Balanced assortment. Crisis Optimization Recipe
17.04.2017 12397

Balanced assortment. Crisis Optimization Recipe

It's time to revise the assortment management methods. The most effective of them are shared by Galina Kravchenko, director of assortment and trend forecasting at Fashion Consulting Group. The 3D assortment matrix *, developed by the company, allows you to choose a clear procurement strategy and methods of managing stocks even at the stage of ordering. This approach allows you to optimize your budget.

Galina Kravchenko Galina Kravchenko -

Director of the Assortment Department, Fashion Consulting Group, representative of the international online trend bureau FashionSnoops.com.

@ galina_kravchenko79, @fcgmedia

Drawing up an assortment matrix is ​​an integral part of the assortment policy of a retail company. The exact division of the assortment into groups is the basis of the classifier, which permeates all stages of assortment management. In the current environment, technologies are coming to the fore that allow managing the assortment promptly. For this, Fashion Consulting Group has developed a “balanced FCG assortment formula” methodology, which helps to reduce the risks of underselling and fill the assortment 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 technique 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-tuning of each business.

The FCG * Balanced Assortment Formula technique allows you to create an 3D assortment matrix *. Let's consider two stages of creating an 3D matrix.
Stage 1: 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.

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
• Often 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 a 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.

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%

The gradation of models by degree of risk is used as one of the scales for compiling the 3D matrix of the FCG assortment *.

2 Stage: Product 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.

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 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 the 3D matrix of the FCG * assortment, two principles of article grouping intersect:

• according to the criteria of "risk reduction";

• according to the criteria “food mix”.

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 bring the bulk of sales and gross profit.

Maximum attention! • Careful planning of goods 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 you should use the technology Nver out of stock ("always available");
• For 3, you should calculate the optimal procurement size and use the Just in time technology (“just in time”);
• 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.

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.

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.

This article was published in the 127 issue of the print version of the magazine.

It's time to revise the assortment management methods. The most effective of them are shared by Galina Kravchenko, director of assortment and trend forecasting at Fashion Consulting ...
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