Consumer demand is continuously changing as a result of consumer trends, changes in seasons, consumers becoming more knowledgeable, and unforeseen occurrences such as the global COVID-19 pandemic. To remain relevant, retailers must ensure that they can meet the demands of their customers at the right time and in the right quantities. This is done through data-driven assortment planning.
In this article, we will be defining assortment planning and the importance thereof. We will discuss its relevance in the category management process, and we will also be unpacking DotActiv’s Assortment Planning Services and what it entails.
What is assortment planning?
Assortment planning is the process of selecting a customer-centric range of products for each category in a predefined market. Assortments are planned at a category level and encompass the products for the sub-category, segment and sub-segment while considering product-specific details such as brand, colour, size and price.
Assortment planning is done per store or grouping of stores, referred to as a cluster. It includes the evaluation of various data types such as internal performance data, loyalty data, and external market data to understand the interaction of your retail business and the products within the market.
The goal is to meet the needs of the specific target market while considering the financial objectives so that both you and your customers benefit. Target markets are defined by considering demographic and regional variables and store location. It is vital to determine your target market for each store or cluster before your assortment planning exercise, as the wants and needs of these consumer groups differ.
Assortment planning must also consider key areas such as the category role, transfer of demand, house brands, product exclusivity, imported products, stock on hand, and brand loyalty.
Let’s consider this practically. For a Destination category role, it might be worth keeping a slow moving item as part of your product range as shoppers will specifically visit your store if they know that this product is available there. This will also encourage purchases of other products from your store.
Assortment planning as a function of category management
Each function of category management is essential on its own but the real value of each is realised in the way that the functions link with each other. Assortment planning forms an integral part of the end-to-end category management process as assortment plans are based on your store clusters.
Assortment planning requires a predetermined category role as this impacts the width and breadth of the range. Classified data, fixture types and dimensions, and the number of drops captured at a category level are also required because this allows for an accurate range cap to be determined so that you don’t range products that won’t fit on your shelves.
Assortment planning rules are used to rank products so that the most relevant products are included in your range. Rules can be specified at different levels of the hierarchy so that items that fit the profile of the cluster and rank the highest accordingly are included in the range plan. Each cluster is represented by a unique assortment plan taking all of the above elements into consideration.
Once the assortments for each cluster have been planned, planograms are created. Planograms are linked to floor plans so that category performance within a store can be analysed and used to determine if the category warrants the space and range allocated to it. This also allows you to identify ‘hot spots’ on your store floor so that product categories can be placed to maximise flow throughout the store.
Benefits of assortment planning include the following:
- Improved in-store experience and customer satisfaction: Through data-driven assortment plans, customers receive localised product ranges. This means that you will be able to provide your customers with the right product, at the right time and in the right quantities. By satisfying the needs of your target market, you will create loyal customers.
- Improved sales, profit and units movement: When assortment plans are tailored to the category role and cluster they serve, poorly performing products are removed from the range to provide space for new product listings and increased forward share of top performing products.
- Reduced stock holding: Data-driven assortment plans reduce or eliminate slow-moving items from your range (depending on your category role and strategy). This reduces the costs associated with inventory holding and reduces the risk of stocking products that don’t sell while optimising your shelf space by making space for products that benefit your business financially.
- Reduced out of stock items: Out of stock items results in customer frustration as they cannot purchase the product that they are looking for, often leading them to take their business elsewhere. Thus, you don’t only miss the sale of that particular item. You also lose out on the sales of other items that the customer may have purchased.
DotActiv’s Assortment Planning Services
Through DotActiv’s Assortment Planning services, we develop and recommend optimised product assortment plans which are data-driven and tailored to your local shopper preferences. At the same time, they take your space into consideration to ensure that the right products are made available at the right stores at the right time, and in the right quantities.
DotActiv’s Assortment Planning Service is perfectly suited to businesses who do not have the capabilities or resources to plan their assortments in-house or businesses who just need expert guidance on assortment optimisation for effective category management.
Our consultants will use our leading category management software and proven methodology to develop and recommend data-driven assortment plans for each of your product categories. What’s more is that this service can be delivered remotely.
For DotActiv to deliver this service effectively, we require an integrated database to be set up and for your data to be classified in your display hierarchy down to segment level. Clusters need to be developed at a category level and stores must be allocated to each cluster.
If you require assistance with this, DotActiv’s range of category management services is for you. Our services are tailored to your requirements so that we can enable you to be successful in category management and achieve the expected results.
DotActiv’s Assortment Planning Services includes the following:
- Data processing: This includes an analysis of your current approach to assortment planning as well as an evaluation of your product classifications and current product ranges.
- Setting up your algorithms: This entails determining your category roles and strategies for each category cluster. Our consultants will determine your range cap for each category cluster. This will avoid the over-ranging of products and identify opportunity gaps. Rules will be recommended to you based on your objectives so that your products can be ranked. Templates, a collection of rules, are created and applied to different levels of the hierarchy so that the most relevant items are recommended for your range.
- Presenting a suggested assortment: We will suggest a range to you for each cluster based on a point system which takes the category role, strategies, range cap and rules into account.
- Providing assistance with assortment maintenance: Due to changes in demand, assortment planning is an ongoing process and therefore assortment plans must be refreshed routinely to accommodate these changes. The frequency of a range refresh depends on the retailer.
Our consultants will be available throughout the process to provide you with expert advice so that you can confidently achieve your category management objectives.
Let us help you improve your category performance through optimised assortment planning. To learn more about our formula for success, you can speak to one of our consultants by booking a consultation here or requesting a proposal here.