The choice of assortment that is carried for a category (category management) is the largest factor in determining the overall performance achieved for the majority of categories. Often, there is little rigour associated with the assortment selection process. A multitude of variables is required to be considered that makes choosing the products to ultimately carry difficulty. Fortunately, ToolBox Solutions has simplified the assortment decision making process by weighting the variables that are important to consider and categorizing clearly based on action. We do this through our proprietary ToolBox Velocity Grouping Methodology.
Without giving away the secret sauce recipe, the Toolbox Velocity Group Methodology aims to apply the most important factors to codifying each SKU within a category. Each product’s performance is made relative to like products that it would be compared to for listing, further distribution, lessening of distribution or delisting. Overall sales per point of distribution, the cumulative contribution to sales and the margin contribution of the product are considered among others. The timeframe that is evaluated aims to reduce the impact of promotions and seasonal performance yet retain any changes in trends and the performance of new product launches. Not only are like products compared, but they are also compared in similar store clusters at the level where assortment decisions are made at. The highest performer is this algorithm are classified as “A+” SKUs. The lowest performers are “D-“ SKUs. Often times we see a items accounting for 20% of the SKUs in a category and representing 70% of sales. D items are often around 25% of SKUs and 4% of sales.
The actions to take after such an analysis are clear. Delist the Ds as they add no value to the assortment. Ensure full planogram distribution of the as to which are often not in full planogram distribution. Lastly, ensure all as that are planogrammed are in stock at every store. These last two points are the largest ways to drive same store sales increases, drive shopper satisfaction, and reduce working capital investment.Tags: assortment, assortment selection process, category management, distribution, planogram, planogram distribution