Assortment & Category MT
"Does the assortment cover the needs of the customer and does it generate sufficient margin?"
The trick at the centre of this issue is having the right vision on identifying consumers’ basic needs! Our experience tells us that this process is not that simple, especially because a discount concept has a limited assortment and that the assortment should be a top selection of fast-movers. The reasons for a limited assortment are on the other hand simple:
to save cost on logistics;
to save cost on expensive space;
to save cost on racking and other kind of expensive displays;
to manage the categories easier;
to manage the stock takings easier;
to keep the work capital in balance (ratio debt value / stock value);
to oversee the whole business easier.
Consequently, the assortment should not be wide, not deep, not complete, and the SKUs must have a high rotation for the sake of keeping the cost low and the prices too.
However, a significant part of the assortment should be a dynamic selection of SKUs, as trends and so customer needs change rapidly due to social-economic developments, product and package innovations, new technology, etc. Notwithstanding, the assortment must be kept limited, the discount chains must be aware of seasonal needs, public holidays and special events. Also, customers like to be surprised which can be covered by In & Out assortments. This means that the discounter should keep being relevant to the customer. The discounter should keep pace with the times and its trends without losing an eye for the basic needs. Assortment optimization is for sure a critical process.
Assortment optimization can be best done by a profound Category management system. Category management is a strategic and systematic SKU-management-approach to organize, to develop and to balance the assortment, sales, volumes, margins and profits, to understand the commodity and suppliers' market, and to understand the dynamics of the food and non-food market.
Applying Category management will provide the needed insights on the core business and it will enable the retailer to make decisions based on facts & figures. However, Category management demands a robust IT system and well-trained, professional Category Managers.
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