June 10, 2013

Pot of Gold

You can't see a rainbow until after the storm passes.

Similarly, your head merchant doesn't really know if a new item is going to yield a pot of gold until the item has been offered to the customer.

There are at least two ways to drive new item productivity.
  1. Previous knowledge of the new items that are going to turn into a "pot of gold".
  2. Developing enough new items so that "x" percent of the new items will turn into a "pot of gold".
Here's an example.  In 2011, the merchandising leader created 200 new items.  Ten percent, or 20 of the new items, became "best sellers", generating a pot of gold.

In 2012, this same merchandising leader created just 140 new items.  The merchandising leader did an even better job of finding "best sellers", with twelve percent, or 17 items, becoming best sellers.

However, the merchandising leader paired back new product development.  As a result, next year, only 17 items graduate to best seller status, whereas the year prior, 20 items graduated to best seller status.

There are merchants you would trust to cut back on new product development, so long as the number of bests sellers remains constant.

For most merchants, however, it's way too difficult to know what "will work" ahead of time.  So it becomes really important to keep pushing on the new item gas pedal.  It is very common, in my Merchandise Forensics work, to identify new product development declines.  These declines hurt new items in the current year, and worse, the new items become existing items that fail to generate enough volume in the future.

Contact me (kevinh@minethatdata.com) for your own, customized Merchandise Forensics project.