If it’s not just potatoes, shoes or open doors you think of when you hear the word “wedge”, then read on! If you’re in merchandising, you’ll want to learn how to replace the Wedge with an Assortment Planning tool that will maximise sales, profit, customer retention and market share.
Grading or clustering stores by size and turnover is the traditional way of planning an assortment and creates what’s known in merchandising as the ‘Wedge’. For many years, the wedge was the most popular way to plan an assortment: The process enables easy roll-up and alignment to higher level financial plans. So, for a UK retailer for example, a medium-sized store with average turnover will get the same range in Liverpool as a medium-sized store in London, or Glasgow, or Manchester – which isn’t a problem if the retailer doesn’t want to offer different ranges based on location. But we do know that local fashion trends have a massive influence on customer demand (it has happened before that England flags have been stocked in Scotland, much to the annoyance of the locals!), so by not offering product differentiation, there are companies that are actually missing out.
As customer choice has expanded, initially through growth online, so have the expectations of customers when it comes to the diversity of a retailer’s range. Forcing an assortment wedge through a fashion retail business simply doesn’t meet the modern-day expectations of customers.
Apart from lack of choice, another downside to more traditional assortment planning is that true best-sellers often sell through too quickly and customers are so turned off by the right product in the wrong location (and vice versa), a store’s products won’t sell at all. Even worse: Retailers are then faced with MD (markdown) costs or inter-store transfers to ‘right-size’ their stock package. Not only is there a cost to clear the wrong stock, but the opportunity has also been missed to maximise full price sales from the right stock. The impact is obvious, with limitations to Sales, Profit, customer retention and market share.
THINKING MULTI-DIMENSIONAL TO ACT LOCAL: WHY A SYSTEMIC SOLUTION IS BETTER
The modern-day approach to assortment planning is to consider the multiple dimensions of customer demand and to tailor the assortment accordingly. Attributes such as brand, price, discounting, fabric type, trend, graphic size, colour mix, climate, regional affluence etc (add any other attribute you can think of here) can all be utilised to put into place a more customer centric approach. Layer on multiple store clusters applying retailer / brand knowledge about target markets, and you get a multi-dimensional assortment plan.
Clusters are built up from a store level and can cover a wide or narrow cross-section of customer type; for example, a retailer could cluster stores based on the level of affluence in each respective area, or based on holiday destinations to maximise shorts and t-shirt mixes, or based on brand dominance by store or area… there are loads of possibilities.
But how do you put this into place? While retailers have traditionally been planning in Excel, the new, multi-dimensional level of complexity far exceeds what the tool can cover. Retailers have therefore been embracing the rise of technical planning solutions.
It’s right to expect these solutions to manage both the hard work and the cool stuff: product images and planning information should be equally easy to maintain. The data can then be turned into visual dashboards to support decision making and to build as well as check allocation plans by store, cluster, area, country, region etc (whatever the requirement).
In the early stages of planning, initial assortments can be created with a suggested range of placeholders, based on the financial objectives outlined in the merchandise plan. Option counts can be consolidated to any hierarchy or alternative hierarchy providing an option roll-up.
The need for financial visibility and control hasn’t changed, of course modern-day solutions still need to conform to business financial plans. However, an added benefit of the technology makes rolling up and reporting faster and much more reliable. Moreover, your plans can be adapted and re-planned on the fly.
The key word for any solution is flexibility. No two businesses are the same – so the idea of “off the shelf” often doesn’t offer the option to adapt to company specifics. Enterprise Performance Management (EPM) platforms such as Board or Jedox provide full flexibility for a retail business to tailor a solution to their individual planning and reporting requirements. Doing it the traditional way, planning a simple assortment could take weeks and was extremely manual as well as prone to errors and delays, with everyone locking each other out of spreadsheets, changing cells, adding tabs… you know the pain. Working in a solution tailored to the planning and reporting requirements of your retail business, on the other hand, you can plan rapidly, but also repeatedly, by creating different scenarios to reflect a changing environment. Other benefits include automatic roll-ups and management summaries, alignment of top-down vs bottom-up, one version of the truth, and so many more functions that will enable you to focus on strategy rather than manual input, and on scenarios rather than trying to avoid or amend errors.
There are loads of benefits that come with the technology, and they will bring with them further upsides like the time it frees up for strategic work, for new ideas, and to make better decisions. Ultimately, it’s the improved visibility of how customer shopping habits are impacting your business and how you can better utilise this data for full price growth, customer retention and market growth.
Sorry, Wedge – it’s time to say good-bye.
