Assortment Optimization and SKU Rationalization

Retailers have hundreds, if not thousands, of SKUs to select from when organizing their portfolios. Selecting the optimal assortment across various sales channels can be taxing. L.E.K. Consulting specializes in analyzing SKU performance, consumer preferences, channel dynamics and competitive strategies to help companies select a channel-specific SKU assortment that will maximize revenue potential.

Our approach

L.E.K.’s approach to assortment optimization involves a comprehensive assessment and analysis of the performance of existing SKUs to identify underperforming SKUs. Additionally, consumer surveying and a review of competitive offerings allow for development of an optimal SKU assortment strategy on a by-channel basis.

	SKU performance: Evaluate financials and perform data mining to analyze historical SKU and product category performance across regions and channels
	Consumer survey: Conduct market expert interviews and consumer surveys to understand perception of current SKU assortment, SKU level and brand preferences, and key influences of purchasing habits
	Channel dynamics: Assess how consumer preferences may vary in-store vs. online, and consider the need to adjust or implement different SKU assortment optimization strategies across the two channels
	Competitive benchmarking: Research and assess competitive SKU assortment in-store and online; evaluate and understand SKU assortment best practices, and establish benchmarks for effectiveness
	Strategy development: Identify opportunities to improve SKU assortment across channels, across regions or within key stores; develop best-in-class SKU assortment strategies based on key findings, and establish a streamlined rationalization process to adjust for business needs and changes in demand

Client successes

• A global footwear company approached L.E.K. to assist with concerns regarding its massive, loosely structured product assortment, which indirectly drove higher selling, general and administrative costs and a lower profit margin. L.E.K. helped the client rationalize its product categories and optimize SKU count by channel, leading to both revenue potential from releasing new product lines and cost reduction from eliminating unpopular SKUs/lines.

• A building material supplier wanted to develop a comprehensive, detailed view of its product categories. L.E.K. identified the needs of the company’s core customer segment and mapped SKUs to best serve its customers by purchase type, geography, channel and profitability. By completing this sophisticated analysis, L.E.K. helped the client trim down to 17 core SKUs while continuing to excel in serving its most valuable customer segments.