Unlocking Retail Success Through Effective Assortment Planning

Optimizing retail profitability is a breeze when you nail the golden trio: having precisely what customers want, where they want it, and when they want it.

Granted, it’s no walk in the park. However, through strategic retail assortment planning, you can masterfully orchestrate your inventory strategy, capitalizing on demand fluctuations and seasonal trends throughout the year to boost your profits.

Buckle up as we delve into assortment planning. We’ll explore crucial phases, discuss dependable tools and techniques, and share best practices to optimize your assortment plan. 

Let’s dive in.

What is assortment planning?

Assortment planning is the process retailers can use to curate optimal product offerings tailored to individual stores and sales channels for upcoming seasons.

Retailers can plan their product assortment along two dimensions:

• Breadth/Width: This entails determining the number of product types and categories to be featured.
• Depth: This involves deciding the number of variations for each product or category.

A broad yet shallow assortment offers a diverse range of products and categories, each with minimal variations. In contrast, a deep assortment involves a more focused selection of products but with several variations for each.

The importance of assortment planning for retailers

Accurate assortment planning carries substantial benefits across various dimensions, profoundly impacting retail success. Here are some key advantages:

• Alignment with customer preferences: By aligning products with customer preferences, assortment planning becomes a catalyst for heightened satisfaction and loyalty.
• Overstock or stockouts prevention: A well-executed assortment plan mitigates the risk of overstock or stockouts, reducing carrying costs and ensuring consistent availability of popular items.
• Sales and profits boost: Accounting for seasonality and market trends in assortment planning directly contributes to increased sales and profits.
• Agile adaptation to market trends: Assortment planning facilitates quick adaptation to evolving market trends and changing customer preferences, ensuring sustained competitiveness.
• Improved brand image: A carefully curated product mix enhances brand image, creating a distinct identity that resonates with customers.
• Operational efficiency and cost-effectiveness: Assortment planning streamlines internal processes such as procurement, distribution, and marketing, fostering smoother and more cost-effective operations.
• Elevated profit margins and value: By minimizing the need for excessive discounts, assortment planning helps preserve profit margins and uphold the perceived value of products.

Challenges of assortment planning

Next, let’s discuss the multifaceted challenges retailers may encounter during the assortment planning process:

• Dynamic market demands: The swift evolution of consumer preferences and market trends requires retailers to continuously reassess and recalibrate their assortment plans to stay relevant.
• Inventory management pitfalls: Miscalculating the needs and desires of consumers can have serious repercussions on inventory management. Too many of the wrong items result in surplus inventory, leading to substantial costs for storage and management.
• Discounting issues: Excess inventory prompts heavy discounts, eroding margins, and tarnishing brand reputation, creating a cycle of anticipated end-of-season bargains.
• Missed revenue opportunities: On the flip side, inadequate stock of popular items leads to missed revenue chances, frustrating loyal customers and hindering sales. 
• Brand image erosion: Frequent discounting harms brand perception, potentially diminishing its value in the eyes of consumers.
• Customer loyalty at risk: Persistent out-of-stock situations frustrate customers, risking erosion of long-term brand loyalty.

Ten key steps of a solid assortment planning process

At this point, you’re likely wondering how to create an assortment plan for your retail business. We’ve got you; here are the main steps of effective assortment planning:

1. Data analysis and research

Begin by collecting and analyzing historical sales data, market trends, and customer preferences. Conduct thorough market research to comprehend the competitive landscape and emerging consumer demands.

2. Goal setting and strategy development

Define clear goals for your assortment plan, taking into account factors like revenue targets, customer satisfaction, and market positioning. Develop a strategy outlining how the assortment will align with overall business objectives.

3. Category and product segmentation

Categorize products based on type, seasonality, or relevant factors. Further, segment them to determine the appropriate breadth and depth of the merchandise assortment.

4. Forecasting and demand planning

Use forecasting models to predict customer demand for each product category. Factor in external influences like economic trends, seasonality, and market events in demand planning.

5. Assortment selection

Choose specific products and variations for your retail assortment, emphasizing a balance between breadth and depth. Aim for a diverse yet focused product mix.

6. Supplier and vendor collaboration

Collaborate closely with suppliers and vendors to ensure the timely and efficient procurement of selected products. Negotiate terms, pricing, and delivery schedules to optimize the supply chain.

7. Visual merchandising and presentation

Plan your assortment’s in-store or online presentation to optimize visual appeal. Consider elements like product placement, store layout, and overall aesthetics.

8. Monitoring and adjustment

Establish a system to monitor sales performance and gather customer feedback to optimize your assortment planning. 

To start, initiate feedback loops with customers, sales teams, and stakeholders. Evaluate the success of the assortment plan against goals and identify areas for improvement based on real-time data and market changes.

9. Seasonal and trend adaptation

Anticipate and plan for seasonal variations and emerging trends. Adjust your product assortment to align with evolving customer preferences and market dynamics.

10. Inventory planning and management

Implement effective inventory management practices to prevent overstock or stockouts. Use inventory turnover metrics to optimize stock levels and reduce carrying costs. You can also explore advanced tools like Inventory Planner for smarter insights, including forecasted profit and past revenue impact due to stock issues.

We’ll be covering assortment planning tools and best practices in more detail below.

Tools and techniques for effective assortment planning

Below are the different tools and techniques you can use to improve your retail business’s assortment planning efficiency:

Data analytics and business intelligence for informed decision-making

• How it works: Analyzes historical sales data, customer behavior, and market trends to help identify top-performing products, understand buying patterns, and predict future demand.
• Tools: Tableau, Power BI, or custom-built analytics platforms.

Market research software to collect insights into external market dynamics

• How it works: Examines competitors, consumer preferences, and emerging trends to align assortments with market demands.
• Tools: Nielsen, Euromonitor, or custom market research solutions.

Inventory planning software to optimize stock levels and lower carrying costs

• How it works: Uses algorithms and demand forecasting to determine the right quantities to order, minimizing overstock and stockouts.
• Tools: Inventory Planner, Blue Yonder, or Oracle Retail.

Assortment optimization tools for well-rounded assortment planning

• How it works: Analyzes sales data and customer preferences to aid in selecting the optimal mix of products.
• Tools: JustEnough, Symphony RetailAI, or RELEX Solutions.

CRM to ensure customer-centric assortment planning

• How it works: Tracks customer preferences, aligning assortments with individual customer profiles and improving overall satisfaction.
• Tools: Salesforce, HubSpot, or Zoho CRM.

Supplier collaboration platforms to streamline supplier communication 

• How it works: Facilitates collaboration, ensuring timely deliveries, negotiating terms, and maintaining a smooth supply chain.
• Tools: Ariba Network, SAP Integrated Business Planning, or TradeGecko.

6 best practices to optimize assortment planning in retail

To optimize assortment planning, you can implement the following best practices to enhance your product assortment planning strategy:

Identify the right suppliers

A reliable supplier ensures consistent inventory delivery and maintains product quality. This reliability has a threefold effect: it prevents operational disruptions, contributes to positive customer relations, and lowers the risk of sales loss to maximize profits.

Observe shopping habits and patterns

Observing the shopping habits and patterns of online and in-store shoppers is equally essential. 

In-store observations regarding purchased items and customer inquiries provide valuable insights into customer behaviors, while online browsing analysis helps retailers better understand customer preferences, facilitating a more tailored and customer-centric product mix.

Consider seasonality

As a retailer, you must align your assortment planning process with seasonal variations in customer demand. This includes adjusting assortments to meet specific customer expectations during different times of the year, ensuring relevance and appeal.

Plan for cross-merchandising

Cross-merchandising is a strategy to enhance product assortments further. By adding complementary products that align with seasonal offerings, you can create a more cohesive shopping experience for your customers and maximize customer spending. Think: pairing back-to-school supplies with children’s clothing or cereal with milk or yogurt. 

Also, leverage historical point-of-sale data to identify products frequently purchased together.

Balance staples and trendy items

Aim to strike the right balance between perennial bestsellers and emerging trends to ensure a dynamic and appealing product mix. Incorporate hard-to-resist styles to plan for impulsive buys, enriching the assortment and boosting sales.

Analyze your retail inventory 

Executing inventory analysis is another crucial ongoing practice. Regularly assessing what’s selling and what’s not provides valuable insights. Take, for instance, using real-time reports from Inventory Planner. These insights enable you to make informed decisions about adjusting assortments based on brand or variation in product performance alone.

Another important factor to round out effective assortment planning is strategic lifecycle considerations. Here, you factor in your products’ lifecycles and seasonality. To ensure a relevant and attractive product mix, focus on widening or narrowing assortments based on customer expectations during different times of the year.

Key Takeaways

Assortment planning is a cornerstone strategy for wholesalers, retailers, and e-commerce businesses, providing a data-driven approach to curating product offerings to specific stores and sales channels. This planning method harmonizes the breadth and depth of your stock to align customer preferences, enhancing satisfaction and loyalty while also limiting overstock or stockout situations. Retailers who master this art not only bolster sales and profits but also streamline operations and cultivate a strong brand image.

To navigate the complexities of assortment planning, retailers should adopt a structured approach. This means leveraging tools such as inventory planning software, performing rigorous data analysis, collaborating closely with suppliers, and staying on top of seasonal trends and customer behaviors. By doing so, retailers can craft assortments that resonate with consumers, optimize inventory levels, and drive sustainable growth in a competitive marketplace.