Magazine Article | June 18, 2008

Assortment Planning: The Science Inside The Retail Store

Source: Innovative Retail Technologies

Retailers may want to consider the science of assortment planning software to assist in offering optimal product selection.

Integrated Solutions For Retailers, July 2008

The pressure is on. Constantly expanding product choices, multiple selling channels, and escalating consumer expectations are challenges many retailers face in building profitable, consumer-focused product assortments. In today's merchandising environment, the commonly used hierarchical and territorial buying strategies sometimes aren't enough when it comes to offering consumers the optimal combination of brands, colors, styles, and sizes. A growing number of retailers recognize they can integrate the traditional art of buying with the 'science' of product selection to assist with this task. Aligning the art and the science means that assortment decisions must be made in an organizationally consistent manner, so that spreadsheet supported processes must be examined, and only the most useful parts blended into updated software applications.

As technology advanced, a shift in consumer decision making influenced buying patterns. With the ability to research and purchase a virtually unlimited selection of products via the Internet, many consumers are no longer content to simply choose from a given selection in a particular store. At the same time, evolving local needs and nonintuitive preferences also make it difficult for retailers to satisfy customer requirements. The first challenge for retailers is to identify consumer preferences as accurately as possible. This can be done by capturing decision-making data from a variety of resources, ranging from in-store product performance to social networking options. Retailers can then use this information to create differentiated, customer-appropriate, and profitable assortments — which will, in turn, require a shift in assortment planning strategies.

Many assortment planning processes can be subjective, disconnected, and time-consuming. In some department stores, for example, individual buyers may work independently from each other, as well as from merchandising and planning operations in complementary categories. As a result of this approach, it can be difficult to optimize the merchandise assortment in a given location or across the enterprise, or to determine the correct amount of floor space for the ideal mix.

Remove The Guesswork From Product Assortment
One option for retailers facing these issues is assortment planning software. This software offers the ability to produce flexible, customizable solutions. In light of the need to integrate and manage increasing volumes of data, the science of assortment planning software can act as a powerful ally to retailers, helping to increase productivity by aligning assortment planning with consumer preference. Assortment planning technology can sift through multiple options to generate plans based on product hierarchy or product attribute, such as theme, collection, floor set plans, or promotions. The software can also calculate optimal quantities based on space, rate of sale, initial distribution, and other user-defined parameters. Software tools can support coordinated decision making across typical hierarchical boundaries, as well as through the phases of the assortment planning process, including floor space allocation.

Integrating the science of assortment planning technology with the art of buying can also address another key issue: performance validation. Assortment planning solutions can incorporate analysis and review capabilities to allow analysis of assortments across every product and store characteristic, which can help retailers drive margin and sales. Due to today's competitive pressures, retailers simply must find a way to align product presentations with localized customer preferences — in every store and every department.