Decoding the Retail Store Cluster Puzzle With AI

Understanding each store's unique needs and preferences in the retail industry is crucial for maximizing sales. This is where AI comes into play, offering the ability to prepare store-specific planograms based on store-level insights.

A recent analysis of 400 stores discovered that by using AI to create store-specific assortments, 8% of the stores (33 stores) could see an increase of over 15% in total incremental sales. This significant increase demonstrates the power of tailoring assortments to the specific needs of individual stores.

However, as the retailer expanded store-specific assortments to more stores, the contribution to incremental sales began to decrease. The sales increase for the next 100 stores fell between 10% and 15%. As the retailer continued to expand store-specific assortments to 156 stores (or 39% of the total store count), the sales increase further dropped to between 5% and 10%. This pattern of diminishing returns indicates that while there is still opportunity for growth, the impact is less pronounced as the number of stores using store-specific assortments increases. These diminishing returns could be due to various factors including certain stores' operational costs, distance to distribution centers (DC), and/or other supply chain constraints which AI can consider and incorporate into its modeling.  

This analysis reveals a critical insight: while store-specific planograms can drive significant growth, it's important to select which stores to focus on strategically. In this case, the 33 stores with a potential sales increase of over 15% would be the best candidates for store-specific planograms. These stores likely have a unique shopper profile that can be effectively targeted with a tailored assortment.

Using HIVERY Curate's AI-driven rapid scenario simulation, retailers can identify which stores to apply a cluster approach and which to go store-specific. This allows retailers to optimize their strategy, focusing their efforts where they will have the greatest impact and get the most bang for their buck.

If you like to decode your stores and determine the value of store-specific planograms in your stores, connect with our team of experts and explore the benefits of AI and using HIVERY Curate as your co-pilot.

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