By Nikki Baird, Managing Partner
6/3/2008
At Manhattan’s User Group event, Momentum 2008, merchandise planning and the importance of connecting planning to execution was much in evidence. And one of the most interesting discussions of the week was on the impact of customer centricity on merchandising. One panelist in particular talked about her unique planning organization, which represents both an extreme of granularity in merchandise planning, but also demonstrates the impact that granular customer-centric planning (and by this I mean approaching unique by store at the category or item level) could also have on more traditional retailers.
The retailer was Follett Higher Education Group (FHEG). They operate over 750 stores across the US and Canada, but those stores create a truly unique merchandising challenge, because each store is essentially a leased operation for a university or college. So while every store may carry “long-sleeved fleece hoodies,” only the University of Colorado store, for example (my alma mater, and not necessarily a FHEG customer, but one I’ll use because I know the school), will carry black ones emblazoned with the school’s buffalo mascot. In fact, most of FHEG’sinventory is held by suppliers as “blanks” in various colors and sizes, and customized with each school’s logo or name only as needed.
But this creates some significant challenges from a merchandising perspective, because FHEG has to satisfy two sets of customers: the consumers that shop at the stores, and the university or college for whom Follett is managing the stores. Fortunately, the consumers that shop at stores are fairly easy to group into segments – students, parents, and sports fans, for example – and there is a very regular season and pattern to the business, driven by each school’s calendar.
The similarities, to a large degree, end there. And so to ensure that both sets of customers’ needs are met, FHEG has organized its planners by store, rather than by category. This allows each planner to get to know the idiosyncrasies of each school – things like “Smith College always has to have logo-wear that includes ‘College’, because otherwise ‘Smith’ is just a name’, or in the case of my alma mater, such peculiarities as “Alfred Packer days,” a bizarre spring festival celebrating the infamous man who appeared to have survived getting snowed in by a storm in the Rocky Mountains in the 1800’s by eating his traveling mates. Fit that one into your category plan.
By organizing by store, planners also serve something like an account manager, presenting one face to that very important “other” customer, the school in question. FHEG fosters both relationships by sending planners into the stores they are responsible for every year, so that planners can renew their relationship with both the store manager and the school representatives – as well as reacquaint themselves with the physical layout of the store (over which FHEG has no say, given that they get whatever space the school is willing to give), and the campus vibe that is unique to every school.
This kind of relationship makes for some fantastic advantages, but also makes category planning a bit tricky. If planners are responsible for every category in a store, how do you make sure that each planner is treating the “hot” categories with the right degree of attention?
FHEG manages this by heavily attributing every product. Buyers research other fashion venues like Urban Outfitters or Abercrombie to see which styles appear to be the big hits. So, for example, “performance athletic wear” is a category experiencing significant growth. So when setting category objectives, FHEG will target significant growth for that category, unleash it on the planners, and then roll it back up to make sure that the total sum of items that planners have anticipated (which are unique by school, but attributed to make these cross-cuts and rollups easier) add up to reflect the expected growth of the category overall.
I don’t know of another retailer who has such granular requirements on the planning side, but it seems to me that other retailers could learn a lot from how Follett handles what is literally planning by SKU/by store. Clean data, disciplined categorization and analysis of products using product attributes, and an organization that uses customers as the primary organizing factor – as assortments get more granular across the industry, these principles will become increasingly important to all retailers.
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