Fundamentals of managing a store's product range
Posted: Sun Dec 22, 2024 10:41 am
An important role in the theory of assortment management and its analysis was played by the Italian economist Vilfredo Pareto. He saw that the yield of peas and the distribution of resources in the economy are closely related. According to his research, only 20% of the pods give 80% of the harvest. This proportion, according to the scientist, is relevant not only for the agricultural sector, but also for other areas. Thus, a fifth of the population has the overwhelming majority of economic resources at its disposal.
Based on this theory, the universal japan phone number Pareto law was born. It states: to get the maximum result, it is necessary to use a minimum of resources or spend a little effort. The proportion 20/80 is conditional for this law, it is usually identified as a mnemonic rule that shows the imbalance between the resources used and the results. The law has become widespread not only in economics, it is considered relevant for various life sectors, as well as business areas. Below we will consider how it relates to the analysis of assortment management.
Fundamentals of managing a store's product range
So, the company is engaged in the sale of goods, and only 20% of them form the company's profit. The majority of buyers purchase only a small amount of products, and a fifth of the main number of consumers brings in income. Based on this, we can conclude which goods and customers are of greater value to the company.
If you use the Pareto law, you can increase profits, reduce costs and make product range management as rational as possible. Large enterprises resort to hiring a large number of employees and implement modern information systems (IS) into the work process.
Increase Profits by 200%: Download 5 Powerful Tools for Free
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
Over the past 7 years, we have conducted over 23,000 comprehensive website audits and I have learned that all of us as leaders need clear and working algorithms for our marketing and sales.
Today we will share with you the 5 most valuable documents that we have developed for our clients.
Download for free and implement today:
How to find out the 5 key marketing metrics in your company?
Step-by-step calculation template with fields where you can insert your data
How to make a KPI for a sales manager based on his work results?
Current template for calculating KPI for sales manager
9 Examples of Universal Selling Commercial Proposals
Upgrade your CPs to close more deals
Cold Lead Processing Script Template
A checklist of ready-made questions for engaging cold clients
7 Profitable Marketing Strategies Examples
Will help increase customer flow by at least 30%
Download the collection for free
pdf 8.3 mb
doc 3.4 mb
Already downloaded
153116
Of course, not every company has the opportunity to seek help from third-party specialists, but nevertheless, it is very desirable to optimize work processes. What to do then?
To analyze the product range of a small store, ABC analysis is most often used. Thanks to this method of managing the range, it becomes possible to determine which products bring the greatest efficiency to trade, which ones are the creators of turnover, and also to identify what does not bring any benefit. The method uses the Pareto law and forms the range.
Obviously, it is best to analyze the nomenclature using special software. The distribution of those 20% that bring 80% of the profit should be done in terms of profitability, revenue, and also by their volume.
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 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.
Based on this theory, the universal japan phone number Pareto law was born. It states: to get the maximum result, it is necessary to use a minimum of resources or spend a little effort. The proportion 20/80 is conditional for this law, it is usually identified as a mnemonic rule that shows the imbalance between the resources used and the results. The law has become widespread not only in economics, it is considered relevant for various life sectors, as well as business areas. Below we will consider how it relates to the analysis of assortment management.
Fundamentals of managing a store's product range
So, the company is engaged in the sale of goods, and only 20% of them form the company's profit. The majority of buyers purchase only a small amount of products, and a fifth of the main number of consumers brings in income. Based on this, we can conclude which goods and customers are of greater value to the company.
If you use the Pareto law, you can increase profits, reduce costs and make product range management as rational as possible. Large enterprises resort to hiring a large number of employees and implement modern information systems (IS) into the work process.
Increase Profits by 200%: Download 5 Powerful Tools for Free
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
Over the past 7 years, we have conducted over 23,000 comprehensive website audits and I have learned that all of us as leaders need clear and working algorithms for our marketing and sales.
Today we will share with you the 5 most valuable documents that we have developed for our clients.
Download for free and implement today:
How to find out the 5 key marketing metrics in your company?
Step-by-step calculation template with fields where you can insert your data
How to make a KPI for a sales manager based on his work results?
Current template for calculating KPI for sales manager
9 Examples of Universal Selling Commercial Proposals
Upgrade your CPs to close more deals
Cold Lead Processing Script Template
A checklist of ready-made questions for engaging cold clients
7 Profitable Marketing Strategies Examples
Will help increase customer flow by at least 30%
Download the collection for free
pdf 8.3 mb
doc 3.4 mb
Already downloaded
153116
Of course, not every company has the opportunity to seek help from third-party specialists, but nevertheless, it is very desirable to optimize work processes. What to do then?
To analyze the product range of a small store, ABC analysis is most often used. Thanks to this method of managing the range, it becomes possible to determine which products bring the greatest efficiency to trade, which ones are the creators of turnover, and also to identify what does not bring any benefit. The method uses the Pareto law and forms the range.
Obviously, it is best to analyze the nomenclature using special software. The distribution of those 20% that bring 80% of the profit should be done in terms of profitability, revenue, and also by their volume.
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 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.