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Crisis Optimization Recipe
27.05.2015 8324

Crisis Optimization Recipe

Today is the time to conduct an audit of assortment management techniques. The most effective of them is shared by Galina Kravchenko, director of assortment and forecasting trends of Fashion Consulting Group.

The 3D assortment matrix * developed by the company allows you to choose a clear procurement strategy and methods for managing balances even at the procurement stage. This approach allows you to optimize the budget and avoid distortions in the direction of illiquid assortment.

Drawing up an assortment matrix is ​​an integral part of a retail company's assortment policy. The exact division of the assortment into groups is the basis of the classifier, which permeates all stages of assortment management. In the current conditions, technologies that allow you to manage the assortment promptly come to the fore. For this, Fashion Consulting Group has developed a methodology “balanced formula of the FCG assortment ", allowing to reduce the risks of undersale and fill the range with profitable models. This technique already at the stage of forming a seasonal collection shows how to manage assortment groups throughout the season. For example, you can understand which assortment groups should always be in the store, since the implementation of the plan depends on them; which groups are not allowed to sell, and which positions should be sold in the current season.

This methodology is integrated into the assortment policy of a retail operator of any scale. Moreover, this is not a fixed "bone" solution, but a flexible toolkit that makes it possible to take into account the fine settings of each business.

FCG Balanced Assortment Formula Methodology * allows you to make 3D assortment matrix *. Let's consider two stages of creating an 3D matrix.

Stage1: Risk Reduction

In terms of reducing procurement risks, the entire assortment can be divided into three groups: volume drivers, must haves, high risk. This is the experience of international brands, which is successfully introduced in the Russian market. This separation of models allows you to maintain the optimal balance of the collection, and is also projected onto visual merchandising: separate tables or calculation zones are formed.

The division of the assortment according to risk groups is individual for each company. So for one brand shoes in beige patent leather for the spring-summer season I can be part of the volume drivers group, and for the other they will be high risk models. This is due to the difference in the target audience, as well as the historical sales of the company. In the first case, the company works with a fashionable audience that chooses a feminine style and versatility. And her representatives will wear beige patent leather shoes for both work and evening out. And in the second case, it will be a brand for a conservative audience, which sees patent-leather shoes exclusively as shoes for a special outlet.

Once again, I want to emphasize that the allocation of groups of volume drivers, must haves and high risk, individually for each company. In FCG consulting projects, we always conduct a detailed audit of the assortment, KPI indicators, and also study the buyer during the purchase process. Such a careful approach to the uniqueness of the business allows you to create an accurate division into risk groups for each specific brand or retail network.

However, despite the need for an individual approach, we can distinguish a list of general rules for dividing the assortment into risk groups:

Volume drivers

• frequently purchased assortment, basic wardrobe models of the brand's target audience;

• an exact copy of successful models or designs of previous seasons;

• best-selling colors for the type of assortment.

Must haves ("mandatory for mods")

• New models of the season;

• Models characterized by the use of commercial fashion trends that the target audience is ready to buy;

• Designs that can repeat the designs of volume drivers models, but with changes to the color, texture of the material, pattern / print, decorative finish.

Hight risk

• Brand new models in the collection;

• Rarely repeat the design patterns of previous seasons;

• May include models proposed for special events and to attract attention, promote other models;

• Models developed on the basis of the newest trends that the target audience is ready to accept;

• As a rule, the trend is demonstrated due to the novelty: design, color, pattern or print, texture of the material or decorative finishes.

Assortment formula: risk groups

FCG technique

Volume Drivers The main volume drivers

• Frequently purchased assortment, basic wardrobe models of the target audience

• Exact copy of successful models and designs and models of previous seasons

• Best-selling colors for a type of assortment.

Must Haves. Mandatory season models

• New models for the season

• Differ in the use of commercial fashion trends that the target audience is ready to buy

• Can repeat the designs of VOLUME DRIVERS models, but with changes in: color, material texture, pattern / print, decorative trim

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High risk fashion. Special models

• Fundamentally new models in the collection, never repeat the designs of models from previous seasons

• May include models offered for special events and to attract attention, promote other models

• Models are developed based on the maximum new trends that the target audience is ready to accept

• Typically, trend in design is supported by trend in color, pattern or print, material texture or decorative finish

The division of the assortment into risk groups implies a projection on the purchase of inventory. Given the specifics of the Russian footwear market, the following ranges can be identified:

• volume drivers - 10-15%

• must haves - 30-40%

• high risk - 50-60%

Gradation of models by degree of risk is used as one of the scales for compiling 3D Matrix FCG Assortment *.

Stage2: Food Mix.

As a second scale 3D Matrix FCG Assortment * groups of assortment separation into detailed views are used.

Not just shoes, but shoes with open shoes or with an open nose. Not just summer shoes, but anklets, moccasins, top siders, loafers, etc. That is, the types of assortment are detailed according to the types of design solutions. Also, if the height of the heel is significant for the company, then gradation in height of the heel or wedge is added. When drawing up a detailed description of the type of assortment, it is important to accurately determine the characteristics that are significant for the retail buyer. So, for example, for children's shoes, the method of attaching shoes to the foot is mandatory in detailing: lacing or Velcro. There are examples of companies that need to analyze detailed types of assortment, combining the type of assortment and the characteristic of seasonality. Thus, detailing assortment types is a specific classification of models according to key parameters affecting sales.

After drawing up a detailed list of types of shoes, KPI indicators are analyzed (at least gross profit (VP)) and three groups are distinguished:

1. The assortment subspecies, which occupy the main share in sales, are the core product (50-60% of VP).

2. Subspecies of the assortment supplementing or developing the core product (20-30% of VP).

3. Other subspecies - an additional assortment (no more than 10% of VP).

Core product - this is what is sold best from season to season in your store. For example, moccasins, ballet shoes, varieties of low shoes on a flat soft sole.

All add-ons to the core product are products that complement the main product line. Continuing the considered example, these can be comfortable models of sneakers, gym shoes, as well as shoes with a stable low heel (square or wedge heels). An additional assortment is subspecies of the assortment that make the store space more lively and mobile, which, of course, has a positive effect on sales. For shoe stores, these are usually bags, belts, leather goods, scarves, hats, glasses, jewelry.

ASSORTMENT FORMULA: PRODUCT MIX
FCG technique

3D FCG Assortment Matrix *

When forming an assortment, it is important to remember that for the sustainability of a business, you need to purchase assortment groups that are in demand in your store and that bring a key share of gross profit. In order to sell this "golden" stock of assortment, we need an assortment that expands the offer, but does not eat up our budget. Therefore, the secret to successful purchasing is the correct "dose" of expansion.

For accurate gradation of models into clusters in 3D FCG Assortment Matrix * two principles of grouping of articles intersect:

• according to the criteria of "risk reduction";

• according to the criteria “food mix”.

3D assortment matrix FCG technique *

Such an analysis makes you look at the assortment of the next season in bulk. On the one hand, given the profitability of the assortment types, on the other hand, understanding what qualitative characteristics of each of the subspecies affect the rileatheress of the purchase.

This allows you to clarify the proportion of the order and abandon the insignificant articles and the benefits of those that are included in the key subspecies of the range and bring a large share of gross profit.

General recommendations for managing assortment clusters

1, 2, and 3 clusters generate the bulk of sales and Gross Profit.

ASSORTMENT MANAGEMENT SOLUTIONS FOR 1-3 CLUSTERS:

Maximum attention!

• Careful planning of turnover and stock;

• Frequent analysis of actual sales;

• Monitoring the implementation of the sales plan;

• Accounting for deviations from planned indicators;

• For 1 and 2, use the "Never out of stock" technology;

• For 3, the optimal size of purchases should be calculated and the technology “Just in time” should be used;

• Balances for these groups, as a rule, can be used for sale in subsequent periods;

• These balances are taken into account when placing the order.

ASSORTMENT MANAGEMENT SOLUTIONS: FOR 4 CLUSTER

The 4 range is a group reflecting the most risky trends in the core competency of the company. However, from the point of view of accumulation of residuals, this group is less dangerous: the buyer will willingly choose a “cool” item from a specialist.

ASSORTMENT MANAGEMENT SOLUTIONS: FOR 5-9 CLUSTERS

Models that are part of the 5-9 groups are products that do not constitute the bulk of the sales. Most often this is an assortment that extends the store's offer.

• When planning the assortment in these groups, it is important to balance the models: volume drivers, must haves, high risk;

• Initially, a balanced approach to the formation of the lineup will avoid excess residues;

• It is important to implement the assortment in these groups in a particular season, therefore, as a rule, it is these groups that are included in sales.

More detailed information on the methodology 3D FCG Assortment Matrix * disclosed in the program of the open seminar "Anti-crisis program for optimizing the range of footwear ". A detailed description of the seminar can be found on the website. http://fashionconsulting.ru.

* Citation and use of the following information on FCG methods described in the article is possible only with the permission of the copyright holder: balanced assortment formula FCG, 3D matrix assortment FCG.

Now is the time to revise the assortment management techniques. The most effective of them are shared by Galina Kravchenko, Director for Assortment and Forecasting Fashion Trends ...
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