Written by Dion Tong Dec, 22nd 2020
Customer demands and expectations for retailers are increasing faster than ever in recent years. Therefore, you need to have a well-developed assortment planning, or retail planning strategy to provide the best customer experience and achieve your sales targets.
The assortment planning strategy sounds complex and might be new to you, so we are here to give you some insights about it. We will go through what assortment planning is, how it works, its benefits, and how you can improve upon it.
What is assortment planning?
Before understanding the term, you may have a question in mind – “what is an assortment?” The word is defined as a collection of products that a company offers.
Assortment planning in retail is the process of selecting the products that a retailer wants to sell during a particular period to maximize profitability. In other words, it means that retailers decide what merchandise they should buy and market to their customers. It is all about having the right goods in the right place at the right time.
Customers’ satisfaction highly depends on the variety of products that retailers provide. Your customers might get disappointed if the products they look for are out of stock or if the color they prefer is not available. As a result, they will go to your competitor’s store instead.
It is important to note that putting all your products in your store is impossible since the inventory cost will go up. Thus, you should optimize assortment and make retail strategy planning a priority in order to save costs and achieve profit maximization.
What does the process look like?
You may wonder where to start and how the assortment planning process works. Have a look at the following steps.
Research and build a plan
Before building an assortment strategy or plan, you have to first analyze each branch and store’s historical sales performance, followed by identifying the latest trends. You are going to study the items required, such as the cost, average selling price, and the lifespan of a batch of products, to name a few. Retailers can develop a plan according to the data and the information cited.
Store clustering
Store clustering is the process of grouping stores with similar attributes, including location, sales, store size, customer demographics, product features, etc. By doing so, you can apply a similar assortment plan to stores in the same group. More importantly, this step allows you to localize product assortments and promotions to meet the customers’ demand in various regions.
Decide the breadth and depth of assortments
Retailers have to decide the number of items being sold in each cluster. Product breadth refers to the number of categories, while depth is various styles and items in a particular category. It is important to strike a balance between breadth and depth to attract the most customers.
Create a visual merchandising plan
Visual merchandising is to present products in the most appealing way. This forces you to think about what products are placed in the center of the store and what options are located near the cashier. Bear in mind that the purpose of carrying out visual merchandising is to motivate your customers to consume by highlighting each product’s benefits. Again, you should localize your plan for different stores and work on it according to past data.
Double-check and execute the plan
After you finished the above steps, you have to ensure everything is on track. You might want to confirm the colors, styles, quantities are delivering to the right stores, and the plan is aligned with the financial budget. When all the examinations are done, you’re good to go.
How can you benefit from assortment planning?
Assortment planning in retail brings a lot of advantages to your business. We will look into some of the greatest benefits here.
Retain your loyal customers
Instead of guessing, you are making evaluations based on each store’s past sales performance and formulating a plan accordingly. In this way, your loyal customers will find what they want in your store since they might have bought similar items last year and assume that you are providing them this year.
Control inventory spending
When your retail strategy planning is carefully done, you will have an accurate estimation of the assortment needed. Retailers will thus spend money on inventory according to the plan and will not overspend. As a result, we will reduce unnecessary inventory costs and spending. You can avoid misallocation of goods and discard redundant inventory since everything is well planned.
Stand out from competitors
Having a good assortment strategy enables you to know what the hottest products are and put them on your shelves. If you can be the fastest to bring in the latest trend, you can beat your competitors and optimize the foot traffic.
How can you improve retail assortment planning?
To ensure that customers are being targeted, you have to understand what they want in order to satisfy their needs. Here are some tips for you to improve your assortment management.
Have a full understanding of your target customers
It is crucial to understand what motivates your customers to spend and why your customers choose to visit your store. Imagine you are the owner of a grocery store; you are going to include a higher product breadth with low depth instead of the other way round since your target customers might want to find a wide range of products. On the other hand, if you are the owner of fast fashion brands, like Zara or Forever 21, that offer trending styles, you will put a large variety of affordable products, while the assortment plan should be updated frequently.
Work on cross-merchandising
Cross merchandising is the technique of putting complementary goods together to increase sales. When you have decided to sell sandals in a specific store, you may consider displaying sunglasses next to them. Customers are more likely to purchase the sunglasses when they are next to each other since these two items are what your customers need for the summertime.
Spend more time on localization
Localization is the process of adapting your products to cater to the needs of customers in various clusters. This concept matters a lot since your customers have different preferences, needs, and habits. For example, you have a fashion brand; some store locations possibly have an earlier winter than others. During the seasonal transition period, you will need to increase the product variety in particular stores, including summer and fall clothes, while keeping the product breadth normal for other clusters. Only when customers’ demands are met, will they come back to your store, as they associate your store with great buying experiences.
Find an assortment planning tool
There are more and more business software companies that offer merchandise assortment tools nowadays. These tools allow you to respond quickly to changes in trends and consumer behavior. Retailers can free up time, costs, and effort since these systems are going to manage most of the daunting work for you, e.g. predict future demand, inventory management, store planning, data analysis, and so on. CBX Software has lots of experience in helping to streamline your strategic retail planning process and expand assortments. You are always welcome to schedule a demo to better understand how it works.
Identify market trends using different platforms
We have been talking a lot about spotting trends in this article, but how can you do it? Apart from using tools like Google Analytics and Google Ads, you can simply study blog posts, trend reports, Google trends, etc. You may also find the most popular items in each product category on large scale eCommerce platforms, such as Amazon, Shopify, eBay, and so forth.
Get ready and start your next assortment plan
Assortment planning plays a critical role in satisfying customer demand and making key business decisions. It helps to understand what consumers expect and ensure that you are doing the right thing. I am hoping that what we have covered is giving you more ideas about merchandise planning in retail. Our Supplier Management Software allows for you to scale your product ranges and lines through precise product specs, creating seamless collaboration with your vendor partners. It is never too late to work on an assortment plan. Always refer to these tips for improving your strategy and take everything slow if it is your first time. Start your plan right away!