Dhimant Bakshi

Topics for Discussion

Category Planning
Outlet Planning
Range Width Planning
Range Planning
Option Management
Planning Process Interaction
Category Planning
Defintion -Sales , Stock and Margin Plans for each
category are determined
Objectives
 Create Realistic and achievable Plans
Ensure Product Potential is realised and Cash Flow /
OTB are managed
Output
Cat / Subcat level sales, Stock , Margin Plans
Buy Value
Outlet Planning
Definition – Capacity, Sales and expenses for each outlet
by category are planned
Objective – Determine and assortment for each outlet in
order to maximise potential
Set realistic and achievable targets
Plan expenses in order to achieve business surplus
Range Width Planning
Defintion – Average Buy per option and total options for
each Sub cat / Outlet / Grade is calculated
Objective – Plan is made based on Product life cycle and
Depth for each option is arrived at –Robust planning
required
Output – Parameters for range planning are arrived at
Range Planning
Definition – Range for each outlet is developed taking
into account the capacity, OTB, Where the Buy and intake
of each option is planned
Objective – Prepare a balanced range for each category in
order to exceed customers’ expectations
Option Management
Management of Weekly Option performance

Objective – Realising potential of options, Managing

Intakes and Stocks in line with the overall category

Output – Managing OTB, WSSI

Store Types
The store type can be determined by any number of
factors such as geographical location – applicable in
India because of the need to stock winter wear in the
North – fashionability or store location (e.g. city centre/
provincial/ out of town). The type can also take into
account factors such as the demographics in of the
catchment area, competition, town economics, shopping
mission etc.
 
 
Store Types
The type is independent of store size and will determine the
assortment content. The assumption is that stores of the same
type will be able to sell the same type of merchandise.

 
The store type can be product group specific, for example a it
could be a Type A Menswear store but a Type B Ladieswear
store depending on the local trading conditions. It is generally
not practical to have more than three store types.
Performance Data
Evidence supporting a prediction improves confidence
and reduces risk
Conversely if the market suggests one thing but
performance data proves another you know to proceed
with caution
Performance Data Gives you THE FACTS !
Performance Data is inconvertible evidence of your
customers preferences
Performance Data
Performance Data is the root of Profitable Decision
Making

Category / Outlet / Range Planning & In Season

Management are not possible without accurate and timely
Performance data

You Can’t act Wisely if you do not have facts

Analysis Performance
Approach
Work Down the Hierarchy of Information
Start with a Big Picture
Understand the detail before making a decision
Prioritise !!!!
Eg ; In Outlet Planning
Category  Sub Category  Option / Attribute  SKU
Analysis Performance
Approach
Focus on the Cause as well as the Effect
 If You can find the cause of your performance it can be
replicated / eradicated
Concentrate on those areas in your zone of responsibility
Consider All the data
Option A Option B
Sales 100 200
Weeks Cover 5 10
Stock 500 2000
Margin % 30% 50%
Analysis Performance
Approach
Compare Relative Performance
Don’t just look at the absolute performance and compare it
with the other members of peer group to plan and last year
data wherever applicable
Check the Exceptions Carefully
Exceptional performance can often point to opportunity or
Risk
Look For Patterns
There may be combinations of factors which consistently
deliver the same results
Analysis Performance
Approach
Take External Factors into Consideration
Were there any distortions to performance as a result of the
weather, competitive activity, Promotions , etc
BE Objective
Avoid emotional interpretations of the facts at all costs &
Don’t distort analysis to support prejudices
Concentrate on the Big Earners
Use 80/20 rule and Focus on the areas that contribute the
most
Monitor perfromance of Key Volume lines carefully
Analysis Performance
Approach
Reference Your Original Assumptions
What were the underlying reasons behind a particular
course of action ???
Once You have Facts , Act Quickly
The speed at which you act, to capitalise on opportunities
or to minimise risk – Is often Fundamental to success

Remember that Perspectives DIFFER

 Analysis Performance
Approach
Cat A Cat B Cat C Total
Plan Act Plan Act Plan Act Plan Act
Outlet 1 120 170 80 350 370
Outlet 2 180 250 170 500 600
Outlet 3 300 420 210 950 930
TOTAL 500 600 800 840 500 460 1900 1900
Analysis Performance – Key
Measures
All Measures should be analysed against PLAN,
PROJECTIONS and YOY wherever applicable
Poor performance against plan doesn’t mean absolute
performance is unacceptable or Poor
It is also important to refer to the assumptions on which
the plan was built
Analysis Performance – Key
Measures
 Sales Volume and Value
Actual Sales achieved net of reductions
A Key objective of Performance analysis is to find ways of
increasing both Value and Volume sales without
jeopradising Margins – Analyse Full Price, EOSS, promo
sales
Stock Volume and Value
Stocks held at the outlet , Distribution Centre and Total
Objective is to reduce or maintain Stock levels while
increasing sales and availability
Analysing Performance –
Key Measures
Margin on sales
Margin achieved on actual sales
Margin on Sales Value = Actual Sales Value Exc Tax – Sales @
Cost
Margin on Sales %= Margin on Sales Value / Actual Sales Value
Inc Tax
Although you would want to see growth in both Value and
Percentage margins – In the end the cash margin achievement is
most important
Margin on slaes % Achievable for a given sales value can be
increased by reducing mdowns or Incr Intake Margins
Analysing Performance –
Key Measures
GMROI – Gross Margin Return on Investment
The Margin on sales represented as a percentage of Total
Cost , GMROI = Margin on Sales / Stock at Cost

Intake Margin
The Margin achieved if the Product is sold at its original
Label Price
Intake Margin % = ( Label Price Exc Tax – Delivered Cost
Prx) / Label Price
Intake Margin % = Intake Margin Value / Buy Value
Analysing Performance –
Key Measures
Intake Margin is a KRA of a Buyer
Intake Margin achievement is critical to your ability to
achieve planned Margin on Sales – Under Achievement
against plan will put pressure on your markdowns
Look for Opportunitites to Increase intake margin % by
reducing the cost Price or Increasing the label Price
Analysing Performance –
Key Measures
Stock Cost of Markdown
The Cost of a Stock revaluation resulting from the price
changes
Stock Cost of MD Value = ( Current Price – New Price ) *
Units in Stock
Stock Cost of MD % = Cost of MD Value / Sales Value
There are two reasons why cost of MD will be higher than
planned
Planned Full Price sales were not achieved
The Average Price reduction was higher than Planned
Analysing Performance –
Key Measures
A high cost of MD is not necessarily bad – Compare actual
to plan and check the margin on sales achievement
A Markdown that is significantly below the plan is not
necessarily good :
If Full Price Sell Thru is also high, Sales Potential may have
been missed
If terminal stocks are high there may be an future MD
problem
 Markdown % can only be reduced by improving Full Price
sell Through % or decreasing the avg Price reduction %
Analysing Performance –
Key Measures
Average Rate of Sale
Average rate Unit sales per Option per outlet per week for
all outlets Stocking the Option
Rate Of Sale ( ROS ) = Sales Units / Outlets in Stock /
Weeks on sale
Rate of sale is a key indicator , together with the number of
weeks cover of the demand for a product – Higher the ROS
in relation to its NWC the higher the demand
Rate of Sale is a better measure of relative performance
than the absolute sales since it accounts for differences in
distribution
Analysing Performance –
Key Measures
Rate of Sale is a good measure for asessing the potential of
limited distribution trials
Rate of Sale comparisons by options within products are
useful to assess if there are colour rather than Product
Problems
Where rate of sale is high for a Product across all options you
should look at the increasing the number of options
( colours ) in the same product and at trailing similar non –
competitive lines
You would generally try to replace products that have a low
rate of sale
Analysing Performance –
Key Measures
FULL PRICE SELL THROUGH %
The amount of total buy in units that you have sold at a full
price
Full Price Sell Through % = Full Price Sales Units / Total Buy
Units
Planned Full Price Sell Through will tend to be lower for
higher risk products with shorter product life cycles
If the actual sell through is high compared to the plan you may
have missed potential – Overall sales would have been higher
if you had bought more due to increased markdown sales
Analysing Performance –
Key Measures
Number of Weeks Cover ( NWC)
The Number of weeks current sales represented by the
current stock holding
NWC = Closing Stock / Sales
Lower the number of weeks cover the harder the stock is
working and the higher the relative demand for the product or
category
If NWC is too low there may be missed potential caused by
stock outs
If NWC is too high there may be an increased markdown risk
Analysing Performance –
Key Measures
Optimum NWC is determined by comparing relative
performance ; Eg – Option A is performing 10 weeks cvr
If the average is 6 weeks, the option performance is
unacceptable
If the average is 15 weeks, the option performance is doing well
BUT if there are several options on 4 weeks cover then may be
the average is too high….
The average number of weeks cover is the number of weeks of
average sales represented by the average stock holding over a
period
Analysing Performance –
Key Measures
Forward Cover
Number of weeks of future sales represented by the current
stock holding
Used in conjunction with the NWC to assess risk –
Stock Turn
The number of times throughout the year which your stock is
completely replaced
Stock Turn = 52 / Average Weeks Cover
Stock Turn = ( Annual Sales / Sum of Closing Stock) * 52
Low NWC = High Stock Turn & Vice Versa
Analysing Performance –
Key Measures
Stock Turn is a measure of asset management – Higher
the Stock turn the harder you are working on your asset
Stock turn will be higher for higher demand and
frequently purchased products
Objective is to increase the stock turn buy decreasing the
average NWC without affecting the availability
Outlet Trading Surplus
Margin Delivered by each outlet after the costs
Outlet Trading Surplus = Margin on Sales – Outlet Costs
Analysing Performance –
Key Measures
Availability
Measures whether an option or a SKU is available during its
primary selling phase
Availability % = ( Avg Actual Stock / Avg Model Stock)%
Other Indicators – Sudden increase in NWC, Slow moving
SKU Stocks at the DC , size imbalances
Poor availability generally equates to poor performance or
missed potential
Availability can be improved by better intake planning ,
better size planning and through Size Balancing
Analysing Performance –
Key Measures
Sales ( Margins ) per sq ft per week
The Sales or margin realised per square foot of selling
space per week
Measurable at category level or above
Sales ( Margin ) per sq ft = Sales ( Margin ) / sq ft /
Weeks
Sales and Margin per sq ft is a key indicator of your outlet
productivity and of the productivity of individual category
within a outlet
Analysing Performance –
Key Measures
Like to Like ( LTL) performance
Like to like performance is a key indicator of Retail Health
LTL growth represents real growth as opposed to that
delivered by new or refurbished outlets
Like to Like outlet is one which has been open in its present
format for at least one trading year
Like to like outlets tend to be the lowest cost to the business
since all set up cost have been incurred – and therefore tend
to be the most profitable
LTL growth expectation is your starting point
Analysing Performance –
Check List
Range Performance
Attribute Performance
Range Mix
Flow & Volume Lines
Promotions
Outlet Performance
Option Performance – Pricing, Product Life Cycle, Size
performance, Buy Quantity,
Timing, Distribution
Analysing Performance
Area Concern Indicators Action Point
Range Were there any All Options in a range Try to establish the
Performance range failures? performed badly reasons for failure –
pricing, timing,fit, colour,
etc
Attribute Are there any Attributes which Check Option
Performance attribute failures? perform consistently performance for
below average contributing factors.
Cancel Commitments
where possible amend
attribute mix in Future
ranges
Are there any Atributes with a NWC Check Option
under potentialised or ROS significantly performance for
attributes? higher than the avg contributing factors. Re
Buy and balance range
where Possible. Amend
attribute mix for future
ranges
Analysing Performance
Area Concern Indicators Action Point
Range Mix Was performance Significant Ensure the learnings are
distorted by poor variations between included in future range
mix of products? attribute sales and plans. Re Buy or cancel to
stock participation balance the range inseason
by week wherever possible
Flow Lines Is the line going to The Sales trend for Identify & Trial possible
need replacing ? the line declining replacements
from its norm
Volume Have the Key Good rate of sale & Evolve or repeat existing
Lines Volume lines for Steady NWC for all lines as appropriate
the coming season options
identified?
Are the current Selecting new Trial Additional Options of
volume lines still volume lines is very potential new lines
relevant ? much a matter of
judgement
Sub Category Plan
It is summary of your overall expectations from the coming
season
It is used to enter the total sales, Markdown & Margin
Protections which will then be phased by week on the WSSI
OTB can be taken from the Subcat plan but is always better
that it is taken from WSSI
Process
Where reqd enter last years sales data
Deteremine LTL performance based on previous season
data/ trends
Component Calculation Example Shrink Shrin
Shrink Incl excl k Incl
Taxes Deduction Tax Rate 10% 10%
Sales Value As Planned 2,000 2,000
Plan Tax on sls Plan Sls Val * Sls tax% 2,000 * 10% 200 200
Plan Sls exc tax Plan sls val – plan tax on sls 2,000 – 200 1,800 1,800
Plan sls val v LY % (plan sls val/ LY sls Val) – 1
Cost of MD% As Planned 13.6% 13.6%
Plan cost of MD val Sales Val * Cost of MD % 2,000 * 13.8% 272 276
Shrink % Buy Val As Planned 0.0% 1.2%
Plan Buy val (Plan Sls Val+Plan cost of MD val)/ (2,000+276)/(1- 2,272 2,304
( 1- shrink %Buy val) 1.2%)
Plan Shrinkage Val Plan Buy Val–Plan Sls Val-plan MD 2304 -2000-276 0 28
Plan Tax onBuy Plan Buy Val * Sales Tax % 2,304 *10% 227 230
Val
Plan buy Ex Plan Buy-Plan Tax on Buy Val 2,304 – 230 2,045 2,073
TaxVal
Sub Category Plan-
Calculations
Component Calculation Example Shrink Shrink
Excl incl

Intake Margin% As Planned 50.0% 50.0%

Plan Intake Plan Buy Val * Plan Intake 2,304*50% 1,136 1,152
Margin Val Margin %
Plan Buy at Cost Plan Buy ex Tax Val-Plan 2,073–1,152 906 927
Val Intake margin val
Plan Margin on Plan Margin on Sales Value / 879 / 2,000 44.5% 43.9%
Sales % Plan Sales Value
Component Calculation Example Shrink Shrink
( Shrink incl) Excl Incl
Avg Label Price As Planned 26 25
Plan Buy Units (Plan Buy Val*1000)/Plan Av 2,304*1000/25 90,880 92,146
Label Price
Avg Price Redn As Planned 40% 40%
%
Shrinkage %Buy Shrink%of Buy Val/(1-Avg prx 1.2%/( 1-40%) 0% 2%
Units redn %)
Plan Shrinkage Plan Buy Units * Shrinkage % 92,146 * 2.0% 0 1,483
Units of Buy Units
Plan Total Sales Plan Buy Units – Plan 92,146 – 1,483 90,880 90,303
Units Shrinkage Units
FP Sell Thru % As Planned 70.0% 70.0%
Plan FP Sales Plan Buy Units * Plan FP Sell 92,146 * 70% 63, 516 64,502
Units Thru %
Buy Options As Planned 100 100
Avg Total Sales Plan Total Sales Units/Plan Buy 92,148 / 100 909 921
Per Option Options
Avg FP Sales per Plan FP Sales Units / Plan Buy 64,502/ 100 636 645
Option Options
Category WSSI
WSSI is the main tool used for Planning and managing the
weekly performance and open to buy for a category
Weekly Sales Stock and Intake
Pre season used to ensure weekly stock and performance
plans are robust and that sufficient OTB when required
In season used to identify the actions needed to ensure that
the sales and margin plans are achieved
Ideally operates at sub category / stock identity level
Responsibility of merchandising with inputs from the buyer
Category WSSI
INPUTS
Historical Performance
Outlet Opening Schedule & Planned sales by week
Promotional Plans
Initial Sales and Margin Projections
Stock Guidelines
Output
Sales, Margin, Markdown, Stock and Intake projections
for the week
 Should be reconciled with Option management

Buy Value to Range Planning

Category WSSI–Stock & Intake
Ideal Intake is the intake required to achieve Target Total
closing stock for a period after sales and markdowns
Ideal Intake = Maximum( Target Total Closing Stock –
Act)
Projected Opening Stock + sales + Cost of Markdown,0)
Example 1 Example 2
Target Total Closing Stock 1,000 1,000
- Act / Projected Closing Stock 1,250 1,000
+ Sales 200 200
+ Cost of Markdown 0 0
Ideal Intake 0 200
Category WSSI - Examples
Calculate Ideal Intake

Mens Shirts Wk1 Wk2 Wk3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8

Opening Stock 1550 1510 1795 1720 1520 1750 1720 1590
Sales 250 290 300 350 320 350 450 400
Cost of MD 0 0 0 250 0 0 0 0
Fwd Cover 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0
Weeks
Target Closing 1510 1570 1720 1520 1750 1720 1590 1540
Stocks
Ideal Intake 210 350 450 400 550 320 320 350
Category Performance
Grid
 L/H - High Units but low GM$. Keep the best Skus . Fix
GM$ (renegotiation , selective price increases etc).
  L/L - Low GM$ & Low Units. Delist non
performers periodically & Fix the GM$ for the fixable skus.
  H/H - High Traffic & High GM$ . Explode the
assortment.
  H/L - High GM$ & Low Volume . Keep these SKUs.
  H/H - High GMROI & High GMROF . Allocate
maximum space , maintain backups of stocks at store &
vendors (never out of stock)
 
Category Performance Grid
 H/L - High GMROI & Low GMROF innovative space
/fixture planning , faster thruputs in least space
 
 L/H - Low GMROI High GMROF derisk stocking -
supplier managed inventory , negotiate extended payment
cycles & intake margins.
 
 L/L - Low GMROI & Low GMROF Candidate for
exit , if required keep narrow assortments
Thank you for your time
and
Happy Retailing to all