October 07, 2012

Dear Catalog CEOs: Carryover Product

Dear Catalog CEOs:

Lost in our zeal to be "multi-channel" or "omni-channel" or whatever the latest term is for the vendor community to encourage us to spend a fortune chasing customers all over the internet is one important word ... "merchandise".

Yup, this is the stuff we sell customers.  Contrary to popular belief, it's the reason why customers buy from us.

One of the most important concepts in the world of merchandise is "carryover product".  It is product that performed well last year, so well that your merchandising team decided to "carry over" the product to next year.

I like to rank-order last year's product from best selling (total sales) to worst selling.  Within that framework, I find the inflection point where 95% of products are "carried over" for the next year.  This point is the "carryover number".

When evaluating the success of new products, I look at the percentage of new products that achieve the "carryover number".

In businesses that are growing, the carryover number changes from year to year - it increases in volume as the business grows.

The carryover number also helps identify when your merchandising team is behaving inconsistently.  For instance, if sales are constant but the carryover number changes by +/- 25% by year, your merchandising team is behaving in an inconsistent manner --- identify why this behavior is happening, there may be a good reason for it.

Carryover product is very important in merchandise analysis.  The carryover number represents an important metric in analyzing merchandise performance.

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