Building Your Space & Assortment IP: Test & Learn in RetaiL
January 17, 2025
What is the value of placing a product in the "strike zone"? How much do extra facings boost sales? What is the impact of a secondary home, or being featured on an end cap? How does adding or reducing SKUs affect brand and category performance? What happens when items are relocated?
These are just a few of the questions that surface daily in discussions about assortment and space optimization. Yet, many of us struggle to provide concrete evidence of their impact. The pressure for rapid decision-making often leaves little room for thorough reflection, and we’re on to the next round of changes…
It’s time to change this.
Applying the Scientific Method
Modern scientific testing offers a robust framework for generating accurate insights and credibility. It differs from more common approaches to testing in its rigor, especially prior to initiating testing. Key steps include:
1. Hypothesis Driven : With background research, strategists initiate a test request by describing what has been observed to prompt the test idea, what specifically they want to test, the anticipated outcome, and the underlying cause-and-effect relationships to drive the result.
2. Defining Success: Clearly specify metrics and thresholds that determine what constitutes success.
3. Rigorous Testing: Design insulated, statistically significant test and control groups to mitigate risks. The testing duration should align with the hypothesized cause-and-effect timeline. Over time, test methodologies can evolve and be repurposed for other scenarios.
4. Trend Monitoring: Track metrics throughout the test to identify early indicators, uncover issues, or seize opportunities for adjustments.
5. Impartial Assessment: Assign testing analysis to an independent, specialized team to ensure objective interpretation of results. Often Finance is tapped for this role, given their analytical skills and arm’s length relationship to merchandising.
6. Analysis & Dissemination: Specialized teams should oversee analysis to maintain consistency and objectivity develop domain expertise. Findings should first be shared with the business team to add context and identify other variables, and subsequently communicated to the broader organization to foster shared understanding and alignment.
Over time, these structured processes refine insights and build organizational confidence in experimentation. The multiple planogram versions for category can serve as passive tests, where subtle differences in merchandise presentation effectively create A/B test scenarios that can be analyzed. With the right priorities and infrastructure in place, dozens of tests can be conducted over the course of a year, enabling the organization to rapidly expand its intellectual property.
Robust test-and-learn methodology cultivates a culture of informed decision-making and strategic innovation. It requires discipline, patience, and persistence. Above all, it demands courage to present ideas and subject them to analytical scrutiny, especially when they challenge long-held beliefs.
The results of this approach can directly inform optimization algorithms, deepening the organization’s understanding of the true value of space. These insights not only shape broader strategic decisions but also reduce risk aversion and foster confidence in experimentation. Summarized findings can serve as the foundation for engaging training sessions or “lunch and learn” events, promoting knowledge-sharing across the team.
Through this methodology, the organization becomes more progressive, its strategies more refined, and its people better equipped to adapt to the ever-changing retail landscape.
