Newport Beach, Calif. – Feb. 21, 2011 - Allocation represents a retailer’s last chance to ensure that products their consumers want to buy are available in the right store, at the right time and for the right price. At stake are sales, profit margins and customer loyalty.
“With a growing emphasis on consumer demand, an unpredictable market and the availability of data that provides a granular view into exactly what their customers are buying and where, retailers simply must get their allocations right from the start,” said Malcolm Buxton, president and chief executive officer of JustEnough Software, a leader in demand management strategies for retailers, distributors and brand owners worldwide. “Companies fighting for market share in today’s highly competitive retail landscape need to execute carefully laid merchandising and assortment plans with allocation strategies that are just as pensive.”
JustEnough recommends the following strategies to help retailers realize fewer markdowns and increased sales with better allocation management:
Use Demand to Drive Allocations
All too often, consumer demand for product choice, color and size take a backseat in the planning process. Retailers frequently put all of their focus and energy into planning assortments based on last year’s numbers. The consequence? A self‐fulfilling prophecy in which product is allocated based on historical information – whether that data served the retailer well or not. Truly optimized allocations are driven by demand potential, rather than historical sales alone. Ultimately, companies that ignore basic signals of consumer choice pay the price with markdowns and lost sales.
In order to combat this challenge, retailers need to get smarter about the way they allocate product. Solutions that leverage demand curves for items based on attributes for comparable products or product categories can help businesses set the level of expected future sales, as well as minimize the risk involved in launching new products.
Think Locally, Get Rid of Store Clusters
Retailers should reconsider allocating product based on loosely defined store clusters. Grouping stores by demographics and past sales performance and buying patterns was a helpful approach before store‐level data became widely available. Research shows that store behavior actually varies greatly and changes often – especially as consumers become more and more discerning about what they’ll buy and for how much.
No matter what their size, today’s retailers have no excuse for relying on cluster‐based, suboptimal allocations. Technology that’s available on a variety of platforms and for almost any budget can help retailers seeking demand‐driven, localized allocation recommendations for first‐time products. Such systems are capable of monitoring how hundreds of thousands of individual stores and products behave, giving retailers invaluable insight that can drive improved allocation management at the store level.