How To Plan a Successful Assortment Planning?
Assortment planning is a task that requires a clear process and can be a bit daunting. Ensure you understand the following best practices for assortment planning before you start. Here are a few of them.
Leverage data from your POS software for more informed decision making
Assortment planning is an essential part of inventory management. And for this, accurate data is essential to avoid making the assortment planning process a pure guessing game. Incorrect data can lead to ordering more or less inventory, which can hurt your bottom line.
The most important data central to your assortment planning efforts is data on customer demographics, seasonal trends, and product performance. This data allows you to make thoughtful and logical decisions about what products to order, stock, where to sell them, and when their best sold. Below are some of the most relevant metrics to track for assortment planning:
- Cost per unit for each SKU
- Revenue per unit for each SKU
Access to this data means using a sophisticated retail POS that can provide you with the sales reports you need in real-time to make decisions. Point of sale reports are an essential tool for retail point of sale systems. Reports detail sales, staff performance, inventory, profit margins, and more.
Each of these elements can be fully customized to meet your business needs. From gross margin to sales rates, sales per square foot, average customer spend, conversion rates, turnover rates, returns/refunds, and gross margin ROI, sales reports will be paramount to you in assortment planning.
Learn more about: Get a Complete POS System: 7 Tools for a Complete Point of Sale
Set realistic goals
Even the most well-thought-out assortment plan can result in stock-outs, as customer demand and sales trends are unpredictable. Therefore, your goal should not be to create an assortment plan that perfectly predicts demand but to create a practical and achievable plan that fully utilizes your store’s data.
If you are new to goal setting, review your previous retail analyses to determine benchmarks and growth trends. This will be a great jumping-off point for setting goals and formulating your assortment planning strategy. Set smaller goals, such as optimizing product selection for a single product category or better sales for a site or sales channel.
Take into account the product hierarchy
The product hierarchy, also known as the customer decision tree (CDT), is the principle that customers use to evaluate products in the same category. For example, let’s say you sell men’s shoes. A customer may enter your store to buy a new shoe. When he heads to the sneaker aisle and browses the options, he will first look at the brand, color, and size. Your assortment planning should reflect this product hierarchy and guide customers through the process. Because every customer is different, there are many ways to reach a final purchase, and different buyers may have a different CDT for the same product.
Leverage cross merchandise
Cross-merchandising is a visual merchandising strategy that involves displaying complementary products next to each other. This strategy is effective because it allows you to target in-store promotions based on product affinity. Cross merchandising makes the shopping experience more convenient for your customers and can inspire ideas or remind them of additional items they need.
A better way to know which products to place next to each other is to check your store’s sales history to see which products are often purchased in the same transaction. Cross-merchandising can increase sales and average order value when executed properly.
Use the high-low pricing strategy
To balance your assortment through pricing, you can also adopt the high-low pricing strategy that Ulta Beauty is known for. The brand offers an assortment of affordable yet luxurious skincare items, allowing shoppers to choose from a wide range of products.