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Retailer Help: Identifying Your Shop’s Key Boardsports Brands Through ABC Analysis

The average board sports store carries about 100 brands. But which ones generate the most profit and therefore deserve to be cultivated with a stronger focus? Find the answers – and a proven method that delivers actionable insights – in this edition of Retailer Help. 

It’s 10 o’clock, do you know who your most valuable brands are? As in, the brands that make your store the most profit. Not necessarily the ones with the strongest social media clout or brand image.

At a time when everyone has to do more with less, brand selection and brand cultivation are key to surviving as an independent boardsports retailer. That’s why we are introducing a method that generates cold, hard numbers to measure brand performance: ABC analysis.

The main goal here is to determine the brands with the strongest sales, in order to increase your focus and attention on them. Overall, getting your priorities straight is the main goal of this analysis.

THE A, B, C OF BRAND CULTIVATION
ABC analysis is a tool to generate a ranked list of all the brands your store carries alongside the sales achieved by each brand. In the process, brands are categorized in classes A, B, and C. This heightens transparency of your brands’ performance and clearly indicates where additional efforts are necessary (or which brands can be cut).

Start by creating an Excel sheet in which you create an overview of all brands, listed in order of their respective sales. Next to overall sales, also list the sales of each brand as their percentage of your overall store sales. This is a key metric.

Why? Because one of the basic truths of ABC analysis is that most companies make 80% of their revenue with only 20% of their brands. These highly potent brands are the A-Brands in the store inventory. B-Brands (30% of portfolio), gross in 15% of revenue, while C-Brands may take up 50% of the overall portfolio, while only drawing in 5% of the total earnings.

It also helps to follow your findings by performing a detailed analysis of profit margins for all products. Huge sales should ideally also mean large margins! Add these in a separate column in your Excel sheet. Also perform a critical assessment of product quality and the complaint and return ratio for a brand’s products. (Remember when skate shoes started featuring ‘air’ pockets in the late 1990s and some sold millions of units? That was awesome, but in some cases, about half of these air pockets imploded within a week and came back as defects. Do the maths!).

ACTING ON YOUR ANALYSIS
As a direct result of your ABC analysis, you have a strong basis to decide which brands in the portfolio require the most attention. Retailers looking to increase his revenues should primarily focus on A-Brands. Especially keeping in mind that all strategic action in this area, like negotiating quantity rebates, will affect 80% of your revenues!

On the flipside, the economic consequences of mismanaging your rock star brands are extremely strong. The good news is that, due to the considerable contribution that A-Brands make to your store’s success, it’s highly likely you’re also important to them. Use this fact to give brands the VIP treatment and work out some special deals, including:

• Framework agreements with suppliers to ensure constant product flow.
• Favourable conditions for returns of inventory in case it won’t sell.
• Discounts (extra, quantity or pre-order rebates) and other bonuses.
• Retailer exclusivity a specific local market.

What else? B-Brands fall right in the middle of the spectrum. According to their individual importance to the store, managers should decide whether to treat them like A-Brands (and give them tons of attention), or like C-Brands (and give them the boot).

THE TRUTH ABOUT C-BRANDS
But wait a minute, C-Brands offer more than meets the eye. Sure, the overall revenue of these brands stands in no relation to the effort they require. All brands in this category should be closely analysed in terms of importance to the store.

Are there reasons of inventory policy or store image that make them a necessary part of the line-up? If the answer is “no,” you should think twice about continuing the brand in your store. As the old saying goes: “Less is more.” And excess brands at low turnaround and quality often mean excess weight and resources better applied to stronger brands.

Retailers are also free to decide whether some products from C-Brands can be substituted by A-Brands. By building up the spectrum and in-store presence of already strong brands, the store also builds a stronger negotiating position as an important partner of these brands. Take the next step by offering a store-in-store corner or hey, some collab product drops with the brand for all the hype beasts.

If you do end up deciding to keep a C-Brand as part of the inventory, utmost efficiency is a key goal in all action regarding this brand. After all, the main goal is to free up your resources for being able to cultivate your A-Brands, right?

ALSO WORTH CONSIDERING…
When it comes to making informed choices in your brand selection, it’s also worth considering a few additional factors. First of all: How important are independent stores like yours to the brand? And how exclusive to core retail are the products they send you?

This is a key question, especially in the long term. If the brand in question is a major global label or conglomerate, there’s a high chance current strategy prioritizes building its own DTC (direct-to-consumer) infrastructure. This means expanding its online store footprint, connecting more closely with end consumers and taking out the middleman… meaning you! If in doubt, flat-out ask your salesperson about their long-term goals and how you fit into the picture.

Another key factor in Covid-19 times is the shift to digital marketing and the support offered by brands in this important segment. Do you have easy access to the latest marketing collateral? Can you download images, video clips and other assets to freely use on your social media to drive traffic?

Also thinking in terms of digital support: Does the brand provide digital substitutes for showrooms and tradeshows to keep you updated with the latest product news? Is the pre-order process still transparent and reliable (does product arrive on the announced date)? Are you keeping in touch via Zoom calls and other digital channels?

Finally, has the brand offered additional support amid the uncertainties of the Covid-19 pandemic? Like shared risk on pre-orders or updated payment terms? We’re all in this together and brand cultivation is about more than just profits and constant growth. So take your ABC analysis with a grain of salt and consider some ‘soft’ factors as well when making the hard decision on which brands to prioritize.

Boardsport SOURCE Retailer Help is a regular Pro Content instalment dedicated to taking your retail success to the next level. For suggestions and requests on featured content, email our team here at SOURCE.