In this first Q&A of a series, Kristin Demel, retail strategy director at Callahan, explains assortment planning. Kristin will dive deeper into additional topics related to retail strategy and planning in this ongoing series of retail strategy Q&A discussions.
What is assortment planning?
Assortment planning is the process of determining the right product for the right stores. This process adds more science to the art of selecting product for retail shelves. Fewer large retailers have a homogenous assortment across all doors. Retailers are rationalizing the assortment to reduce overlap and clustering stores to better meet consumer needs.
As a result, retailers are adding assortment planning as a separate function to support the buyers’ assortment decisions. As retail has changed over time, you can no longer use breadth of assortment as a differentiator in brick and mortar. Online will always have that differentiator. So, assortment planning applies more analytics to support answering the question — “Is this the right product to be adding to the shelves?” The analytics determine if the product will provide incremental sales, if the demand for this product changes based upon region, urbanicity, income level, etc.
When working on retail planning, do buyers consider this approach on a store-by-store basis, or is this a more regional, or national chain effort when certifying data?
It depends upon the retailer’s number of stores. When you’re starting to talk to any retailer that has hundreds or thousands of stores, typically, the stores are clustered to find similar patterns. Clusters can also be at a product category level vs. total store clusters.
Let’s take a grocery store for example. There could be stores that over-index in specific categories compared to another. If you’re in a store that over-indexes in organic, there could be a larger organic assortment offered, which might not make sense for the entire country.
How long have stores or chains been implementing or using assortment planning to make decisions about inventory?
I would say there’s always been a level of science around assortment selection, and there’s always been a level of data that has been applied with some rigor. What’s starting to change is the amount of data used and the type of analytics that are applied to support these decisions, and the science is not just being applied to new product selection. It is also being applied when retailers evaluate whether products should stay on the shelf.
So, if you’re a brand that has national distribution today, assortment planning could impact the number of stores your product is stocked, as well as the breadth of assortment offered to the consumer. This also can impact your new products. Innovation and newness will be evaluated for incrementality differently as well as being evaluated for the right store selection.