April 30, 2013

Merchandise Forensics: Growing/Shrinking Businesses Standardization

Let's say that your business is on the upswing.

Last year, you had 100,000 customers, and you sold $12,000 of a certain item.

This year, you had 150,000 customers, and you sold $16,000 of a certain item.


Clearly, your merchandising team is doing a great job with this item, right?

  • Last Year's Demand per Thousand Customers = ($12,000 / 100,000) * 1,000 = $120.00.
  • This Year's Demand per Thousand Customers = ($16,000 / 150,000) * 1,000 = $106.67.
Now, I get it ... if you featured the item in catalogs more/less frequently, or in email campaigns, then the metrics will be impacted.  But for most items, this isn't the case.  Consequently, you can get a directional view of merchandise productivity by controlling for the number of customers who purchased in the past year.

This metric can be adjusted - for great customers, for average customers, for marginal customers, for new customers ... your choice.

But you owe it to your merchandising team to tell them, in a changing environment, how items are performing, correct?