A merchant's guide to how to conduct a sku rationalization for their category or brand. This is a step by step process to improving inventory productivity by eliminating waste in assortment. Mech/ Merchandise /Revenue/Gross Profit/Margin/Dollars/Data/Ecommerce/Omnichannel/Retail

1. Joan Braatz
Vice President Merchandising
How to
conduct sku
rationalization

2. What is
it?
Sku Rationalization
• Evaluation of sku performance within
category/brand
• Creates assortment focus
• Optimizes choice count
• Contributes to inventory management
• Supports product life cycle management
• Eliminates operational waste
• Frees cash flow
2

3. 3
Steps to
review
Sku Rationalization
• Merchandise data review
• Balance assortment
• Incorporate innovation
• Adjust financial forecast
• Revise POG

4. 01
Data Review
• Rolling 12-month sku data
• Net Sales (dollars + units)
• Gross Profit (rate + dollars)
• Inventory Turn
• GMROI (gross profit return
on investment)
4

5. Data
Review
Questions to ask:
• Are best sellers turning too fast?
• Can high volume unit sku’s be renegotiated for
better profit? Ticket increase?
• What sku’s are most profitable?
• What are the bottom quartile sku’s?
• What percent of sku count drives total sales?
• What percent sku count drives bottom?
• Does store vs. e-commerce perform differently?
5

6. 02
Balance Assortment

7. Balance
Assortment
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Questions to ask:
• What is sku ceiling for assortment?
• What are choice counts by volume grade?
• What are number of sku exits?
• Are small store assortments intact?
• How does this stack to competition?
• With exits, what is the mix for:
Tops: bottoms ratio
Fashion: core: essential
 Good: better: best pricing
Exclusive: national sku’s
Customer lifestyle

8. 03
Incorporate innovation
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9. Review Innovation Pipeline
Jul Aug Sep Nov
Oct Dec Jan Feb Mar Apr May Jun
Schedule dates:
Coordinate dates of in-coming
sku count with markdowns to
liquidate slow selling sku’s
Clear the Space:
Preplan space to house
innovation at volume grade
level; Deploy markdown
strategy prior to launch
Strategize Exits:
Strategize markdown cadence
to clear unproductive
inventory; Plan placement of
exit product in clearance zones
Safeguard Profit:
Negotiate markdown support
from supplier; Bid shelf space
investments to new vendors
Q1 Q2 Q3 Q4
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10. 04
Adjust Financial Forecast

11. Adjust
Forecast
11
Questions to ask:
• Should safety stock be increased on best
sellers?
• What’s on order for exit sku candidates?
• How to capture “no buy” exit sku’s?
• Should store allocation change?
• What sku’s should be removed from
automatic replenishment?
• What are model stock for new sku’s?
• Does innovation fit within OTB?

12. 05
Revise POG
12
• Review number of facings of best sellers
• Reduce number of facings on slow sku’s
• Identify optimal space for innovation
• Create placeholders for multiple
launches
• Flag exit sku’s and space created
• Review small, medium, large formats
• Determine if new signage is needed
• Collaborate with store operations

13. Summary
Communicate
• Notify planning partners
• Partner with store ops
• Strategize with suppliers
• Share out with marketing
Execute
• Markdowns to clear exits
• Implement POG changes
• Shift purchase funding
• Eliminate duplication
Review & Repeat
• Evaluate data every 6 months
• Practice 1 in, 1 out method
• Measure incrementality of new
• Tie to inventory turn goals
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14. Thank You
14
Reach Me
Joan Braatz
Vice President Merchandising
Retail | B2C | B2B
braatzjoan@gmail.com
214-733-9677
https://www.linkedin.com/in/joanbraatz/
https://joanbraatz.com/