Exhibit 32.5 Assortment optimization.
Retailers are constantly grappling with
requests to list an ever-increasing parade of new products. Their space is finite
— as new items get listed, some items on the shelf need to be de-listed.
One approach to optimizing assortment is on the basis of sales volume,
sales value and profitability. This is covered in detail in Chapter
Sales and Distribution. It is important
also for the retailer to examine measures such as the proportion of shoppers who
buy an item (% buyers), and particularly those who exclusively buy.
A low selling item might have relatively high base of shoppers who
exclusively buy it. Such an item exhibits high brand loyalty. So, if it is de-listed,
the likelihood that some shoppers may switch to other stores, is greater, and the retailer
stands to lose their total spend in store when shoppers switch.
Exhibit 32.5 depicts an analysis of exclusive buyers and cumulative
duplicate buyers of items for some category. The items are listed in order starting from
the item with the biggest buyer base.
Observe, at the tail end, items r and v have a high proportion
of exclusive buyers. Since their shoppers exhibit high loyalty, the retailer should refrain
from de-listing items r and v; or do so only after careful consideration.