assortment-planning-retail-localization

Acing Allocation and Assortment Planning

This post originally appeared on Apparel, reposted here with permission.

Just hours after the University of Alabama won the 2013 national football championship this January, fans were lined up outside Hibbett Sports’ Birmingham stores to purchase championship t-shirts, hats and other Alabama apparel. The 800-store regional sporting goods chain sent email blasts to 20,000 of its top customers to let them know stores would open right after the game and the shelves would be stocked with championship merchandise. Thanks to Hibbett’s careful assortment and allocation planning, the Crimson Tide fans were able to scoop up the coveted championship gear.

assortment-planning-retail-localization

The ability to execute on this type of localized merchandising has set Hibbett apart from the competition for some time. The company, which operates stores in 26 U.S. states, plays largely in small markets where understanding the nuances of local consumer needs is key. “We pride ourselves on our localized merchandise assortment — we were doing it long before localization became a big buzzword,” explains Mike McAbee, strategy officer and vice president of merchandise planning for Hibbett Sports.

That focus on localization is one of several factors currently driving apparel brands and retailers to refine their assortment and allocation planning capabilities, says Gartner analyst Janet Suleski. “The move toward attracting customers on a local level and being able to serve those very specific customer needs is one pressure that is motivating retailers to think more carefully about assortment and allocation strategies,” she explains, pointing to the greater availability of so-called big data which assists in creating those localized assortments.

“Big data can help retailers sense demand at a very granular level. Then the challenge is to match the allocation of products to the best estimate of what the demand for those products will be in any particular location,” Suleski says.

A trend toward more frequent allocations is also causing retailers to re-evaluate whether their assortment and allocation planning strategies and technology solutions are up to par. “Retailers are embracing a strategic use of more frequent allocations — holding back on some inventory so they can respond to demand signals more effectively once those signals start coming in,” Suleski explains. “To do that, they need to make inventory available to be deployed to the places where actual demand is outstripping forecasted demand.”

Hibbett Sports gaining allocation sophistication
This more sophisticated approach to assortment and allocation planning was exactly what Hibbett Sports had in mind when it invested significant capital to restructure its merchandising IT systems a few years ago. The technology overhaul included new merchandise management, allocation, replenishment, store clustering and planning tools.

However, the company still lacked a reporting tool that could take all the great data the new IT solutions produced and turn it into actionable assortment and allocation planning information.

“Everyone was still pulling their own reports from various systems, so we didn’t have standardized reporting. We were missing that holistic one vision of the truth,” McAbee says. Hence the company’s decision to partner with retail analytics firm QuantiSense. Hibbett Sports will be debuting QuantiSense’s exception-based reporting tool by Summer 2013.

The goal, according to McAbee, is to take to the next level Hibbett’s already impressive ability to execute on localized assortment and allocation plans. Case in point: the stores currently plan around hyper-local cues such as when the various high school baseball seasons start and which vendors the schools contract with. Store managers even make sure to know the team colors of all the area high schools so a store won’t display a rival’s schools colors.

But it has been hindered in its ability to react swiftly when changes to these local drivers occur.

“If it’s baseball season and we know High School X is a Nike logo school, we will load up the local store with Nike cleats. But if the school switches its brand logo to Under Armour, by the time we realize it, we’re toast and cannot react to the next sport season,” McAbee explains. With a growing number of stores, it has gotten harder and harder for Hibbett merchants to make sure it knows about these types of local shifts. What the QuantiSense tool will do in that instance, Hibbett, explains, is allow merchants to realize something is amiss by flagging a shift in the sales pattern.

“QuantiSense helps you see SKU-level movement at each store, so we would be flagged to the fact that Nike cleat sales had dropped sharply and we could investigate that shift. This type of reporting will lead us to better decisions in a more timely fashion,” McAbee says.

McAbee is also expecting QuantiSense’s exception-based reporting to help it perfect the timing of its allocations — something that is crucial for Hibbett because of the seasonal nature of its products, and its small-box store format. “Our stores are 5,000 square feet, so we can’t afford to have products sitting for four or five weeks taking up prime real estate. If we allocate goods to a store too early or too late for the start of a local sports season, they won’t sell as quickly as they need to for us to make room for what is coming next,” he says. “With the QuantiSense tool, we will be able to see selling histories at the store level, and thus be able to make better allocation decisions of when to flow those goods into the market.”

Ackermans and the ‘consumer need’ factor
Developing allocations that more accurately meet actual shopper needs was also a driving factor in South African apparel retailer Ackermans’ decision to kick its allocation planning technology up a notch. While the retailer — which sells men’s, women’s and children’s apparel in more than 450 stores across South Africa — operated in a planning-focused environment thanks to JDA’s Enterprise Planning suite, it was underperforming when it came to executing on those plans.

“We were using an in-house application for allocation that was not delivering the level of results [we needed],” says Renee Jain, IT systems manager for Ackermans.

Allocation was a labor-intensive process that required manual input, and was done without accurate direction on where and when stock should be slated for individual stores. “Stock ended up in a particular store that was wrong for that location, and other stores did not receive stock at all,” Jain recalls.

Seeking a greater ability to send the products to the right stores to meet consumer demand, Ackermans added JDA Allocation to its IT arsenal a few years ago. One of the key benefits the solution provides is a consumer-need variable, which tells Ackermans how much stock should go into each store based on a number of different parameters. “If you go into our stores now, you’re likely to find the item you’re looking for. And you’re likely to find that item in many colors because we’re now able to do that kind of sophisticated allocation,” report Jain.

The retailer has gained numerous efficiency and productivity increases that have allowed it to boost the scope of its merchandise allocation and enhance assortments. The entire business process of determining where and when merchandise should be allocated — and communicating that between planners, store groups and the distribution center — has gone from a process that took two days to roughly one hour.

“Our planners are now able to plan about twice as many items as before because it’s so much easier for them. Because they now have more time on their hands, we can broaden the assortment in our stores,” notes Jain.

As a result, Ackermans has embraced a new merchandising mindset: instead of just repeating successes from previous seasons, it is embracing what Jain calls a “more fashion-oriented” process. For example, while the retailer has an established reputation in the baby and toddler clothing category, it wasn’t seen as a women’s clothing leader. “We realized we have the moms shopping with us, but we never offer her anything to buy. So we’re now doing a big ladies’ wear project, because we have the ability to allocate the stock easily into the stores,” Jain explains. “JDA Allocation has given our planners the ability to think bigger than what they did last year.”

And thinking bigger, after all, is really what successful assortment and allocation planning is all about.