Retail assortment planning, a key part of merchandise planning, is the process of determining which products a retailer will offer for sale and in what quantities. It involves understanding customer demand, monitoring market trends and sales data, considering seasonality, and allocating budget. The goal of retail assortment planning is to offer the right products in the right quantities at the right time to meet customer demand and drive sales.
Assortment planning is critical to the success of any retail business. The right product mix can attract customers, increase sales, and drive revenue. On the other hand, an ineffective product mix can result in overstocked or understocked shelves, missed sales opportunities, and reduced customer loyalty. Retailers who take the time to carefully plan their product offerings are more likely to succeed in a highly competitive market.
Here are 10 reasons why retailers suck at assortment planning and what you can do to #notsuckatassortmentplanning.
1) Not Understanding Customer Demands: Retailers often make the mistake of not fully understanding their customers’ demands. This leads to a misalignment of product offerings and customer expectations. This can result in poor sales and dissatisfied customers.
How to Fix This: To address this issue, retailers can conduct customer surveys and market research to better understand their customers’ needs and preferences. They can also use customer data, such as purchase history and browsing behavior, to inform their product offerings. Regularly revisiting and adjusting their customer understanding can help ensure their product offerings remain aligned with customer demands.
2) Ignoring Market Trends: Another common mistake retailers make is ignoring market trends. This can result in them stocking products that are no longer in demand or failing to offer products that are in high demand.
How to Fix This: Retailers can stay on top of market trends by regularly reading industry publications and attending trade shows. They can also use data analytics tools to identify emerging trends and monitor changes in customer demand. Collaborating with suppliers can also provide valuable insights into market trends and product demand.
3) Overstocking: This is a common problem for retailers. This can lead to increased storage costs and the need for clearance sales to get rid of excess inventory.
How to Fix This: To avoid overstocking, retailers can use data analytics to closely monitor their inventory levels and sales data. They can also regularly review and adjust their inventory management processes to ensure they are not holding onto excess inventory. Implementing just-in-time inventory practices can also help minimize the risk of overstocking.
4) Underestimating Lead Time: Retailers sometimes underestimate the lead time for products to be delivered, resulting in stock shortages. This can lead to lost sales and dissatisfied customers.
How to Fix This: To ensure accurate lead time estimates, retailers can collaborate closely with their suppliers and regularly review their processes for estimating and tracking lead times. They can also use technology, such as inventory planning software, to automate and streamline this process. Regularly reviewing and adjusting lead time estimates can help ensure they are accurate and up-to-date.
5) Not Considering Seasonality: Seasonality can greatly impact customer demand for certain products. Retailers who fail to consider this when planning their product assortment can miss out on sales opportunities.
How to Fix This: Retailers can stay on top of seasonality by monitoring sales data and customer demand patterns. They can also collaborate with suppliers to understand lead times for seasonal products. Implementing a flexible and agile assortment planning process can also help retailers quickly respond to changes in customer demand during seasonal periods.
6) Neglecting to Monitor Sales Data : Retailers who neglect to monitor sales data are missing out on important information that can help them make informed decisions about their product offerings. This can result in stocking the wrong products or failing to restock popular items.
How to Fix This: To ensure they are making informed decisions about their product offerings, retailers can use data analytics to closely monitor sales data and identify trends. They can also regularly review their processes for tracking and analyzing sales data. Incorporating sales data into their assortment planning process can help ensure they are offering the right products to meet customer demand.
7) Failing to Use Technology: Technology can greatly improve a retailer’s assortment planning process. Retailers who fail to use technology, such as retail merchandise planning software, are missing out on valuable insights and efficiencies.
How to Fix This: Retailers can improve their assortment planning by utilizing technology, such as data analytics and inventory management software. These tools can provide valuable insights into sales data and customer demand patterns. Automating routine tasks, such as inventory tracking and restocking, can also help free up time and resources for more strategic tasks.
8) Not Diversifying the Product Mix: Retailers who have a limited product mix run the risk of relying too heavily on a few best-selling products. This can lead to decreased sales if these products become outdated or lose popularity.
How to Fix This: To diversify their product mix, retailers can regularly evaluate their product offerings and seek out new and emerging products that meet customer needs. They can also use data analytics to identify potential new products based on customer demand patterns. Collaborating with suppliers can also provide valuable insights into product trends and customer demand.
9) Not Allocating Enough Budget: Retailers who do not allocate enough budget for their assortment planning efforts can suffer from inadequate product offerings and missed sales opportunities.
How to Fix This: To allocate enough budget for their assortment planning efforts, retailers can regularly evaluate their spending and adjust their budgets as needed. They can also prioritize spending on technology and Open To Buy software that can help improve their assortment planning process. Ensuring they have adequate budget for their assortment planning efforts can help ensure they are offering the right products to meet customer demand.
10) Not Collaborating with Suppliers: Collaborating with suppliers can provide valuable insights into product demand and lead times. Retailers who fail to collaborate with their suppliers risk missing out on important information that can impact their product offerings.
How to Fix This: Retailers can improve their collaboration with suppliers by regularly communicating with them about product demand, lead times, and market trends. They can also involve suppliers in their assortment planning process and seek their input on product offerings. Collaborating with suppliers can help ensure they have a better understanding of product demand and lead times, leading to more informed decisions about their product offerings.
TL;DR – Retailers can avoid these top 10 assortment planning mistakes by staying informed about customer demands, market trends, and sales data, using technology, diversifying their product mix, allocating enough budget, and collaborating with suppliers. By doing so, they can ensure they are offering the right products at the right time, leading to increased sales and customer satisfaction.
