Range Management: Are You Offering the Best Products for Your Market?

Optimising Range Management to Increase Sales.

Before COVID-19 there was a steady increase in online buying and selling, and high-street retail was becoming less popular. However, the pandemic accelerated this shift. Retail outlets were forced to close their doors and rely on online trade. Whether you work in a retail environment that’s closed at the moment due to lockdown, or you work in a making, stocking and selling organisation, the question is always which products/items should you invest your cash in to make available in your range. This is as true for fast-moving fashion trends as it is for nuts and bolts and things we are always in need of. If your sales are limited by the products people buy, what you offer in your range determines the products that people can buy from your business. Naturally, the more items you offer in your range, the more people will buy from your shop. 

However, it isn’t a case of simply adding more and more products to your range; offering more options can cause problems. Firstly, you must consider the space you will need to store an increase in stock. Secondly, in procurement, you will need to work with more/larger suppliers. In production, you will need to invest in more Raw Materials, and in additional production capacity… So, adding more and more options into your range can cause problems, but more than that, it does not guarantee you more sales either. The key to increasing sales and growing your business is offering the right range to your market – not necessarily the largest. 

To do this you must understand what is the evidence of a good performing range. Typically, when looking at different business’ ranges, you can expect to find that roughly 80% of their sales come from only 20% (or less!) of their product range. For example, if you walk into a Nike store you would likely find that despite Nike’s vast colour options, it is the plain black football boots that generate the most sales – only a few people will opt for the bright, luminous yellow ones. Similarly, the white tennis skirts are fashionable, but the black ones are not. Most people like to follow the trends, which means that most people look to buy similar things. Stores are always trying to find more products that people definitely want to buy – this is the 20%. Of course, it may not be exactly 20% of the product range, it might be 15% or 25% but the point is that it won’t be proportional. This is commonly referred to as the Pareto Principle. 

Therefore, a review of a product range should consider three parts: the ‘head’, the ‘body’ and the ‘tail’. The ‘head’ consists of the most attractive products. The fast-moving products that are consumed by many, many people and constitute a large proportion of the business’ sales. 

The ‘body’ products usually make up the majority of SKUs (Stock Keeping Unit). To continue using Nike as an example, they may offer a large collection of jogging bottoms in a range of colours and sizes. The unisex black and grey jogging bottoms in the sizes small, medium and large may belong to the ‘head’ whilst the other colour options and less common sizes belong to the ‘body’. Then, the rarest sizes of the boldest colour would likely belong to the ‘tail’. 

The ‘tail’ equates to very low levels of sales but still consists of many SKUs that business’ think they need to offer to market a full range. 

The diagram above demonstrates the mix we tend to find in any range. The ‘head’ constituting 80% of sales, the ‘body’ making up 15% of sales and the ‘tail’ only contributing 5% of sales orders. If you wanted to move towards an ideal range, you would want to add more ‘head’ parts and remove some of the ‘tail’ parts. Logically, of course you would want to introduce another top seller and get rid of the slow-moving stock. So, what’s the hold up? 

The problem is that you will never know, when launching a new product whether it will land in ‘head’, ‘body’ or ‘tail’. Nobody can tell what will become popular at the time of the launch – it is dependent on trends, tastes, marketing and selling. Though there are challenges, your direction of solution is simple:  add more ‘head’ parts, and reduce the ‘tail’. If you don’t know what they are, that’s your first step towards creating a brilliant range – do the analysis and identify which products land in which category. First, find out what your top-sellers are – remember these represent the majority of the business’ sales and are consumer by many customers. Look at the availability of these, and historically what the availability of these products has looked like. Has there been any evidence of stockouts or unfulfilled orders? If so, you’re missing a trick with your ‘head’ parts – these are the products you never, ever want to stock out of! The important thing is to ensure 100% availability of ‘head’ products. If you want to improve inventory and availability, get in touch at [email protected]

On the other side, you need to identify your ‘tail’ products (those products where the sales volume and frequency are low, yet they are still being stocked and reordered). The policy here is straight forward: identify them, and get rid! Undoubtedly, there will be some reservations. There will likely be someone who will think you need them in the range, and this may be true… but it doesn’t mean they need to be stocked. You can always move them to purchase-to-order. However, ultimately you need to identify these products and implement a plan to remove them – free the space, free your cash. 

Lastly, there is the ‘body’. Within that there will be products that stand closer to the ‘head’ (some decent sales) and some that are closer to the ‘tail’. To ensure you are doing the right things with these products you need to make sure you are marketing and selling them properly. Are they being promoted on the right channels? Are they being offered in the right ways? Only once you have completed the following will you have maximised the range you are currently offering. 

  1. Identified the ‘head’ products and protected their availability. 
  1. Identified the ‘tail’ parts and removed from the range. 
  1. Efficiently marketed and sold the ‘head’ and ‘body’ parts. 

Then you can consider growing your range. So, how do you add more top sellers? You need to be able to identify and fill any gaps in your range. The good news is that there is already evidence you can draw on which will help you to predict whether the new product will be a good or a bad seller. One option is to look to your competitors – they will often offer products that you don’t. These products would be good candidates for considering adding to your range. Another option would be to speak to your suppliers and distributors, they would be able to tell you which of your products sell very well globally or outside of the range you are currently offering. If any of those products are not in your range, they should also be immediate candidates. So, scout your competition and talk to your suppliers for inspiration.  

Once you have decided on a product you want to launch, you will need to make sure it is marketed and promoted as well as possible. Then monitor its performance – will it remain a ‘body’ part? Or, will it become a ‘head’ or a ‘tail’ part. If it becomes a ‘tail’ part you should promptly remove it – free up your cash to invest in lines that will sell! This way you can move closer and closer to the perfect product range for your market. 

If you would like help or further guidance in reviewing or amending your product range, don’t hesitate to get in contact. You can request a case study of a range management implementation by emailing [email protected].

By Phil Snelgrove, Lauren Wiles