Improve markdowns and sales through smart planning
As the retail environment matures and competition heightens, merchants are turning to assortment planning to differentiate themselves and increase same-store sales. Today's more sophisticated assortment planning tools are helping retailers create a customer-centric shopping experience based on customer profiles, climate and local trends.
"As Abercrombie, Gap, Victoria's Secret, Ann Taylor, and American Eagle mature and reach 500 to 1,000 stores, growth must come from comp sales," says Rick Amari, president, Columbus Consulting. "Being able to tailor assortments by store becomes increasingly important to drive those sales."
Assortment planning offerings are improving and proliferating, prompting more retailers to take notice of the benefits and research their options. "Within the next 24 months, over 80 percent of the retailers surveyed will have implemented automated systems to support virtually all aspects of their planning, allocation and replenishment operations," according to a recently released study from Aberdeen titled "The Business Benefits of Advanced Planning and Replenishment: A Benchmark Report."
"Assortment planning is a hot item," Amari says. "It's the area where we're receiving the most inquiries from retailers right now and what they are looking for, primarily, is store clustering, especially smart clustering, where assortments can be localized but easily managed over large fleets."
Conquering Assortment Challenges
With $1.6 billion in sales and 750 stores, Follett Higher Education Group, a retailer of college textbooks and apparel, needed to address a number of assortment planning challenges. The company required a tool that would allow its stores to provide detailed plans on a store-to-store basis. "When it comes to apparel, each college campus has a unique set of needs such as certain colors need to be provided to certain stores," notes Tom Dillon, vice president of merchandising. "In addition, each campus has its own atmosphere, such as sports, Christian heritage or a community college, and we encounter all different assortment challenges."
The Oakbrook, Illinois-based retailer implemented Manhattan Associates Advanced Planning with positive results. "We've reduced inventory levels by two percent, and we've actually reduced the level of effort from a human standpoint," Dillon explains.
The retailer began the implementation slowly, with a pilot program in April 2005, Follet initiated the system using 10 out of 25 planners from its apparel department. Prior to Manhattan Associates Advance Planning, Follett's planners used Excel spreadsheets and had to enter the data manually into the merchandising system. Now the integration is built in, and the system automatically creates a purchase order. "We cut six weeks out of our process, and we now have more time for analysis and honing assortments," Dillon explains.
Staying One Step Ahead
Bakers Footwear, a women's shoes and accessories retailer operating 220 stores in 36 states, expects to see sales increases, payroll savings and fewer markdowns with a new assortment planning system, according to Stanley Tusman, executive vice president of Information and Inventory Management. Bakers Footwear sells dress, casual, and sport shoes, as well as boots, sandals, and accessories, targeting women ages 12 to 29.
When researching options, Bakers' goals were to better manage assortments relative to customer demand and current product mix. With 16,000 new style and color choices each year, effective assortment planning is vital.
The retailer chose Marketmax, a division of SAS, to provide a system that classifies stores into clusters and analyzes historical data from each cluster to determine the right product mix for each group of stores. "Marketmax allows us to hone our assortment mix by matching our merchandise assortments relative to store size, sales volumes and customer profile,"according to Tusman.
The Marketmax software allows Bakers planners to analyze previous year's sales data, identify the chain's hits and misses, and factor in fashion shifts to create detailed assortment plan by store cluster, Tusman explains. Each plan can be modified by location and forecasted up to 180 days in advance. With assortment planning solutions, retailers can become better business managers by synchronizing their product offerings with financial plans. By putting the right product in the right store at the right time, and replenishing those offerings, retailers will avoid unnecessary markdowns and keep missed opportunities to a minimum.