Holiday heroes size right with size optimization

We all know the holiday shopping season is paramount to a retailer’s annual results.  As we enter the 2012 holiday shopping season, customers’ expectations of retailers have never been higher. One thing that can plague retailers, especially during the hectic holiday season, is out-of-stocks. Whether you are a fashion retailer or a fast-moving consumer packages goods company, 0ut-of-stocks = unhappy customers and lost sales.

What’s the alternative? You could be like one of my favorite retailers who:

  • Opens stores while other retailers were closing their doors.
  • Succeeds selling primarily branded products.
  • Takes “customer-centric” beyond the buzzwords.
  • Respects and understands its customers.

Who is this successfully growing retailer?  DSW.  Designer Shoe Warehouse

Already a successful retailer, a DSW executive identified size as a critical obstacle to growth – having the right sizes in the right quantities in the right stores. Nearly all size-centric fashion retailers have the continual challenge of having the right sizes in the right stores at the right times.

The size optimization problem has two sides to it. You need to know what sizes to have in which stores (size profiling helps here). And you need to have the physical inventory where the demand is (pack optimization helps here).

Retail merchandise is typically shipped from suppliers in a predetermined configuration of sizes – an “average” size curve that the manufacturer predetermines. This average size curve does not come close to matching individual retail stores’ demands, or consumers’ needs. And a shopper doesn’t care if you have extra size 12's when they need a size 8 shimmering dress for a holiday function this weekend. A shopper doesn’t care what it takes for the retailer to have it in the right store. But shoppers certainly have options:  they can drive down the street, or find the same item online and get it quickly delivered from a competitor’s web site.

There are more challenges.  Once a retailer attempts to become more customer-centric and decides working to solve “the size problem” is  essential, there are obstacles to maximizing results.   If only looking at historical sales to determine size profiles, a retailer would be prone to repeating mistakes.  You’d have “0” sales for items that were out-of-stock for a set time period.  How can you more accurately predict demand for items and act on this demand using “0” to project? What might your sales have been if you’d had adequate inventory?

DSW is working with SAS to solve just these issues.  DSW wanted a robust advanced analytics engine, and they wanted the software to be easy-to-use.  After working with SAS, DSW saw tangible financial results.  Moreover, the top executives at DSW now believe that retail analytics is part of the company’s ongoing success.

Getting size optimization right can increase margins and reduce markdowns and out-of-stocks. You can learn more about how DSW delivers better assortment, value and convenience in this video:

 

Bottom line:  Many retail holiday heros use retail analytics behind the scenes to save the shopper's day. You can learn more about them by following my holi-blog blog series.

tags: holi-blog, holidays, retail