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?

2 comments:

  1. Anonymous8:01 AM

    Kevin - Forgive me if this is taking your post out of context, but as a marketer, why do we owe it to our merchandising team to tell them, in a changing environment, how items are performing? Shouldn't it be their job?

    I've found that when an analytics team is not in place that "Marketing" shoulders a lot of the intelligence gathering work for the whole company. True, I'd rather do it than not have it done at all but it seems Marketing is the only dept held to analytic standards? Have you seen the same or am I alone?

    ReplyDelete
  2. This probably requires an entire blog post.

    This is just my opinion.

    Shouldn't it be the job of the merchant to know how items are performing in a changing environment? Yes. Is that how the world works? No. Merchants do not have the measurement systems to do the work properly. Merchants do not have the aptitude to do the work properly.

    Aptitude is something that measurement experts, consultants, and others do not thoroughly understand. The reason we pick up a broom and do the hard work is two-fold ... first, nobody else has the aptitude (and therefore, without aptitude, the work is done poorly), and second, by picking up a broom, we take a leadership position within our organizations. The former is important for the company. The latter is important to our career.

    ReplyDelete

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