When a store's performance is poor, the first step should be to use data analysis to identify problems in the product mix, rather than assuming which categories are problematic. Please see the following case.

-01- Problem

The core of store competition lies in price competition, and the foundation of price competition comes from quantitative sales of individual items. If 50% of the items achieve 50% of sales, it indicates that the store's products can sell a little of everything, but nothing sells well. Where is the quantitative sales? That is, there is no A-class main product or the A-class main product is not clear!

Then how can this store negotiate lower purchase prices with suppliers? If purchase prices cannot be lowered, what can it rely on to build a low-price image and compete with competitors?

So, how to determine what proportion of item count and sales is normal?

-02- Data Extraction

The smallest classification unit for data extraction is the sub-category of each product group. For example, if the major category is washing and care, the medium category is laundry and cleaning, and the sub-category is laundry powder, then extract data based on the smallest classification "laundry powder."

This avoids omissions when extracting data by major or medium categories, and also reduces errors caused by the characteristics of certain sub-categories (such as low sales volume).

First, extract total sales, i.e., the sales data of all normal products (excluding discontinued products) in the selected product sub-category. Generally, a 3-month period is used; the longer the sampling period, the more accurate the final result.

Second, extract the "30 products": sort the products in the sub-category by sales volume, define the top 30% of the total number of items as the "30 products" of that sub-category, and sum the extracted "30 products."

Finally, calculate the proportion of the total sales of the "30 products" to the total sales of the sub-category, and use this to analyze whether the structure of the category is reasonable. From the "30 products," extract 5% to 8% of items sorted by sales volume as sensitive and essential products.

-03- Data Analysis

If the sales proportion of the category is between 70% and 90%, the product variety structure is basically reasonable. If the proportion is greater than 90%, it indicates that the number of items in this category is too small, the price band is unreasonable, and sales are concentrated on a very few sensitive low-margin or promotional items, which will directly affect the store's profitability.

In terms of solutions, on one hand, accelerate the introduction of new products to enrich the product selection; on the other hand, adjust product displays to increase sales opportunities for sensitive products. Additionally, adjust price bands and increase promotional efforts to enhance overall sales capability.

-04- Price Positioning for Products at Various Levels

Price positioning for sensitive essential products (extracted as 5% to 8% of the 30 products): gross margin is generally controlled within 5% of the purchase price, adopting a pricing strategy lower than competitors. Supermarkets can use these low-margin products to attract more traffic, thereby driving sales of other products.

At the same time, by increasing product turnover, the store can enhance its bargaining power with suppliers to obtain more price discounts. Common forms include cumulative order volume discounts, sales incentive discounts, and year-end rebates.

Price positioning for 30/70 products: in the absence of market competition, lower the price by 1% to 5% from the category's average gross margin; in the presence of market competition, lower the price by 1% to 5% compared to competitors.

-05- Structural Adjustment

30/70 products generally need to be redefined every 3 months due to seasonal changes or other factors (with minor adjustments monthly). The purchasing department can also eliminate the bottom 10 items monthly based on sales rankings of each sub-category, and introduce new products at a rate of one new item for each eliminated item.

-06- Case Analysis

The following uses sales data from a supermarket's laundry powder sub-category to explain category management more clearly:

A supermarket's laundry powder sub-category has a total of 44 items, with an average monthly sales capacity of about 300,000 yuan. According to product category division:

The "30 products" number 13 items (44×30%), with an average monthly sales capacity of about 216,000 yuan, accounting for 72% of monthly sales (21.6/30%); the "20 products" number 9 items (44×20%), with an average monthly sales capacity of about 54,000 yuan, accounting for 18% of monthly sales; the "50 products" number 22 items (44×50%), with an average monthly sales capacity of about 30,000 yuan, accounting for 10% of sales.

According to the 8% extraction of "30 products," the number of sensitive essential products is 1, with an average monthly sales capacity of about 60,000 yuan, accounting for 20% of monthly sales.

In summary, the category structure of this classification is basically reasonable.

Source: "China Chain Supermarket" Magazine

If a tip is adopted, a reward of 400-2000 yuan will be paid.

If you like this article, click [Wow] and share it with friends.