Assortment Planning: Boosting Retail Performance

Sweet Spot. Bulls Eye. On Target.

These are some of the most expressive words you might have seen coming out of the head honchos characters from a fictional setting of movies or your favorite Netflix series when a plan comes through just as they would have imagined it. But setting a target and idealizing a plan to achieve it, well, that’s everyone's dream. More so from a retailer stakeholder point of view. An outlet’s strategy has to be on point to maximize its stock-selling potential. This involves knowing the perfect mix and match of different SKUs or offerings that have the best chance of making it to the user's wish list and, ultimately, conversion.

In the realm of supply chain, the phenomenon is known as Assortment Planning. Taking a comprehensive look at the customer's current demand, product variety, present stock levels, and the trends that have been doing the rounds, assortment planning best practices can hold up an outlet in good stead, elevating its standing in a competitive market. The core idea behind the titular process execution is to line up the commodities that have the finest chance of getting the target groups' attention. In this write-up, we will highlight how an analytical approach to the assortment planning process can boost the retail chain.

What is Assortment Planning?

As a strategic approach, the assortment planning gives the stakeholders the smarts to know which products are in demand currently and which others in the catalog can see their demand rise owing to sudden shifts in market dynamics. It also incorporates what offerings have a better chance of succeeding at offline stores and those with a higher conversion rate in the online marketplace. One key benefit of assortment planning solutions is that by studying the demographics and their buying habits, an organization can offer a dynamic range and add immensely to their bottom line revenue.

And to have astute results from a platform that ably does the job, supply chain management needs to ensure that data, including historical data, is updated, and vetted to run the analytics. If done right, the virtues of the said planning process can translate into better sales and more profitability.

How does Assortment Planning Work?

Like with any process, groundwork is of the utmost importance. With assortment planning solutions, quite a few factors need to be aligned for them to be fruitful and have maximum impact.

• Goals & Strategies: Align the objective as it will set the marker for the plans to follow. The stakeholders must be clear about whether their target is profit maximization, increased sales, or customer satisfaction.
• Customer and Market Research: Your action plan shapes itself once you have highlighted your target audience. With thoroughly researched factors like market competition, price range, buying habits & preferences, new product potential & more, an enterprise stands to give itself the best chance to outline its assortment planning.
• Analytics: Data analysis on past sales performance can help identify which product offerings have been getting the most attention and the specific userbase demands during a season to help them chart out better inventory that attracts the highest conversion.
• Customization: A more nuanced understanding of which product performs the best in certain demographics helps the manufacturing leg customize accordingly. This is more true from a fashion retailer's point of view. For instance, a shop near the beach has a better chance of selling tees than woolen clothes.
• Inventory Management: When you know the exact number of sales that might be quantified, logistics are better places to avoid the excess stock or understock of any particular SKU. This keeps inventory management more tuned to the exact requirements.
• Performance Review: A product’s demand might taper off and be replaced by a different commodity in just a fortnight. At this juncture, organizations should be wary of letting go of the momentum they’ve had. Conducting a regular performance review navigates any potential hiccups in an enterprise's ascendancy.

Why is Assortment Planning Important?

To tap into customers’ behavior is a difficult task, and retailers certainly can’t go by their hunch. To quote a famous saying, ‘one size doesn’t fit all’ is perfectly apt on why assortment planning in retail is needed. From determining the perfect mix of product catalogue that are in line to what the target userbase is expecting, to also keeping the offerings true to the factors like demographics or seasonal demands, inventory optimization and maintaining the right amount of commodities, all helps in finetuning a brand positioning in the marketplace. And this is achieved via assortment planning.

What does Assortment Planning Include?

A seamless assortment planning for e-commerce, or a retail shop includes key factors and methods that collectively ideate the best way ahead. Here are the essential pointers.

• Product Variety: A retail shop offers a whole assorted collection that differs in size, color, price, and many more factors. These variations cover the wide array a conglomerate might have to offer. So, cataloging these diverse offerings form one of the significant factor.
• Separate Customer Base: Each customer base represents a different affinity for different products. Studying each faction with respect to their demography, spending nature, and more helps SCM plan astutely.
• Store Mapping: At the end of the day, assortment planning results reflect how well the stores are performing. It’s a factor that needs strategic calculation as well. Organizations, based on the analytics, have to form a roadmap that makes the store footfall ascend and, in some cases, maintain it, too. And this is done by knowing which products or a mix and match works best. Also, the presence of multiple stores in one particular demography should be done knowing that they don’t eat into each other daily transactions.
• Financial Objectives: Setting achievable financial goals helps retailers plan better. This is especially true for assortment planning in fashion, as stakeholders can devise seasonal discounts or sales to attract more interest in the most sought-after products. The same interest can be directed toward the latest commodities that can be sold at their original price, both contributing to the end result of reaching magical revenue.

What are the Challenges of Assortment Planning for Retailers?

Any application adept with data science capabilities requires a considerate approach, keeping in mind the organization's current infrastructure, data capabilities, etc. If left unaddressed, these can amount to considerable challenges in assortment planning platform execution.

• Prioritizing Variety: The key focus is balancing the customers' demands in context with the varied SKUs offered by the company. Since it’s a time-sensitive action, it becomes imperative that stakeholders quickly finalize the best balance of products in the retail outlet, which keeps them on the positive side of the balance sheet.
• Data Availability: To run any analysis, the critical requirement is the collection of historical data, which includes past sales figures, demographic understanding, and trends insight, among others. SCM must pool relevant information that helps machine learning algorithms provide the best sales wisdom.
• Collaboration: Any process requires multiple points of contact for seamless functioning. With assortment planning, too, teams like merchandising, finance, marketing, etc., need to be aligned for disruption-free operation.
• Being Adaptable: Customer preferences are fickle in nature. Their choices define trends, and trends are limited by changing times. So, to steer clear of any guesswork at the later stage, some proactivity is demanded from the management to understand which products will catch the user’s eye.

When to make the most of Assortment Planning?

More than making a valuable addition to the quarterly balance sheet, the leadership's main priority is to maintain that edge that keeps them yards in front of the competition. As an approach, assortment planning virtues are synonymous with boosting a brand's values. Here are many ways that the titular process makes a significant impact.

• Seasonal Demand: Seasonal demands are part of retail operations. And to ensure that your brand moves ahead diligently backed by data insights, assortment planning does the job.
• Store Opening: As a direct channel to present an organization's offerings, assortment planning is the perfect framework for decoding a new store’s strategic location to attain maximum impact.
• Supply Chain Volatility: Assortment planning counters supply chain volatility by helping you plan well in advance what stock to house and what particular SKU will perform well in the upcoming timeline.
• Prepping for Online Channel: Some products get maximum traction through online channels. This is more true for e-commerce websites that employ assortment planning techniques to drive more customer traction.

Assortment Planning with 3SC

Leveraging machine learning models and AI algorithms, 3SC offers a breakthrough platform that elevates your supply chain operations. With our assortment planning platform, we finetune your strategies by studying historical data (sales figures, trends) to chart out the best way ahead for your organization’s sustainable growth. With insights backing up your action plans, 3SCs embed a proactive approach to your value chain that gives your business a competitive advantage with a future-proof approach.