Assortment Optimization

What is assortment optimization?

Assortment optimization is the process of selecting the right mix of products to stock on your shelves, whether in a vending machine, a fridge at the checkout or in the 14th aisle of a big-box retailer. The next part of the process is arranging your chosen products to ensure that you sell as many as possible. It’s as simple and as complex as that.

What are the benefits of getting assortment optimization right?

Assortment optimization is an ongoing and time-consuming process that can seem impossible to achieve with conventional methods given the volume of data, rules and constraints. But, if you get it right, the rewards are there for the taking. You’ll be able to identify and swap lower profit for higher profit products without a decrease in volume. You’ll be able to group partner products together, increasing the probability of additional sales and that’s just the beginning. Overall you’ll increase sales, reduce costs and significantly add to the bottom line.

How do you do that?

To perfect assortment optimization, it’s essential to analyze historical data along with an array of complex operational rules and business constraints. You need to be sure that a product swap you’re considering will not result in a reduction in sales volume or breach those important rules and constraints. The more data you analyze, the more accurate your analysis will be. For example, while a brand may currently be selling well, you might be able to spot a decline if you extend your horizon to include more historic data over the last few years. This could perhaps indicate a lack of investment from the brand itself or even a general decline in the category. The more data you have to review and the more complex your rules and constraints, the more likely you need to invest in software to help you navigate these decisions. The more you know about your sales trends, the better you can predict and get ahead of changes, before they get ahead of you.

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HIVERY Enhance

AI-powered assortment optimization for vending machines

HIVERY Curate

AI-powered assortment-space optimization for product store categories and category managers

Category management

What is category management?

Category management is the process of managing similar groups of products in a retail environment. It’s a combination of forecasting, supply management and procurement. In essence, it’s about the efficient use of limited resources to maximise sales and minimise costs.

What are the benefits of getting category management right?

By accurately predicting and adapting to future changes in consumer needs, category management can help you increase sales and gain customers from your competition. It can also help you negotiate better deals with your suppliers or retailers as you’re more certain of demand and can therefore buy more product, driving the price down accordingly.

How do you do that?

To excel at category management, you need to analyze large amounts of data to discern the patterns and trends. You need to consider your product range, new products, shelf space and layout, price and promotion while ensuring the right visibility and display, generally at per retail store level. More broadly speaking, you need to efficiently manage your supply chain, ensure alignment with business plans and be able to negotiate effectively.

Most importantly, you need to be quick. There’s a reason they’re called fast-moving consumer goods. The market moves fast and you have to find a way to keep up. The entire category management process can take up to six months in the US, which is why it’s known as the "dreaded relay process". Good category management is about offering the right choice and availability of products by analyzing retail data, rules, constraints and market insights into smart forecasts to eliminate out-of-stock situations and ensure customer satisfaction. To nail category management, you need a solution capable of evaluating and generating superior recommendations within minutes, not months.

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HIVERY Curate

AI-powered assortment-space optimization for product store categories and category managers

Vending machine technology

What is vending machine technology?

Vending machines have provided product delivery technology with several advancements over the years. A range of Vending Management Software (VMS) solutions has improved performance, particularly as fleets have grown and this has facilitated vending machine management. The latest vending machine technology adds a layer above that, using AI to enhance the effectiveness of your existing VMS and all the data it has accumulated. AI can find new patterns and relationships in your existing VMS datasets to provide you with smart assortments and space recommendations at an individual machine level.

What are the benefits of getting your vending machine technology right?

Vending machines are everywhere, with an estimated 5 million in Japan and about 4.6 million in the US. However, despite increased competition from online services like UberEats, Grab and Amazon Go, vending machines retain the ultimate advantage of proximity. The benefit of leveraging the latest AI technology enables you to maximize that advantage, resulting in increased sales and revenue, and a reduction in costs.

How do you do that?

To grow your vending machine profit and leverage your VMS data better, you need to get the right products (assortment) in the right place (space to sell). Too often, these are treated as separate efforts, resulting in dissatisfied vending machine consumers and suboptimal results. You need to look at your vending data in a different way. With a sizable fleet, you should invest in a good VMS and use HIVERY Enhance to take advantage of your investment by applying artificial intelligence to optimize your vending fleet at an individual vending machine level.

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HIVERY Enhance

AI-powered assortment optimization for vending machines

Trade promotion optimization

What is trade promotion optimization?

Firstly, we need to distinguish between trade promotion management (TPM) and trade promotion optimization (TPO).

The former is the planning, management and execution of the activities that require collaboration with a retail partner around promotional activity; the latter is about doing this in the smartest possible way. This includes knowing what to promote (e.g. Mars Chocolate 25g), how (half price deal) and when to execute the promotion (e.g. in 13 weeks).

HIVERY Promote is focused on TPO. It relates to promotions like a two for one deal or 50% discounts that you see in supermarkets. There are often two parties involved - a supplier (the CPG like The Coca-Cola Company) and a distributor (the retailer, such as Kroger). The trade promotion activities for retail nowadays are a little more sophisticated and planned out for weeks or even an entire year. A trade promotion calendar can take several weeks for CPGs to create before being presented to a retailer, resulting in further adjustments before final completion. This is a time-consuming and arduous process. Traditional trade promotion, while effective in the short term, can become relatively ineffective in the long term as competitors replicate the promotions and customers over purchase, leading to promotion fatigue. Better and faster generated trade promotions are needed. This is what HIVERY Promote solves.

What are the benefits of optimizing trade promotion?

Trade promotion done right is a powerful tool. You can time your promotions to supercharge traditionally high sales periods and similarly support sales during low periods, flattening the sales cycle and avoiding large swings in revenue from season to season. This results in a higher level of sales overall, delivering a more consistent revenue stream, allowing you to make future plans with more confidence. For the retailer, it means constant traffic into their stores and bigger basket sizes. After all, people don't just buy that Coke on promotion - they often end up adding corn chips, milk, bread, eggs and more to their basket, too.

How do you optimize trade promotions?

Very carefully. We are bombarded by sales and promotions everywhere these days - in-store, online, anywhere – so you should guard against promotion fatigue and buyers’ regret. Human bias can also enter the planning process, so be aware of this and try to remove it from the process. Once again, history can inform and help predict future events, so examine as much data as you can and make your best guess. Alternatively, invest in technology and plan your promotions with certainty using artificial intelligence (AI) and operations research (OR). Companies invest tens of millions of dollars in their trade promotion calendar each year. Managing this expenditure requires a confluence of data from diverse internal and external sources, requiring considerable time to assemble, aggregate, cleanse and manage. Most of this work is done in spreadsheets, built for different purposes by different people with various levels of skill and rarely shared beyond a functional team within the organization. This analysis fails to include many of the most important factors impacting the effectiveness of promotional activity: promotional fatigue, cross-elasticity, competitors’ pricing, cross-channel effects, special displays, and seasonality. Sales and Revenue Growth Management teams are often under intense pressure from internal stakeholders as well as retailers to achieve sales, revenue, market share, profits and margin targets. Most of their time is spent in data curation, using spreadsheets with simple price models unable to capture all of the factors relevant to produce accurate predictions of demand and incapable of optimizing promotional calendars. Their scenario analysis is extremely limited in its scope and breadth and is restricted to using anecdotal evidence and replicating past success stories. This hinders promotional innovation, leaving significant value unrealized and creating opportunities for their competitors.

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HIVERY Promote

The world’s first AI for retail trade promotion calendars

Planograms

What is a planogram?

A planogram is a diagram that shows where products should be stacked on a shelf.

It’s the final step in a process that has often taken years and billions of dollars to complete. This is because once a product is on that shelf, the most complicated of all algorithms truly comes into play. A potential customer wanders by, briefly lingers for a few moments, reaches out their hand, makes a selection and it’s done. Creating planograms is a complicated and lengthy process but when you get it right, it’s absolutely worth the effort.

What are the benefits of getting planograms right?

If you create a planogram that works properly, you’ll be able to avoid the nightmare of the empty shelf. You’ll sell more products across the board, and you’ll be more profitable as well. There will be less restock trips required, so your costs will reduce, and you’ll be able to enjoy your achievements for the briefest of moments, before starting all over again.

How do you do that?

A combination of art and science is required to build planograms effectively. The process takes brand and business rules into consideration, along with the physical restrictions of space while still making the shelf look appealing overall. The resulting planogram is a static snapshot in time however, so the quicker they can be created, the more up to date with shifting customer preferences you can be. The fast and effective data analysis provided by planogram software once again becomes paramount in delivering this valuable advantage.

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HIVERY Enhance

AI-powered assortment optimization for vending machines, create vending machine planograms in seconds

HIVERY Curate

AI-powered assortment-space optimization for product store categories and category managers, create store planograms in seconds