4 Strategies to Boost Assortment Planning Effectiveness
Baby and Maternity Retailing
With the ongoing frugal nature of consumers and cash-strapped parents, it is important to monitor the shifting behaviors and purchases of your shoppers.
Babies are sensitive little beings whose needs vary regionally and change rapidly; you need to be aware of what items will be flying off the shelf, what core products you should always have in stock and which products you need just a few of. But this is a much more complex process than it seems on the surface. When you look a little closer you will see that parents are buying different products and different brands in different amounts in each city, each demographic, each neighborhood, and each social circle. Combine all those differences together and it means every store has unique needs and to truly serve the urgent needs of your shoppers, you need awareness of the behavior of each of your products at each store individually.
This process can not only dramatically increase margin and sales, but can also help localize store-level assortments and enhance your customer's shopping experience. However, when it comes to assortment planning effectiveness, most retailers "one size fits all" approach on what to assort leaves opportunities and market share on the table.
Let's look at four ways you can boost the effectiveness of your assortments:
1. Forecasting in Assortment Planning
A forecast can help determine both the breadth as well as the depth of the assortment. First, clustering of stores using a forecast, rather than past performance, will identify trends at individual stores that might not have been seen in historical information alone. Secondly, looking at the expected performance of an item at an individual store using similar products (e.g. similar brands, price points, item strategies, etc.) can help determine where a new product should be added to a store's or cluster's range. Knowing how a product is going to behave when introduced to a new store as well as how that product is likely to behave over its lifecycle is a great way to determine where and even when to introduce a new item.
2. Intelligent Clustering Decisions
Once stores are clustered together and new sales activity is received, your clusters are wrong. I'm certain of it without knowing who you are. Individual stores do not behave as we expect them to. It is important that you accept this fact and are prepared to adapt. Stores should be re-clustered as often as is realistically possible. Once a month is probably a realistic expectation. Your assortment planning process must include the ability to update the store-cluster assignments based on how the stores are actually behaving and not how we expected them to behave.
3. Localizing Assortment Plans
In order to compete in today's market – retailers in all verticals need to focus on availability and local consumer behaviors. This kind of granular detail cannot be obtained with traditional, data aggregating systems. Retailers need to remove the simplification from their inventory planning process and focus on real-time local demand. This means creating a dynamic inventory plan that is highly reactive to local demand fluctuations, allowing the retailer to be flexible and responsive to how their customers are behaving now. SKU rationalization is no longer a once or twice per year process. The environment today demands that this assortment planning process become fluid. You should be reviewing the SKU breadth in your stores on an on-going basis and seeing trends that recommend expanding and contracting the individual store assortment based on its behavior. By definition trends happen quickly, reacting to those trends just as quickly can have many benefits including delighted customers, less markdowns, and reduced stock outs.
4. Managing the Attributes
Attributes of a product are a great way to enhance the localization process and also stay on top of trends. A thorough Assortment Plan should have goals for product attributes and should even cluster stores at the product/attribute level if the attribute is a primary driver of consumer behavior (think sizes of diapers). Any product attribute can be planned and scored to ensure that the assortment meets not only financial objectives, such as revenue or profit, but also objectives that are merchandise based. Have a hot color in car seats this year? Ensure that a percentage of your car seat assortment is in that color. Similar examples can be made for brand, age, or any other attribute.
One example of product attributes is the strategy of the product. Product strategies are basically the role the product plays in the assortment, or why you bought the product in the first place.
The following are examples of possible roles and the objective:
Traffic Driver: In the assortment to bring customers into the store (diapers)
Image Item: Defines your store, but has very low turns (high end furniture)
Core: The main assortment (baby food, basics)
Fringe Assortment: Round out an assortment's presentation (fringe styles and patterns)
It would be wise to have a plan for which items in your assortment fulfill each of the above roles, of course, you may have a few others. Once you outline the plan to ensure that you have something driving your customers into the store, items that are creating the foundation of your assortment and items that are enhancing or establishing your image in the marketplace, you'll have a well rounded assortment.
By following these guidelines, you can begin to unlock the patterns of your unique customers and start to develop strategies that will help you serve them more efficiently, while improving your sales and profit at the same time!