
Boutique
Department Stores
Hypermarket
Department Stores
Mass Discounters – Coupon, Brand Factory
Fashion
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Customer Analytics
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
0
500
1000
1500
2000
2500
3000
3500
4000
Books Entertainment Toys Stationery Gifts
Age-wise Spending Power Category-wise Spend
Spe
ndin
g A
mou
nt
0
500
1000
1500
2000
2500
3000
3500
18-25 26-30 31-50 50+
Spe
ndin
g A
mou
nt
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Store Layout
The store layout clearly defines the stocking capacity of the store and hence enables detailed SKU qty ordering.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Sourcing Strategy
Based on:
Lead-time to store launch
Margin requirement
Stock availability
Working capital availability
FactoryWholesaler/
ImporterDistributor Retailer
Highest Margin Lower Margin Lowest Margin
Longest lead-time Shorter lead-time Shortest lead-time
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Pricing Strategy
Purchase terms
• Whether to buy outright or on consignment ?
• Is it better to get the products as a Shop in Shop ?
Pricing
• To what extent will the price be competitive for exclusive products ?
• Should some products carry a promotional discount ?
Credit Period
• To what extent can the credit period be renegotiated ?
• Will bigger volumes help in improving the credit period ?
Returns
• Will the supplier accept returns of ageing stock ?
• Who will bear logistic cost of returns ?
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Visual communication
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Planogramming
Inventory Control and merchandise display technique which enables the
retailer to maximize shelf space utilization.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Inventory Management
Corporate
DC1
S4
DC 2
Supplier
S1
S2
S3
S5
S6
Corporate
DC1
S4
DC 2
Supplier
S1
S2
S3
S5
S6
Inventory in a PULL system involves store requirements to be consolidated at the corporate
level via the DC and then procured.
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.
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Ageing Inventory Liquidation Routes
InstoreDiscounting
Tieups with Mass
Discounters
Transfer to stores where
required
Return to vendor
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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
© 2009 KINDUZ Business Consulting - All rights reserved
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
Contacts
© 2009 KINDUZ - All rights reserved 29
Aartee RoyPrincipal Consultant, Retail Vertical
Website: http://www.kinduz.com/
Email: [email protected]
India Mobile: +91-924685184
India Office: +91-40-40165594
US Phone: +1-312-473-9767
Sundeep MSenior Director,
Customer Relationships
Website: http://www.kinduz.com/
Email: [email protected]
India Mobile: +91-9246085180
India Office: +91-40-40165594
US Phone: + 1-312-473-9767