May 17, 2018

Expanding The Assortment

You have a line of widgets, and they sell really well. A million dollars last year.

So you decide to expand ... you offer a cousin of widgets ... bidgets!
  • Widget Sales drop from $1,000,000 to $800,000.
  • Bidget Sales are $500,000.
  • Total Sales = $1,300,000.
You're frustrated a bit that widgets seem to be "dying", so you introduce quidgets!
  • Widget Sales drop from $800,000 to $700,000.
  • Bidget Sales drop from $500,000 to $400,000.
  • Quidget Sales are $400,000.
  • Total Sales = $1,500,000.
Here's another fun way to look at the dynamic.
  • 0 Product Lines = $0.
  • 1 Product Line = $1,000,000.
  • 2 Product Lines = $1,300,000.
  • 3 Product Lines = $1,500,000.
Transformed into an index gets us to this:
  • 0.000 , 0.000.
  • 0.333 , 0.667.
  • 0.667 , 0.867.
  • 1.000 , 1.000.
Guess what? That's another situation where a*(x^b) comes into play!!
  • a = 1.009.
  • b = 0.387.
And just like that, we have a forecasting tool to help us figure out how big or small our merchandising assortment needs to be!

Speaking of Omnichannel Theory

Have you ever purchased something from Apple? Apple are Visual Merchandising experts. You might buy a lightning cable and you instead...