What is Assortment Planning?
Knowing which products to stock and what will be most popular within an upcoming season is important for any business. This strategy and planning can make or break a business, which has made it a vital concept to understand. So, what is assortment planning and how can a business strategize its stock planning? Assortment planning involves creating a strategy to determine the products that a business will sell and the quantities to purchase them in for an upcoming season.
Assortment plans are broken up into the different product types to purchase as well as the quantities of each product in each category. A shallow assortment type would mean that a business is planning on purchasing many different product types with very few variations while a deep assortment type would mean that they plan to purchase a few product types only but in many different variations. The type of assortment planning that you use will entirely depend on the overall goals of your company and what sells best to your target audience.
A large part of merchandise assortment planning is also considering how businesses in different areas will function and what they will sell over certain periods of the year. A company that is in summer and sells clothing will want to focus on selling summer wear as opposed to a different store that may be in winter and be selling winter clothes. Assortment planning is incredibly important for clothing brands as you want to be sure that you are purchasing products in a quantity that matches demand.
Why is Assortment Planning Important?
Assortment planning solutions can help a business save both time and money when it comes to its stock. Any business will only be able to store a certain number of products and it is vital that the products that are purchased and stored will be met with the anticipated demand. If the assortment of products that you order is not in the correct quantities or categories, you may find yourself storing and purchasing unnecessary products. In the same breath, if you are not purchasing enough products to meet the demand for certain items in certain categories, you run the risk of losing out on potential sales.
Assortment planning tools take into account store layouts and how placing certain products near to certain items may increase the chances of a sale. Assortment planning is important because it can encourage customers to spend more and purchase items that they may not have thought about buying before! Retail assortment planning software, for example, will be able to help a retail business better prepare for an upcoming season and what types of products customers would like to see.
What are The Pillars of Assortment Planning?
To properly apply assortment planning tactics to your business, it is important to understand what drives this process. There are three pillars of assortment planning that can help you better understand how to apply these tactics and why this process is so important.
Understanding who your customers are and what they are most interested in buying is vital when it comes to assortment planning processes! Monitoring the market and the most popular trends of the time will help you when deciding on what kinds of products to stock. Part of ensuring that your customers are satisfied with what you are selling is to look at what is selling well and what could be reduced. Your main aim should be to cater to the needs of your target audience and if a product is not selling well, you should reduce the stock to make way for products that sell better and are more in demand. Customer satisfaction increases brand awareness and ensures that you are making as much profit on the stock that you sell as possible.
Balance Product Staples and Trends
Certain products will be considered staples, while others will follow the trends of a certain period of time. It is important that you balance these staple products while still catering to the trends that may differ from season to season. Having a wide variety of both staple and trend-setting items will ensure that you are catering to all of your customers’ needs.
Assortment Planning Data and Software
Using assortment planning software to help analyse certain information can help a business make better and more informed choices when it comes to assortment planning analytics. This software will be able to use data in such a way that predictions can be made on which products to stock, how many to purchase and the variety of categories to purchase within. This information would be quite hard to obtain and keep up with manually so automatic processing has become quite an important aspect of assortment planning.
How to Get Started With Assortment Planning?
- Use the data you have collected: A large part of assortment planning is using the data you have on hand to help make decisions around which products to purchase. As different product types will need to be purchased in different quantities and in different categories, it is important to know what your target market wants to better plan your inventory.
- Note supply chain issues: If you are having issues with the supply of certain products, this could be disastrous when it comes to assortment planning. Assortment planning is all about getting the correct quantity of products in the right time frame and if you have issues with how you receive the products and the time that they are delivered within, this could impact your inventory. Getting started with assortment planning will mean solving these supply chain issues.
What are The Factors to Consider When Doing Assortment Planning?
Though you may have assortment planning software to help you build up and create an assortment plan, there are many elements to take into account. The following are just a few of these elements that you should consider.
How a brand is perceived by customers is vital and creating a brand strategy can help when it comes to following the correct assortment planning steps. Looking at how you can present your brand and the products that you sell to customers will determine how your target audience sees the brand and what they associate with it.
Business Model and Trends
Part of understanding assortment planning and creating the most effective strategy is considering the business model and trends. A business model outlines the profit plans that a business has and will predict future trends when it comes to how much a business will look to profit over a certain period. This business model is created by looking at current and past consumer trends, and estimating what future demand will look like.
Sales and Margin History
A large part of planning for future stock and inventory is looking at past sales and margin history. This information can help a business better plan for the stock that they are going to keep in the future based on what has been sold in the past. Though this may not be an accurate prediction, if you combine this with information on the current trends of the season, this could greatly benefit your assortment planning strategy!
Sales Channels and Finances
Another important consideration to make when it comes to assortment planning is being able to analyse sales channels and the financial capabilities of a business. Sales channels may rely on looking at how your product is sold, whether it is online or within stores. The financial stability of a business will also help to know whether you can expand into new product ranges and expand the quantities purchased if an expected rise in demand is anticipated. If your business is having issues with finance, you may need to consider lowering the quantity of certain products. Using this information can greatly help when it comes to assortment planning strategies!