MERCHANDISE INTELLIGENCE
DAN MITCHELL, RETAIL INDUSTRY GLOBAL PRACTICE
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Localization, Personalization….and
SAS Retail Relevance
Customer Analytics
Merchandise
Intelligence
Customer
Intelligence
KNOW
PLAN, OPTIMIZE,
ACT
ENGAGE/
INFLUENCE
Copyright © 2012, SAS Institute Inc. All rights reserved.
Copyright © 2012, SAS Institute Inc. All rights reserved.
SAS Retail
Merchandise
Intelligence
• Plan sales strategy across
channels.
• Determine optimal product
mix to achieve targets and
customer expectations.
• Localize product mix.
• Ensure execution is
PLAN, OPTIMIZE,
ACT
Copyright © 2012, SAS Institute Inc. All rights reserved.
informed by operational
constraints.
Copyright © 2012, SAS Institute Inc. All rights reserved.
• Merchandise Financial Planning & Store
Planning
• Demand Forecasting
• Assortment Planning/Category
Management
• Store Segmentation & Intelligent
Clustering
• Revenue - Price Optimization
• Allocation/Size Optimization
Proven
Capabilities
Merchandise
Intelligence
• Belk
• Sears
• Levi’s
• Canadian Tire
• Macy’s
 Net sales, for the Q1 2010 ended
November 28, 2009, increased
3.9% to $1.823B from $1.754 B in
the Q1 2009. Comparable store
sales for the quarter increased
2.4%.
• JC Penny
• Lord & Taylor
• Overstock.com
• DSW
PLAN, OPTIMIZE,
ACT
 SAS named FDO Strategic Partner of the Year
• Unimarc
• Shoppers Drug Mart
• Wet Seal
• Aeropostale
Copyright © 2012, SAS Institute Inc. All rights reserved.
Copyright © 2012, SAS Institute Inc. All rights reserved.
2009
Consistent
Customer
Experience
SAS Retail Solution Framework
Marketing & Merchandising
Buying
Planning
Store
Ops
Logistics
Mkting
Replenis
-hment
Cust.
Service
Merchandising
Direct
Mail
Online
Merchandise Intelligence
Integrated
Merchandising
& Marketing
Capabilities
Mobile
Call
Centre
Stores
Kiosks
Social
Emails
Customer Intelligence
Merchandise
Financial
Planning
Assortment
Planning
/ Optimization
Advanced
Clustering
Space
Optimization
Campaign
Management
Real-Time Offer
Optimization
Marketing
Optimization
Marketing Mix
Optimization
Demand
Planning
Size & Pack
Optimization
Revenue
Optimization
Inventory
Optimization
Social Media
Analytics
Online
Customer
Behavior
Marketing
Resource
Management
Marketing
Performance
Management
Analytical
Insights
Data Mining &
Customer Analytics
Demand Forecasting
Sentiment & Unstructured
Data Analysis
Customer Profitability
& Forecasting
Data
Management
Data Quality
Data Integration
Data Model
Metadata
ERP
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CRM
EDW
Online
POS
Supply
Chain
Social
Campaig
n
Others
SAS® SIZE / PACK
OPTIMIZATION
THE SHOPPING EXPERIENCE
I want this dress
but they don’t have
my size. I really
wanted to wear it
tonight
I’ll wait; I can
always get my size
on sale
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
SAS® SIZE / PACK
OPTIMIZATION
HOW SAS CAN HELP…
Size Profiling
Understand how sizes are truly demanded
• Lowest intersection product and location
•
Continue to plan at the levels done so today
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Pack Optimization
•
•
•
•
•
•
•
Optimize Assortments
Maximize Omni Strategies
Localize by Size
Reduce Stock Outs
Build Customer Satisfaction
Rapid ROI
Give Users Time Back
SAS® SIZE / PACK
OPTIMIZATION
THE POWER OF ONE
Average Sales Unit
Shift
3 – 8 units
+$3M
THE VALUE
-1
Net Revenue $
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
Power of One Net Revenue $s
Based on $1B Annual Revenue, $25 AUR, 30% MD ppt, 65% ST prior to MD
+1
DSW SIZE OPTIMIZATION
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
SAS® SIZE / PACK
INTELLIGENCE GATHERED AND CONSUMED
OPTIMIZATION
Enables retailers to
automatically convert
higher-level plans into
optimized size- and
pack/single
recommendations for
pre-season orders and
in-season allocations
Delivers Value Quickly
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
Size Profiling
Pack Optimization
SAS® SIZE / PACK
OPTIMIZATION
‘FITS’ INTO THE BUSINESS PROCESS
Product Planning
Pre-Season Planning
Assortment Planning
Product
Development
Merchants
Size Analysts
Merchants
Planners
Size Analysts
Size Profiling
Pack Optimization
Merchants
Planners
Size Analysts
Supply Chain and Factory Collaboration
Decision Making
Insights
Supply Chain
Suppliers
Size Analysts
Locations
Purchase Order Creation
Allocation / Replenishment
Executives
Merchants
Planners
Size Analysts
Allocations
Regions
Locations
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
Merchandise
Operations
Order Entry
Allocations
SAS® SIZE / PACK
A QUICK BIG WIN TO PREVENT LOST SALES
OPTIMIZATION
Size Profiling
Pack
Optimization
Improve Size Precision Accuracy
Drive Financial Results
Optimize Assortment Management and
Omni Strategies
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
Maximize Location Size Precision with
Recommended Packs
SAS MARKDOWN
OVER INVENTORIED? GOT MARKDOWNS?
OPTIMIZATION
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Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
SAS MARKDOWN
RETAILER’S MARKDOWN CHALLENGES
OPTIMIZATION
Markdowns may mean ‘deals’ to your customers, but
what does it mean to your organization?
?
Increased Shrink?
Loss Margins and Profitability?
Supply Chain Inefficiency?
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
Poor Customer Experience?
Space Allocation Concerns?
Broken Merchandising
Assortments?
MARKDOWN
OPTIMIZATION
WHAT IS MARKDOWN OPTIMIZATION?
Markdown Optimization is simply defined as a solution
that defines the right price, at the right place, at the right
time markdown pricing to drive improvements in margin,
sales, and customer satisfaction
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SAS MARKDOWN
OPTIMIZATION EFFICIENT CLEARANCE STRATEGIES
• Manages markdown recommendations to the store level
• Maintains budgets and margin protection while eliminating inventory
• Monitors inventory at risk to identify areas of opportunities
Copyright © 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed.
A MARKDOWN STRATEGY THAT LEVERAGES…
30% OFF
10% OFF
45% OFF
2%
45%
OFF
10% OFF
Incremental
Margin
Gain for
Total Chain
1 Coat
...AN OPTIMIZED AND LOCALIZED APPROACH CAN PRODUCE A…
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SAS IS ABLE TO EFFECTIVELY MARKDOWN PRODUCTS THAT…
FORECAST, LOCALIZE, AND OPTIMIZE DEMAND TO MEET CONSUMERS’
EVER-CHANGING NEEDS!
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SAS® ASSORTMENT OPTIMIZATION
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WHAT IT IS ASSORTMENT OPTIMIZATION
Assortment Optimization recommends the best
assortment mix based on available shelf space
and your financial objective.
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WHAT DOES IT DO ASSORTMENT OPTIMIZATION
 Recommends
an assortment mix that reflects how
the customers shop
 Finds
the best products to carry to meet the
financial objective
 Makes
the best use of available space to offer
variety while avoiding duplication of like products
 Determines
 Balances
optimal inventory for the space
the breadth and depth of an assortment
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SAS ASSORTMENT OPTIMIZATION
Scale assortment to store specific space
Eligible Assortment
The eligible assortment is
considered the largest possible
planogram with forecasted or
historical performance as a input.
SAS Assortment Optimization then
identifies the best mix of product to
fit store specific fixture
configurations.
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Store Specific Shelving
SAS ASSORTMENT OPTIMIZATION
Thousands of
possible choices
& multiple store
configurations
Category
Role
Clustered
Customer
Segments
Financial
Objectives
Attribute
Constraints &
Item
Associations
Optimization is required
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Customer
Loyalty
Shelf
Height &
Depth
SKU
Dimensions,
Pack Size
Critical
Mass
Presentation
Balance
Service
Levels
Available
Space
Assortment
Balance Variety
& Duplication
Unit
Quantity
Store
Specific
Demand
SAS ASSORTMENT OPTIMIZATION

Optimally choose the best performing mix of SKUs for specific space
 Optimization objective- Maximize financial objectives
Subject to:

Decision variables »

describing the actions that can be taken
Customer Decision Tree, Eligibility list
Constraints- describing the limits of the decision variables
»
Item selection requirements: days of supply, consumer loyalty, item relationships, minimum presentation size
» Physical properties: Item and shelf dimensions

Optimization Tasks
»
Score each item based on financial objective and occupying linear space.
» Determine inventory requirements based on service level and local demand.
» Calculate product block shape that maximizes shelf space.
» Optimally determine breadth & depth by store considering space trade-offs.
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THANK YOU
@DMitchell_
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