Merchandise hierarchy or hodge-podge? | IR News

Merchandise hierarchy or hodge-podge?

Posted Date: 25/01/2012

By Stuart Bennie*

Wikipedia describes 'hodge-podge' as a word describing a confused or disorderly mass or collection of things; "a mess or a jumble".

This is how a lot of Merchandise Hierarchies end up after years of degradation and contamination. And they tend to stay that way because people are terrified about ‘losing history’. The IT department says that it is simply too difficult (which translates to “too much like hard work”) and so the very basis on which your business functions and plans, continues to be ‘not right’ or downright rotten.

I have seldom seen more passionate debates within retailers than those concerning the merchandise hierarchy. In fact I mediate/facilitate workshops when changes are considered so that matters remain on course.

Merchandise hierarchy formulation has changed over the years partly due to technology whereby one can now slice and dice information every which way and so planning and reporting is a lot easier. However having a sound hierarchy up front sure helps.

The variables in designing a hierarchy are numerous and include:

Age: Dresses for over 40’s

Lifestyle: Skirts for work

Season: Winter slacks

Supplier: Nike shorts

Colour: White handbags

Length: Long dresses

Size: Large sized tops

Fabric: Wool jumpers

And probably a whole lot more.

So is there a right and a wrong answer?

Kind of. There are certain things to avoid.

Let’s look at one example: A customer wants to buy a handbag. She wants a white one to match her shoes. Also she has in mind a leather white bag. However when she gets to the store she finds the white leather bags are quite expensive and those in her price range are a bit rough. However she spots a really nice polyurethane white bag. It looks like leather and is soft and she ends up buying it.

Well the solution seems simple. Have a merchandise category for white bags regardless of what they are made from. After all, the customer is very unlikely to choose another colour but she will change materials. Sounds fairly logical.

But what about the buying and the suppliers? Most handbag manufacturers make either leather bags or bags from other materials. It is therefore much easier to have leather bags as a category and use colour as a variable within this category.

Basically the question is: Do I gear my hierarchy towards how the customer buys or towards how my buyer buys?

By no means discounting the importance of the customer, it is usual that the hierarchy should accommodate the planning and buying process.

When it comes to variables such as ‘supplier’, this is entirely warranted if the volume justifies its own category or if there are few suppliers. A Melbourne sports shoe retailer only stocks about six brands and it is logical to use these for the purposes of the hierarchy.

So how often should a hierarchy change?

In fairness to those in IT, it is a cumbersome job but that aside, it causes all kinds of other issues too such as making comparisons tricky. Generally once or twice a year is a good rule of thumb unless some major fashion hits town in between.

And if yours is broken, take the plunge and fix it before more rot sets in. Remember, looking ahead is far more important than looking at history.

*Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at stuart@impactretailing.com.au or 0414 631 702.

Keywords:

Comments:

Wednesday, January 25, 2012 by Paul Reilly - CIBER

As an implementer of Retail Systems I face this dilemma on every project. Often Retailers will take the opportunity to redesign their hierarchies as part of the implementation of a new system. We always counsel that this work start as soon as possible, as you rightly point out the debate is often passionate and time consuming. Most modern Merchandising systems usually offer the ability to maintain parallel hierarchies. At least in my case with SAP Retail we can maintain an internally focussed hierarchy for the purposes of managing the ranges according to buying parameters as well as a Consumer Decision Tree which groups products around typical baskets and allows retail pricing and promotions to be based on customer behaviour.

Leave your comment

CAPTCHA Validation

Code:

Name:
Email:

Please note: all comments are subject to moderation for legal reasons and to prevent spam. We'll approve your comment as quickly as we can. If you don't see it appear you do not need to repost it.