Successful merchandising relies on good hierarchy

We often meet retailers who have poorly organised data, whose product is grouped together based on their organisational structure or in a supplier facing way. It is often a mix of attributes and hierarchy; and is rarely consistent.  

This lack of structure is holding their business back; it is limiting visibility which means it is holding back good range construction and constraining growth. 

What is a product hierarchy? 

Product Hierarchy groups product together in a parent/child relationship where each child can have only 1 parent.  

Product hierarchy is used to group like items together in order to see trends in the data and enable us to focus on areas of growth and decline. It needs to be stable so that trends can be seen over multiple years.  

Has a consistent set of principles applied based on customer purchasing journey and end use – e.g., Category-led, Brand-led?  

They are the key purchasing motivators for a product and are key to the phasing of sales and stock. 

How is this different from an attribute? 

Each product can have multiple attributes, they build on the hierarchy enabling richer analysis and include things like colour, fabric type, shape, price, supplier. Whilst some attributes will be stable, many will not as trends change over time. 

An example 

For example, let’s say I want to buy a new spoon. The decisions I make initially follow a hierarchical path: Company > Home > Cook and Dine > Cutlery > Spoons 

I have now navigated to the right part of the website or store and I’m beginning to make selections on attributes – material, colour, finish, price, promo, etc. 

The merchandisers forecasting the demand will be able to do this for many years. As things go on- and off-trend the number of spoons will change, but they are likely always to be part of a cutlery range. 

What does the product hierarchy drive? 

Because it drives the forecasting (the identification of areas to grow and decline – basically where to put the money!) product hierarchy drives the structure of reporting.  

Applying consistent rules to the hierarchy enables reporting to surface comparisons – ensuring you are comparing like groupings in each division. 

With it driving visibility of performance it follows that it must drive planning and therefore it drives the structure of the WSSI and is used in several tools.  

Because it is vital to align ownership to the planning being done, the money being spent, the range being constructed, and the performance of that range versus the plan, the hierarchy drives not just tools but the organisational structure in Buying and Merchandising too. 

Good structure is the key to B&M success

Managing costs 

  • Organisational structure is effective and appropriate to the detail required 

Visibility 

  • Enables performance comparison to target investment to the right product 
  • Year-on-year (YoY) comparison to ensure deep understanding of what is driving performance 
  • Analysis of mid-level data to enable application to like product 
  • Consistent over multiple years to enable long-term market share growth  
  • Minimises product duplication  

Accountability  

  • Focus on the macro (product groupings) to drive the micro (line-level buying) 
  • Build expertise in specific products 
  • Enable replication of approach across multiple product areas 
  • Objective groupings enabling objective review 
  • Enables effective product phasing 

Well organised data is critical to understanding what is driving a retail business and that is the basis for consistently growing the business. And it will be the basis of any merchandising tool development so is critical to address ahead of system investment. 

Think you might need some external support?

If you’re looking at ways to improve your B&M systems and processes or simply need help defining and organising your product hierarchy, we can help. From health-checking your existing systems, processes, and strategy, to systems implementation and training – the First Friday team has the hands-on experience and expertise to help drive your retail business forward. 

Find out more about our retail consulting services, or get in touch to discuss your particular headaches with one of our retail experts. 

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Victoria Ward

About the author: Victoria Ward

A consultant with over 20 years’ experience, Victoria had a long career in merchandising for blue-chip retailers before joining First Friday where she now supports and guides businesses through transformation programmes, enabling them to deliver sustainable change in her role as a strategic transformation consultant.

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