Category Management and Assortment Planning Presentation

Enabling Sustained Business Excellence
Category Management & Assortment planning
Aartee Roy
Senior VP, Retail Industry Consulting
KINDUZ Business Consulting
Category Management & Assortment Planning in the Retail Industry | KINDUZ Business Consulting | http://www.kinduz.com/
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Contents
 What is a Category ?
 What is Category Management ?
 Key areas of Category Management
 Identifying Product Groups
 Space Planning
 Assortment Planning
 Visual Merchandising
 Inventory Management
 Complete Process Flow
© 2009 KINDUZ Business Consulting - All rights reserved

What is a Category ?
 A Category is a group of similar or related items which the

customer would ideally like to find together in a store.
 Categories are mainly used as organizational aids to better
manage and monitor predefined groups of products.

What is Category Management ?
Right product
At right price
To right location
At right time
To meet projected sale
Generate required Margin
And maintain defined stock cover

Key Areas of Category Management.
 Category Managemnent includes :

• Space Planning to ensure desired display space.
• Assortment Planning to facilitate the achievement of required
financial objectives.
• Visual Merchandising to optimize display efficiency and aid
walkins/conversions in a store.
• Inventory Management to ensure required stock cover and avoid
being out of stock.

Identifying Product Groups
Product Groups/Categories should be defined based on the

consumer’s needs and purchasing habits.
Home Fashion
Decor Lighting Acc. Jewellery
Aroma Watches
Wall décor Perfumes
Flowers Leather Bags.
Garden Jute Bags.
Decorative Acc. Travel Bags

Space Planning
Considerations for Layout

Decisions :
 High margin items should be
placed in high traffic areas.
 High demand items should be Home Decor
placed in low traffic areas.
 Complementary items should be
placed near each other.
 Seasonal needs should be
considered.
Leather Acc.
 Items needing frequent restocking Niche Products
should be placed near storerooms
Perfumes
or cash registers.
 Larger departments should be
placed in lower traffic areas.
 Impulse items should be placed in
closer to billing. Jewellery
 Shopping behavior and
Cash Till
operational considerations should

be recognized.
Impulse items

Layout Options
Straight Floor Plan Geometric Floor Plan
Angular Floor Plan Mixed Floor Plan


Benefits of Space Planning
 Inviting store layout improves walkins into the store.

 Improved circulation space within the store allowing for
accessibility to all products.
 Improved conversion rates by better product visibility and
display.
 Reduction in shrinkage.
 The store layout can impact the customer’s perception of
the store’s positioning.

Assortment Planning
Competition Analysis
Revenue & Margin Projection Assortment Plan Forecasting/Trends Analysis
Demand Planning
Customer Analytics
Assortment Plan or the Merchandise Mix is rated around the globe as the second
most important factor for a store, after its location. The assortment plan
defines the revenue stream, impacting not only the top lines and bottom lines
but also the working capital locked in inventory.

Key Deliverables of an Assortment Plan
 Required Average Revenue/sft.

 Required Gross Margin
 Required Average Ticket size
 Required Stock cover based on demand forecast
 Suitable product as per catchment analysis and target
customer profile.
 Based on competition study, merchandise mix should
define the store’s USP.

Assortment Planning
Process • Customer & Catchment

• Benchmarking Centric Assortment Plan
• Category composition which will deliver
• Customer Profile
• Sub Group Planning required financial
• Financial Projections
• Sourcing strategy targets.
• Store Layout
• Pricing strategy
Input Output

Benchmarking
Fashion
Boutique
Department Stores
Volume--- Volume +++

Department Stores
Mass Discounters – Coupon, Brand Factory
Hypermarket
Mass
Incorrect market positioning results in wasted resources by competing with players that are not the
right match. Define your focus market segment, key competitors and identify where YOUR
opportunity is.

Customer Analytics
Age-wise Spending Power Category-wise Spend

3500 4000
3000 3500
2500
3000
Spending Amount
Spending Amount
2500
2000
2000
1500
1500
1000
1000
500
500
0 0
18-25 26-30 31-50 50+ Books Entertainment Toys Stationery Gifts
Understanding of customer buying patterns is critical for all retailers. Defining the target customer’s
buying power, age, category preferences and regional influences can positively impact your top-line

Store Layout
The store layout clearly defines the stocking capacity of the store and hence enables detailed SKU qty ordering.

Category Composition
Once the Broad categories are defined, the finer details need to be planned. The above example summary is based on a
detailed subgroup level plan, both in terms of space allocation and sale projection.

Sub- Category Planning
Within a category, shelf displays are planned product wise and supplier/brand wise. Based on past sales experience or
market figures, a sales projection is created which confirms the inventory requirement and hence the investment required
for the first fill.

Sourcing Strategy
Based on:
 Lead-time to store launch
 Margin requirement
 Stock availability
 Working capital availability
Highest Margin Lower Margin Lowest Margin
Wholesaler/
Factory Distributor Retailer
Importer
Longest lead-time Shorter lead-time Shortest lead-time

Pricing Strategy
• Whether to buy outright or on consignment ?

Purchase
terms
• Is it better to get the products as a Shop in Shop ?
• To what extent will the price be competitive for exclusive products ?

Pricing • Should some products carry a promotional discount ?
• To what extent can the credit period be renegotiated ?

Credit Period • Will bigger volumes help in improving the credit period ?
• Will the supplier accept returns of ageing stock ?

Returns • Who will bear logistic cost of returns ?

Visual Merchandising
“Visual Merchandising”, the art of attracting patrons with visual cues,

is central to a retailer’s ability to generate sales. Visual
Merchandising got its start at the turn of the century, when
department stores began using theatrical set design and lighting to
create exotic displays. Today, the way the departments are
arranged, the location of the escalators, the lighting--all are
carefully planned to earn the store more sales per square foot.

Store Display Decisions
1. Shelving 1. Value/fashion 1. Fixture Types

2. Hanging image 2. Merchandise
3. Pegging 2. Angles and Presentation Planning
sightlines 3. Selecting Fixtures
4. Folding
3. Vertical color for Merchandise
5. Stacking blocking 4. Visual
6. Dumping Merchandising

Visual communication

Planogramming
Inventory Control and merchandise display technique which enables the

retailer to maximize shelf space utilization.

Planogramming Benefits
 Improved sales presentations & closure results

 Increased consumer appeal of product displays
 Better brand awareness through consistency
 Improved efficiency of shelf space allocations
 Improved financial performance of assortments
 Faster, more accurate replenishments
 Quicker inventory resets
 Much better marketing through targeted displays

Inventory Management
S2 S2
S1 S3 S1 S3
DC1 DC1
Supplier Corporate S4 Supplier Corporate S4
DC 2
DC 2
S5 S5
S6 S6
Inventory in a PUSH system is managed at the corporate Inventory in a PULL system involves store
level where all buying decisions are made and then pushed requirements to be consolidated at the corporate
to the distribution centers for allocation to stores. level via the DC and then procured.

Ageing Inventory Liquidation Routes
Transfer to
Tieups with
Instore stores Return to
Mass
Discounting where vendor
Discounters
required

Complete Process Flow
Assortment Assortment
Planning Planning
Realign Mix close

Sourcing
to Best Sellers
Identify Top
Ordering Performers
Delivery to
Monitor Margins
warehouse
Delivery to Store Monitor Sales

Contacts
Aartee Roy Sundeep M

Principal Consultant, Retail Vertical
Senior Director,
Customer Relationships
Website: http://www.kinduz.com/ Website: http://www.kinduz.com/

Email: aartee.roy@kinduz.com Email: sundeep.m@kinduz.com
India Mobile: +91-924685184
India Mobile: +91-9246085180
India Office: +91-40-40165594
India Office: +91-40-40165594
US Phone: +1-312-473-9767
US Phone: + 1-312-473-9767
© 2009 KINDUZ - All rights reserved 29

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Enabling Sustained Business Excellence

Category Management & Assortment planning

KINDUZ Consulting Network

• Network with Experts from all over the World

© 2009 KINDUZ - All rights reserved 2

© 2009 KINDUZ Business Consulting - All rights reserved

 A Category is a group of similar or related items which the

© 2009 KINDUZ Business Consulting - All rights reserved

To meet projected sale

Generate required Margin

And maintain defined stock cover

© 2009 KINDUZ Business Consulting - All rights reserved

 Category Managemnent includes :

© 2009 KINDUZ Business Consulting - All rights reserved

Product Groups/Categories should be defined based on the

© 2009 KINDUZ Business Consulting - All rights reserved

Considerations for Layout

operational considerations should

© 2009 KINDUZ Business Consulting - All rights reserved

Straight Floor Plan Geometric Floor Plan

Angular Floor Plan Mixed Floor Plan

© 2009 KINDUZ Business Consulting - All rights reserved

 Inviting store layout improves walkins into the store.

© 2009 KINDUZ Business Consulting - All rights reserved

Revenue & Margin Projection Assortment Plan Forecasting/Trends Analysis

© 2009 KINDUZ Business Consulting - All rights reserved

 Required Average Revenue/sft.

© 2009 KINDUZ Business Consulting - All rights reserved

Process • Customer & Catchment

© 2009 KINDUZ Business Consulting - All rights reserved

Volume--- Volume +++

Mass Discounters – Coupon, Brand Factory

© 2009 KINDUZ Business Consulting - All rights reserved

Age-wise Spending Power Category-wise Spend

© 2009 KINDUZ Business Consulting - All rights reserved

© 2009 KINDUZ Business Consulting - All rights reserved

© 2009 KINDUZ Business Consulting - All rights reserved

© 2009 KINDUZ Business Consulting - All rights reserved

Highest Margin Lower Margin Lowest Margin

Longest lead-time Shorter lead-time Shortest lead-time

© 2009 KINDUZ Business Consulting - All rights reserved

• Whether to buy outright or on consignment ?

• To what extent will the price be competitive for exclusive products ?

• To what extent can the credit period be renegotiated ?

• Will the supplier accept returns of ageing stock ?

© 2009 KINDUZ Business Consulting - All rights reserved

“Visual Merchandising”, the art of attracting patrons with visual cues,

© 2009 KINDUZ Business Consulting - All rights reserved

1. Shelving 1. Value/fashion 1. Fixture Types

© 2009 KINDUZ Business Consulting - All rights reserved

© 2009 KINDUZ Business Consulting - All rights reserved

Inventory Control and merchandise display technique which enables the

© 2009 KINDUZ Business Consulting - All rights reserved

 Improved sales presentations & closure results

© 2009 KINDUZ Business Consulting - All rights reserved

Supplier Corporate S4 Supplier Corporate S4

© 2009 KINDUZ Business Consulting - All rights reserved

© 2009 KINDUZ Business Consulting - All rights reserved

Realign Mix close

Delivery to Store Monitor Sales

© 2009 KINDUZ Business Consulting - All rights reserved

Aartee Roy Sundeep M

Website: http://www.kinduz.com/ Website: http://www.kinduz.com/

© 2009 KINDUZ - All rights reserved 29