Every business is concerned with profitability and retail business is no different. However, in order to achieve the desired profitability, retailers need to have the right stock at the right locations at the right time. One smart way to achieve this is through optimal assortment planning in retail.
Assortment planning is a process that helps retailers strategize their inventory and manage the catalog considering past sales, season, and demand. This in turn allows retailers to meet the customers’ demand, improve their overall experience, and generate better sales and profits.
In this blog post, we will have a detailed look at assortment planning, its benefits, best practices, and different strategies.
What is Assortment Planning?
Assortment planning involves determining which products to stock, how many units to order, and when to restock. The goal of assortment planning is to offer customers a diverse selection of products that meet their needs and preferences while also maximizing profits for the retailer.
In simple words, assortment planning aims to determine the products to sell and where to sell based on the seasons and demand of the customers. And not to forget, its a crucial element of merchandise financial planning and allocation in retail.
For instance, if a retail store is in a location that’s snowy and cold for most of the year, the company shall choose to sell apparel like jackets and other similar apparel.
Explore How Replan – Retail Planning Solution Makes Assortment Planning a Cake Walk.
How Does Assortment Planning Work?
For effective Retail planning retailers use data analysis and machine learning algorithms to identify trends, predict demand, and optimize inventory levels.
For higher efficiency, they also consider factors such as product categories, seasonality, pricing, and customer demographics. By optimizing their assortment, retailers can improve customer satisfaction, increase sales, and reduce wasteful spending on unsold merchandise.
Benefits of Assortment Planning in Retail
Here are five key benefits of assortment planning in retail, explained in detail:
- Improved Customer Satisfaction
Assortment planning helps retailers offer a diverse range of products that cater to different customer preferences and meet their expectations. This leads to higher customer satisfaction, loyalty, and repeat business.
When customers have access to a wide variety of products, they’re more likely to find exactly what they need, which enhances their shopping experience and encourages them to return to the store again.
- Increased Sales
A well-planned assortment strategy ensures that the right products are available at the right time. By analyzing customer behavior, seasonal trends, and market patterns, retailers can adjust their assortment accordingly.
This further helps in minimizing the risk of overstocking or understocking, capitalizing on emerging trends, and capturing additional revenue opportunities.
- Reduced Markdowns
Effective assortment planning helps retailers avoid overbuying, which often leads to markdowns and wasted resources.
By accurately forecasting demand and maintaining optimal inventory levels, retailers can minimize the number of items that end up on clearance. This not only saves money but also frees up space for new, fresher products that are more likely to sell at full price.
- Better Inventory Management
Assortment planning allows retailers to manage their inventory more efficiently, reducing the risk of stockouts and overstocks. By continuously monitoring and refining their assortment, retailers can ensure that they have enough stock on hand to meet customer demand without tying up too much capital in unnecessary inventory.
- Enhanced Brand Reputation
A well-curated assortment reflects positively on a retailer’s brand reputation, showcasing its commitment to providing customers with a compelling and relevant shopping experience. Customers are more likely to trust and respect a retailer that offers a thoughtfully selected range of products, which can lead to positive word-of-mouth advertising and online reviews.
Different Strategies of Assortment Planning
There are several strategies that retailers use in assortment planning, including:
- Wide Assortment Strategy
This strategy involves offering a wide range of products across multiple categories to cater to a large number of customers. This approach is typically used by department stores and big-box retailers.
- Narrow Assortment Strategy
This strategy involves offering a limited selection of products, often focusing on a specific niche or category. This approach is typically used by specialty stores and boutiques.
- Deep Assortment Strategy
This strategy involves offering a wide range of products within a specific category or niche. This approach is typically used by retailers who want to dominate a particular market segment.
- Shallow Assortment Strategy
This strategy involves offering a limited selection of products across multiple categories. This approach is typically used by convenience stores and other retailers who want to offer a limited selection of products to their customers.
- Complementary Assortment Strategy
This strategy involves offering a range of products that complement one another. For example, a retailer might offer a range of sauces and condiments that go well with their meat products.
- Substitutable Assortment Strategy
This strategy involves offering a range of products that can replace one another. For example, a retailer might offer both name-brand and generic versions of a product.
- Duplicative Assortment Strategy
This strategy involves offering multiple versions of the same product. For example, a retailer might offer both a men’s and women’s version of a product.
- Expansive Assortment Strategy
This strategy involves offering a wider range of products than traditional retailers in the market. This approach is typically used by online retailers who have lower overhead costs and can afford to offer a larger selection of products.
- Personalized Assortment Strategy
This strategy involves creating personalized product recommendations for individual customers based on their past purchase history and preferences. This approach is typically used by online retailers who have access to customer data and can use it to create personalized experiences.
When To Consider Assortment Planning in Retail
Not sure what’s the optimal time to plan assortment? Below we have shared a few instances where you should consider
- During Product Development
Assortment planning should start early in the product development process to ensure that the products being developed align with customer preferences and market trends. This helps retailers avoid investing in products that may not sell well.
- Seasonal Planning
Assortment planning is critical during seasonal transitions, such as back-to-school, holidays, or summer. Retailers need to plan for changes in consumer demand and adjust their product offerings accordingly.
- Category Management
Assortment planning is essential when managing categories, especially those with complex product hierarchies. Retailers need to ensure that they have the right mix of products within each category to satisfy customer needs.
- Store Remodels or Relocations
When remodeling or relocating a store, assortment planning helps retailers optimize their product offerings to fit the new space and layout. This ensures that the most profitable products are displayed prominently and that the overall assortment aligns with customer expectations.
- Omnichannel Integration
With omnichannel retailing getting traction, assortment planning must now consider both brick-and-mortar and digital channels. Retailers need to ensure that their product offerings are consistent across all channels and that inventory is managed effectively to meet customer demand.
Want to Plan Assortment with Ease?
If you are a fashion retailer and find it hard to manage the complexities around assortment planning, REPLAN is your go-to solution. It not only helps in range and assortment planning but also other aspects of retail planning including merchandise financial planning, Open-To-Buy (OTB), WSSI, allocation & Replenishment.
REPLAN comes with an intuitive interface and powerful analytics capabilities that help you to make better decisions and Planning.
