Editing Assortments

I exchanged emails with a friend in retail yesterday who assured me that assortments were being edited, and would be again! Certainly an appropriate response to the evaporation of consumer spending is to minimize inventory risk by reducing the breadth of the assortment. I'm going to argue that there needs to be a systematic and appropriate process followed in determining how to go about that "trimming"......and that it will vary from category to category, and perhaps even with a category.

First, and in my mind most important, is to segregate the management of replenishment businesses from trend/fashion open to buy. Assuming for the moment that replenishment businesses represent "basics" (however those may be defined for your category), they also represent fundamentally necessary aspects of the overall merchandise strategy. Further, once the investment is made to carry presentation stocks, they are for all intents and purposes self funding. While an assortment evaluation and editing process needs to be in place for replenishment SKU's (and seldom actually is in place), there truly is not a great deal of turnover in the overall assortment for these items. It follows that existing levels of inventory are probably sufficient to sustain appropriate presentation stocks. So don't try to reduce inventory by starting in on replenishment SKU's! Remember....they really do pay for themselves (assuming you are using appropriate minimum turn criteria and minimum GMROI threshholds). And don't leave that decision up to the Buyer...the same person who finds professional rewards in managing the fashion/trend aspect of the open to buy.

Assuming you now have a distinct fashion/trend/seasonal open to buy created, the next step is to develop the business rules appropriate for your category to guide the assortment trimming process. Stop for a second: the knee-jerk reaction may be to simply tighten existing metrics: raise the GMROI requirement, raise the turn rate/sell through hurdle rate....or any of the other numerical measures many retailers use in determining if a product should remain in the assortment or not......is probably NOT the best approach. It is NOT true that using these guidelines will result in higher turns, higher GMROI and better performance. Well, it is not ALWAYS true. And that's the key take away: NOT ALWAYS. Each category, and possibly subcategory really needs it's own set of decision rules to guide the trimming process: and they should be driven by the merchandise strategy established for that particular business. If you don't know or can't articulate a merchandise strategy (competitive advantage)....stop what you are doing and get one!

The truth is that assortment trimming is as fast a way to kill a category as it is to make it healthy. Think about gardens. Some plants need to be cut way back each season to make room for new growth....and they look like someone tried to kill them to the uninitiated. Other plants need to be carefully trimmed branch by branch, slowly, and only at specific growth points and done in a specific way. The same is true of your merchandise categories. The business rules used to guide the assortment rationalization process for consumer electronics are not even remotely the same as those used to guide apparel.

We'll talk more about those specific rules and guidelines in future postings.