One of the retailers’ biggest challenges is identifying products that their shoppers will buy. While estimating the right stock amount is the other challenge for them. Getting these too much means tying up capital in surplus inventory and then finding yourself in a situation to sacrifice profit margin forcefully. However, getting too low means missing sales opportunities.
According to an analysis report, the total loss of overstocks and out-of-stocks was $1.1 trillion combined in 2015. Most importantly, this was approx. 7.5% of the overall retail economy.
However, a term assortment planning is here to help retailers turn these losses into profit. Assortment planning is all about choosing the right products and bringing the right quantities into inventory.
However, let’s get into the details of assortment planning below to get a better idea about the things in this regard.
What is assortment planning? Everything you need to know about it
Assortment planning is a strategy to pick up the right product collection to offer in a particular area and specific period. It will look at the seasonality and functional objectivity of the selection of products. So, you and your customers both can gain from their outcome more effectively.
Assortment planning also includes individual product attributes during the selection process to address customers’ needs and preferences. These products’ attributes include:
- Stock keeping unit performance
The assortment plan will also define products to make up segments, categories, sub-segments, and sub-categories.
Assortment planning has become a key strategy for retailers. It is because, over time, retail transitioning has turned into a consumer-driven industry faster than ever. Issues such as identifying the best product mix and choosing the right inventory size are critical of retailers. Perhaps assortment planning can play a bigger role here.
Importance of assortment planning
Optimizing product selection and shelf space within a certain space is always an important concern of retailers. The product assortment is essential for shoppers’ experience and demand generation. However, offering different products and enhancing customer satisfaction are the most effective ways to increase financial performance.
Assortment planning can be an effective approach to optimizing assortments needs.
Even more, with retail channels are blurring, assortment planning has become more vital than ever. It can help whether or not a retailer is relevant in the current competitive environment. A growing number of retailers are considering assortment planning. It helps them to respond well to the local preferences. Also, retailers can offer the right products to the shoppers at the right time and right place.
Factors to consider while developing an assortment planning strategy
A product-centric approach has been engraved deeply into their nature. Therefore, retailers are having a hard time hitting the right place when it comes to assortment planning. However, the answer to this lies in the primary factors such as:
- Category weight
- Brand identity
- Market trends
- Price range along with others.
Each factor coupled with some tangible information can provide a clue to the mystery. In the retail industry, retailers don’t have any crystal ball to know what kind of products shoppers prefer.
Additionally, multiple data sources from different channels come across during assortment planning. Due to this, merchandisers are constantly struggling with strategic choices regarding assortments. However, retailers’ teams have to ride the latest trends in the industry without any risky maneuvers.
However, we have some important tips that you must consider during assortment planning. It will surely help you to make the most out of assortment planning in the best possible way.
So, here we go:
1. Have the right balance of staples and trends
Here is one of the most effective assortments plans that will definitely work for you. Whenever it comes to optimizing assortments, you must stick to the right balance between staples and trendy products. One of the main strengths of this factor is that trend-forward products won’t stay on the shelves for longer.
So, you can sell the trendy products quickly and even at full prices also. However, to attract more customers, you can easily offer a certain discount on older, basic, yet staple products to enhance your sales more effectively.
2. Manage your assortments in real-time
For both brands and retailers, real-time data analysis is the saving grace. It is also helping in assortment planning. This can highlight the active approach to optimizing assortment in real-time. Also, it will allow quick insights into the impact of decreasing or increasing specific products from the mix.
Even more, managing assortments in real-time can also help in managing visibility in the marketplace as well as handling discounts when the time is here.
Additionally, retails and brands can also consider advanced retail solutions to analyze different SKUs in real-time. Assortment planning analytic solutions can be a great help to spot and react to emerging trends. You can do this even before the competition does the same.
3. Be a trend-forward retailer
As retail is being done by uncovering customer insights largely. Therefore, the game plan of merchandising is changing drastically. As per data, retailers who are trend-forward are ahead one step than others. It is because their mindsets are clear. Also, they are focusing more on the integration of demand forecasts and assortment planning.
While for others, there is a risk of leveling the playing field. It is a risk of basically downgrading both the identity and position of the brand. Fortunately, this risk is worth taking. It is because the opportunity for a trend-led retailer who is just entering this environment is massive. With careful analysis and highly desirable updates in real-time, there will be no FOMO.
Overall, assortment planning is an effective way of determining the type and number of products retailers need in inventory for a certain period. Assortment planning can be an effective solution for retailers who are having a hard time buying and managing their product inventory. However, it is highly important to know how to make the best of assortment planning effectively.