Assortment planning is the process by which retailers determine what products to offer to customers and how much stock they should keep of different SKUs and other similar decisions. This can be a complex process if the retailer happens to be a chain of stores and also sells products across multiple channels.

Product assortment planning in retail is of vital importance. This planning needs to take into account various factors –  an analysis of historical data of product movement across different stores, analyzing sales data, gaining insights from customer preferences, making decisions based on category roles, determining stock allocations across different stores and so on.

Why is Product Assortment Planning A Difficult Task?

Assortment planning in retail involves so many different factors. Tracking all the relevant data and factoring them all into the decision making process can be a huge and challenging task. Product assortment planning at the basic level has to take into account the following elements:

Category Roles

Retailers divide products across four basic categories – Destination, Core or Routine, Convenience, and Seasonal.

Destination Category: This are the categories the store wants to specialize in. They want to position themselves as the go-to store in these categories, offering the best selections in items, all of the best quality. They want customers to say that they visit this store exclusively for these products.

Core or Routine Category: This category comprises of products that are in high demand across all stores and throughout the year. The product segments can be wide and the SKUs deep in this category. More shelves are allocated to products in this category and the prices are competitive to attract repeat customers.

Convenience Category: Products in this category are not displayed prominently, these are secondary purchases the customer makes after the destination and core category items. These products may have higher margins on them, as customers do not generally compare prices for these items.

Seasonal Category: These are products that are in high demand during a particular period of time, but the demand dwindles down at other times. Sweaters in winter, Valentine gifts in February are some examples of seasonal products.

Store Clusters

A chain of stores can’t just make one-size-fits-all purchasing decisions. Stores in a chain are divided into clusters based on many factors. Stores generating high-volume sales can form a cluster. Clusters can also be determined by demographics of customers, type of products that move fast in different stores, etc. Different store clusters require different product assortments.

Store Space

Store space is a limiting factor in deciding product purchases. Even for high demand products, product assortment planning has to take in the total space available across store clusters. The available store space has to accommodate the different categories of products, and some receive more focus like Destination and Core category products.

Customer Focus

A vast amount of data is now available to study customer preferences – market buying trends, and customer opinions though reviews, feedbacks, and social media. This is besides In-store data. Now, customer behavior can be analyzed thoroughly using software that provide product assortment planning modules. This is then used to determine the type of products to stock across various stores and the stocks to keep of different SKUs so that popular products do not go out of stock quickly.

The Competition

Product assortment planning also has to consider the performance of the competition and the inventory changes they make, to stay ahead. Gathering data on local and online competitors can be a difficult task, but needs to be done if your store wants to stay competitive and even become the leader in certain categories.

This is just an overview of Assortment Planning, which can involve even more elements. Keeping track of all these data and analyzing them to arrive at the right decisions can be a daunting exercise, which most retailers choose to avoid. Many retailers even now rely on older Assortment Planning Models and instinct based decisions to drive their assortment planning. However, a good Retail oriented software with a well implemented product assortment planning module can help make these decisions more accurate.

These kind of software have the ability to analyze internal data and also access external data like competitor’s performance and stock strategies. They can also find ways to access customer data outside of your stores, like customer reviews of various stores, products etc at review sites and at social media sites. All these help provide a broader picture for decision making. A product assortment planning strategy devised with the help of such software can help you stock items that keep customers happy and avoid problems like understocking and overstocking.