August 26, 2012

Dear Catalog CEOs: New Merchandise Percentage

Dear Catalog CEOs:

You probably grow tired of yelling at your merchandising and marketing teams about the performance of your business.  Or your inventory team for doing a miserable job of forecasting item-level demand.  Or your creative team for abandoning well-performing imagery for fashion-forward shots.

This week, take a break from your usual victims, and ask your merchandising team to illustrate, by month, the percentage of sales that come from new items.  Define new items however you like ... there are many choices.  You want to correlate the fraction of sales from new items with your current level of business performance.

Here's an example:

When this business has less than 27% of merchandise sold in the "new" category, sales begin to slide.  Interestingly, when 33% or more of merchandise sold is in the "new" category, sales also begin to slide.  Customers are clearly telling this brand the "right" mix between new and existing products.

Have your merchandising team correlate your new/existing mix with comp quarterly sales.  See if there is a merchandise development problem that can be addressed.

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