1 Why is category allocation important?

Category allocation is important because it affects how customers perceive and navigate your store. If you allocate too much space to a category that has low demand, you will waste valuable floor space and inventory. If you allocate too little space to a category that has high demand, you will lose sales opportunities and frustrate customers. By using data to analyze customer behavior, preferences, and trends, you can optimize your category allocation and create a store layout that maximizes your sales potential and customer loyalty.

2 What data do you need for category allocation?

When allocating categories, the data you need depends on your business goals and objectives. However, some common types of data that can be useful include sales data, which reveals revenue, profit, sales velocity, seasonality, and price elasticity of each product; inventory data, which shows stock levels, turnover rate, sell-through rate, and shrinkage rate of each product; customer data, which provides insight into who your customers are, what they buy, how often they buy, and how much they spend; and market data, which reveals your competitors' performance, industry trends, and customer expectations. To gain further understanding of customer satisfaction and preferences, customer feedback, surveys, and loyalty programs can be employed, while market research, benchmarking, and analysis tools can be used to gain more information about your market position and opportunities.

3 How do you analyze data for category allocation?

Once you have collected the data you need, analyzing it is essential to identify patterns, insights, and opportunities. To do this, you can use various methods and tools, such as data visualization, data mining, and data modeling. Data visualization helps to present and explore data in a graphical or interactive way, like charts, graphs, dashboards, and maps, which can help you to spot trends, outliers, correlations, and gaps in your data. Data mining, on the other hand, can extract and discover useful information from large and complex data sets, such as patterns, associations, clusters, and anomalies, which can be used to segment customers, predict their behavior, and optimize marketing strategies. Lastly, data modeling can create and test hypotheses and scenarios based on your data, like what-if analysis, forecasting, and optimization, which can be used to estimate the impact of decisions, plan budgets and inventories, and allocate resources.

5 How do you evaluate data-driven category allocation?

Finally, it is essential to assess the impact of your data-driven category allocation on your business outcomes. To do this, you can use a variety of metrics and indicators, such as sales metrics to measure the revenue, profit, growth rate, market share, and conversion rate of each product. Inventory metrics measure the stock, availability, turnover, and markdown rate of each product. Customer metrics measure the satisfaction and loyalty of customers, as well as the retention rate, repeat purchase rate, and referral rate of each customer segment. Through this evaluation, you can identify the strengths and weaknesses of your data-driven category allocation and make the necessary improvements and changes.