What is Assortment Optimization?
Assortment optimization has evolved into an essential part of every successful consumer fashion brand’s efforts to remain competitive in an increasingly challenging market. With global competition continuously rising and consumer preferences changing as quickly as a social media feed, a brand needs an agile, strategic approach to how and what they offer. By understanding the challenges teams face in assortment optimization along with solutions to enhance the assortment strategy, better choices can be made which can directly improve a brand’s bottom line.
For brands, from fashion to home goods, assortment optimization encompasses the strategies and processes involved in curating a mix of products that effectively cater to consumer preferences, market trends and the brand’s identity. This step helps to ensure that the right balance between variety and volume exists. By leveraging data analytics and market insights, brands can effectively determine which items to introduce, maintain or phase out, maximizing sales and minimizing inventory costs.
Better Merchandising = More Targeted Assortments
Assortment optimization is all about presenting the right mix of products in the right channels at the right time. Accurate Merchandise Financial Planning (MFP) is pivotal, as it sets the foundation for decision making through the various parts of category management and assortment strategy. Ensuring accuracy and compiling large quantities of this data can be an ongoing obstacle. But when teams put systems in place that intuitively compile and organize such information, the result is often quickly seen in better stock control, improved sales predictions and increased profitability.
As the diversity of consumer bases expands and more channels linking to consumers increase, data collection and analysis becomes all the more unwieldy. Effective assortment optimization means sifting through this data to derive actionable insights and cater to specific market segments effectively. But with how fast markets move, large collections of statistics need to be analyzed efficiently, otherwise merchandising teams will be forever playing catch-up and missing out on trends that lead to greater sales.
How to Optimize Product Assortment
By focusing on specific product attributes that resonate with consumers, brands can refine their product offerings to better align with consumer preferences. Analyzing sales data at an attribute level can reveal patterns and trends, guiding assortment decisions. Without a searchable attribute tool, this can often be an overwhelming task for teams mired down in a plethora of spreadsheets and physical product boards.
What are the Challenges of Assortment Optimization
By better understanding the stumbling blocks teams encounter while attempting assortment optimization, you can take the steps to prevent these obstacles and create a more efficient approach to assortment strategy.
The consumer world is grossly different today than it was just a few decades ago. If your business is still operating with a limited perspective on where your consumers are based, it can be missing out on enormous revenue opportunities. The increasingly global market demands an omnichannel approach that takes into account an increasingly diverse customer base and rising competition from global markets.
The e-commerce environment has significantly lowered barriers to entry, resulting in a flood of new brands, competing for the rather fixed consumer spending budgets. In turn, customers have grown accustomed to ever-changing merchandise and demand faster, better products from brands. Add to this the fact that product life cycles are constantly accelerating and consumer preferences constantly fluctuating, and you have an extremely challenging marketplace that demands the most accurate and up-to-date data for assortment optimization. Today’s trends can quickly tumble into tomorrow’s discount overruns, depending on how quickly a brand can respond to market changes.
If it wasn’t obvious before 2020, uncertainty is certainly part of every brand’s category management now. Factors like supply chain disruptions, alterations in trade agreements and the constant balancing act between product popularity and shelf-life further add to the complexities of assortment optimization.
The Benefits of Assortment Optimization for Omnichannel Retailers
Underperforming products occupy valuable retail space that could be used for more popular or profitable items. Efficient assortment planning ensures optimal utilization of shelf space, reducing wastage and maximizing sales opportunities.
A poorly executed assortment strategy can have dire consequences on your brand’s bottom line. One comprehensive meta-analytic review of hundreds of papers and studies found that large assortments are more desired and expected by consumers. However there are numerous instances when more doesn’t equal better when it comes to consumers. A poorly aligned assortment, no matter how large, can have negative effects on customer brand loyalty. By tailoring assortments to cater to specific consumer segments and channels, retailers can enhance the overall shopping experience, driving loyalty and repeat business.
Inventory glut and stockouts cost retailers significant revenue. In 2015 for instance, one study estimated a $1.1 trillion annual loss on a global scale due to poor assortment decision-making which resulted in overstocks and out-of-stocks. This isn’t that startling when you factor in the increased holding costs and potential markdowns of excess inventory and the missed sales opportunities caused by stockouts. Effective assortment optimization leads to a balanced inventory, minimizing stockouts and overstocks and ensuring optimal stock turnover.
Tailoring product assortments to specific store or channel demographics enables retailers to cater more effectively to localized preferences, maximizing sales and customer satisfaction. Geospatial analytics should be a part of any assortment strategy that attempts to plan for multiple locations, whether they are within one country or across continents. Taking into account seasonal needs, language, culture and religion, along with other variables safeguards brands from missteps that could potentially negatively impact them in a myriad of ways.
How Can Centric Software Help Retailers with their Assortment Optimization?
Navigating the labyrinth of assortment optimization is an ongoing challenge for retailers in an ever-evolving market landscape. With the weight of such a challenge, retailers need a reliable partner to guide and enhance their assortment strategies. Centric Software, which offers intuitive tools and solutions such as Centric Visual Boards™ and Centric Planning™, can make the days of data disorganization and information overwhelm a thing of the past.
One of the significant pain points in retail is the unpredictable nature of consumer demand. With Centric Software, retailers can benefit from tools that ensure a higher level of accuracy in preseason planning. The result? A strategy that is more aligned with consumer demand patterns, enabling retailers to stock the right products at the right time.
There’s a reason thousands of the world’s leading brands choose Centric. To remain competitive they lean on Centric’s suite of technology which places top priority on providing the most accurate, real-time data in visually-appealing, user-friendly platform that is easy to integrate and configure to each brand’s unique needs. Derived from a profound understanding of the retail landscape and leveraging AI and ML capabilities, Centric’s assortment optimization capabilities are able to deliver faster reporting in a variety of formats that empowers teams with the necessary information for proper decision-making when it counts.
In retail, timing is everything. Leveraging advanced algorithms, Centric Software provides real-time insights to retailers. These insights aren’t just data points; they guide actionable strategies that can significantly impact the bottom line when implemented at the opportune moment.
Your products aren’t SKUs on a spreadsheet, they’re multi-dimensional, tangible goods. So your analysis shouldn’t be relegated to the rows and columns of an Excel sheet. Centric Software transforms your data into a visually dynamic space that propels proactive decision-making. With Centric, you have the ability to visually pivot and balance product mixes by sight, not by just by figures.
Centric’s Visual Assortment Boards for instance, provide a visually interactive approach to assortment planning. With it, brands can quickly pivot and balance product mixes, ensuring that they are in tune with consumer preferences. This digital innovation replaces static spreadsheets with dynamic visuals, allowing teams to make informed decisions based on real-time data. With the ability to visually collaborate, teams can cohesively define their collection’s DNA, efficiently address market trends and streamline the planning process with the freedom to brainstorm and collaborate without silos or outdated data bogging the process down.
Since a huge portion of your products’ appeal is based on visuals, shouldn’t your teams be making decisions in such an environment as well? While data and technology drive modern retail, creativity remains its soul. By providing a visual overview of offerings for each demographic, store or season, Centric liberates retailers to creatively plan each product drop, ensuring a balance between data-driven decisions and creative insights.
With automation and advanced algorithms handling the heavy lifting, Centric enables retail teams to focus on what they do best: creating products that resonate with their target audience. Centric Software gives back valuable time, allowing teams to channel their energies into category management and assortment optimization. With less time spent tracking down data, sifting through identical-looking spreadsheets and manually matching products for competitor comparisons, teams can focus their energies on the real-time decisions that will have the biggest impact on revenue, equipped with all of the data needed to make the proper changes or updates.
Understanding the week ahead is crucial for retailers to adjust strategies on the fly. With Centric Software, a quick glance provides a comprehensive overview of the trading week, allowing retailers to be proactive rather than reactive. Centric’s cutting-edge assortment optimization and planning solutions are designed to address the complexities of modern retailing and to ensure brands stay ahead of the curve.
Recognizing the importance of accurate forecasting, budgeting and planning in today’s ever-changing market, Centric Planning streamlines these processes, offering a centralized platform that fosters collaboration and real-time decision-making. The tool provides a 360-degree view, enabling teams to holistically understand sales performance, margins and inventory positions. By doing so, it empowers brands to make informed decisions, ensuring they align their product offerings with market demand while maximizing profitability. With cloud-based architecture and user-oriented functionality and design, Centric ensures agility, allowing teams to react promptly to market changes and to optimize product assortments effectively.
Assortment Optimization and Merchandising can be Supercharged with the Right Software Solution
Centric Software isn’t just another tool in a retailer’s arsenal; it’s a game-changer. In a retail landscape marked by uncertainty and rapid change, utilizing Centric Software’s real-time, intuitive systems can be the difference between thriving and surviving for retail brands. By enhancing responsiveness, ensuring data accuracy and a more cohesive product strategy, teams are empowered to make more confident decisions when it comes to assortment and merchandising.