Successful retailers deliver on multiple fronts such as location, customer experience, marketing and pricing. Behind the scenes, retail assortment planning plays a key role in enabling success. In simple terms, “assortment” is the range of goods that a retailer offers, but it quickly gets more complicated as retailers make buying and stocking decisions based on styles, sizes, colours, store size, historical store traffic, customer preferences, etc.
Done right, a successful assortment plan helps a retailer:
- Increase sales, gross margins and inventory productivity
- Improve customer loyalty
- Avoid costly mistakes of being over stock (leading to markdowns) or out of stock (resulting in missed sales)
- Enforce a culture of continuous learning where retailers analyze plans and actuals to identify assortment improvements and new opportunities
Assortment planning is a combination of art and science. The “art” portion leads to variations in the industry as to how buyers and planners describe their assortment. For this article, I have defined assortment in terms of three pillars and one characteristic:
- Breadth: Number of product lines a retailer carries.
e.g. Fashion retailer deals in 3 product lines: men, women, children
- Length: Variety of products in a particular product chain or line
e.g. Men’s section offers t-shirts, casual shirts, suits, etc.
- Depth: The number of different versions/SKUs of the same product that may exist in each product line
e.g. “T-shirts” has 1000 SKUs based on different styles, sizes, and colours
- Consistency: The degree to which product lines relate to each other on a season-by-season basis
e.g. Collections and store stocks are aligned around the family shopping experience
Assortment planning can be accomplished with a variety of tools, ranging from spreadsheets to sophisticated, specialized software. Dynamics AX 2012 R3 and Dynamics 365 also have a built-in assortment planning module that can meet many retailers’ needs.
Above is an example Assortment planning module in Microsoft Dynamics AX. From left to right, the menus are as follows:
- Assortment can be defined for different type of product hierarchy
- This retailer has 6 product lines – action sports, apparel and footwear, electronics, etc. (Breadth)
- Each product line has subcategories. E.g. Fashion offers products in fashion accessories, menswear and womenswear (Length)
- Menswear has 70 different articles and each has 4 different sizes (S, M, L, and XL) and 3 different colours (Blue, Black, and Red) which lead to 840 varieties. (Depth)
- Products can be added to an assortment in AX for a category, sub-category or across the board.
- This section also enables variants in the assortment for a better product offering in a retail channel.
Add Selected Products
- This section confirms the products assigned to the assortment.
Product assortment is also impacted by season, weather, location, and other factors, and this article just scratches the surface of its importance and customizability. Assortment planning can pay off for any size retailer, so why not start with a planning tool that makes it easy and is integrated with your other financial and supply chain processes?