Assortment planning is the process of deciding on the product mix you want to stock in your store, and how much of each product/SKU to stock. This process takes into account many different aspects of your business.

Assortment Planning – What it Involves

When planning merchandise assortment, you have to consider various factors. It begins with your brand positioning:

Brand Image: Your brand image is a vital factor in deciding your merchandise assortment.  It will help you decide your product selections and your price points.

So how do you see your brand – as an exclusive high-street label, or a brand focusing on a wider market, offering more choices at different price ranges? As an economy brand that provides value items to customers at affordable rates? You will have to define your brand positioning and then select those products that fit within your image.

Once you have decided your brand positioning, then focus on your sales model within this. Do you want to sell only exclusive top-brand, high-price fashion items that have a short product life cycle? Or you want to sell top brands in limited-time sales to members, at discounted prices? Will you be focusing on seasonal products? In these cases, your content or product mix is more important than stock levels and prices. Customers won’t be too upset by your running out-of-stock, they expect these items to be exclusive and scarce. Price tags will not bother them either.

If you are focusing on a traditional sales model, selling staples that have a longer product life cycle, your stock levels will be important and so will prices. You will offer a wider choice of merchandise at different price points, and ensure that you always have stock on hand for the popular SKUs.

Demand Forecast: This is a complex process, and not 100% accurate. However, you can arrive at good estimates, based on your historical sales data, and market trends. Look at the items that have sold well in the past. Have some items brought in higher profit margins? They may be worth retaining even if their sales volume has not been large. If certain items have sold in huge numbers, what factors increased their sales? Did you sell an SKU only after providing deep discounts? Is that item worth retaining or should you discard it?. Has another item that was new last year sold well after just a small period of initial promotion? Can you consider adding identical or similar items this year?

Then you have to consider market trends. Have customers moved away from a certain type of product that was popular last year? Is a new style of product trading now, will its market last long enough to be worthwhile? Are your competitors offering certain products that you do not usually stock, are they selling well? Should you add these, do you see continuing demand for them? Will it be suitable for your customer base?

Sales Channel Constraints: Do you sell in physical stores, through online stores?

If you sell in a brick & mortar store, will your floorset/visual merchandising infrastructure impose limits on what you can stock? Will you have to rearrange your store if you plan on adding a lot of new items? If you are a retail chain, what product assortment will you plan for different store clusters, and how much stock of each SKU will you allocate for each store?

If you have an eCommerce setup, will your warehouse and delivery system or your fulfilled centers be able to handle any new sets of products you are planning to offer? Will you have to invest in new warehouses and other related infrastructure? Will you have to revamp your site navigation or will just adding a few new categories/subcategories be enough?

If you sell through catalogs, will you have to add more pages and will your established catalog page design be adequate to present all product details?

Financial Goals: Your assortment planning will also be affected by the sort of financial goals you have. Do you plan to increase sales? Maybe you will need to add SKUs that are popular in the market. If you want to increase profit margins, you may want to bring in a few more exclusive, high-price items and eliminate a few of your economy products.

Locations and Channels: Once you have decided on your overall assortment, you need to break it down into assortment plans for your store clusters, your different sales channels, etc. What product categories do you wish to sell in your different store locations, though your different sales channels like physical stores, online stores etc?

Assortment Planning can be a complicated and tedious process, but you can make your life easier by implementing a good Assortment Planning software that uses AI, to learn and adapt with time. A SaaS solution like Intelligence Node’s retail suite can be a good choice, to streamline your product assortment and increase revenue and margins, and also improve customer satisfaction and customer retention.