Leading electronic retailer sees significant inventory savings with a more customer focused approach to clustering.

Below you can find highlights from a case study exploring how M.Video, largest Russian consumer electronics retail chain, has achieved significant inventory savings while becoming more customer focused using Galleria’s behavioral clustering software. Read the full case study here.

Background

M.Video is the largest Russian consumer electronics retail chain by revenue, providing a successful service across 379 stores across 161 cities in Russia. In 2010, as M.Video approached an estate exceeding 200 stores, the management quickly realised a key opportunity; to group stores together according to similarities in customer behavior to improve the management of assortment and merchandising strategy.

In 2011 M.Video selected Galleria, part of RELEX solutions, to support store clustering in-line with customer behavior to drive insights for optimized assortment and space. Together, with an existing project for assortment, M.Video set out to select a partner who could support the foundation for an end-to-end solution.

A rapid roll-out

After a successful pilot with top-selling destination category ‘televisions’ – in which M.Video saw significant improvements with a sales increase in excess of 11% and stock turnover improvements of 12% – the team were keen to accelerate the roll-out of behavioral clustering.

Having the ability to conduct detailed cluster analysis in just a few days meant that M.Video could very quickly create store groupings for the best performing 20 categories based on actual customer buying behavior, as well as for very fast moving categories. In addition to this, M.Video identified that behavioral clustering offered a key opportunity not only with the analysis shopper behavior across the physical bricks & mortar estate, but also to drive analysis across internet sales for the category.

M.Video

Seeing the benefit with behavioral clustering for built-in appliances

A top 10 seller for M.Video, ‘built-in appliances’, comprises a variety of major categories including ovens, panels, extractors, dishwashers and refrigerators. Recognising a key opportunity to unlock further benefits and improve the customer experience, M.Video took top selling category, ‘ovens and panels’, with an objective to carry out a more formalized category management review to tackle identified store space and demand issues.

  • Devising a more standard space allocation
  • Historically, assortment and shelf space allocation had been completed at a group level, however, in the absence of a formal category review process for select categories, the exact space at each store remained unknown. After calculations were carried out, M.Video found approximately 200 space combinations possible across the estate.

  • Understanding customer demand
  • Utilizing Galleria’s Behavioral Cluster Planner to analyze customer purchasing patterns across attributes of type and colour by sales revenue, M.Video were rapidly able to identify clear variations in customer demand across the store’s estate for ovens and panels.

“We’ve seen significant benefits with this latest review. Galleria’s solution has allowed us to quickly move from a generic approach focused on group averages to one which is tailored in-line with our customer’s needs.” Egor Bakharev, Head of Competence Centre of Category Management, M.Video.

The benefits

The allocation of new space bands, along with the use of Behavioural Cluster Planner to support the category management review for ovens and panels, meant that M.Video were able to accurately allocate stores to the right cluster in-line with demand. This unlocked a number of significant benefits:

  • Improved understanding of customer behavior across ovens and panels
  • Improved assortment mix in-line with identified customer demand
  • Improved inventory turns of up to 12% in some stores giving a total saving of over $260,000 across the store estate for the category
  • Improved logistics efficiency with more accurate replenishment
  • Improved customer experience at store

Read the full case study: “M.Video – Success with behavioral clustering for built-in appliances”