Putting Merchandise Results to Work

By Phil Minix

Great circulation planning and fabulous creative cannot save a bad product offering.

Customers order from your book because they find (with your astute help) products they want. Having a strong and focused merchandise concept means offering the right product assortments at appropriate price points and knowing how to use the page space efficiently and effectively. Reviewing your merchandise results is the first step in understanding how to move forward.

Components of an Effective Merchandise Review:

• Do square-inch analysis of all products.

• Using several financial metrics, develop a threshold for success (winners).

• Roll up item information into sub-categories and categories.

• Mark up a catalog to visually reference winners and losers.

• Look at products, categories, pages and spreads that performed best and worst.

• Look at your annual top performers and make sure you grew sales on these items.

• Compare average price offered (APO) and average price sold (APS) for the book and each category.

• Study changes from last year to this year, plan to this year's actual.

Planning for the Next Season

Having reviewed results, you need to find and maximize growth opportunities, and spot and minimize troubles for this coming year. This is where great catalogers separate themselves from mediocre ones. Take action based on quantitative and qualitative information to optimize the next promotion.

Finding Opportunities

• A new item appears in the top 20th percentile.

Action: See whether opportunity exists to build around this new item with a successful category or sub-category.

• APS is higher than APO

Action: Customers are responding disproportionately to higher-priced items. Review the current price point distribution and plan to add some higher-priced items.

• Category contains more than 70 percent successful items and has higher percentage of overall sales than overall space.

Action: Grow the category. Add more items and allocate more space in the catalog. If it isn't in a hot spot, relocate it to one.

• Category has higher-than-average margin or lower-than-average return rates.

Action: Grow the category as a percentage of overall sales. Look for more items in this category, being careful not to increase the offering without a high rate of success. Otherwise, replace unsuccessful or marginal items.

Spotting Trouble

• Total gross units sold (adjusted for any circulation changes) were below last year.

Action: Review price-point distribution and top unit selling items. Ensure price-point mix is similar to previous year and that all high-demand items were given appropriate billing within the offer. Check that any unavailable high-demand items from last year were replaced with something that should have sold similarly.

• APS is more than 20 percent below APO.

Action: Customers are responding disproportionately to lower-priced items. Review price point distribution and try to add more lower-priced items.

• Individual items or categories sold less than last year (adjusted for any circulation changes) or less than planned.

Action: Review creative presentations, placement and pricing. Has anything changed competitively (external or internal)?

• Top-20-percent item has dropped off the list.

Action: Review creative presentation, pricing, competition (external or internal).

• Category has low percentage of successful items or percentage of sales is less than percentage of space.

Action: Reduce space and offering. If you are not ready to give up on the category, try new items, but within less overall space than before.

• Category has high return rate or low margin.

Action: Fix the problems or eliminate the categories. If you must carry them and you cannot fix them, then reduce exposure by limiting offering and space.

If you have not been performing regular merchandise reviews, this should get you started. If you already perform them, I hope you have seen some new ways to spot trouble before it becomes major, or to harvest your opportunities while they are ripe. And don't forget—"it's the merchandise, stupid!"

Phil Minix is executive vice president and general manager of J. Schmid & Associates Inc., a catalog consultancy in Shawnee Mission, KS. He can be reached at (913) 385-0220 or by e-mail at philm@jschmid.com.