What is Assortment Planning in Retail: Create a Winning Strategy

As a retailer, picking the right products at the right times, and in the right quantities, can make or break your success in any given season. When your assortment plan aligns with market demands, you’re more likely to see higher conversions and better margins. But, if your retail assortment planning efforts fall short, you’ll be left with disappointed customers, excess inventory, and wasted costs.

Here’s what retailers need to know about assortment planning — from what it is and what factors go into it, to how you can leverage artificial intelligence (AI) to optimize this critical process.

What Is Assortment Planning in Retail?

Assortment planning is a process retailers use to determine what product categories and styles to stock and in what quantities. The ultimate goal is to optimize product selection and increase sales.

Importantly, assortment planning is not limited to buying. It involves factors such as digital or visual merchandising, store location, and customer demand to drive the highest conversion rate. Planning efforts must also work within business constraints ranging from budget and store size to realities of the supply chain like manufacturing capabilities and vendor relationships.

Why Is Assortment Planning So Important for Retailers?

The fashion cycle moves fast, so it’s important for retail businesses to carry the right variety of styles in the appropriate quantities to meet consumer demands at every moment and seize every sales opportunity. As a result, there are many benefits to a streamlined assortment planning process.

With the right strategy in place, a retailer can minimize out-of-stock products and missed conversion opportunities. Plus, with the optimal product assortment, stores can avoid cutting into their margins by discounting excess merchandise as needed. 

Optimizing assortment planning improves operations across the supply chain. It makes retail operations more efficient by helping to reduce costs and improve profitability. In addition, enhanced planning can guarantee the most profitable and effective use of available retail space — whether in physical store layouts or across digital properties.

A solid assortment plan also means retailers have a deep understanding of their customer base — from what trends they’re most likely to buy to the circumstances under which they’re most likely to convert. This level of insight can have a positive impact on other activities from how a retailer markets their products to how they craft the ideal customer experience online and in stores.

5 Considerations for an Assortment Planning Strategy

There’s no one-size-fits-all way to get assortment planning just right. It depends on what type of products a business sells, how it forecasts demand, and what level of complexity and sophistication its internal processes have. 

Despite these nuances, all retailers should consider these factors when refining their assortment strategy:

1. Assortment Width vs Depth

The retail assortment planning process addresses both the breadth and depth of product assortment. 

Width or breadth relates to the number of distinct categories and product types. A fashion retailer with a wide assortment may carry a smaller number of products across a larger number of categories such as jeans, tops, jackets, and shoes.

Depth describes how many variations there are for each product type or category. Variations include colorways, size options, price points, brands, and other characteristics. A shoe store would have a deep assortment and carry many different brands and styles within the shoe category, as well as related sub-categories like sandals, sneakers, and dress shoes. 

However, all retailers have to address both dimensions during the assortment decision process. Achieving the right balance of variety and variation will ensure customers can easily find products they love and that no inventory is going to waste.

2. Planning for Physical vs Digital Retail Environments

Retailers with multiple physical locations will adapt their assortment planning approach based on local factors to ensure each store generates the most conversions possible. Moreover, an assortment strategy designed for physical stores will take different factors into consideration. These factors will naturally be different to those considered in one intended for ecommerce merchandise planning.

For brick-and-mortar stores to be as profitable as possible, retailers place an emphasis on local consumer needs, preferences, and buying behaviors to create a localized assortment. For instance, a clothing store in a hot climate wouldn’t stock a lot of heavy winter apparel. This would be despite the fact that the retailer might sell those products online and in other regions. Other factors like local shopper demographics and buying power could influence inventory decisions as well. 

Retailers can use a store clustering strategy to group locations with similar characteristics together. They can also apply a similar assortment plan across that store cluster. These sections can be determined by customer traits or geographic location. The sections can also be based on performance-based characteristics like store size and monthly sales.

Online stores, however, need to appeal to a global consumer base. This is regardless of whether they’re strictly ecommerce or part of an omnichannel retail operation. Assortment planners must look at their ecommerce properties as unique environments with distinct audiences. Down the supply chain, logistical considerations related to warehousing and distribution take the place of store size and layout.

3. Accounting For Seasonal and Evergreen Products

A retail assortment strategy is an important part of pre-season planning. It may occur at any period. It depends on how a retailer defines its seasons and how frequently new inventory is introduced. For instance, a fast-fashion retailer will work at a faster, shorter cycle compared to a furniture retailer that follows quarterly seasons.

Retailers will need to consider the length and cadence of this cycle. They will also need to plan for replenishing popular items as well as introducing new trends. Most retailers ensure their product mix strikes the right balance between fresh, new products and best-selling items that customers frequently purchase, regardless of seasonal fluctuations. A strong assortment plan will identify the most profitable opportunities across both categories.

4. Leveraging Cross-Merchandising Tactics

Individual products should always be evaluated in the context of the overall product catalog. Strategic assortment plans should take into consideration how products relate to each other. They should also account for how products can be merchandised in an effort to increase basket size.

For instance, a retailer with a wide assortment is well-positioned to offer product suggestions that help shoppers accessorize or complete a look. They can leverage digital and visual merchandising opportunities to ensure consumers discover more great products. This can ultimately inspire them to make a larger purchase. However, products across the catalog should be compatible so that suggested pairings are compelling and profitable.

5. Optimizing Assortment Planning With AI

At scale, manual efforts can only get retailers so far. AI tools can help automate and optimize parts of the assortment planning process.

Greater catalog intelligence can help decision-makers surface historic trends in a granular manner. For example, they can trace the popularity of certain patterns, sleeve lengths, style occasions, fits, materials, and other relevant attributes. 

A smarter catalog can also help retailers generate more accurate demand forecasts. Moreover, it can rapidly identify evergreen best-sellers and the most in-demand product variations, like the most frequently bought clothing sizes and fan-favorite colorways. 

Advanced AI tools can dive deeper into the customer journey to help retailers understand consumer behaviors. They can also pinpoint what product attributes and merchandising tactics inspire buying decisions. Ultimately, this empowers retailers to drive higher conversions and profit off of every possible opportunity.

To learn more about how ViSenze’s AI-powered Discovery Suite can help your business achieve greater insight and assortment optimization, get in touch with our team today.