As soon as you enter a retail business or visit an online store, there’s a strategy behind everything you see.
From where and how products are placed on the floor and endcaps to the layout itself, brands have a goal in mind: they want you to buy.
In a nutshell, this strategy is defined as assortment planning.
Product assortments and store clustering might also reflect changing seasons or months depending on the retailer. For example, fashion retailers are more apt to display swimwear before or during summer rather than during fall or winter.
During the early planning stages, retailers use demographics and metrics data to forecast customer demand while also thinking about how to drive sales.
Then, as new products or carry-over inventory is considered, planning details are finessed and strategically placed throughout the store in a way that makes sense to a shopper.
There are added benefits to retail assortment planning. Advantages include:
- Helping avoid inventory risks and dead stock
- Encouraging healthy margins
- Forecasting trends and providing the best assortment of goods
And as necessary as it is for physical retail stores to implement assortment planning into an overall strategy, it’s equally as important to apply those same practices to ecommerce shops and online stores to drive sales and optimize conversions.
Why is assortment planning important?
At the core, assortment planning helps retailers understand which products to place in a store or online layout and where they’ll do best.
Retail stores with more than one location might approach assortment planning differently depending on locations or shopper demand.
For online retailers, in particular, assortment planning helps similarly: it helps brands determine which products to feature and what options for bundling.
Moreover, collecting sales data from previous purchases helps in the assortment planning stage, as brands can better forecast the demand for new products.
Assortment planners also make retail operations and replenishment more efficient, too.
Instead of just focusing on products, brands can consider variations within a different product category or segment. This might look like offering trending colors, a range of price points, and expanding SKUs of a brand that are in high demand.
Shannon Stewart, chief product officer at Harry Rosen, strikes a balance between offering an assortment without going overboard with options.
“If it’s a basic essential item like a polo shirt, we know customers want to see multiple options because they are usually purchasing more than one – perhaps to update their white polo each summer and then a couple more “fun” colors to enjoy for the season,” Stewart explains.
“Looking at bigger investment pieces, such as a shearling coat or a suit, we might keep the item very special and only offer the fabric in one color. This way, it takes some of the guesswork out of the purchase for the client – we are letting the client know we are confident in the option and no other choices are required.”
Key takeaway: assortment planning helps retailers (and online stores) optimize elements that increase conversions and spur impulse purchases: visual appeal, layout flow, and product placement, for example.
Assortment planning and Average Transaction Value (ATV)
Despite the massive online sales boom, shoppers still spend more on in-store shopping. For that reason, implementing an assortment strategy can impact a retailer’s ATV while boosting customer satisfaction.
Assistance while shopping: there’s more opportunity for sales assistance, which increases the likelihood of an associate recommending products at a higher price point or showcasing complementary products designed to what a customer is looking for.
Impulse buying: how many times have you walked into a retail store only to come out with everything except what’s on the list? This is good assortment planning in action. As shoppers wander through aisles and experience visual merchandising, they are likely to buy more than they came in for.
Product discovery: assortment planning and forecasting help keep product selection fresh. Aside from replenishing popular items, it enables retailers to introduce and incorporate new brands frequently.
While these examples are geared toward physical retail stores, many of the same elements can be modified and applied to online stores, too, as a way to increase ATV.
Best practices for assortment planning
What are some of the best practices to consider with assortment planning?
Create distinct retail and ecommerce goals when planning.
As with any strategy, the first step to start with assortment planning is determining the goal.
Are you aiming for a sales target or looking to increase conversions? Understanding the end game will help your team create a visual merchandising guide that aligns with those goals.
Use past sales data and consumer trends to forecast assortment needs
Past sales data plays a big role in assortment planning for both online assortments and physical retail stores.
Did certain products sell better than others? Do best-selling products have anything in common? Are shopping trends pointing to certain characteristics or products the brand wants to incorporate during specific times of the year?
These are all questions a retailer should consider during the assortment planning process. However, past sales data shouldn't be the only determining factor for your assortment needs. As we've written about before, retailers who rely solely on past sales data can have an inaccurate picture of how many SKUs of each product they need.
To avoid falling into this trap, look at where consumer behavior is trending. You can collect this data by looking at customer searches on your ecommerce store and analyze the volume of searches for different SKUs over time. You can also share demand data with your suppliers and get their feedback on whether they're seeing similar trends from other retailers.
Think like a customer
When customers walk into a store (or shop online), they often look for a general item.
Maybe they aren’t sure about the color, pricing options, or size of said item, but that’s where assortment planning comes in.
Cohesively organizing inventory helps make the buying journey that much easier.
There’s also a process customers go through when shopping. For example, shopping for a coat might look like this weight > material > color > size.
When customers easily find what they’re looking for, there’s a better chance they’ll make a purchase.
Stewart implements a similar process at Harry Rosen.
“Assortment planning is approached from several different angles. In the case of our business, we look at satisfying the lifestyle needs of our clients – work, play, event, etc., and then within each of those lifestyle needs the components of a wardrobe,” Stewart shares.
“Within the components of each wardrobe are the various styles required, along with fabric, color, and fit options in each of those products. We also need to consider size assortments and ensure we can fit as many body sizes as possible.”
Assortment planning is approached from several different angles. In the case of our business, we look at satisfying the lifestyle needs of our clients – work, play, event, etc., and then within each of those lifestyle needs the components of a wardrobe
Plan your assortments to influence impulse purchases
Assortment planning, when done correctly, can increase product awareness across different categories.
Shopping for a barbecue? Placing a display next to outdoor furniture entices customers to consider revamping their entire outside deck. Picking up some office supplies or back-to-school goods? Highlighting promotions like buy-one-get-one gives shoppers a reason to pick up more than they came in for.
Tip: Looking at data from some of the strongest-selling items in-store and online can help you narrow down where customers are going when they shop and use that to promote new or trending products.
Tools for assortment planning
Assortment planning helps keep retail offerings fresh based on market trends. So what do you need to get started?
Consider some of these options:
- Spreadsheet templates (such as Airtable): listing names, high-quality images, manufacturers, and other product details will help you track and manage an inventory more efficiently. Depending on the store size, something as simple as an Excel sheet is sufficient, or you might opt for a platform that offers more functionality and data to help make assortment decisions.
- Planograms: when you want more detail, planograms help visualize the space and provide valuable information related to the inventory, such as supply data and space allocation.
Onboarding speed is critical for digital storefronts.
Convictional helps streamline the process, so it takes only a fraction of the time (literally minutes, not months!) to get dropship vendors connected and ready for customer shopping.
Next steps for assortment planning [and pitfalls to avoid]
Businesses need to have a finger on the pulse of what customers want or risk a significant loss in traffic and revenue. When going through assortment planning, keep these recommendations in mind:
Connect with inventory management platforms
Since omnichannel is now a must, retail and ecommerce brands need to find ways to accommodate various logistical demands.
Inventory management tools help monitor stock levels, so you are always up-to-date, regardless of where the customers are ordering. Plus, with fluctuations in the supply chain, it’s crucial to get ahead of demand across all business channels to maintain sales and customer service expectations.
Monitoring stock levels is critical so that you avoid stockouts in your physical and digital assortments. Stockouts are a major inventory risk and cost retailers an estimated $1 trillion every year.
Leverage dropshipping to mitigate inventory risk
Inventory forecasts aren’t always accurate, so teams must look for ways to mitigate issues related to excess inventory or elevated demand.
Over the last few years, merchandise planning for physical and retail stores has been a complete rollercoaster. One of the biggest challenges for merchandising teams and small businesses is knowing what to offer and when.
Retail stores across the board are seeing profits dip due to excess inventory markdowns, while others are seeing increased demand for products and can’t keep up with demand. An option? Moving select product categories to a virtual inventory model like dropshipping.
Combining a retail merchandise planning strategy with dropshipping is a powerful solution for businesses wanting to boost profit margins and exceed financial objectives.
Make your assortment plan more flexible with Convictional
Having the right assortment is critical to fulfilling your customer promise.
But you might not have the working capital, the storage capacity, or the labor needed to provide all the products that contribute to a robust assortment for your customers.
Convictional provides a low-cost, high-value approach to delivering an assortment that adapts to your customer's tastes effectively. We help you automate your dropship operations so that you can expand your assortment without adding headcount.
Whether you want to onboard a vendor that's on Shopify or EDI, Convictional helps you sync their product and inventory data to your store in minutes. Get started by contacting our sales team today.
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