Pavel Shcherbakov took part in the online forum for MAGNUM partners
The online forum for MAGNUM partners "We fill life together!" took place at the end of October 2021. During the event, the largest retailer of Kazakhstan shared its strategy and plans for 2022, and also discussed with its partners important issues of service in stores, the introduction and withdrawal of goods from the assortment, the specifics of working with new products, plans for marketing activations, bonuses and more.
In the block "SERVICES OF EXTERNAL PARTNERS" Alexander Muravyov, Managing Director of Commerce of the MAGNUM retail chain, presented Pavel's report with a recommendation to contact the C4R team with all questions about how the assortment is formed and how it is optimized, and about how to immersion in the process assortment optimization within a tripartite agreement.
Pavel Shcherbakov, CEO of Consulting for Retail, showed the benefits of the joint work of a retailer and a supplier in the selection of the optimal range of chain stores and revealed the specifics of the implementation of such projects. Read more about what Pavel spoke about further.
A joint project to optimize the assortment: MAGNUM – PARTNER – C4R
The Consulting for Retail (C4R) and MAGNUM partnership began in 2015. During this time, C4R has become a strategic partner of the retailer in business automation projects. Primarily a planogram management project. The next were projects for assortment management (I2E), ERP, demand forecasting, solutions for automating store processes, and warehouse logistics.
In all projects, the C4R team actively participated in building the company's business processes and building IT infrastructure, taking into account new solutions. Already in the course of implementation, work was underway to develop a concept for future projects of interaction between the manufacturer and MAGNUM based on assortment projects in order to optimize the assortment.
About assortment optimization projects
C4R together with MAGNUM started participating in these projects last year. During the development of key parameters, it was determined that the results of the project should provide benefits to three parties to the process: first of all, the buyers of the network, MAGNUM as a commercial structure, and the supplier who participates in this project. In principle, this is where the question arose "how to assess the benefits?"
Loyalty programs contain a huge amount of data, but most retailers do not use this data for in-depth analysis of customer behavior.
The C4R team has the expertise and is ready to properly prepare the analytical structure of this data in such a way as to visually show partners how a buyer of the MAGNUM network decides to purchase a product. C4R specialists can analyze how a customer makes a choice between one and another product within a specific category and calculate a decision tree (DT) between different units of need.
Each time a customer makes a purchase, he closes his need. For example, customer needs to buy fresh milk. Accordingly, he will buy fresh "three-day" milk from the refrigerator instead of packaged milk for long-term storage. Also, the buyer will have to choose between fat and non-fat milk.
To better understand the process of choosing goods, it is necessary to determine which "units of needs" we are dealing with. C4R experts just work out the question of which units of need should be present in a certain category and identify the significant needs for the buyers of the retail chain based on the analysis of purchasing behavior.
Such analysis gives an understanding of what products should be presented on the shelf to satisfy the needs of guests of MAGNUM stores to the maximum extent. Shelf space is limited and product optimization is an inevitable process that needs to be done regularly.
As part of projects to optimize assortment in several categories in the MAGNUM network, the project team:
- calculated the optimal shelf;
- managed to calculate how each centimeter of the product displayed on the shelf increases sales;
- have identified in which category it is pointless to add products since the need is filled;
- prepared key arguments to defend the very position on the shelf. This is important as the customer changes and new shopping motives need to be understood and explained.
Shopper behavior has changed a lot. This is proved by the buyer himself through loyalty cards and his purchases, voting with money for a particular product within the framework of sales. You need to track and keep pace with changes. Understanding of these changes is best assessed through analytics rather than hypothesis on guesswork. This is what C4R experts suggest to do with the help of special tools and services.
If you are interested in the topic of cooperation between a retailer and a supplier in matters of assortment optimization, write to [email protected] or fill out the callback form and C4R specialists will give you an understanding of how such a project can be implemented in your retail network by the end of this year.
How is assortment optimization going?
Interaction with partners of the trading network takes place within the framework of a tripartite agreement. The C4R team is considering the following option:
- The selected supplier enters a pilot project, within which a mathematical analysis of the assortment in a specific category is launched based on the retailer's raw data. Specialized analytics tools will help you determine how to change the assortment to increase sales and customer loyalty.
- Products for which calculations show that sales will increase will go to the pilot. The pilot is launched in typical stores of each format of the chain's retail outlets. Then, for each such store from the pilot program, a pair is selected that works on the old assortment matrix. And within 4-8 weeks, C4R specialists analyze how the modified matrix works within each of the formats.
- As a result of the analysis, partners and the network, together with representatives of C4R, in the framework of trilateral meetings, discuss the results of the project in terms of the feasibility of deployment. If the piloting effect is positive, the assortment optimization project will be rolled out to the entire network.
Such a sequence of works will speed up the process of transforming the assortment since the limited resources on each side remain a key factor. The task of C4R specialists is, first of all, to help in key aspects, to transfer knowledge so that the retailer and partners can understand how in the future it is possible to independently use figures from big data, apply them within the framework of analytics and show the result in a more accelerated format.
Pavel expressed special gratitude to Mars, which responded to the offer of cooperation in the framework of the assortment optimization project. The C4R team is ready to analyze the key categories for Mars.
In turn, Mars has shown its willingness to share its international experience in interpreting the data itself. This is very valuable because analytics can help identify specific anomalies that need to be interpreted about a specific category. But how and why the buyer behaves in one way or another within the framework of the purchase of a product, the manufacturer and supplier of this product know best, since they have a greater understanding of their category.
Naturally, in the course of the project, cooperation of all parties and the help of partners are required to interpret the data as correctly as possible. Based on the results of such interaction, MAGNUM and partners will be able to offer customers those goods that will not only fill the assortment but close the units of need.
The pilot projects look something like the one described above. An understanding was reached that the issue of assortment optimization should be approached together, combining the efforts of the retailer and the supplier. And this is already a pretty good result. The toolkit is also there and has proven its effectiveness now it is necessary to implement it in life. To accelerate this and get the result, it is necessary to involve all parties. C4R is partnering, in this case, to help meet this challenge in the shortest possible time.
“To launch the project itself, there are contacts on the site. Contact the specialists at +38 (044) 492-67-00 or ask your questions in the form below. Our consultants will be happy to answer them. We will be glad to see you at any of the projects. " - summed up Pavel Shcherbakov.
Reference: Magnum Cash & Carry (MAGNUM) is the largest retailer in Kazakhstan, one of the top ten private companies in the country. On the market for over 14 years. During this time, the retailer has opened more than 139 branches with over 11.5 thousand employees. The chain's shopping malls operate in eleven different cities. More than 35 thousand items of goods are presented in the stores of the network, and the total number of buyers exceeds 300 thousand people.
