Updated: May 20, 2019
In today’s crowded retail climate, retailers are pulling out all the stops when it comes to customer acquisition and retention. But, with “experiential retail” being the brick-and-mortar buzzword of 2019, retailers may be overlooking one of the most important fundamentals of successful retailing - product mix.
Also referred to as Product Assortment, your Product Mix encompasses the entire range of products that you offer for sale. Keeping a close eye on your product mix is a fundamental "must" when trying to nurture a clientele that will consistently return to buy their staples AND who are willingly enticed into the occasional splurge purchase - like accessories for their previous purchases, new products or seasonal items. (These are often where the "sizzle" can come in - meaning have a little fun with seasonal products or local makers!)
Determining the proper product mix is essential to maintaining a positive balance of customer satisfaction and cash flow. Keep too much inventory on hand and you could be sitting on capital that is not providing any return. Let inventory sit on the shelf too long and it could age out of demand and provide less of a return than you’d originally anticipated. Have too little inventory and customers may leave empty handed and disappointed...and they may not return.
"It matters where and how you stage products - it will ultimately determine their shelf life and overall success in your store."
So, how do you decide what goes into your product mix? While there are a number of factors that weigh on this decision, the first step is to understand the components of a product mix:
Length: The number of products in a given product line. (Some companies will also refer to the number of SKU’s.) When trying to decide which products to put on your shelves, it’s smart to start small and work your way out from there. Most lines will have “hero products" or best-sellers - doing a small test with those will help you discover what SKU’s to add next, from that line or another.
Breadth: The number of product lines offered for sale by a given retailer. When looking at the breadth of line, don’t forget that, “overchoice” is an actual phenomenon in today’s market. If there are too many choices available, customers tend to experience decision fatigue and choice deferral resulting in their being unhappy and leaving empty handed.
Depth: Closely related to length, this refers to the different ways you can buy a specific product. For example, being able to purchase a CBD tincture in 500mg, 1500mg and 2500mg dosages or 10mg CBD gummies in bear, worm or watermelon shape.
Consistency: This refers to the connection between products within the product line and the way they reach the consumer. For retailers, consistency in a product line can help with everything from suggestive selling and making customer recommendations to growing customer loyalty and creating value.
Once you understand the components of the product mix, you’ll need to factor them in with a few other additional influences; seasonality, regionality, your target customer, etc. to truly nail down your overall product strategy. Need a little help putting this all together? We're here to help! Click here to request a complimentary consultation with our team.
Also, here are a few tips that may help you discover the right product mix for your business:
Yes, you do need more colorways. Customers are looking for that feeling of connectedness (experiential retail) in the brick-and-mortar environment and having the ability to customize can be a big part of making that experience memorable - and multiple color options are an easy way to make this happen. Does this mean you need every color (or option) available? Not necessarily. When I’m ordering for Vintage Vapor, I usually purchase enough of a new colorway to evenly display it in the key traffic areas of both of our locations; I then reorder according to sales by color. Once sales begin to slow, I reduce the colorways by half, keeping only the top performers - this maximizes my shelf space to ROI ratio. Basically, be early to the party and don’t stay too late.
It matters where and how you stage products - it will ultimately determine their shelf life and overall success in your store.
Use pricing strategies to facilitate product rotation. At Vintage Vapor, we introduce products above our average margin, while demand and interest are high, and reduce price as demand declines. (Target has a great methodology for marking down their clearance items that may give you some ideas.)
Depending on your shelf space, some items will eventually decline to the point of elimination, or “close-out” pricing. Keep an eye on your original product costs when closing out items, you don't want to lose all your margin if you don't have to.
Practice trend spotting. Stay active in your industry and review your sales reports regularly. Predictive inventory planning, versus reactive planning, can result in sizable swings in both overall sales and margin, not to mention bulk pricing and shipping savings.
Have more questions? Give us a shout! We'd love to talk shop with you!