ProfitLogic Advances Merchandise Optimization Suite to Meet the Need for Better Decision Support throughout the...

Paul Demery

New Capabilities Help Retailers Effect More Localized Merchandising Decisions, Fine-tune Inventory Investments, and Gain Improved Insight Into In-Season Merchandise Performance

Boston – November 30, 2004 – ProfitLogic, the industry-leading provider of Merchandise Optimization solutions, today announced major advances in its Merchandise Optimization Suite to help retailers make better assortment, allocation, promotion and pricing decisions. These advances were designed to address three key retailing objectives: to enable more localized merchandising decisions to better meet customer need, to fine-tune decisions around inventory investment and flow of merchandise for significant financial improvement, and to gain additional visibility and insight into in-season merchandise performance in order to quickly respond to unexpected opportunities and issues that arise as the season unfolds.

Capitalizing on extensive experience delivering profit-driving decision support solutions to the world’s leading retailers, ProfitLogic has advanced its solutions to meet these merchandising objectives through three new capabilities: Analytic InSights, Assortment Execution Optimization solutions, and the Merchant DesktopTM. The result is an expanded suite of solutions with enhanced functionality that are easily implemented in a modular and flexible fashion in line with ProfitLogic’s goal of delivering a quick return on investment.

"Adoption of Merchandise Optimization solutions is increasing as more retailers realize the tangible financial benefits,” wrote Deborah Weinswig, Citigroup Smith Barney’s Director of Retail Research, in her report: Markdowns Changing Behavior – What’s Next? “Since Markdown Optimization solutions enable users to become more in-tune with customer needs, the natural progression is an extension into other processes.”

Enabling More Localized Decision-Making
More retailers are focusing their merchandising decisions below chain-level in order to respond to differences in local customer buying behavior. Traditional merchandising systems are not designed to help merchants identify differences in customer buying behavior at the regional or store level, nor do they help guide optimal decision-making based on analysis of these differences. As a result, merchants often resort to using class-level and chain-level averages to make merchandising decisions, resulting in unnecessary mistakes and missed sales opportunities. Increasingly, merchants are seeking the flexibility to tailor assortments to local market needs and to more surgically apply markdown and promotion strategies only to locations that need to spur demand.

Driven by a detailed analysis of customer demand, ProfitLogic’s Merchandise Optimization solutions help retailers expand their understanding of local market needs to better tailor their assortments, allocations, promotions and pricing decisions, resulting in higher customer satisfaction and increased profitability. ProfitLogic has significantly enhanced the Merchandise Optimization Suite with a collection of Analytic InSights that support merchandising localization such as Store Clustering for more targeted pricing and Size Profiling for more tailored allocation. (For more information about Analytic InSights, click here: ProfitLogic Expands Merchandise Optimization Solution Suite with Insights that Turbo-Charge the Merchandising Process)

"Markdown optimization for retailers with fashion, short-life-cycle or seasonal products has proven to be an ideal place to start applying optimization technologies to an area of your business that will result in a lot of benefit without requiring changes to large parts of your organization,” wrote Hung LeHong, Research Director of the GartnerG2’s Retail Practice in his Research Report: The Process Changes Behind Retail Optimization Technologies published in September 2004. “Many of the early adopters are now looking to move from the successes of markdown optimization and into upstream processes such as pre- or in-season buying, assortment and allocation."

Fine-tuning Decisions around Inventory Investment and Flow
Another increasingly important area of focus for leading retailers is inventory investment and the flow of merchandise to the DC and stores. Traditional systems do not provide insight into buying behavior at the SKU-level nor do they predict how demand will play out over the season by week. As a result, merchants are forced to rely on historical item and class-level averages when calculating order quantities, often necessitating front-loading receipts at the beginning of the season.

ProfitLogic’s Merchandise Optimization Suite provides planners and allocators with the tools and insights needed to develop buy quantities, build flow plans to the DC and to the stores, set size profiles and determine the best combination of pre-packs. It analyzes the impact of seasonality, price, low inventory, and promotions on demand at the local market-level and considers operational constraints such as presentation minimums, shipment minimums, and safety stock levels. The result is a purchase and shipping order that reflect just the right amount to buy at the right time, more effectively managing cash flow and driving increased GMROI.

ProfitLogic will be announcing its next-generation Assortment Execution Optimization solutions for planners and allocators in December 2004. These solutions fill a gap in the market for decision support around execution of the assortment strategy – the computationally intensive work required to optimally match inventory investment and flow to demand-by-store over time. The Assortment Execution Optimization solutions are built upon the market-tested demand analytics of ProfitLogic’s flagship solution and provide operational workflow that flexibly addresses the needs of merchants from plan development and execution through in-season management.

Gaining Visibility and Insight into the Performance of Merchandise In-Season

In today’s highly competitive retail environment, merchants are seeking visibility and insight into the performance of their merchandise in-season so that they can quickly respond to unexpected opportunities and issues. Traditional planning systems typically stop at the purchase order, leaving retailers without the tools necessary to capitalize on in-season open-to-buy and cancel-order opportunities that could make the difference in overall season performance.

ProfitLogic’s newly developed Merchant DesktopTM is a monitoring, reporting and early warning system for retailers, which helps track planned performance against in-season actuals. For example, if an item is selling better than plan, the merchant is advised how much more to buy. If an item is not performing well, the merchant is alerted to markdown the item, redirect the allocation of that item to a different store where it is performing well, and/or cancel the additional order.

Based on the company’s 20 years of experience assembling large customer datasets for detailed analysis and forecasting, ProfitLogic is uniquely positioned to support the tracking and reporting necessary for in-season management. By combining these reporting-ready datasets with ProfitLogic’s forecasts and customer demand insight, merchants will now have the tools necessary to track and react to performance against the assortment plan throughout the season. The Merchant DesktopTM will be launched in December 2004.

Using Insight Into Customer Demand to Maximize Return on Inventory Investments

Whether they are localizing their merchandising strategies, fine-tuning their decisions around inventory buy and flow, or striving to maximize in-season results, retailers are recognizing that by using insight into their own customer demand, they are better positioned to make decisions that truly maximize their return on inventory investments. ProfitLogic’s Merchandise Optimization Suite of solutions is designed with flexibility and granularity in mind, enabling retailers to adopt decision-supported strategies at their own pace. Whether retailers prefer to work at the chain/class-level, store/SKU-level or any combination along the way, ProfitLogic has the computational sophistication and retail domain expertise to help retailers achieve their merchandising objectives.

“Over the next two months, ProfitLogic will be announcing next generation solutions and capabilities in the areas of assortment, allocation, promotion and pricing,” said Tom Ebling, Chairman and CEO of ProfitLogic. “Our primary objective is to build on the value of customer demand insight, and break through the complexity of today’s retail business, to deliver the robust decision support environment required by customer-responsive retailers.”

About ProfitLogic
ProfitLogic provides an industry-leading suite of Merchandise Optimization solutions designed for retailers whose priority is getting the highest return on inventory investments. ProfitLogic`s solutions provide merchants with day-to-day operational decision support and workflow for making better-informed assortment execution, allocation and fashion replenishment, promotion, pricing and markdown decisions. ProfitLogic has delivered fast, flexible solutions with significant financial benefit to industry leading retailers such as American Eagle Outfitters, AnnTaylor, Bloomingdale`s, Charming Shoppes, Gap Inc., including: Banana Republic, Gap, Old Navy, Gap International and Gap Outlet; JCPenney, Lerner New York, Marshall Field`s, Meijer Stores, Northern Group Retail, Sears, ShopKo Stores, Target Stores and Toys R Us. For more information about Cambridge, Mass.-based ProfitLogic, call 617-218-1900 or visit www.profitlogic.com.

Jakki Glivicky


business finance, Merchandising, Planogram, Program optimization, Returning