Cracking the Assortment Planning Code
Leonardo da Vinci was one of history’s most intriguing figures. He painted “The Last Supper” and “Mona Lisa” and designed the eight-barreled machine gun and a flying machine. His mind was a rare combination of the scientific and artistic.
Tapping into that science-meets-art philosophy is Atlanta-based assortment planning firm daVinci. Founded in 2004, it focuses solely on this particular aspect of supply chain management.
President and COO Ning Chiu says her team saw a need in the marketplace for helping soft goods retailers spot national and local trends at the single-store level. In women’s fashion, for example, dresses were extremely hot in 2010, but overall sales are down this year. At some stores, however, dress sales remain constant.
The daVinci solution can be used with any retail system, Chiu says, and helps retailers plan based on individual store trends. “They can look at the trend, but they’re going to have to ask, ‘Do I believe that this same trend is going to carry over?’”
Same brand, different trends
Chiu says the single largest investment that a retailer can make is in the inventory, but how retailers have determined this investment has changed dramatically. Twenty years ago, executives made buying decisions based on budget dollars available; 10 years ago, they looked to make everything more efficient.
“We’re coming at it from a new perspective,” she says. “It’s our belief that unless you buy right to begin with, everything else is hindsight. Everything else is reactionary.”
With that said, merchants also have to trust their gut. “They’re out at market, they are spotting the trends, they are seeing what trends are taking off and those may not be what their numbers are telling them,” Chiu says.
A retailer with two stores just five miles apart could have completely different customers, she says. “You could have a very small store that trends a whole lot faster than that large store. Even within the same store, it can be different. For example, that store could be in a tourist spot. Then your clientele all of a sudden changes in the summer because all of the tourists are flocking to it.
“In the summer it could be what we call an ‘A’ store, which is a highest-volume store, but in the fall it could go down to an ‘E’ store, one of your lowest-volume stores,” she says. “How do you adjust to that?”
That’s the question several retailers have asked before calling daVinci. The first thing retailers are looking to do is automate the entire process. Another problem with individual stores performing assortment planning is that a senior manager never sees the planning, Chiu says. daVinci helps senior managers gain visibility into purchase orders, allowing them to get involved in the planning for individual stores.
“The idea is to have a consistent planning methodology,” Chiu says. “If you’re all using Excel, then you’re at the mercy of the newest planner or merchant that has just come on to the team, or the most senior person that’s been there for 20 years and knows exactly how the business works. They can each be functioning or planning their assortments quite differently.
“The idea,” she says, “is to get everybody onto the same platform [with] consistent methodology.”
Price by market
Scandinavian woman’s clothing retailer Gina Tricot tapped daVinci while fighting a price war with competitors. With 165 stores throughout Denmark, Finland, Sweden, Norway and Germany, Gina Tricot’s customers were looking to buy as cheaply as possible, says the retailer’s purchase controller Annelie Johansson.
“The competition is tough,” she says. “Many retailers offer approximately the same product at a 20 percent discount with offers through websites or Facebook.”
Despite selling its own label and not the everyday brands, Gina Tricot felt its market shifting. It knew they had to outfox the competition with better planning.
“Using daVinci, we have been able to plan to see differences in countries,” Johansson says. Gina Tricot’s divisions have also worked closer together. Johansson says denim, lingerie and other departments have been able to track each other’s trends, giving the company a better overall view of each store’s trends. “daVinci helps you calculate the need for the actual buyer, based upon average quantities and life cycle,” she says.
Assortment planning has been especially important to Gina Tricot because the brand is in high-growth mode, Chiu says.
“They’re increasing their [number of] stores, they’re going into new markets,” she says. “Different people in different markets dictate different pricing and have different price tolerance.
“Some countries that they go into will, just by default, have a higher price tolerance than others,” Chiu says, “so one of the key components to their assortment planning is to price according to market.”
Fashion-forward specialty retailers benefit from using assortment planning more so than hard-good stores. “Their floor sets are changing fairly rapidly,” Chiu says. “Soft goods are much more fluid. We say that fashion is fickle and that’s exactly what it is. That’s very different from selling a stapler because you’re replenishing if you get down to a certain number of staplers on your shelf.
“Anybody who thinks they have a fashion trend ought to be thinking about how to keep it fresh,” she says.