Assortment Planning

Nothing leaves customers more dissatisfied than not finding the items they want in the style or size or color they want. And dissatisfied customers lead to lost sales; so finding ways to make sure the right items are in the right places at the right times is vital. At RIS News' recent Retail Technology Conference, merchandise management, including assortment planning, was a hot topic, continually mentioned as something the retailers were still trying to optimize.
Assortment planning is the ways and means of tailoring merchandise to meet customer demand, often at the store-level. Assortment plans both identify the types of products, including range of styles, colors and sizes, that align with customer preferences and seasonal needs, and offer step-by-step processes to bring in-demand merchandise onto the shelves in the right stores in the right amounts.
Typically, assortment plans are integrated with space planning, allocation, replenishment and financial planning. It is nearly impossible to discuss assortments without also mentioning space requirements, allocations of specific items to specific stores, replenishment as needed and the overall financial goals of the retailer.
The more detailed and integrated the plan, the more visibility a retailer has into the demands of its customer base and the needs of specific stores. Of course the more detailed the plan, the more complicated it is, thus the need for technology-based assortment planning. Even in a basic plan, the numbers can quickly rise into the hundreds of thousands. As retailers add more subcategories (style, size, color, geographic location) to the mix, the numbers quickly outdistance the ability of the human mind to calculate.
Successful assortment planning can enable retailers to meet financial goals and drive customer loyalty by creating satisfying shopping experiences. Good assortments yield higher sell-through, reduced markdowns, less excess inventory and, most importantly, satisfied customers.
According to the Retail Customer Dissatisfaction Study 2006, conducted by the Verde Group-Baker Retail Initiative at Wharton, not being able to find a desired item is among the top reasons for customers not making an intended purchase or going someplace else. In addition, on average a shopper who has had a negative experience finding an item will tell 2.5 people about the experience.
To avoid alienating any customers, retailers must have detailed assortment plans in place. But with the number of sub-categories growing, and the recent incorporation of geographic and cultural demographics into the assortment mix, the tried-and-true spreadsheet methods are no longer adequate. The quantities of data are just too large, not only for manual systems, but also for older assortment planning software.
When the 300-store apparel chain Simply Fashion outgrew its spreadsheet assortment planning system, the retailer looked to NSB for an upgrade. "We needed to be able to factor in more variables to plan at a deeper level," says Austin Englebert, vice president of store operations at Simply Fashion. "To do that, we needed a fully automated system designed exclusively for planning that would take us to the next level."
Using Connected Retailer Planning from NSB Simply Fashion has much greater visibility into what each store's customers actually want. The retailer creates plans not only by the main categories (Junior, Missy, Plus) but also by 75 additional subclasses. "Because we are now able to plan by subclass, we will not only be able to monitor performance and report at this level but also create our assortment plans in sync with store subclass numbers," Englebert says. "That means that our shelves will not only be fully stocked, they'll be stocked with merchandise that is going to sell fast," he adds.
Prior to the upgrade, creating reports was cumbersome, says Englebert, and time consuming, taking hours and "sometimes days" to produce usable analyses. Because the retailer could not easily plan by subclass, stores often received incorrect orders. For instance, if a store ordered a certain number of subclasses (jeans and jackets) in Junior, that store often received the number ordered of different subclasses (shorts and short sleeve shirts). "There was often a real disconnect between what a store's customers wanted and what we were able to provide," Englebert says.
International retailer Guess? uses the JDAArthur suite of applications, including Assortment Planning by Arthur, to provide a platform for the precise execution of inventory plans and weekly sales. "Retail is all about planning," says Guess? CIO, Michael Relich. "If you get the planning right and make sure you get the right products in the right quantities at the right time, you're going to be successful."
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