How to Develop a Profitable Merchandise Mix

Maintaining a sound balance between assortment, price points and gross margin is a difficult task for any cataloger to master.

Add to the job the “clanging” of other variables — such as the mix between new and repeat products, imports vs. domestically sourced items, branded vs. private-label merchandise, and durables vs. disposables — and you see how harmony quickly can turn to cacophony.

It’s not unusual, therefore, for business-to-business (b-to-b) catalogers to merchandise a catalog with every product and part number found in the warehouse. A decision to increase catalog page count often is then a function of SKU count. And the pricing strategy is a symbolic gesture to discount the manufacturer’s suggested retail price.

But developing the skill set to orchestrate a profitable product mix often is found in the answers to the five most commonly asked merchandising questions.

1} How can I tell if I have the right assortment?

To answer this, look at a few key metrics, such as your inventory status, price-point analysis, square-inch analysis, category analysis and gross-margin percentage.

Each metric provides insight to the answer, as well as having customer information provided by marketing (data such as items per order, response rates, response to offers, etc.).

Focusing on one particular metric, the square-inch analysis (the so-called SQUINCH) can offer the greatest variety of answers to the question. SQUINCH is the most granular view of the merchandise offering.

To develop it, use your printed catalog as a guide and spreadsheet-based software to tally the information. Look at each page in your catalog, and identify every product on that page, the price points offered, the square inches used to sell the products and the product categories.

After you’ve compiled this basic framework, add columns of information to further segment the products. For example, differentiate new products from existing, imports vs. domestics, and brand name or vendor. (Note: Use categories meaningful to your particular organization.)