What can one consider as optimization? In the retail business, marketing optimization can represent many different targets.

Considering only sales policy:

• is optimization getting more margin volumes in the next period?
• Is it ensuring a better price position?
• Is it extending own brand items offer?

Each decision has a benefit in one hand and a drawback in the other hand. For example, decreasing retail price of a sensitive item optimizes my price position but can widely impact my margin levels.

At the opposite increasing the retail of a non-sensitive item can increase my margins levels without penalizing widely my competitor position.

The whole game of optimization process is to determine the right balance in millions of possibilities to determine the best approach. Defining business bounds and objectives and letting ibs AMS find the best combination within the given bounds ensures finding this right balance and achieve targeted objectives.

By using its own heuristics and greedy algorithms, and tuning them respecting the basics of the retail, ibs AMS proposes a unique solution, including various optimization possibilities, directly connected to the business.

The principle of determining a strategy into the business modules ensures that optimization results will respect the business and the inputs from the business expert and maximize the potential benefits in term of market share, price image, margin, offer completion.

INTEGRATION INTO THE BUSINESS

The ibs AMS optimization engines are fully integrated in to the business solution and allow a complete integration into the marketing policy of the retailer.

Optimization can be be performed on:

• Retail Price. Based on forecast decomposed models (retail price elasticity in particular) and joined to ibs Pricing service, ibs AMS provides optimized Pricing policies, allowing a better competitor position, increasing market shares without sacrificing margin volumes.
• Transfer Price. Following the retail price optimization, ibs AMS also provides the ability to optimize margin distribution between stores and purchase center. It is particularly interesting when stores are independent to ensure giving them the right amount of margin and maximize margin volumes at the level of the purchase center.
• Promotions Policy. Integrated to ibs Promotions, ibs AMS performs promotions optimization, helping in determining the best flyer communication and advertising, promotion offer type (% off, $ off, BOGO, BAGB) and rate off levels.
• Markdown Policy. ibs AMS is also able to determine the best rate off by markdown wave to optimize costs or sell the full remaining stock at a given date. It is particularly well suited for seasonal goods and apparel categories. Markdown optimization is integrated to merchandising business suite with an access from ibs Pricing, ibs Assortment, ibs Promotions depending on the retailer organization of the markdown campaigns.
• Assortment / Offer Definition. Adding the cross-elasticity (halo & cannibalization effects) and joined to ibs Assortment service, ibs AMS is able to determine the best set of items to be included in the assortments based on given objectives. It includes determining the right amount of references, the selection of references according to given qualitative and / or quantitative objectives.
• Auto Shelves-Space Allocation. Final step of the offer definition, ibs AMS provides the ability to build assortment in parallel to planogram definition with ibs Space Planning. It ensures that assortments fit on shelves and ensures having sufficient facings to avoid out-of-stock and optimize ordering process.

Once again, the native integration of ibs AMS into the Retail Business Suite coupled to the simulation portal and forecast engine, allows business users to leverage their capabilities and maximize the efficiency of the marketing policy, outperforming targeted objectives.

RESULTS AND BENEFITS

Real implementations of ibs AMS have exposed actual benefits. For example, various Pricing optimization use have lead to over perform margin volumes by 2%+ comparing to classical strategies. Another example related to Auto Shelves Space Allocation has allowed an average earn in space authorizing integrating additional items in stores without a loss in visibility.
The ibs AMS optimization solutions are fully dedicated to Merchandising Business Suite optimal use.

They allow to outperform classical policies by introducing latest optimization techniques without impacting business processes and let business users build their own approaches and control results.