Spinning the Middle
by Marc Weiss
Not all classes are created equal. Spinning the Middle is a retail term that refers to that portion of a classification, called the middle, that sells well but the end parts perform sluggishly. This type of situation can stall growth, and reduce planned receiving, for needed open to buy to satisfy demand for the middle that is turning profitably.
Spinning the Middle can happen when a classification becomes so large that sluggish sales, in specific subclasses, are covering up potential growth in the middle stock that is selling quickly. For example, many of our men’s retailers place all of their 5-pocket style pants in their denim classification. In this case, we think we are measuring denim as a classification. But, in reality, it is the 5-pocket look that is being used to measure demand. If non-denim is selling well, and denim is dragging sales, then there is a missed opportunity in the non-denim. We would not be feeding enough OTB dollars to satisfy the need to both replenish non-denim, and grow the classification.
Let’s say the total combined denim classification is $100,000 in annual revenue. After some research, we find that for the last 12 months we achieved $60,000 in sales from non-denim and $40,000 in sales from denim. We further discover that our on-hand inventory in denim is $28,000 and non-denim inventory is $18,000. The overall planned inventory is $35,000. There is no Open-to-Buy for the total class because the total inventory is over plan.
By breaking up the classes, we find that the denim class is overstocked and the non-denim stock is open for immediate goods. Three months after the split, the annualized rate for non-denim is $85,000 and the denim is at $40,000. The real demand for 5-pocket pants is $125,000, not the $100,000 previously forecasted. We were ‘spinning the middle’ on the 5-pocket non-denim, and not taking action on the 5-pocket denim, to balance its inventory in proportion to its sales.
Splitting classes can be handled in a number of ways. They can be by price point. Or they can be broken out by vendors that consume most of the OTB dollars. That allows you to buy into the vendor often times as a category, with supporting classifications. Then, you can have additional available dollars to invest in the class to merchandise with that vendor.
The small cost to separate and to plan the split classes is insignificant to the sales and profit potential that was previously hidden.
Other factors to consider would be additional lost sales on items that would have been sold along with the non-denim 5-pocket pants, had they been fully stocked. Sport shirts, knits and sweaters could have completed the outfit. Consider, as well, how many customers went elsewhere to purchase this desired fashion look.
Some retailers may feel that they can accomplish this merchandise maneuver at the subclass level. But the reality is they will assign a % to future OTB based on the overall plan for that classification. The overall plan is flawed because the real growth is being diminished by the subclasses that are masking the growth of the subclasses that are trending up.
Business demands that we identify and seek out opportunities on emerging trends.
Management One’s proprietary planning logic can be a valuable tool in guiding retailers to buy the right amount of goods - in the right classifications - in order to seize opportunities and drive top line revenue… profitably.