Stop us if you haven't experienced this scenario before. Something isn't right with your product offering. Your sales are down, and fewer customers are visiting your store. What can you do to fix this? Your best option is to look at what products you offer and see where you can improve. In short, we'd recommend a product range review.
It's apparent if you see the signs and perhaps even daunting if you realize how much work it might be. But this exercise doesn't need to be intimidating. Yes, I can be. However, let's look at this from another point of view. Instead of seeing this as a frustration, look at what it would lead to - more sales and happy customers who know you have what they want and need.
Fortunately, you don't have to complete an exercise alone. By that, I mean doing it manually. There's specialist category management software such as DotActiv with various features and functions to help you monitor what's happening across your product assortment. If the software is intimating, or you know you don't have the necessary resources to dedicate time to it, DotActiv offers category planning services.
Whichever you choose, you can rest assured that you'll ensure you have the best assortment for your business and customers.
What is a product range review?
The products you stock directly impact your success as a retailer. How?
For one, by stocking the wrong items, you frustrate your customers. That leads to fewer shoppers visiting your store. You can also develop a poor reputation. Instead of the go-to retailer, you become the store no one wants to go to.
Of course, you can reduce the likelihood of this happening when you complete a product range review. But what is that?
A product range review is when you take a close, logical, and unbiased look at your data to understand which products to keep in your store and which to replace.
That makes it easy to understand why it’s necessary.
It means you can stock products that match customer needs
By evaluating the performance of each product, you can ensure you stock a range of products that match customer needs. During this evaluation, you can assess if you should keep a product, replace it, or remove it. By replacing or removing any products that aren't selling as expected, you can give more space on the shelf to top-performing items.
That also speaks to the point that you can't set and forget your product range. Your customer's needs are ever-changing, and you must adjust as they do. At DotActiv, we recommend you complete a bi-annual range review where possible.
You'd only need to consider any seasonal category or item to see a clear example. If you're a clothing retailer, you'll sell more swimming costumes during summer than in winter. Or, more wool jerseys during winter than in summer.
It helps you reduce costs long-term
Adding products to your assortment leads to increased inventory costs. That's unavoidable. However, you can mitigate any unnecessary costs by optimizing your assortment regularly.
We've written about the cost of rising inventory value. There is a knock-on effect from holding inventory you struggle to sell. When you can't sell a product, it remains in your store or stockroom. More stock in your storeroom with nowhere to go means you can bring products into your store. That means fewer sales, less profit, and an unhappy work environment.
It also goes back to our opening statement. No one wants to visit a store that doesn't have the products they want.
When should you review your product range?
Now that you know what a range review is and why it's necessary, it's critical to understand when to complete such an exercise. There are a few factors that play a role in your review.
1. Consider seasonality
Knowing this factor helps you determine how many times per year you need to review your range. It's not only that. You can also understand your sales. When it comes to certain SKUs, they may only perform at their peak during specific months of the year, and you must consider that when ranging.
Let's consider a category like Towels. You would only review the range twice a year. Once to ensure you list your winter products and again in summer to list your summer products. Whereas if you consider a clothing category, you'd want to review it as often as seasons change or new trends appear.
2. Look at your chosen category role
Category role is a second factor.
Your chosen role plays a significant part because your product range needs to reflect it in-store.
For example, if you have given a category a Destination role, you must offer a wide range of products throughout the year. If you don't, you're working against your chosen category role.
Likewise, if you've given a category a Seasonal role, you would only need to ensure your range covers what your customers want during that particular season. During the rest of the year, you can reduce your range and give more shelf space to other products or categories.
3. Keep your supplier/retailer relationship in mind
The relationship you have with your suppliers is a third factor. The state of it has a direct impact on your success. How?
Let's consider your current working relationship with your suppliers is poor. It could be because they can't fulfill stock orders on time, or they price inconsistently, and you struggle to provide customers with what they want at a cost that makes sense to them. That affects your range - brands can pull out - and your reputation as a go-to retailer suffers.
On the other hand, let's consider when you have a good working relationship.
In the case of de-ranging products that affect your supplier, because you have a good relationship with them, they could buy back any stock that isn't selling as well. These suppliers could also help you with logistics and reduce prices so you can place these products on promotion.
The same goes for listing products or planning to highlight their product to boost sales. When you understand that a supplier/retailer relationship is a collaboration more than a rivalry, you can only gain from it.
How do you complete product range review in DotActiv?
Considering that the average grocery store carries over 39 500 items, manually completing range reviews would feel like an uphill climb - if the hill you were climbing was Mount Everest.
Manually analyzing ranges would mean overinvesting time, money, and energy without reaping benefits. For this reason, we have created the Range Optimizer - a DotActiv software feature designed to fast-track ranging.
1. Complete range reviews in DotActiv software
Range Optimizer allows you to improve your ranges without burning the midnight oil. The software feature has built-in analytical tools that provide insights into each SKU in your product range.
One of the perks is that it is fully customizable. By setting up your analytical tools in the range settings, you can determine precisely how you would like your range to be analyzed and which insights you want to see. You can customize, amongst other aspects, your range caps, results grid, and KPIs.
Range Optimizer evaluates the performance of each product within a brand against the entire range and highlights remunerative products. By considering customer data, you ensure the assortment you carry in-store allows you to do the following:
- Meet the target market needs;
- Increase your return on investment;
- Improve stock turnover, and
- Create repeat customers.
But before we can use Range Optimizer, we need to integrate your database with ours.
A two-way database integration system provides the latest, most accurate data and allows you to understand your ranges. You can add to and subtract from your product range, and these real-time changes will be immediately accessible to all your stakeholders.
2. Diagnose ranging problems with DotActiv software
Range Optimizer pinpoints which products to keep and which to delist according to your predetermined KPIs and rules.
In a nutshell, rules are SQL-coded calculations that give products a points-scoring based on the command linked to them. Product ranges are generally reviewed based on performance-based rules like simple sales and units. Products receive more points the higher their sales and units are and fewer points if they are underperforming.
Seems fair, right?
Even so, it’s okay to play favorites now and again. If you want to prioritize the products from your house brand, you will select that as one of your rules. Now, your house brand will receive additional points regardless of its performance.
You can create templates consisting of different rules in your range settings. And when you are ready to create a new range plan for Range Optimizer, you can apply it to whichever level of the category hierarchy you are reviewing.
With your rules and templates set up, Range Optimizer knows how to allocate points and assist you with creating performance-driven ranges customized to your needs.
All you have to do now is let the Range Optimizer run.
Once it has run, you can analyze the results in the results grid. Each SKU in your product range is allocated points, and the software recommends which lines to keep. Lines highlighted in green in the Total Points column are top performers, and you should consider delisting the lines highlighted in red.
The Range Suggestion column will also be highlighted in red if the number of SKUs you have selected to keep in your range exceeds the range cap. Once you have unticked enough product lines, the highlight will disappear.
Range Optimizer does the grunt work, yes. But we still need to ensure we set it up for success.
Confirm the range has the latest product lines and POS data; and that the templates and rules solidify the category strategy.
It might seem counterintuitive to keep product lines that are low-performing. But if you want to position yourself as the primary category provider, keeping these product lines is the better choice.
You can measure Range Optimizer success by evaluating the Impact Analysis. This grid shows how the proposed range changes affect the category. It links to your KPIs and displays the %sales, sales loss, and more.
3. Deliver impact with DotActiv's Assortment Optimization service
If you want to review your ranges and ensure what you stock in store is the best, but you don't have the resources, DotActiv’s Assortment Optimization service is the solution.
Let the experts handle it.
Our trained consultants can determine a range that is the most profitable and optimal for your store. We analyze consumer behavior, spending patterns, and their environment to establish the perfect amalgamation of items.
No product range is too big or small for optimization. If you have a product range, you can benefit from this service.
- If you have many stores, we can apply range optimization to a cluster of stores with the same attributes (size, LSM, location, and so on).
- If you have a small number of stores, we can apply range optimization store-by-store.
However, if you believe your ranges are too large for the space available in your stores, then range optimization is critical.
Yes, the DotActiv software already simplifies ranging. But, having the convenience of trained professionals to do the job cannot be ignored.
Our consultants follow a meticulous step-by-step process to extract as much data as possible to facilitate effective decision-making and optimize ranges. They make suggestions from a neutral but expert perspective based on KPIs and category strategies.
For adequate assortment planning, balance is essential. Not all categories need to have an extensive product range. Over-ranging causes range congestion, cluttered shelves, idle stock, and results in wasted money.
The same goes for limited ranges. Increasing facings unnecessarily is not profitable. Broadening the assortment with new lines will have a meaningful impact. However, remain mindful of merely adding a product with no strategy behind it. Doing so may result in closing down on your faster-moving products to make space for a product that is possibly not even in demand.
From reviewing ranging objectives and category strategies to running and analyzing the Range Optimizer results, there is much to gain from using DotActiv's Assortment Optimization service.
Fortunately, our consultants communicate with you every step of the way so you know what's happening. We will give you data-driven insights on the most profitable ranges and present you with visual applications of these ranges through planograms. We do all the work and you benefit from the output.
Conclusion
Completing a range review isn’t so much a recommendation as a requirement. That’s if you want to continue providing shoppers with the products they want, no matter the time of year.
With DotActiv’s rang optimizer tool, you can create assortment plans that are more attractive to local shoppers while improving the profitability and efficiency of your different product categories. What’s not to like?
Are you searching for advice or need a category management solution that’ll help you with both? Book your complimentary consultation with a DotActiv expert today, and we’ll show you how we can help you achieve that and more. You can also browse our various software editions and services on our online store.
