July 12, 2016

Generating Enough New Winners

In most of my projects, companies do not do a good enough job of generating new items that become winning items.

Since writing the booklet, I've simplified my view on new items ... there are only three types of items.
  • Winners = Top 5% of Units or Top 5% of Demand.
  • Contenders = Next 40% of Items sorted on Demand Volume.
  • Others = All Other Items.
Using this framework ...
  • Winners are worth about 45% of annual demand.
  • Contenders are worth about 45% of annual demand.
  • Others generate about 10% of annual demand, but represent 55% of styles offered.
New items tend to go through a two-year development cycle.
  • The new item must become a Contender to have a chance in the future.
  • The Contender must become a Winner in year two.
Here's where the problem arises.

It is not hard, in these projects, to teach a company that there need to be 10 winning new items and 90 contending new items each year to fuel the future health of the business. If the company offers 400 new items per year, then 10 of 400 (2.5%) must become Winners, and 90 of 400 (22.5%) must become Contenders.

Let's say that a company wants to get 15 new Winners and 135 new Contending items, in order to fuel future growth. How might the company go about this?
  1. Do a better job of identifying Winners / Contenders.
  2. Have marketing promote potential Winners / Contenders more heavily.
  3. Increase total new items by 50% so that new Winners / Contenders grow by 50%.
Most companies should pursue (2) and (3), with (3) getting priority.

Most companies instead pursue (1) and (2), with (1) getting priority.

It is terribly hard to achieve (1) ... for if that line of reasoning were successful, most companies would already be successful at (1) and there wouldn't be a problem!

It is hard, HARD work to find new items that become winners. Really HARD work. I'd rather place my bets with a diversified portfolio of new items that yield more winning new items than to double down on finding more new / winning items off of the same quantity every year. At least that's what the project work suggests.

The Read and Reject audience, of course, thinks that you can just yell at merchants louder and get results. Doesn't work that way.