Set up your shop
How to select the right stock for your store? Nicolas Loeuillet explains this to us in his interview with Audrey Gallier
8 January 2024
In this interview, Audrey Gallier from “L’Arrière Boutique” podcasts speaks with Nicolas Louiellet, Head of Ankorstart, the coaching programme for entrepreneurs opening a shop. In their conversation they cover key points such as assortment definition, common mistakes to avoid, the magic formula for budget allocation, seasonality, category and price mix, as well as concrete and practical advice to help you build your assortment in a strategic and relevant way.
- Our speakers
- How to approach the topic of assortment?
- Why is it important to have an assortment strategy?
- What would be your recommendation for an effective product mix ?
- How can we create a mix of categories, mix of prices and margins, and the mix of brands?
- How to set up long term relationships with suppliers?
- When starting a retail business you don’t need to do it alone
Audrey Gallier is a consultant in the fields of retail, entrepreneurship, and brand development. After ten exciting years of creating and growing her own stores, she decided to share her experiences and that of other experts of the sector to entrepreneurs opening a shop.
In her podcast L’Arrière Boutique, she brings in professionals who are experts in the field to provide practical advice and effective tools, inspiring individuals to share their stories, taking her audience behind the scenes of the retail experience.
Nicolas Louiellet is the head of Ankorstart, the free coaching programme for entrepreneurs opening a shop. The programme was launched in June 2022 by the B2B marketplace Ankorstore. Ankorstore has the goal of creating an ecosystem that supports retail entrepreneurs: this includes a wide selection of selected brands, an all in one place system for orders as well as a coaching programme for those that may need some expert guidance to successfully open their shop.
Nicolas has a diverse career background, starting in the airline industry and later exploring the world of retail at the well-known company—Amazon. He then joined Ankorstore about a year and a half ago and, with his team of retail experts, has been guiding more than 6,600 successful shop openings.
How to approach the topic of assortment?
Audrey | Let’s dive into the main topic for today—the stock of a shop. How do we approach building an assortment?
Nicolas | When thinking about the stock of a shop there are two perspectives to keep in mind, the one of the shop owner that is focused on selecting the right products and right brands, and that of the customer that enters a store with expectations on products to find. The challenge is to create a bridge between these two worlds ensuring that the retailer’s vision for their shop assortment translates into a compelling customer experience that leads to a purchase.
Building an assortment is not just about personal preferences; it requires the definition of an assortment strategy, especially considering the budget involved. Inventory management requires both an important initial investment and budget allocation and a lot of planning.
Why is it important to have an assortment strategy?
Audrey | Why is the reflection on assortment planning and the purchasing strategy so crucial for a retailer?
Nicolas | The profitability of a business highly depends on the quality and solidity of the assortment. Assortment planning is indispensable for achieving high levels of turnover and ultimately business success.
There are three important elements to a retail business that are connected and dependent on the quality of your inventory:
- The ability to attract traffic to your store
- Building effective visual merchandising that makes your products appealing
- Ensuring customers find what they expect and therefore make a purchase
Audrey | How should a retailer approach budget allocation of inventory for their store?
Nicolas | Before you start ordering your stock, you need to break down the process into three key parameters.
1. Firstly, we have the forecasted turnover. How much turnover are you expecting to generate? Whether it’s a monthly, quarterly, or yearly projection of your sales, this data influences your entire buying strategy.
2. The second parameter is the stock turnover rate. How frequently do you expect your products to need to be replenished? A higher turnover rate means more rapid replenishments. Understanding this dynamic is crucial for keeping your customers happy, allowing them to always find the products in stock and consequently to generate sales for you.
3. Lastly, the desired gross margin. This is the difference between your product’s selling price and its cost. Your gross margin is the determinant of profitability, setting a clear target is key to the financial health of your store.
To calculate your budget, you can use this formula: Budget = Forecasted Turnover / (Stock Turnover Rate x Desired Gross Margin).
This magical equation will give you an initial figure to work with. Of course, this is a simplified starting point, and you’ll need to adjust it based on factors like supplier payment terms, seasonal variations, and market trends.
Nonetheless, it is an essential element for business planning, funds requests and the business strategy itself.
To give you an example, at Ankorstart, we recently assisted a retailer in Bordeaux whose financing request was initially rejected by the bank. We revisited it with him, integrated our magic formula, and the second time around, his proposal was accepted.
What would be your recommendation for an effective product mix ?
Audrey | Thinking specifically about product range, what would be your recommendation for an effective product mix?
Nicolas | I believe that is one of the most important points when it comes to assortment planning.
Your shop’s product assortment is the variety and selection of products you want to showcase in your store. More specifically we break your stock down into two components: the breadth and the depth.
The breadth is essentially the width of your product range. It’s about understanding how many different types of products you want to offer.
Picture your store layout, consider your number of shelves, and calculate how many products you can comfortably place. Start by mapping out your space, measure your linear footage, and calculate how many products per linear meter you want to showcase.
The second component is depth. This is the quantity of each product you plan to stock. It’s the number of units per SKU (Stock Keeping Unit) that you anticipate needing. My recommendation is to start thinking in terms of a 3-month stock coverage initially.
At the beginning, always prioritise breadth over depth. Because, especially when starting out, you want the flexibility to test your assortment, experiment with different products, and see what resonates with your customers.
Also, my suggestion is to include a safety stock budget. This buffer helps you manage the unexpected like delayed deliveries or sudden changes in demand.
How can we create a mix of categories, mix of prices and margins, and the mix of brands?
Audrey | We can say that any assortment is characterised by three key elements – the mix of categories, the mix of prices and margins, and the mix of brands. They’re the three pillars you need to keep in mind when figuring out what goes into your store. Nicolas, can you help us break them down?
Nicolas | Sure thing!
First, the mix of categories – this is about organizing your assortment into families and sub-families. Take the example of a grocery store. You’ve got the sweet, the savory, and the drinks. Dive deeper, and you find sub-families like biscuits, chocolates, honey, and jams under the sweet category. It’s about giving your customers choices. If you’ve got a gap in your lineup – say, more muesli than spreads – your customers might raise an eyebrow. So, balance is key.
Next, the mix of prices and margins. Understand that customers have varying budgets based on different circumstances – time of day, day of the week, and their specific intentions. Finding a balance in the mix of prices and margins is crucial. Think strategically about how you can boost sales with affordable, impulse-buy items alongside your premium selections.
Finally, the mix of brands. Many retailers initially focus on a handful of brands that resonate with them personally. However, experience tells us that’s not enough. You need variety. We recommend a mix of iconic, widely known brands and niche, perhaps local, brands. You should include brands that tell your story and resonate with your values, but also consider what your customers expect to find.
Your assortment is a form of communication. It’s a way of expressing who you are as a retailer, your values, and what you stand for
Audrey | What is your recommendation for a balanced product assortment ?
Nicolas | Our suggestion is to have 70% permanent products and 30% seasonal ones. The key is always to test. Start small, see what works, learn from it and keep your assortment dynamic and engaging.
How to set up long term relationships with suppliers?
Audrey | Do you have any advice on how to set up long term relationships with suppliers?
Nicolas | It all starts with being clear about your values, the products you want to sell, and the prices you’re willing to pay. We recommend creating a simple document outlining essential elements like the type of prices you’re aiming for, the conditions of purchase and payment you desire, and the general expectations for your partnership. You can find some downloadable templates in our toolbox.
We recommend writing down, pen to paper, not just what you want to buy but also the values and the ethics of the suppliers you’ll be dealing with. Are their products made in China or are you supporting local craftsmanship? This will guide you away from impulse purchases that might look good on Instagram but don’t really align with your vision.
If you’re feeling a bit overwhelmed when first opening your store, remember that by being part of our free Ankorstart programme, our retail experts can help you negotiate with brands and purchase your stock at favorable conditions, including low minimum orders, free shipping on larger orders, and extended payment terms. Our goal is to empower retailers to start their business care free.
When starting a retail business you don’t need to do it alone
Audrey | Thank you Nicolas, I think that is a crucial point.
When starting a retail business you don’t need to go it alone. Seeking guidance and assistance is not a sign of weakness but a testament to your commitment to success. Experts, like those at Ankorstart, exist for a reason – to guide you through the complexities of assortment strategy. After all, two heads (or more) are often better than one.
Seek support, professionalize your approach, and remember, your assortment strategy is not just about what you sell; it’s about how you create an experience for your customers.
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