Carryover of Winning Items

In general, a small number of high-performing items account for the top 20% of your sales. Then a small number of good-performing items account for the next 20% of your sales. Eventually, a large number of low-performing items account for the bottom 20% of your sales.

Using this segmentation strategy, you can produce a quick query that will help you understand if your merchandising team is killing off high-performing items.

Step 1:  Select last year's winning items (top 20% for sales).

Step 2:  Calculate the percentage of last year's winning items that are in the top 20% for sales this year or are in the next 20% of sales this year.

Step 3:  Repeat the analysis one year earlier.

Step 4:  Compare results.

For instance, this is a common outcome when the merchandising team is prematurely killing off items.

• This Year:  55% of winning items remain winning items, 20% of winning items are at the second level, 75% remain in the top 40% of item performance the following year.
• Last Year:  75% of winning items remain winning items, 15% of winning items are at the second level, 90% remain in the top 40% of item performance the following year.

We went from 90% of items "holding their own" to 75% of items "holding their own".

In other words, the merchandising team is doing something wrong.

From here, you dig in by category and price point to figure out what is going on. Sometimes it's an inventory situation. Sometimes the merchants have contempt for items from the prior regime. Regardless, they're harming the business.