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    Product To Stock Group

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    Deepanshu Gupta
    This document describes a new technique to help retailers improve assortment planning by analyzing sales data according to customer attributes like size, brand, and warranty. It involves the following steps: 1) Assemble sales data and forecast demand for all potential product combinations 2) Refine the forecasts by adjusting brand/warranty sales shares to minimize differences between estimates and actual sales 3) Account for customers trading up or down quality levels to further improve demand estimates The technique provides a data-driven way for retailers to optimize their assortments for maximum revenue or profit.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Product To Stock Group

    Uploaded by

    Deepanshu Gupta
    22 views10 pages
    This document describes a new technique to help retailers improve assortment planning by analyzing sales data according to customer attributes like size, brand, and warranty. It involves the following steps: 1) Assemble sales data and forecast demand for all potential product combinations 2) Refine the forecasts by adjusting brand/warranty sales shares to minimize differences between estimates and actual sales 3) Account for customers trading up or down quality levels to further improve demand estimates The technique provides a data-driven way for retailers to optimize their assortments for maximum revenue or profit.

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    product to stock

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    Product to Stock Group

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    This document describes a new technique to help retailers improve assortment planning by analyzing sales data according to customer attributes like size, brand, and warranty. It involves the following steps: 1) Assemble sales data and forecast demand for all potential product combinations 2) Refine the forecasts by adjusting brand/warranty sales shares to minimize differences between estimates and actual sales 3) Account for customers trading up or down quality levels to further improve demand estimates The technique provides a data-driven way for retailers to optimize their assortments for maximum revenue or profit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    22 views10 pages

    Product To Stock Group

    Uploaded by

    Deepanshu Gupta
    This document describes a new technique to help retailers improve assortment planning by analyzing sales data according to customer attributes like size, brand, and warranty. It involves the following steps: 1) Assemble sales data and forecast demand for all potential product combinations 2) Refine the forecasts by adjusting brand/warranty sales shares to minimize differences between estimates and actual sales 3) Account for customers trading up or down quality levels to further improve demand estimates The technique provides a data-driven way for retailers to optimize their assortments for maximum revenue or profit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    A new technique to help retailers improve assortment

    planning
    Customers don’t buy products; they buy
    attributes.

    A tire retailer ‘s sales data was


    analyzed according to what mattered
    most to its customers: size, brand, and
    mileage warranty.
    This method uses sales of existing products to estimate the demand for their various
    attributes
    • Assemble sales data for a recent period
    1

    • Forecast demand for all potential SKUs


    2

    • Refine the forecast


    3

    • Account for trading up and down


    4
    • Unit sales of the SKUs

    • Each brand-warranty combination’s share of your total sales

    • Sales data by SKU for every store over a recent six-month period
    • Start by adding up the shares of total sales enjoyed by each of the combinations offered in a
    particular size

    Example: F (7.7% + 2.6%+ 19.2% + 57.5% = 87%). This tells us the share of total demand or
    size F that the retailer is currently capturing (87%).

    • Next, we calculate total demand for size F, divide total sales for size F by the share of demand
    captured:
    1,204 ÷ 87% = 1,384.

    • Once we know the total demand for size F, we can estimate demand for any SKU in that size, by
    multiplying the total demand for the size by the share of sales enjoyed by the brandwarranty
    combination.
    • It can be observed that the estimated forecast and the actual forecast differ
    One reason for the discrepancy is that sales shares are influenced by the assortment
    offered.

    • To correct for such discrepancies, we tweak the brand-warranty sales shares to


    minimize the average difference between estimates and actual sales.

    • Adjust share values to make forecasts closer, and repeat until it arrives at the share
    values that minimize the sum of all discrepancies over the SKUs offered.

    • This process resulted in “best-fit” demand shares


    The forecasts are not perfectly accurate.

    Two factors contribute to forecast errors:

    1) There are random fluctuations in sales.

    2) Our assumption that demand for a SKU equals the demand


    for the size multiplied by the brand-warranty share is
    imperfect, because the shares of brand-warranty
    combinations can differ by size.
    In order to account for substitution, we need the fraction of
    customers who trade up one quality level, who trade down one
    quality level,

    Once we know the fractions of customers trading up or down, we


    can account for substitution in our demand estimates.
    • Decide whether to maximize revenues or profits

    • Decide on pricing for potential SKUs


    • We need to know how much revenue (or margin) each SKU would
    generate
    • Prices are a key input in this calculation
    • If prices are not known, come up with estimates

    • Decide on the final assortments


    • Start with the SKU that would generate the greatest revenue or profit
    • Add the SKU that would yield the second-greatest increase in
    revenue
    • Continue to add SKUs until you hit the maximum number of SKUs you

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