The art of creating customer-centric assortments

The art of creating customer-centric assortments

Nick Bourland from JustEnough Software explains the role of data analytics in assortment planning

Caspar Herzberg |

This article first appeared in the Winter issue of The Record.

In a perfect world, retailers build flexible product assortments that can be adapted to new trends and tailored to suit unique customer preferences across all their store locations and sales channels. However, unlike some aspects of retail planning that are predominantly guided by data analytics – such as inventory management – assortment planning remains a largely art-based process driven by the unique knowledge and the instincts of merchandisers and buyers.

Today, technologies that mine data to reveal valuable customer insights are shifting assortment planning towards a scientific data-driven process. This shift comes as retailers are being challenged by demanding and seemingly brand-agnostic shoppers with limitless purchasing options, the rise of new selling channels and competitors, and greater pressure to meet financial targets.

JustEnough Software offers six tips retailers can use to create and execute optimised customer-centric assortments that satisfy consumer demand and drive sales, while reducing inventory costs and under- or over-stocks.

1. Create visually compelling assortments that don’t break the bank: product hierarchies have traditionally guided assortment development, but digging deeper into data helps retailers pinpoint new selling opportunities created by local customer affinity that would otherwise go unnoticed. This empowers merchandisers to create optimal visually compelling assortments without over- or under-assorting – both of which can break the bank.

2. Stay on track with open-to-buy planning: flexible, advanced open-to-buy planning solutions enable retailers to compare inventory demand to actual availability at the category level. Such solutions allow retailers to reserve open-to-buy dollars at the start of seasons so they can take advantage of new trends as and when they arise, without missing sales through a lack of inventory.

3. Leverage customer attributes: customer attributes reveal critical information about shoppers’ lifestyles and interests, helping retailers to gauge popular trends before creating assortments. For example, the attributes of a store in San Diego, California might suggest it should stock the same clothes as stores in similarly warm climates. However, customer attributes may show it should actually stock cold-weather outerwear because many locals head north to ski on weekends.

4. Reduce the risk of introducing new products: retailers that do not add sufficient new products to their assortment each season often fail to meet demand targets, while those that add too many may end up reducing prices to offload excess inventory. JustEnough recommends an assortment rationalisation approach, where retailers model historical product sales data to adjust product option counts for the coming season. They can do this by cleansing historical data according to different thresholds and calculating the diminishing rate of return for each additional customer choice that will be offered within a specific timeframe.

5. Capitalise on selling trends by clustering stores together: selling trends can vary greatly between stores, even within the same geographical area. By grouping similar stores and incorporating location-level differences and refined product information into their analytics, retailers can localise assortments without having to plan them for each individual store.

6. Think holistically about assortment and space planning: space and assortment planning are integral to one another when it comes to building winning product assortments. It starts with setting the right metrics by sales channel. Retailers should measure space consistently across the business and then cluster similar physical stores together. For digital sales channels, it’s important to plan based on productivity – options, sales, margin – to control and constrain assortment options.

Technology plays a crucial role in empowering retailers to perfect their assortments and drive profits and customer loyalty, without putting undue strain on their business. Using clustering, profiling and other techniques to automatically create assortment plans, the JustEnough Assortment Planning solution enables today’s retailers to strike the optimal balance between art and science.  

Nick Bourland is a product manager at JustEnough Software

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