What is assortment planning?

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If you had to explain assortment planning to someone who had no understanding of retail, what would you tell them?

I usually start with something like this:

Imagine you have a few hundred retail locations in various places around the world. Each store is unique. It might be large or small, busy or quiet. How do you decide what items to buy, and in what quantity, so each location gets just the right amount of merchandise to meet customer demand? That’s assortment planning.

It sounds simple, but in reality it’s much more complex. A team of merchants has to work with designers and vendors to create styles that work together. Buy plans have to factor in markups, margins, trends, and more. Hundreds of moving parts have to work together to accomplish a common goal.

For fashion retailers, the company’s success depends on the strength of the assortment. Yet many are content to stay with the status quo, when it comes to the way they plan and buy.

The status quo sees assortment planning as a single step in the merchandising process in which a buy plan is constructed, but it’s actually much more than that. Decisions need to be made at every step along the way, from the initial concept through to in-store. Each decision needs to marry creativity and insight with careful thought informed by data. It’s because of this that daVinci’s definition of assortment planning is much broader than what you might have in your mind.

The assortment planning process begins with a concept. Even as ideas are being formed and fashion trends emerge, merchants need to begin by understanding customers and measuring demand. They combine pure creativity and careful analysis to create concepts and styles that satisfy customer demand, financial goals, and dozens of other requirements. It’s a balancing act that few in the field have mastered.

As concepts take hold and styles are mapped out, it is the merchant’s responsibility to buy products in just the right quantity to match customer demand. This means making decisions early in the buying cycle about which styles are appropriate for which locations, and buy basing quantities on those decisions. The most proficient at this use multiple dimensions of customer demand to make these calculations. Sales volume, physical store size, climate and customer demographics should all be considered, among others.

See also: What Is Clustering?

Traditionally merchants are responsible for the product mix and allocation worries about individual locations. But it’s at this point in the buying cycle, before buys are committed, that customer demand has to be assessed and matched. This creates a partnership between the merchants and allocation. Not only does this method help control inventory spending, it has a cascading effect that reduces the need for permanent markdowns and improves customer satisfaction.

By calculating customer demand at this point in the process and using it to inform buy quantities, merchants also improve their ability to meet their receipt goals.

After buys are quantified and committed, the assortment planning process continues as results are measured. Merchants should be constantly reviewing previous buys to learn from their successes and failures. Results inform future buys, making assortment planning a cyclical process.

As you can see, assortment planning is much more than a stop along the way. It’s the method of planning both sides of the puzzle – the fashion and the finance. Assortment planning is about using data to guide the creative process. It’s about determining customer demand and ensuring decisions are made with the customer in mind. It’s about seeing plans through and learning from results. And it’s about making smart decisions that have a positive impact on the bottom line.

At the very core of your business, you have your products and the customers who want to buy them. Assortment planning is the method of understanding those customers and making sure the product selection is targeted to them. And if you do it right, your assortment planning process will keep those customers coming back.

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2020-05-20T12:11:15-04:00Categories: Blog|Tags: |
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