What is Assortment Optimization?

What is Assortment Optimization?

Assortment optimization refers to the process of selecting the right mix of products to offer to different customer segment in each store or channel. The primary goal is to maximize sales and profits by tailoring the product offerings based on consumer preferences, local demand, store size, and seasonal trends. This process focuses on balancing product variety and product depth that meet consumer needs while also reducing overstock and understock issues.

Factors to consider for Assortment Planning

Factoring in the following into your Assortment planning can help you achieve an optimized plan-

• Review the Merchandise Plan
• Analyze Historical Data
• Customer Segmentation
• Choose the Right Assortment Planning Model
• Store Clustering
• Pre-Season Planning
• In-Season Adjustments

What are the different types of assortment planning models?

Depending on specific business goals and market conditions, retailers typically employ one or more of the five common assortment planning models for optimizing assortment and improving retail business performance.

• Wide Assortment Model- This model focuses on delivering a broad variety of products, to cate to a wide range of customer preferences and maximize market share.
• Deep Assortment Model- Offering fewer product categories but with more variations in colour, size, or style.
• Scrambled Assortment Model- Some retailers offer products outside their primary business line, which can present both challenges and opportunities for assortment optimization in retail.
• Localized Assortment Model- Emphasis on providing personalization that cater to regional/local preferences.
• Mass-Market Assortment Model- In this both wide variety of products and deep variations within each product category are considered.

Best Practices for better Assortment Optimization

Balance Variety and Depth-

This will ensure you maximizing your reach while at the same time not diluting your brand perception.

Embrace Data-Driven Decisions-

Retail Assortment optimization should be based on analytics that consider past sales, customer behavior, and market trends, ensuring that future assortments are based on relevant insights.

Localize Assortments-

The target should be to offer tailored product assortments to specific stores or regions, especially for large chains. Leveraging assortment optimization analytics enables a higher degree of localization, resulting in increased sales and stronger customer loyalty.

Plan for Impulse Buys-

Including product that are inexpensive and hard-to-resist near checkouts or famous products can lead to spontaneous purchases that will increase your sales.