We talk a lot about small ways to further your store’s efficiency, productivity, and overall success. And the nice thing is, there are so many different approaches any small business owner can take. It’s important to remember that you need not tackle all of them at once. Instead, focus on one or two at a time and pursue the channels that will have the biggest return on your time and money investment.
Your business’s inventory management is one of the most important areas to focus on. It’s hard enough to anticipate what products shoppers want to buy; determining the right amount of inventory for each item is even harder.
Assortment planning in retail is a combination of the best way to optimize your product selection and quantity alongside your in-store merchandising and layout. Continue reading below to learn about ways to improve your inventory management and cash flow in order to make your business more successful.
What Is Assortment Planning in Retail?
As we touched on above, retail assortment planning is the process of optimizing your store’s inventory and improving all merchandising, displays, store layout, and shelving. Of course, this doesn’t simply apply to brick and mortar shops – assortment planning for eCommerce retail
Assortment planning is used to help retailers determine how their shoppers will interact with the product. Simply put, the strategies for inventory assortment are meant to help business owners understand the what, where, when, who, and how much of sales.
Oftentimes, assortment planning is confused for just one aspect of this. In reality, it’s about so much more. It’s about what drives sales and how to drive more sales. That’s where the what, where, when, who, and how come in. You want to ask yourself the following questions:
- What sells the most?
- Where does it sell best?
- When is the best time to sell it?
- Who buys it?
- How much will be bought?
In the end, proper assortment planning allows business owners to better anticipate demand and therefore optimize their inventory and cash flow based on that anticipation.
Why Are Assortment Strategies So Important?
It’s so critical for retailers to manage their assortment strategies because it helps optimize products for more conversions. Below are several examples of how great assortment planning can have a positive impact on a store:
- Point of purchase merchandising increases last-minute impulse purchases.
- Bundled gift displays boost holiday gift shopper purchases.
- Optimizing a price point maximizes profits by finding the sweet spot.
- A great promotion helps you run out of seasonal dead stock.
- Automated reorder levels ensure that you never run out of stock.
Even more, there are so many factors to consider when determining your assortment strategy. Below are a handful, only to name a few:
- Size and dimensions
- Visual displays
- Product descriptions
- Retail space layout
- Par levels
It’s a lot, we know. But again, take it one step at a time. Only big box retailers can tackle each component of this. Optimizing only one will still have a positive impact on your bottom line.
Let’s get more in-depth with several common retail assortment strategies.
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Break your inventory down into large categories and smaller sub-categories. Most retailers organize their inventory by SKUs in their point of sale system.
Take the time to analyze each category in your store to ensure that you offer products from each. Typically, it’s better for retailers to reach a large potential audience so offering a wide array of items might be better than offering a lot of depth in product options.
Adding cross-merchandise is a great way to up the average transaction value by reminding shoppers about items that they had forgotten they needed.
You can again focus on categories, but this time you’ll likely add depth to your catalog. Cross promotions or cross merchandising offer shoppers additional options based on similar items that they like.
You can analyze your POS reports to find products that would be good to cross promote. Simply look at items that are often purchased together and go from there.
You may also want to add product depth. This is usually the best option for specialty retailers. Apparel stores, jewelers, and health food and supplement shops, for example, would all be more likely to offer more product depth and variation as part of their assortment strategy.
Think about adding more sizes, colors, fits, patterns, etc. Consumers love having choice, so adding more depth in your assortment planning could help bring in additional shoppers.
Many shoppers will be happy to settle for substituting a similar product if the exact one they were looking for isn’t in the store. A shopper may be looking for a substitute if your business is out of stock for a certain item or if you don’t carry a specific brand that they were looking for.
In either event, it’s important to be able to offer something comparable. Again, focus on categories and having something to offer any shopper that comes in your doors.
Of course, carrying seasonal inventory is a great way to appeal to shoppers based on the time of year. It’s important to carry items for any major retail holiday, general time of the year, or weather patterns.
Seasonal retailers will have a revolving inventory door and constantly changing catalogs. It’s critical to consult past seasons and sales to get an idea of what to carry and how much of it to order. Your inventory management software and sales reporting are the best things to consult.
If you have multiple locations, you must consider each uniquely. A store in Los Angeles is not going to have the same customer demands and tastes as a store in New York.
You also need to consider the amount of retail space that each location has. A smaller store, of course, doesn’t have the luxury of holding vast amounts of inventory, so you’ll have to be more selective in your product catalog. Use space constraints and market demands to help guide your retail assortment planning.
Finally, historical data is extremely helpful for setting organizing your ordering, planning your inventory, and setting new goals. With retail analytics, it’s easy to get a snapshot of your store and what you can anticipate for the upcoming weeks or months.
- Historical data is important for analyzing any assortment strategy:
- Look at price changes and how it affected units sold and bottom line numbers.
- Promotions should be analyzed to see their short-term profit margins and long-term effectiveness.
- Demographic data help you target higher-intent audiences.
- CRM and loyalty tools aid in remarketing and helping get shoppers back in your doors.
No matter what direction you go, a modern POS system is essential. Without one, product assortment planning is nearly impossible. Inventory and sales are too vast to allow you to strategize by hand. To learn more about how this can be implemented at your store, click below. KORONA comes with an unlimited free trial so every business owner can see how it works before making a purchase.