George Mollo, president of consultancy GJM Associates, says that only two to three of every 10 new products are potential winners and contribute to profit. Mollo wants to help merchants improve their batting average by adding one new product hit a week. One more new product hit a week separates the average player from a potential Hall of Famer, Mollo says.
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Inventory planning is crucial to developing a product hit machine, Mollo says. Here are two tips that help in identifying winning products.
Average Item Index. This is simply the index or ratio of how one projected item demand compares to the average of all items. So if the simple average of all items in an offer is $10,000, an item projected to do $12,000 would have an index of 1.2 or 20% better than average, Mollo says.
“This can be calculated at category, subcategory, spread, and page levels for very fast reviews of potential winners and losers being planned,” Mollo says.
A second measure is Net Ad Margin, which stands for margin remaining to cover costs after advertising costs have been taken into consideration.
If you want to know more, Mollo will be speaking on this topic at the Operations Summit in Memphis May 2-3. For more information, go to www.operationssummit.com.