Assortment planning turning strategy into action

Bobbin, May, 2001 by D. Brooks Mitchel, Stacey Leibowitz

Implementing an effective assortment planning process may be the key to offering the right products to the right customers.

the old adage, the right product, iii the right place, at the right time, still holds true in today's retail marketplace, but with one important change. Retailers -- whether traditional, e-commerce or bricks-and-clicks -- must have a compelling selection of merchandise for the right customer as well. To determine the best course of action for reaching the right customers, it is important to examine one of the most important factors that impacts the merchandising process: assortment planning.

Assortment planning -- which involves asking questions such as: Which product? How much of it? What colors? What sizes? Where to place it? Who is the target customer? and so forth -- although it directly affects product selection, price, timing and micro-merchandising, has traditionally been de-emphasized due to hectic retail schedules. Extinguishing delivery fires and meeting marketing and financial planning obligations use valuable time, forcing companies to take the easy approach to merchandising: repeating assortment breadth and depth from previous seasons, creating store assortments based on store volume and ranking items by sales volume alone.

Yet, to attract the right customer in today's increasingly competitive environment, assortment planning must focus on creating appropriate product breadth and depth based on the customer's desires and shopping patterns, taking into account lifestyles, climates and trends. Furthermore, assortment planning must present a compelling mix of products to illustrate the company's strategic vision.

Benefits of Effective Assortment Planning

The primary benefits of effective assortment planning fall into two categories: financial impact and personal impact.

* The financial impact is a result of matching product assortment with market potential, while aligning inventory to sales. This leads to increased sales, fewer mark-downs and improved margins. In turn, these factors dramatically impact profit and shareholder value.

* The personal impact of effective assortment planning is improved employee morale and overall efficiency. Increased store collaboration, buying and planning groups, more complete analytical information, clearly defined roles and responsibilities, and a detailed plan of action all work together proactively for this improvement.

Taking the First Steps

When implemented correctly, assortment planning is circular in nature. The findings and analysis of one season become the input into the planning of the next. Given this circularity, it is important to step back and examine the big picture to determine the preliminary steps that should be considered before beginning the process (See Diagram A).

Often relegated to senior management, the first step to successful assortment planning is the development of a clear, actionable merchandising strategy based on the corporate mission and current retail environment. During this stage, planners identify the right customers and develop a plan to attract them.

Next, management should set corporate financial goals. It is crucial that these plans be developed early enough to allow sufficient time for all parties -- buyers, planners and designers -- to collectively coordinate a particular season's line, while maintaining the flexibility to react to current trends.

Implementing the New Process

Most companies rely on processes used year after year, regardless of the realization that performance can be improved. The term "process" can instill fear in the creative and instinctual worlds of design and buying, making it difficult to implement a new assortment-planning process. It is critical, therefore, to approach the implementation of the new process with the same attention to detail as its creation.

The pain of implementation can be alleviated through effective communication. In many cases, it may be best to implement the new process in small pieces -- by company division, for example. Problems or issues resulting from the process in one division will most likely be applicable to others. Therefore as the process evolves, the problems can be corrected.

The best test for the success of any process is time. As more parties utilize the process and discover the benefits -- whether increased sales, margins or customer satisfaction -- the company's culture will absorb the assortment planning process into its daily activities, making it the normal way of doing business.

Remember today's marketplace demands the right mix of products for the right customers. Don't let old methods for determining product assortments hinder your chance to succeed. Define an actionable strategy, set financial goals early, develop lines using appropriate breadth analysis and assign merchandise to stores based on attribute matches. Finally, watch your bottom line performance grow.

Stacey Leibowitz is a consultant in Kurt Salmon Associates' (KSA) Merchandising Group. Prior to consulting, Leibowitz worked in retail store management and as a production coordinator for a private label apparel manufacturer. Since joining KSA, she has worked extensively in the areas of merchandising and inventory effectiveness.