Assortment Agility

Advanced analytics help retailers manage assortments more effectively.

Traditionally, gut feeling instead of technology has been the tool of choice in the selection of short life-cycle products. Once products are purchased, the merchant would then determine which stores will sell which product lines, in what quantities and at what time.

"Short life-cycle retailers will be facing more competition as discounters and grocers stock more seasonal and fashion products," predicts analyst, Hung LeHong in the GartnerG2 report, How Retail Technology Can Make Fashion Smarts Smarter. "The result will be a significant increase in direct competition for short life-cycle retailers."

In order for retailers to compete, LeHong recommends investing in better pre-season planning and improved in-season agility.
Although technology cannot simulate the experience or intuition of a buyer, it can help merchants effectively and efficiently plan merchandise assortments.

Assortment planning solutions can help retailers make the most of available space and factor-in the impact on inventory and replenishment, while helping to guide assortments to a local market.

Northern Turnaround
Canadian retailer Northern Group, comprised of 150 Northern Reflections women's apparel stores and 100 Northern Getaway children's apparel stores, was faced with growing revenue losses due to apparel being sold at significant discount and stagnant inventory. Part of the retailer's turnaround carrying strategy included implementing a merchandise optimization tool to help clear goods more profitably.

Northern Group had an ERP system, but it lacked an analytic tool that would help sell goods at a maximum gross margin. "Assortment planning is something all retailers aspire to and we all do it to various degrees," says Michael Stanek, CFO of Northern Group Retail. "Until you can sell out of every product in every quantity for full price, you're not optimizing your merchandise power."

Northern Group selected a ProfitLogic solution because of the software's focus on revenue management. With the help of a cross-functional business team to build rules and configure the software, the Markdown Optimization tool was up and running and delivering significant benefits to the company, including a $250,000 gross margin increase on just one SKU in children's outerwear.

The tool gives the retailer data analysis at a glance and allows management to make assortment planning decisions differently across the country.

"We can divide markdowns and pricing amongst clusters based on what will be most profitable," explains Lalonnie Biggar, general merchandise manager of Northern Group Retail. "That type of information in that level of detail are impossible to get from a general merchandising solution. You must have focused software."

The solution enables the retailer to forecast fashion merchandise, view the most profitable merchandising decision out of all possible options and experiment with different markdown scenarios to evaluate the impact of decisions before executing them.

Personalizing Channels
Lillian Vernon, a national catalog and online retailer that also operates 11 outlet stores, required a solution that would allow it to plan assortments more efficiently across each channel.

The retailer's homegrown solution was "not robust enough to do any sort of top down or bottom up type of merchandise planning," explains Tom Scott, executive vice president of operations and CIO of Lillian Vernon.

The company selected Evant's Merchandise Planning and Demand Planning Replenishment solution because of its forward-thinking approach to multi-channel retailing.

Product personalization is a big business for Lillian Vernon, and the solution helps the retailer approach it from a planning perspective by identifying trends across each of its retail channels. Some products sell better on the Web, while others sell better in the catalog or in the outlet.

"It's important for us to examine personalization across each of the categories we carry, so that we can generate a shopping list for our merchandisers that indicates the categories and assortments we need," says Karen Bohla, vice president of MIS at Lillian Vernon.

"Because of our seasonality, more insightful data helps us leverage volume while making buys because we can see what will be appearing in multiple catalogs."

One unique benefit of the new Evant application, particularly useful to Lillian Vernon's catalog planners is that it can capture the image of a product into the system. When merchandisers are planning the assortment, they can bring up shots of how the item actually appears, look at product, copy and how profitable the product was in the past.

The retailer's future plans include optimizing planning for the Web channel. The applications will help Lillian Vernon improve placement of merchandise on the Web, which will increase revenue by identifying better cross-sell and up- sell opportunities.