Merchandising Management

Class 3

Assortment Planning
To know assortment planning we must know the following : Product management Role of product management in Retail Business Product Range and Assortment

Product assortment strategy

Consumers perception of Assortment

Product Management
Products in retailing context are defined as anything sold and purchased in a retail transaction. They could be goods, services, places, events, ideas, etc. A product can be tangible or intangible. Examples : Outlets selling intangible products are servicefocused stores like beauty parlors, banks, and other advisory services. For Retail Outlets, services may take the form of home- delivery service, entertainment and child-care facilities, information and advisory services like interior designing services provided by home solution product retailers, etc.

Role of product management in Retail Business

Product management is a key activity in the management of retail business. It drives the business strategy of the retailer and has immense cost and profit implications. A related aspect is the management of retail brands and the decision to offer retailers private labels along with or instead of , national and local brands of manufacturers. Product management deals with issues related to the kind of products sold by the retailer. The product plan is drawn keeping in mind various factors that influence shopping behavior and the strategic and cost concerns of the retailers.

Role of product management in Retail Business

Products are critical to a retail firms existence and profitability. They constitute the basis of exchange transactions between retailers and consumers. Product management is critical to the success of retail business. Identification of the products to be retailed forms the core component of a retailers business plan. There are varied demand patterns and competitive factors for different product categories. Good product management by the retail firm is crucial to ensure the satisfaction of consumer needs.

LEVIS PRODUCT STRATEGY IN FRANCE

Out with unisex, in with jeans for women only . That became part of Levis new strategy in France . Hoping to lift sales in its vital European market, Levi Strauss opened jeans boutique for young women. The company also implemented a gradual dividing of the sexes in other stores, with many just for women, and for men. One such new store in Paris, called Levis for Girls, was aimed at women between 19 and 25 years of age, though the company admitted that the average customer is more likely to be aged between 15 and 22 years. Levi also transformed its Paris flagship into a store for men only . This was all part of a broad plan to have multiple outlets for different corners of the market.
Source ; The Herald (2003)

Product Range and Assortment

A product range is the total product offering expressed in terms of width and depth. The width of the product range depends on the variety , or number of different types of product category. The depth on the other hand refers to the amount of choice offered in terms of product and brand variation within a product category.
Increased depth will allow a retailer to cover a number of different price levels, should this be part of their overall product strayegy.

Product Range and Assortment

Product similarity is a common way of managing product groups .The most relevant are the following : End Use

Price
Brands Core and non-core

Product Range and Assortment

End Use
Products may be grouped on the basis of being complementary with each other for end use. For example B & Q, the international DIY (Do It Yourself) retailer, groups products according to projects such as installing a new bathroom suite, or tiling the floor. Supermarket retailers sometimes group products around meal themes, as a way of encouraging related sales. Consumers who are convenience driven are likely to value retailers who provide products that are grouped according to lifestyle solutions.

Product Range and Assortment

Price
Retailers may organize product ranges according to the price level at which groups of products are pitched. For example, variety store retailers might have a budget range that is bought separately from other ranges. Alternately, a premium range of luxury foods in a supermarket may be managed in its entirety by a team operating separately from the other food categories.

Product Range and Assortment

Brands
A brand of a product can be the most important product feature for some customers; and some brands might have products across various product categories. It may therefore be appropriate to manage ranges by brands rather than by product category. Department stores, like Debenhams , which have over fifty of their own house brands, often manage products by brand in order to create and maintain a strong, consistent , and coordinated identity, from the development stage through to display within the store.

Product Range and Assortment

Core and non core : For many retailers products can be divided into core and non-core ranges. Core items are those that have consistent demand , which the retailer matches with continuous availability. These products are generally what are termed staple items and they do not tend to under go change. Non-core lines may be seasonal, only being stocked for a short duration within the year, or they may be subject to fashion trends and are replaced by different trendy items once their appeal dies.

Product Range and Assortment

Retail format and typical product assortments :
Retail Format Example Depth of Assortment Width of Assortment

Department store
Variety Store Category Killer Specialty Store Convenience store Discount Supermarket

Harrods, Debenhams
Marks and Spencer Toys R, Us, The Body Shop 7- Eleven, All days Aldi, Netto

Deep
Shallow Deep Deep Shallow Shallow

Wide
Wide Narrow Narrow Medium Wide

Product Range and Assortment

Retail format and typical product assortments :
Retail Format Superstore Mail order catalogue Specialist catalogue Example Wal - Mart Great Universal stores Innovations Depth of Assortment Medium Shallow Deep Width of Assortment Wide Wide Narrow

Product Assortment Strategy

Consumer Perception of Assortment

Number of unique SKU offered

Space devoted to category

Availability of consumers favorite SKU

Product Assortment Strategy

Consumer assortment perception has been shown to be one of the top three criteria, along with location and price, in determining retail patronage. However carrying very large assortments results in the following : Higher inventory costs and more out of stock for retailers. These higher costs made it difficult for conventional super markets to compete against the growing retail formats of discount store, warehouse clubs, and super markets.

Product Assortment Strategy

It makes choice difficult and decreases purchase at the consumer end.

Consumer Perception of Assortment : Assortment perceptions are said to be influenced by three factors: The number of Unique SKUs offered The total space devoted to the category The availability of a consumers favorite SKU.

Product Assortment Strategy

While the number of SKUs offered is an important factor, consumer perception is not a one to one function of the number of items offered. It has been found that consumer perception of assortment is affected by the total number of SKUs offered, size of category space , availability of favorite, and ease of shopping. For instance, consumer assortment perceptions have been reported to be unchanged with 25-50 percent reduction in assortment, if the size of the self space was held constant and their favorite item was still available. The multidimensional nature of assortment perception implies that retailers may be able to reduce the number of items offered without decreasing consumers perception of assortment.

Product Assortment Strategy

ASSORTMENT AND PRODUCT CHOICE Across a wide range of products and services, consumers report a desire for large assortments. But large a assortments have several negative effects on product choice, such as the following :

1. Large assortments increase choice difficulty and decrease product purchase.

2. These negative consequences are more likely for non-aligned than for aligned assortments.

Product Assortment Strategy

PRODUCT SELECTION Selecting the right product requires an understanding of the complexity of the modern shopper , and an ability to bend product detail in a way that satisfies both physical and emotional need of the shopper.

This must be carried out within the context of the retailers positioning strategy.
The product selection process involves a review of the performance of the existing product range. This exercise aids in deleting some products or assists in revising various aspects of product portfolio.

Product Assortment Strategy

PRODUCT SELECTION A retailer is required to consider various issues related to the selection of the products to be retailed.
These pertain to the type of products to be retailed, lifecycle of the products, trends in the product category, and its strategic fit with the retailers business. Broadly it helps to identify the opportunities to bring in new products or product-related attributes to meet the changing preferences of the target customers.

Product Assortment Strategy

Product Selection Product performance review utilizes information collected from secondary data and primary sources such as : Sales Report Product profitability Report Quality Report Return Figures Promotional Campaign results and plans Product-market trend information Consumer Research

Product Assortment Strategy

Product Range Review

Alternative product range decisions Deletion of a product Increase in variety and range Change / Increase suppliers Update or revamp product Review and revision of Promotional campaign Display product differently

Alternative decisions as a result of product range review

Retailers Criteria for Selection

Product selection Criteria for the retailer

Physical Properties of a product

Packaging

Product Quality

Brand

Product Selection Criteria for the Retailer

Retailers Criteria for Selection

PHYSICAL PROPERTIES These are tangible aspects of the product, Represented by size, weight and volume and by the components or ingredients. These have direct bearing on consumers evaluation of the product. The inclusion of physical properties that give increased customer value can be a way to encourage customers to use the product benefit rather than price to guide their purchasing, for example, ultra violet (UV) protection in childrens clothing.

Retailers Criteria for Selection

PACKAGING For many products it is packaging that initially attracts a potential customer, and so the design of the package in which a product is enclosed is as important as the formulation of the product within. Packaging performs a variety of functions, including aesthetic appeal to consumers, protection of the product, added value for the customer For example , container that can be used when empty, an aid to product use such as spray container, a contributor to brand identity and a vehicle for promotional messages.

Retailers Criteria for Selection

PRODUCT QUALITY Product quality is determined to a large extent by its physical properties. However, the components or ingredients used may themselves be subject to physical variation that determines the level of quality.

For example, a sweater may be made of 100 per cent wool, but the quality of wool used may determine how soft and smooth the garment feels. Quality may also determine how long the garment lasts. Consumers are also increasingly concerned from a social and ethical stance about what goes into a product and how it is made. Example concerns about child labor.

Retailers Criteria for Selection

PRODUCT QUALITY Achieving consistency in the level of quality in the product range is very important to retailers in order to maintain customer trust and satisfaction.

Product specification is an important document in quality control process and includes a detailed description of the product .

Retailers Criteria for Selection

PRODUCT QUALITY- Product specification Relevant Product coding information Labeling and packaging information Component materials Production method Details Dimensions ( with full size specification for alternative sizes) Sketch or blueprint (a technical representation of the item

Retailers Criteria for Selection

BRAND Although the brand is an intangible product feature, for some consumer purchase decisions it may be the only attribute that counts.

A corollary of effective product management is brand management. The nature of product assortment is an active ingredient in building a strong retail brand.