Challenges

The client wanted to develop and deploy a robust analytical and scalable approach for assortment optimization and category management, which could be extended to other geographies and retailers.

Currently, the number of SKUs in the categories and the store were increasing consistently, making it difficult to manage the overall assortment at the store and the retailer. Moreover, a significant number of SKUs were contributing to very limited volume and revenue.

Solution

We applied the following approach (and process):

Conducted a critical review of the existing category spread at the store and the retailer levels

Evaluated the existing assortment and identified areas of improvement, as well as developed and deployed an analytical and scientific methodology for assortment optimization

Using the business-rule approach, identified candidate SKUs for deletion/addition at outlet level, and also assessed net financial impact of optimization:

• We further used these rules to segment SKUs into four categories—Winners, Sleepers ,Opportunity Gaps & Questionable.
• Performed a deep-dive among the Questionable SKUs to identify the ones which should be deleted.

Impact

We successfully quantified the financial impact of assortment optimization, showing a base case increase of ~USD 3.6 mn (3%) in revenue for the retailer.

We also used our expertise to create an interactive dashboard tool for executives & category managers to test the impact of various scenarios of assortment optimization.