By Tara Kaifesh, category analyst, for the “Profits in the front end” blog series
Do you have departments you’re ordering products for on a weekly basis while there are others you can’t remember the last time you placed an order? If this is the case, you’ll want to review your product assortment as well as how much space is being dedicated to each department.
While this may seem like a huge undertaking, it will greatly improve your bottom line. You don’t want inventory sitting on your shelves that doesn’t sell, eventually expires, and must be thrown out. You also don’t want customers to shop elsewhere because you’re not carrying a larger mix of products for a top-selling category.
Review your department sizes versus your sales every 1-2 years. You’ll need either point-of-sale data or a report of items ordered the past year. Point-of-sale data is preferred because it is what customers actually purchased; however, if you do not have it, use the order report. Within your POS system, be sure you’ve assigned a category to each item (pain relief, cold & allergy, skin care, etc.). This is important because you want to see which departments have the most sales/items ordered. Then you will determine the percentage of sales for each category based on the total sales for the year.
Once you’ve determined percent of sales for each category, the next step is to determine how much linear space is dedicated to each department or category. To calculate the linear footage, review the width of your shelf and multiply that by the number of shelves for a particular category. For example, if you have four foot shelves in your cold & allergy department, and there are six shelves (include peg space if applicable), the linear footage would be twenty-four linear feet. Once you’ve calculated the linear footage of all categories, you can determine the percentage to the total linear footage.
The last step is to review the percentage of sales against the percentage of linear footage for each department. If the sales percentage is higher than the linear footage percentage, increase the footprint of that category. Take space away from departments that have higher linear footage percentages than sales.
It’s a best practice to review your product assortment monthly. You don’t have to review the whole store at once, rather a few categories each month. Focus on a top-selling category and a marginal category each time. Look at products that have low or no sales over the past few months. Is this item new? Is it unique? Is this a type of product that customers purchase once every few years like a blood pressure monitor or diabetes meter? If the answers to these questions are “no,” you may want to look at discounting the item and replacing it with something different. Take a look at new products to the market — are you missing out on sales because you’re not stocking these items in your store? Review the businesses around your store. Do you have hospitals or clinics in close proximity? If so, you may want an assortment that is heavier on health products rather than beauty products. You’ll also want to know the demographic of the neighborhood your store is in. Do you have a large percentage of mature adults or young families? Knowing this information helps you determine if there are departments that your store should be stocking to satisfy your shoppers’ needs.
By incorporating this step into your regular monthly processes, you can be sure that you are carrying the right assortment for your store and lower your inventory costs while increasing your front end sales!
