The meaning of the analysis of product range management is as follows. In the process, specialists identify which products are sold faster than others and bring the organization the largest share of profits. It is also found out which goods consistently attract customers, but at the same time bring only a small income. It is important that the presence of such units in the store is mandatory. Specialists determine that there are also low-margin goods that do not have a positive effect on the profitability of the enterprise.
So, the ABC analysis for revenue looks like this:
Group A - 20% of goods that generate 80 percent of income;
Group B - 30% of goods - 15 percent of revenue;
Group C - 50% of goods - 5 percent of income.
The conclusion suggests botim database itself that group A is formed by the products that are necessary for the formation of the retail assortment, goods from part B are of average importance, and those from part C play practically no role in the efficiency of the store’s operations; among them there may be illiquid items, as well as products with which the consumer is not familiar.
Before starting the analysis, it makes sense to divide the products into categories. For example: dairy products, bakery products, groceries, sweets, etc. The method will not bring any benefit if you analyze all the products at once, since they have different properties if you look at them from the point of view of consumer behavior. Accordingly, competent management of the product range will not work.
In addition, the ABC analysis method will be useful in managing investments in certain product categories. It will show which products make sense to invest money in, and which do not.
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8 stages of category assortment management
Let's run a little ahead and note that at each stage of assortment management, the names given to categories must be understandable to any consumer. Based on the name, a conclusion must immediately be drawn about what products are included in this group. For example: goods for the car, for the home, for active recreation, etc. That is, the definition of the category and its name must necessarily be endowed with logic.
Step 1: Create Product Categories
At the very beginning of the work, it is necessary to combine into one group those products that, according to the opinion of buyers, have common features. The structure depends on various factors, the main place among which is occupied by the buyer's portrait and the store format.
After defining the categories, it is necessary to ensure control and evaluation of their effectiveness. For this purpose, it is customary to use matrices of the following formats:
Price. It indicates the names of the products and their cost.
Role-playing. Here, images of goods are reflected within the category to which they belong.
Assortment. Includes a complete list of product items at each classification level.
Correlation. This matrix describes the relationship between products. With its help, experts conclude how interchangeable and complementary products affect profit.
Summary or final matrix. This is where economic information about the entire category is reflected.
The role of matrices is to structure and systematize data on the trade nomenclature. With their help, it is possible to clearly depict the products and evaluate the quality of assortment management.