How to Make Strategic Choices on What to Carry

In the June issue of Convenience Store News, I wrote about how to analyze your data to make more strategic and fact-based decisions that focus on your unique shopper. First, you need to understand the key data sources available to you as a convenience store owner and then, you learn how to analyze and ultimately make better decisions for your stores using the data.

Now, I want to talk about choosing the right product assortment for your categories or, in other words, what items you will carry in your store. Assortment is one of the most important decisions you make for your store. What items you do and don’t carry has a direct impact on:

• The Shopper: Are you carrying the right product choices for your shopper and their needs when they come in your store?
• Shelf/Space Planning: How will the products fit on the shelf? Where do they belong on the shelf?
• Store Labor: How frequently do your shelves need to be filled? How much work is it to put products onto the shelf?
• Inventory Cost: How much inventory do you need to carry of the product, both on the shelf and in your backroom? What are the product turns?
• Marketing: How do you let your shopper know about the product?

It’s important to understand the fundamental decisions and requirements behind assortment. Here are four steps to help you do this:

1. PREPARE

Key considerations that should influence the choices you make for your category assortment include confirming the category’s role. What is the role of that category and the corresponding assortment strategy? Your most important categories (those with a destination role) require the broadest assortment. Also, consider your shopper. What are their most important needs to be met in the category? If you don’t understand the shopper for a specific category, talk to your supplier and see if they have any information to share.

2. ASSESS THE CATEGORY  

Category assessment (I covered this in my June article) is important to understand who the shopper is, how the category is performing and where the opportunities are.

Requirements for this step are:

• Category item rank report: Based on dollar sales, unit sales and profit from your retail scanned sales data. You should pull this data for each of the subcategories within the category.  For example, in confectionery, you would pull an item rank report each for chocolate bars, peg candy, gum, non-chocolate bars, candy rolls and mints, and changemakers/penny counter goods. If you don’t have that level of detail, you can either manually categorize each item for a better analysis, or just use your total confectionery item rank report.
   
• Market item rank report (for convenience channel): Provided by your supplier for each of the subcategories. This is important because without it, you’re basing your assortment decisions only on what you currently carry in your store. You need to consider everything that the shopper is purchasing in this category, as you may be missing out on some important items.
   
• Brand and subcategory productivity: You should start by looking across brands and subcategories to determine in which ones you have too many/too few items relative to the dollars that each sells. (Refer to How To graphic above.)

A fair share analysis is a great way to complete some topline assortment analysis for your categories and gives perspective on where you may be carrying too many or too few items.  Combine this analysis with an understanding of the shopper and category opportunities from your category assessment, and Step No. 3 will be an easy next step.

3. RECOMMMEND

Now that you understand the opportunities from your subcategory analysis, you can analyze your item-level data to determine the category item lists/delists/reviews.

Follow these three steps:

• Sort your item rank report for each subcategory in descending order (from highest to lowest dollar sales).
• Confirm the number of target listings for that subcategory (based on your category assessment and FSI results).
• Determine which items should be considered for removing from your assortment lineup (as well as any additions).

Make sure the items you remove have a similar item to meet shopper needs, is not a newly listed item, and that it has been in stock and available for an appropriate amount of time.

Make sure new items you choose to list meet unmet shopper needs, aren’t just a duplicate of another item, and/or have a strong marketing program behind them.

4. IMPLEMENT

Now, implement the recommendations in your store. This also ties in with decisions you make for the shelf. You should also share your findings with key staff in your store so they, too, can benefit from the category learnings you have uncovered.

Choose a category that you know has too many SKUs or one where you’ve struggled with making assortment decisions. Determine the data sources you can access to complete your assortment analysis (make sure you incorporate your supplier and their knowledge and data).  Complete an assortment analysis using some of the measures I’ve captured above, and determine the biggest areas of opportunity for your category. 

You may be surprised at some of the opportunities you uncover.

Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News for the Single Store Owner.