category managment

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

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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



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.




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




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.




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.




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




Layout Options

Straight Floor Plan

Angular Floor Plan Mixed Floor Plan

Geometric Floor Plan




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.




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




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.




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




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



http://www.williampenn.net/index.php

http://www.google.co.in/imgres?imgurl=http://www.toniaurum.com/images/Logo Montblanc.gif&imgrefurl=http://www.toniaurum.com/relojes.htm&h=356&w=548&sz=66&tbnid=86gl9n4xmHgxFM::&tbnh=86&tbnw=133&prev=/images?q=Montblanc+logo&hl=en&usg=__gV7G_T5Ng_QH_VKHAZKeeCp2aKw=&sa=X&oi=image_result&resnum=1&ct=image&cd=1

http://www.gs1india.org/index_files/009-Odyssey Logo.jpg

http://www.google.co.in/imgres?imgurl=http://www.lifestylestores.com/images/lifestyle_logo.gif&imgrefurl=http://www.lifestylestores.com/pages/special_offer_delhi.htm&h=85&w=174&sz=2&tbnid=Fk3WuBXOTZOZqM::&tbnh=49&tbnw=100&prev=/images?q=lifestyle+logo&hl=en&usg=__JfyS8c-OKNtHCwJ9zuibh0AwS0g=&sa=X&oi=image_result&resnum=2&ct=image&cd=1

http://www.google.co.in/imgres?imgurl=http://www.landmarkindia.co.in/images/landmark-logo.gif&imgrefurl=http://www.landmarkindia.co.in/&h=62&w=88&sz=2&tbnid=l-bUBLMkUSyg6M::&tbnh=54&tbnw=77&prev=/images?q=landmark+logo&hl=en&usg=__w_jYjnVrRcdrlUuj5f71POFkS4w=&sa=X&oi=image_result&resnum=4&ct=image&cd=1

http://www.google.co.in/imgres?imgurl=http://www.plazacenters.in/images/carrefour_logo.gif&imgrefurl=http://www.plazacenters.in/clients.htm&h=85&w=150&sz=1&tbnid=P-vuoUX1CIydMM::&tbnh=54&tbnw=96&prev=/images?q=carrefour+logo&hl=en&usg=__3CUrMvLBHZbWi520I1BNX96QCoY=&sa=X&oi=image_result&resnum=1&ct=image&cd=1

http://www.google.co.in/imgres?imgurl=http://trak.in/wp-content/uploads/2007/08/walmart-logo.png&imgrefurl=http://trak.in/Tags/Business/retail/ja/&h=137&w=640&sz=53&tbnid=n5B25kXPvpoTIM::&tbnh=29&tbnw=137&prev=/images?q=walmart+logo&hl=en&usg=__mTlx_hJ-JGi7whZZdj5XxVRQnq0=&sa=X&oi=image_result&resnum=1&ct=image&cd=1

http://www.google.co.in/imgres?imgurl=http://www.retaildetailz.com/images/Client/Big Bazaarbig_bazaar_logo.jpg&imgrefurl=http://www.retaildetailz.com/clients.asp&h=79&w=191&sz=5&tbnid=sbSwhoEBTEXNdM::&tbnh=43&tbnw=103&prev=/images?q=big+bazaar+logo&hl=en&usg=__8QePkqdccfQOepF5a-NDQJyDI40=&sa=X&oi=image_result&resnum=1&ct=image&cd=1


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




Store Layout

The store layout clearly defines the stocking capacity of the store and hence enables detailed SKU qty ordering.




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.




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.




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




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 ?




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.




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




Visual communication




Planogramming

Inventory Control and merchandise display technique which enables the

retailer to maximize shelf space utilization.




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




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.




Ageing Inventory Liquidation Routes

InstoreDiscounting

Tieups with Mass

Discounters

Transfer to stores where

required

Return to vendor




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




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



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