Product Assortment Optimization

The Client: A leading manufacturer of decorative hardware products

Situation

Because these products are sold to a specific upperincome demographic, there were performance issues within their largest customer’s stores resulting in declining comp-store sales and a decrease in GMROI. Solutions needed to be developed quickly for an upcoming line review with this major retailer.

Approach

In order to optimize product, price and product mix at the store level, we collected information on consumer perceptions of brand value, price elasticity and the product feature/value equation. Using demographic data to identify optimal locations and store size for this brand’s product offering, we were able to identify gaps in what was being sold in each location versus the type of person likely to buy it.

Solution

By interpreting the consumer information and overlaying it with geographical demographics, we were able to develop an optimal assortment size and product mix by store. This was achieved by understanding the characteristics of the target consumer needed to purchase particular products, versus the characteristics of consumers shopping in a given store.

Results

The manufacturer was successful in the line review and was able to get the retailer to implement the plan immediately while maintaining their current pricing structure. An $8 million sales increase and an average gross margin increase of 12.5% were achieved in the first year.