Sell More, Produce Less: Introducing a Better Way to Maximize SKU Productivity
March 8, 2022
Are we boring consumers with so much core? Is this newness really going to help us hit our revenue goals? Do these styles put us at risk for over assortment?
If you find yourself repeatedly asking these questions while crafting a line, you’re not alone. Brands everywhere are struggling to deliver product mixes that maximize appeal while avoiding overproduction, especially as retail-generated waste hits an all-time high. Striking the right balance and successfully maximizing SKU productivity is next to impossible when teams rely solely on gut-instincts and last year’s sales performance to guide assortment decisions.
Enter Line Efficiency — MakerSights’ new feature that enables brands to do more with less by building assortments that capture more sales with fewer products. Line Efficiency is the first retail-focused analytics feature based on the well-established media planning methodology known as “TURF” (Total Unduplicated Reach & Frequency).
Line Efficiency uses best-in-class data science to determine the Reach of each product within an assortment, or more simply put: its potential to attract new customers and add incremental value to the line. Teams can use the interactive graph to objectively assess the implications of adopting or dropping styles to make more confident and sustainable choices.
Using Line Efficiency, brands like Rothy’s and Herschel Supply Co. are able to accurately identify and cut the long tail, optimize assortments to efficiently meet revenue targets, and comprehensively plan for every scenario. Let’s dive into each of these three use cases in more detail.
1. Cut the Long Tail
Cutting the long tail of an assortment to eliminate SKUs that erode margins is a necessary yet risky step in the concept-to-consumer process. Dropping the wrong styles may unintentionally deter significant consumer segments from buying, or even create holes in your brand’s competitive strategy.
Line Efficiency ranks each SKU by its Reach so you can quickly identify when additional styles or colors have diminishing returns in the context of the larger assortment. This makes it easy for merchants to objectively pinpoint and drop underperforming styles with confidence.
Determining when styles shift from essential to ‘nice-to-have’ isn’t easy. Plus, there’s no magic number of SKUs to keep. Each assortment is different. With the Reach ranking, you can (1) confidently discern when additional colorways are no longer necessary, while (2) avoiding the controversial new trend that doesn’t resonate with your consumers.
2. Optimize the Product Mix
In most scenarios, simply cutting the long tail isn’t enough to improve SKU productivity. Brands also need to find the right mix of newness vs. carryover, core vs. trend colors, and other style attributes to achieve the widest market appeal while creating as few SKUs as possible. Crafting the right product mix is challenging, but the implications of markdowns and unsold merchandise on your margins make getting it right imperative.
With insight into the incremental Reach of each product, Line Efficiency empowers brands to screen for potential cannibalization between styles and spot undetected assortment gaps. Identifying and adopting bold styles that extend Reach to niche consumer segments while dropping low Reach products that cannibalize sales from existing styles has never been easier.
Merchandising 101 tells you core styles and colorways always resonate well with target consumers, while experimental trends will likely be polarizing. But five variations of black is excessive and shooting down every bold idea leaves the line at risk of becoming stale. With Line Efficiency, merchants can avoid swinging from 'playing it safe' to over-exposed with risky fashion-forward trends. The result? An assortment that broadens market appeal and drives sales, while keeping the assortment flush with energy to excite consumers.
3. Plan for Every Scenario
Whether a certain region prefers a different style or production issues prevent a particular SKU from being made, crafting the line is rarely straightforward or without surprises. Milestone meetings are often spent scrambling to update assortments that meet new demands and accommodate unexpected situations without hurting margins.
Fortunately, Line Efficiency is dynamic and interactive, enabling brands to test various product mixes to plan for supply chain issues, wholesaler exclusives, regional nuances, channel differences, and more. Visually add or drop specific products to and from the line, and the graph instantly adjusts to reflect the Reach of the updated assortment, allowing merchants to meet evolving market needs without increasing costs.
Remember that blue T-shirt you adopted to expand the Reach of your assortment? Surprise — Nordstrom wants it as an exclusive! Luckily, removing it from the equation and finding a replacement that delivers the same optimal Reach and revenue is simple with MakerSights.
Brands that can successfully maximize SKU productivity attract more customers, achieve higher margins, improve brand integrity, and help protect the environment. Selling more while producing less is a challenge, but Line Efficiency is here to help.
“The new Line Efficiency feature in MakerSights gives us the insights we need to deliver the right mix of products and get the most mileage out of every SKU,” - Rothy’s Director of Strategic Insights, Charu Subramanian.
Eager to achieve similar results? Reach out to our team today to find out how Line Efficiency can help you.
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