The magic of assortment planning: why and how to implement it

Every eCommerce business without exception focuses on sales results, or more precisely - on increasing them. Reaching new industry peaks, however, is not possible without wise management of products and other existing resources - stocking the store for high season, and having goods distributed in appropriate warehouses and locations at the right time.

Somewhat simplistically, the process of getting the above factors under control is called retail assortment planning in the industry. In this article, we'll look at how to optimize assortment planning, how the basic approach differs from the seasonal approach, and what factors contribute to speeding up the decision to implement this process.

Retail assortment planning: the role of products (and clients' behaviour) knowledge

In retail, we all have the same goal and focus on ways to increase sales. Every retail business without exception, selling different products has actually a slightly different target group, and thus also different planning needs. Regardless of what you trade, however, one factor remains equally important - wise management of the supply chain. Basically, every customer buying in any industry wants to get his order as quickly as possible and be able to choose from the widest possible assortment.

So what exactly is the fabled assortment planning? It's nothing more than strategic decision-making about what products to sell, and where to sell them - based on historical data, trends related to the seasonality of sales of a given product (if any), and based on the geographic location of the store or warehouse.

To put it more simply and figuratively - imagine that you are for example a clothing store. Thus, in the hot summer in Spain, you bet on selling airy dresses, in the winter in Canada - on down jackets, and regardless of the location, in November you put on sale Halloween costumes.

The assortment planning process thus consists of two aspects:

• material merchandising (further staying with the example - the type of jackets or dresses);
• quantity merchandising (eg. the number of products manufactured and stored).

Sounds simple? Only in theory - remember that seasonality also means getting ready for such a sales world as the well-known Black Friday, Cyber Monday, or Christmas! Of course, in this case, the fact that it is difficult does not mean that it cannot be done correctly - tips on how to properly take care of sales and logistics in high season can be found in our ebook.

Assortment planning: when you definitely need to work on it

On the one hand, assortment planning seems at first glance to be something real, making it possible to de facto run a resale business at all. On the other hand, the focus on smart inventory management is eminently important, especially in the context of the situations described below.

1. Too many SKUs

Theoretically - the more SKUs, the faster the company's growth at first glance. However, the situation is not black and white: too many SKUs can negate potential profits, contrary to expectations. As usual, the ideal solution is to find the golden mean and rationalize the number of SKUs, maintain control and bet on selling the most profitable items.

2. Excessive stockpiling

Deadstock is a serious problem that many companies face (as well as obsolete inventory). Another, counterintuitively similar challenge is.... sales, especially those conducted on the regular basis. If you organize them and the demand for the products included in them does not diminish - remember to replenish the assortment on a regular basis to keep up with sales and not force customers to wait too long.

3. Lack of warehouse space

Storing all the products you sell as your business grows can cause eCommerce owners a real headache - especially if they take care of them on their own rather than using external fulfillment providers. Those vendors can really simplify the sales life and take the burden of having to take care of logistics off the shoulders of the seller. However, if you nevertheless made the decision to embrace the stocking issue yourself, remember that the proper assortment planning will also take care of warehouse capacity and adequate shelf space.

Pssst... if you want to read more about smart warehouse management be sure to take a peek at the text about hacks to improve warehouse efficiency.

How to control assortment planning properly? Retail strategy tips and tricks

Retail assortment planning can be tricky. To do them well you need to collect a lot of actionable insights, and pieces of data, and focus on customer service improvement.

The most important thing you need to focus on is further optimization and ... very accurate analytics. Collect and analyze data - about customer needs, those related to seasonal trends, or product performance. Based on them, you will be able to predict exactly what stocks you have to check for the upcoming sales periods. Nowadays, you don't have to do it manually - take advantage of the goodness of technological development and solutions dedicated to ecommerce analytics based on, among others, artificial intelligence.

More specifically, focus on data important for retail industry such as cost and revenue per unit for a particular SKU, inventory turnover rate, or lead times.

Secondly, set realistic goals. We know: sometimes customer needs are kind of unrealistic; try to work on them after all. It is a good idea to divide a large goal (improving sales by x percent) into several smaller steps correlated with the main goal (e.g. optimizing the product selection within one smaller, previously defined category).

In addition, in order for even the best-considered assortment plans to work properly, you need well-organized logistics at every stage of the supply chain. We truly recommend that you leave it in the hands of professionals, thanks to which you will not have to worry about the limited supplier capacity or long lead times. In cooperation with a fulfillment provider, you will handle shipment, order management, and returns handling processes.

Remember: none of these above-mentioned factors can be disregarded. As part of the retail business running, you need to know your planning capabilities, what items and what quantity you need to stock in which warehouse, etc. In retail, there is no place for mistakes. What happens at the bottom line of your business translates directly into the customer experience - and may work to your advantage by building customer loyalty or, on the contrary, it may deter them from completing their purchases in your online store. The ability of retail planning is pivotal for really important for every store owner.

Summing up

Managing inventory is both hard work, as well as a kind of selling art; thus should be treated with respect. Assortment planning isn't as easy to get handled as it seems - for a particular reason planning and cross-merchandising are put into the hands of the best eCommerce experts.

The process of designing the most effective product mix takes time and money - but it is undoubtedly an effort that is worth taking and which will definitely pay off in terms of business. Make the right decisions - plan wisely and adjust the assortment in store to the real needs of customers.