Does a shopper in Arizona have the same needs as someone in North Carolina? It really depends on the actual product, but in a lot of cases the answer is yes. So why do many retailers merchandise their stores the same way all across the country?
It’s a subject explored in Tuesday’s edition of the Wall Street Journal, detailing Home Depot’s success in increasing sales by customizing their merchandise mix by region. Riding lawnmowers don’t sell very well in Phoenix where most lawns are comprised of decorative rocks. Yet, Arizona Home Depot locations had just as many riding lawnmowers in stock as those stores located near Carolina homes with lush lawns. It may seem funny on the surface, but the cost to retailers of unsold goods like these is significant.
Home Depot, Wal-Mart, and other retailers have begun to customize their merchandise mix to match well with specific regions. This approach has led to large savings on merchandise, and also increasing sales by stocking certain products in those stores that people are interested in buying – regional brands, etc.
This regional merchandise approach by retailers is tremendous, and marks a big shift in thinking. However, this approach can get even more granular – taking it from region to actual store level. Even within a market like Phoenix, Home Depot has locations in different types of trade areas. The stores there have trade area compositions that are very different pyschographically and demographically. So, even having a merchandise mix that accounts for region will still have certain products in some stores in Phoenix that will sell better than in other stores.
Customer Analytics allows retailers to create customized merchandise mixes – by store – so that merchandise will be stocked in the right place in the first place, and in the proper amount. This leads to significantly fewer markdowns, which neither the retailer nor the manufacturer wants.
In today’s difficult economy, the retailers who operate the smartest will be the big winners. Customizing merchandise mix is one way to achieve that success by improving the sales of existing locations, while reducing merchandise costs. This customized merchandise mix - by store - approach is only possible with the usage of customer analytic solutions.