How to structure in detail the assortment by items that bring the largest share of the gross profit of the shoe store

To optimize the purchase of an assortment or develop a new collection, visualization and detailed statistics of the features of the model range of assortment types are required. In this article, expert SR, Galina Kravchenko, a leading expert on the assortment and forecasting trends of Fashion Consulting Group, talks about how to highlight the key competencies of the company if you structure the assortment in detail.

Assortment optimization: maintaining competencies

The first step in optimizing assortment management is optimizing the assortment structure. To plan seasonal inventory and manage it throughout the season, it's important to identify priority product groups —those that generate the "golden eggs" —50-60% of gross profit (GPP) . However, the specifics of our industry are such that raw numbers alone won't accurately forecast sales, for example, for "slip-ons with tractor soles."

To optimize the purchase of an assortment or develop a new collection, visualization and detailed statistics of the features of the model range of assortment types are required.

Competences of the company in the assortment structure

What are they - key competencies in the range? Each fashion company gives its own answer to this question. Someone says - shoes, someone - boots, someone - sneakers. But such a faceless description of the types of assortment can be made more descriptive, and then it turns out that the company specializes not just in the assortment of shoes, but, for example, in shoes with increased fullness with a stable heel. And a specialist in the type of “boots” assortment may in fact turn out to be a manufacturer of children's “dutik”.

The popular phrase "art is in the details" also applies to analyzing the assortment of a shoe retail store. The key reason why it's beneficial to break down each assortment item into smaller pieces (for example, 30% of the total product range) is the need to distinguish significant (3%, 5%, 10% or more) and insignificant (less than 1%) items within a top-ranked assortment item. It's like dividing a large "pie" into smaller pieces.

Each model has its own name.

It is possible to consider the assortment more closely if you put in its structure a grouping of models by names.

The name is a detailed description of the model, which the company uses as the lowest level of SKU grouping for analytics. Below this level is the SKU (stock keeping unit) or SKU—the unique product code. The name typically details the product type and may contain one or more characteristics from the full SKU description.

The set of the most popular characteristics for a detailed description of the type of shoe assortment that are used in the name is the design features of the model, material / composition, sole, heel height, prints / patterns, decor.

So, to identify which particular assortment brings a key share gross margin (EP), not just shoes are considered, but shoes of the opera shoes design (construction of shoes with an open toe) with high heels, stiletto heels, Mary-Jane shoes (model with an ankle strap) with a wide heel of medium height, a model of ballet flats with a thickened tractor sole, etc. .d. These are examples of names in the form of an assortment of “shoes” by variety of design solutions, heel height and heel / sole shape. If the material matters to the company, then this is also indicated in the name. For example: if a company produces low shoes from materials of various qualities and textures, then it is important to consider the combination of design and material composition in the name. Thus, the range of low shoes will be additionally divided into genuine leather oxfords, suede oxfords, faux leather oxfords, textile oxfords, leather loafers, textile slippers, suede slippers, etc.

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A detailed analysis of gross profit by product name allows us to identify groups of products that are essential to the overall profitability of the business, as well as those that are less significant or perhaps even unnecessary in the product range.

In the analysis of gross profit by rating of names, 3 groups are distinguished:

1. Core Product, total share in EaP - 50-60%;
2. Supplement (extension) Core Product, total share in EaP - 30-40%;
3. Additional assortment, total share in EaP - 10-15%.

In the product line, it looks like this:

Core Products are what sells best season after season in your store. These are the styles that are your signature pieces. The Core Product brand name represents the core competencies of a fashion brand.

For example, for a shoe store of SPORT CASUAL style these will be slippers, sneakers, trainers.

Core Product extensions are items that complement the core product line. Continuing with the SPORT CASUAL example discussed above, we can highlight oxfords with sneaker soles, sandals with thick, lug soles and wide heels, as well as orthopedic-style sandals, EVA wedge boots, and so on. Additional merchandise is a subset of the product line that makes the store more vibrant and interesting, which undoubtedly has a positive impact on overall sales. Continuing with the SPORT CASUAL shoe store example, we can highlight additional and related merchandise items such as backpacks, bags, belts, hats, and eyewear. These are a kind of "get-a-pie-with-it" offering, similar to McDonald's, which increases the average order value.

When optimizing the purchasing or development budget for a seasonal collection, the greatest amount of resources (time and money) should be allocated to the Core Product group. Maintaining the breadth of the product range in key competencies will allow the company to maintain its identity and sales. Budget reductions should be distributed between the Core Product expansion and supplementary product groups. Furthermore, the greatest burden of budget reduction should be placed on the supplementary product group.

A detailed analysis of sales by detailed assortment groups - names - allows you to:

• accurately highlight the competencies of the company - the "face" of the fashion brand;
• show the share in the inventory for the projection for the next season;
• emphasize the names on which the volume depends gross margin in season;
• highlight the names whose width, when reduced, will not cause damage to commercial indicators.