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How to turn leftovers into a commercial assortment
20.10.2020 4122

How to turn leftovers into a commercial assortment

In the coming seasons, the fashion market in general, and the footwear segment in particular, will expect an excess of models that are not relevant, from previous seasons. However, it is necessary to treat the inventory, which turned out to be in excess at the end of spring 2020, not as illiquid assets, but as resources that can ensure sales. In new conditions, it is important to compose a collection / lineup for the season, relying on the available models, adding new articles pointwise. How to reduce risks, optimize costs and, most importantly, how to turn leftovers into a commercially effective collection in a pandemic, says SR expert Galina Kravchenko, director of the Assortment department at Fashion Consulting Group, head of trend analytics at FCG / FASHIONSNOOPS.

Galina Kravchenko Galina Kravchenko - Director of the Assortment Department and Head of the FCG Representative Office of the FashionSnoops.com international trend bureau. Former Director of Marketing and Member of the Board of Directors of Zenden. He specializes in the development of commercial collections of clothing and footwear, assortment management in retail chains and wholesale companies. Introduces international experience in fashion product development into the practice of Russian companies. Author and host of a series of training-workshops and a course of lectures on assortment management and fashion trends for the HSE. In Fashion Consulting Group, she has implemented successful consulting and training projects for companies in the clothing and footwear segments, including: Unicel, Rossita (TM Lisette), Sursil Orto, butik.ru, Cavaletto, Vitacci, Nikamed, Ekonika, Cablook.ru, 2fellini.ru, Gretta (Eleganzza retail chain), Leo Ventoni, Lamoda, Otto Group, Muschel (showroom), Wild Orchid, Oodji (Almeo Group, Kazakhstan) , "Sport-master", Sela, "Holding Center", Vito Ponti, TM Fest, TM Golub, Luisa Cerano, Molito Group (chain retailer of Molito, Baltman, Mosaik brands), Westland, and others.

Stock or stock typology

It is customary to divide the leftovers or inventory into 3 parts: illiquid, liquid, low-liquid.

An illiquid product consists of:

  • articles that do not correspond to taste preferences, features of socks, parameters of the buyer's foot in terms of characteristics: construction, last, sole and heel, materials, colors, finishes and accessories;
  • marriage;
  • models damaged during fitting and displaying in the sales area;
  • extreme sizes in low demand;
  • obsolete goods. For example: it once corresponded to sharp fashion trends, has been in the trading floor for too long and is radically different from the presented models.

The rest of the assortment is divided into:

  • liquid, that is, sold without leftovers;
  • low liquidity, sold with the balance,% of which is more than originally planned.

Models that ended up in warehouses due to a drop in demand (warm and late winter of 2019, as well as the closure of retail outlets and a drop in demand due to quarantine from March to May 2020) are mostly low-liquid models that were not sold due to external negative factors.

Algorithm for working with inventory until the end of 2020

In order to create a successful commercial collection in the current crisis, you need to follow the basic algorithm:

  • we work not with leftovers, but with inventory, that is, with the amount of all goods, with the entire mass of goods.

Stages of working with residues:

STEP 1: How much? Determine the minimum sales: RUBLES (RUB.), PIECES (PCS.).

STEP 2: What are we selling? What does the lineup look like, what set of articles will we present?

STEP 1: LOOK THE TRUTH IN THE FACE. CREATE ANTI-CRISIS PLAN: IN RUB. AND PCS.

Inventory planning is based on a sales plan. This is now a bottleneck. Excess balances are usually formed due to optimistic plans. The best way to plan in a crisis situation is to plan from covering costs.

Basic steps:

  1. Optimize costs and turn into a specific figure.
  2. New sales plan:
  • You need to understand what your costs are, and calculate the total sales plan: at least in pieces, rubles. by the end of 2020 to cover costs.
  • Calculate the target for each month (total for the month, average sales per day of the month). Assess the realistic plans for the month. If this is not feasible, then it is necessary to look for which cost items can be reduced.

3. New plan - the amount of inventory at cost in rubles and pieces:

Under the "minimum" plan, calculate the total volume of inventory, which covers the new sales plan until the end of the year and the balance rate at the end of the year for the remaining month and a half of summer 2020 and further for the fall-winter 2020/21 season.

4. We consider the inventory in stock and in transit at cost in rubles and pieces (low-liquid stock SS 2020 + purchase / goods in transit FW 2020/21) - the mass of goods that we will manage until the end of 2020. It is important to immediately select the articles according to the seasonality groups. For the autumn-winter season, 3 groups of seasonality are traditionally distinguished in shoes: winter, spring-autumn, all-season.

- SS 2020 SKUs: select the SKUs for sale this year. These are LOW-LIQUID articles of the spring-autumn seasonal groups and the all-season group of residues formed due to downtime in March, April and May.

It is necessary to plan the transfer of these seasonal groups in autumn colors to August-October. The rest of the highly seasonal, as a rule, light, pastel and bright vibrating shades are important to sell now or postpone to the spring-summer 2021 season, with the possibility of storage in warehouses.

  • FW 2020/21 season articles: highlight the seasonality groups to understand which groups are redundant.
  • We summarize the inventory of two seasons SS 2020 + FW 2020/21 for selected SKUs to determine what inventory the company has for sale by the end of 2020.

5. We compare the new, estimated inventory plan for both the minimum sales plan, and the inventory in stock and in transit.

Result:

Option 1: There is less or sufficient stock on hand and in transit to sell by the end of 2020.

What we do:

  • monitor sales;
  • we find / negotiate with suppliers on a prompt purchase from an open warehouse, if the actual sales are greater or meet the minimum plan.

Option 2: More inventory on hand and in transit than the minimum plan.

What we do:

  • we are negotiating with suppliers to reduce the order;
  • we find the possibility of selling a surplus lot (possibly even in bulk);
  • we transfer the surplus to the SS 2021 season, that is, we optimize the upcoming order, reduce the upcoming purchase budget.

STEP 2: REINCARNATION OF THE RANGE

It is necessary to consider the lineup in the form of photographs, which will help to imagine how it will look on the monitor screen and in the sales area, so that the buyer does not "get stuck" on repeat models and gets the feeling of a new assortment.

What to do:

1. Visualize - to make a visual demonstration of the "new" collection. Now it is very important to look at the assortment the way your customer will look at it online through a showcase on the website and offline on store shelves. This will help the skills of visual merchandising in the trading floor and online VM for the competent placement of models on the website and in social networks. The “tasty” and harmonious arrangement of the models next to each other gives the buyer EMOTION and accents on the items that need to be sold.

2. Go through the lineup.

● Select models according to risk groups: VOLUME DRIVERS - they are timeless, can be sold for a long time, they can be moved between seasons; highlight HIGH RISK - they need to be promoted, since they have a "short life", and sold in a certain time period, that is SS 2020, FW 2020/21.

● Highlight names and models in them for the possibility of reduction.

We do not abbreviate: names, key competencies.

It is important to keep what you have always made money on: titles, core competencies that brought you at least 60% of your gross profit. In order to see the competencies, you need to correctly divide the assortment into parts: correctly highlight the set of characteristics to describe your assortment. For footwear it is: a combination of the type of assortment, design, in women's shoes - the shape and height of the heel, seasonality.

We reduce: the assortment, which develops and complements the key competencies of the assortment, as well as an additional assortment:

if the company is innovative, we reduce the number of names, but leave the rileatheress;

if the company is more traditional, we reduce the most risky assortment, leaving the base.

1. To place accents in seasonal assortment groups:

● to maximize the summer assortment / separate the demi-season one. In summer, plan sales of exactly summer models: sandals, sandals, open shoes and low shoes (including sneakers), perforated and textile shoes;

● transfer the demi-season assortment to autumn: closed shoes, low shoes, sneakers, leather sneakers, leather models, without cutouts and excessive perforation;

● focus on transitional trends: colors and quality of materials. For example, shades of brown and chocolate, purples, medium grays, metallic, bright pink and fuchsia for the ladies' range.

METHODS FOR PLANNING AND ASSORTMENT ANALYSIS

In the current situation of the pandemic, it is extremely important to revise the calculation technologies; this is a set of solutions for operational analysis and a planning system.

Current analytics requirements:

  • speed - quickly identify models that "sag" in sales and can form an excess balance;
  • use standard convenient analytical tables that help to see the entire matrix as a whole and problem areas in particular;
  • provide feedback on items that need to be promoted through visual merchandising and personal sales.

The system for planning the purchase or inventory for the season changes direction to flexible planning technology or OPEN TO BUY.

Flexible planning system implies that the seasonal budget is split into several parts. Thus, the company decides to purchase the assortment in parts, having the ability to change the total budget for the season and, as a result, the composition of the assortment, depending on the trend of current sales. (An increasing trend - we increase the budget, a decreasing trend - we reduce). That is, the purchase / production is planned not for 6 months, but for a period of 2-3 months. In this way, the company is able to react quickly to more recent sales trends and changes in purchasing behavior.

In the standard scheme, purchases are carried out 8 (10) -6 months before the start of the sales season, which requires accurate, advance plans and their further implementation. Today it is important to switch to a system of "response" to demand. This does not mean that 100% of companies will turn into shuttle traders. This means that it is necessary to rebuild plans for the required minimum of sales, and if there is a possibility of large sales, purchase for a promising delta. More efficiently than in 8-6 months.

Thus, new realities teach to work not with leftovers, but with inventory, change approaches to assortment structuring and visualization, as well as to a system for calculating assortment plans and analysis technologies.

In the coming seasons, the fashion market in general, and the footwear segment in particular, will expect an excess of models that are not relevant, from previous seasons. However, one must refer to the inventory that ended up in ...
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