For retail and management professionals, understanding assortment planning is crucial for crafting successful inventory strategies that drive revenue. This involves preparing product categories according to market trends and top-performing products.
In this blog, we delve into the definition of assortment planning, its significance, and the various models utilised, and offer practical advice for its implementation in your retail management endeavours.
Let’s begin!
What is Assortment Planning?
Assortment planning involves strategically curating the most fitting product lineup for a business. The intricacy of this process varies greatly depending on the scale of the enterprise.
While smaller, family-owned shops might rely on intuition and local suppliers, larger retailers employ sophisticated operations to track key performance indicators (KPIs). Nowadays, AI-powered tools are even utilized to optimize data-driven product assortments.
Apart from sales data, assortment planners must also consider various economic theories and models of customer behaviour. For example, it’s crucial to acknowledge that customers can feel overwhelmed by an extensive product selection in a cluttered store.
Moreover, logistical hurdles like maintaining optimal stock levels and efficiently managing warehouses with diverse product stock-keeping units (SKUs) also come into play.
How Does Assortment Planning Work?
It typically unfolds at least six months before a season’s commencement.
- Planners utilize a plethora of data, especially past sales transactions, to create assortments for all channels—each store, website, and catalogue.
- Styles are allocated to individual channels during the season, considering factors like channel or store performance, spatial limitations, and geographic location.
- For example, stores in regions with earlier seasons may receive certain products sooner and in greater volume.
- Planners adjust allocations based on store-specific performance data. If a store struggles to sell a certain product, allocations may be limited.
- Tactical adjustments are made throughout the season based on real-time demand, daily sales results, and inventory fluctuations.
- Retailers maintain flexibility to modify the plan during the season, such as ordering additional quantities of fast-selling items.
Why is Assortment Planning Important?
It holds significant importance as it dictates the precise product mix allocated to each store—tailoring assortments to fit available space, capitalising on strengths, aligning with customer preferences, and driving sales.
Adopting a uniform approach doesn’t suffice for most retailers, given the variations in store size, sales potential, and customer demographics. Ensuring each store receives the right styles in optimal quantities improves sales, and inventory management, and prevents issues like overcrowded or understocked shelves.
Ultimately, the efficacy of this planning lies in its ability to boost sales, streamline cash flow, and enhance overall profitability when executed proficiently.
Assortment Planning Models
These models aren’t one-size-fits-all. However, even fashion retailers who tailor their plans often kick off the process with one of the following models:
1. Wide
A wide-model assortment plan boasts a diverse array of products and styles, catering to every shopper’s needs. This model is commonly favored by large stores and national chains.
2. Deep
In a deep-model assortment plan, there are fewer products but more variations of each. For instance, a men’s store might offer three styles of business-casual pants—chinos, dress slacks, and dark jeans—in a variety of brands, colors, and sizes. Boutiques and speciality shops often find this model beneficial.
3. Scrambled
Retailers seeking to boost sales explore scrambled assortments, offering products beyond their typical business line. For example, a sports apparel retailer might include power bars, nutritional supplements, and discounted gym memberships in their assortment.
4. Localized
Assortment planning often incorporates products from local vendors. For instance, a fashion retailer might feature jewellery or silk-screened T-shirts crafted by local artisans. This approach adds a creative touch to assortments and stimulates additional sales.
5. Mass Market
Mass-market assortment planning combines both width and depth, offering a wide range of products with numerous variations. For example, a national men’s store chain might offer 15 brands of neckties, each with a wide variety of styles, colours, and materials.
Examples of Assortment Planning
Although there are several examples of assortment planning in retail and supply chains, we’ve decided to highlight these 3 fashion chains:
1. Mr. Price
Fashion brands like Mr Price in South Africa have utilised assortment planning to overcome challenges, notably during the pandemic. Amid cautious consumer behaviour, Mr Price adjusted by allocating more products to smaller stores and reducing quantities in larger malls, boosting sales and profitability while minimising unsold inventory.
2. Ulta Beauty
It is a nationwide chain specializing in cosmetics and beauty products, relies on assortment planning to stock its 1,300 stores efficiently. Through meticulous planning, Ulta has enhanced merchandise displays and streamlined orders from numerous suppliers.
3. Forever 21
It is renowned for its fast-fashion offerings for women and employs assortment planning to pinpoint high-demand styles. By analyzing data from hundreds of stores, Forever 21 makes informed decisions regarding product attributes such as colour, size, fabric, and neckline, ensuring their inventory resonates with customer preferences.
How to Optimise Assortment Planning?
When retailers apply these strategies, they arm themselves with dynamic assortments that distinguish them from their competitors.
1. Dive Into the Merchandise Plan
Understanding this overarching plan sets the financial framework for seasonal product selection. Grasping budgetary constraints aids assortment planners in curating the most suitable product styles.
2. Harness Historical Insights
By delving into the past seasonal sales data spanning a cross a couple of years, retailers can gain crucial insights into style performance, customer preferences, and top-selling locations, guiding current assortment decisions.
3. Embrace customer-centricity
Thoroughly analyzing customer segments and demographics informs retailers on which styles to prioritize for different customer groups and geographical areas.
4. Optimize Planning Models
Tailoring assortment planning models to align with the merchandise plan facilitates meeting financial objectives. Choosing between wide or deep planning models depends on the desired breadth or depth of product offerings.
5. Streamline with Clustering
Segmenting stores into clusters based on relevant attributes simplifies assortment planning, enabling retailers to focus efforts on a manageable number of store groups.
6. Strike a Balance Between Classics and Trends
Successful retailers maintain equilibrium between perennial bestsellers and emerging styles, enhancing their assortment with fresh variations while preserving customer favourites.
7. Consider Local Sourcing
Integrating locally-made clothing and accessories into product assortments appeals to shoppers’ desire to support regional artisans and manufacturers, adding depth and authenticity to the offering.
8. Embrace Cross-Merchandising Opportunities
Pairing complementary products within seasonal assortments enhances the shopping experience and boosts sales, leveraging historical transaction data to identify synergistic product combinations.
9. Cater to the Impulses and Purchases
Incorporating irresistible styles into the assortment, such as eye-catching accessories strategically placed near checkout areas, encourages additional purchases and elevates overall sales.
FAQs: Optimising Assortment Planning for Seasonal Retailers
What are the main factors in assortment planning?
Factors include sales data analysis, customer preferences, merchandise budget, seasonality, trend forecasts, store clustering, and cross-merchandising opportunities.
What are some limitations in assortment planning?
Challenges may arise from unpredictable trends, inventory constraints, data inaccuracies, changing consumer preferences, and the complexity of managing diverse product assortments.
How to analyse assortment planning?
Analysis involves reviewing sales performance, customer feedback, market trends, and competitor strategies. It includes evaluating assortment breadth, depth, profitability, and alignment with business objectives.
How is an assortment planner different from an assortment buyer?
An assortment planner focuses on strategic planning, budgeting, and optimizing product mix, while an assortment buyer executes purchasing decisions, negotiates with suppliers, and manages inventory levels.
Conclusion
To end things, when you’re trying to manage your retail resources, assortment planning will work as one of the key factors in strengthening the base of your company. Not only this, but it also contributes to driving revenue and customer satisfaction through product selection.
By leveraging data-driven insights, retailers can tailor assortments to meet diverse customer needs, optimize inventory, and capitalize on market trends.
Qodenext, with its innovative AI-powered solutions, empowers retailers to streamline assortment planning processes, enhancing efficiency and profitability. As the retail landscape evolves, mastering it remains essential for staying competitive and meeting the ever-changing demands of consumers.
