Importance of Retail Assortment Planning

Importance of Retail Assortment Planning

Retail Tech Insights | Friday, October 21, 2022

The main objective of retail assortment planning is the creation of customized product ranges or collections.

FREMONT, CA: Traditionally, retail assortment planning has been a relatively broadly defined skill encompassing numerous operations. At its core, this essential retail process involves the creation of distinct product lines based on buyer segments. Sometimes assortment planning is combined with item planning, but it generally takes place before the season begins.

WHAT IS RETAIL ASSORTMENT PLANNING?

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Assortment planning is widely used in retail but has no clear, uniform definition. The meaning can vary depending on the user's perspective and the context. The phrase has also been used to quantify item/style-level sales and purchases, establish targeted assortments, and assortment/space optimization, among other things.

The literature on assortment planning published over the past four decades has covered almost every aspect of merchandise and space planning.

Defining financial goals for a certain period at the relevant levels of the product hierarchy is part of assortment planning. These objectives are then connected to a broader merchandising strategy. Therefore, the planning of assortments and items is usually integrated as a part of the assortment planning process. However, various components of the assortment plan may exist based on the organization's planning cadence and expertise. It may be used, for example, to quantify purchases for each item or to assist in determining the quantities of inventory to be supplied to each store and held back for direct sales.

The primary objective of retail assortment planning is the creation of specialized product ranges or collections.

The assortment strategy considers the retailer's financial goals and the seasonality of items to ensure proper merchandise receipt. Outputs of assortment planning include initial purchase quantities and the flow of receipts through time, which will inform allocation and replenishment operations. The level of depth in the assortment planning process will also vary based on the type of product being planned.

WHAT IS THE ASSORTMENT PLANNING PROCESS?

Developing assortments that match an organization's merchandising strategy requires many tasks. These include the following:

LOCATIONAL AGGREGATION

Location clustering is the practice of grouping selling places with similar properties, such as performance, regionality, space, or other user-defined characteristics. Each cluster has similar locations based on the selected criteria, making managing various customer-centric assortments more efficient.

DISMANTLE MFP TARGETS

This activity aims to disaggregate planner-created merchandise financial plans/targets (MFP) from strategic to lower levels in the product hierarchy. During this phase, plans often begin at the class level and are distributed to the subclass level. During this activity, overall sales are separated into regular and promotional sales, while clearance sales remain distinct.

ASSORTMENT CURATION

The assortment selection procedure comprises—examining historical facts (LY or LTY), setting sales goals that fit with MFP objectives, defining the assortment of leftovers, creating alternatives for placeholders, selecting the target assortment attribute, and approving the distribution strategy.

The approved assortment plan generates the shopping list (line sheet, assortment list) required in the subsequent process steps. A rationalization exercise can help accomplish this for long-lifecycle products (such as groceries, vitamins, and health and beauty products). The merchant would evaluate the current selection and determine whether to add, remove, or retain various alternatives. The assortment period declaration is also a critical action that assigns clusters to periods from the assortment and different receipt lead times and flows for the desired time.

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