Your guide to effective assortment planning strategies

In the ever-evolving realm of customer demand, optimizing assortments has become an essential tactic for retailers and B2B distributors aiming to flourish in intense competition. As consumer behavior undergoes constant transformation and innovative technologies reshape buying behavior, businesses must adapt and leverage the potential of assortment optimization to stay competitive.

Exploring the essence of assortment optimization & Its relevance for retailers & B2B distributors

Assortment optimization is a strategic procedure where retailers and B2B distributors carefully choose and oversee a thoughtfully curated array of products to cater to their target market’s distinct needs and preferences of their target market. This process includes a thorough analysis of factors like consumer demand, market trends, inventory levels, and sales data to craft an ideal assortment of products. The objective is to optimize sales, elevate customer satisfaction, and boost overall profitability by ensuring the availability of the right products in the right quantities at the right times. Embracing assortment optimization becomes not just a business strategy but a key driver for sustained success and resilience.

Assortment planning serves as the central hub in the intricate wheel of merchandising strategies and tactics. Decisions related to buying, localization, pricing, promotion, space allocation, visual merchandising, and replenishment and allocation for both physical stores and ecommerce channels all emanate from the comprehensive choices made in range and breadth considerations. Moreover, assortment planning establishes the framework within which planners and merchants engage with vendors, formulate supply chain and distribution strategies, and work towards achieving, or potentially falling short of, merchandise financial goals.

Demystifying the essence of assortment strategies

An assortment strategy pertains to the quantity and variety of products showcased in stores for consumer purchase. Commonly referred to as a “product assortment strategy,” it is a strategic instrument that retailers and B2B distributors employ to govern and boost sales effectively.

There are several types of assortments, each serving a different purpose based on customer needs, market trends, and business goals. Some of the most common assortment strategies are:

Each type of assortment strategy serves as a compass, guiding businesses in their pursuit of a product mix that captures market share and cultivates customer loyalty. The varied strategies underscore the nuanced decisions retailers and B2B distributors make to establish a distinctive presence in their customers’ hearts and minds.

Decoding assortment excellence: unveiling the components of optimization

At the heart of the assortment optimization strategy lies a series of meticulously interwoven components, each playing a pivotal role in refining the selection and arrangement of products. To make these strategies impactful, online channel owners must navigate the complexities of the market and deliver a compelling and competitive product offering.

The key components of assortment optimization include:

As businesses strive to meet the diverse needs of their customer base, the components of assortment optimization serve as the guiding principles, ensuring a delicate balance between customer satisfaction, operational efficiency, and financial viability.

Effective assortment management can significantly improve financial performance

As businesses navigate the ever-evolving marketplace, the significance of thoughtful assortment management becomes increasingly apparent, as it promises not only a diversified and appealing product mix but also a direct impact on the bottom line.

For example, NielsenIQ helped a personal care manufacturer that was looking to optimize the assortment at shelf, remove the clutter, identify the best-selling SKUs, and maximize distribution efforts with the goal to improve shelf rotation and optimize costs. Following a 12-month implementation plan designed to refine assortment strategies and reviewing performance together, it was observed that there was a +11% category value sales organic growth in hypermarkets resulting from a -10% fewer SKUs by retailer, translating into greater shelf space per item.

Bain & Co. helped a clothing retailer increase their stagnant sales and average marginsby identifying opportunities to tap into underutilized customer segments due to assortment challenges. Bain & Co.’s portfolio expansion recommendations to venture into additional apparel categories beyond basic products led to a ~5X sales and EBITDA growth while the company experience a more than +60x increase in its stock price.

eClerx has also helped its client, a global supplier of Industrial components and tools, to apply an analytics-based assortment optimization process that would maximize margins by deciding what products to keep, remove, add, and improve. The solution assessed the optimal SKU range by delivering insights on product performance and opportunities, helping the client increase revenue by 40% and product demand by 11% in a top category of their products. Read the case study here.

eClerx also helped another US-based industrial and MRO products provider to effectively carry out data-driven range rationalization exercises and identify NPI opportunities. Our advanced analytics solution, which employed complex modules like NLP, Substitutability, Competitor Analysis, Clustering & Forecasting, helped the client identify approximately 8000 new SKUs with varying priority levels. The client introduced 1500 SKUs from the list recommended, which resulted in $2.4M incremental annualized revenue and 3PP improvement in Gross Margin due to the addition of more profitable products.

Getting started with assortment optimization

eClerx’s award-winning proprietary solution for assortment optimization helps brands like yours in finding the optimal product mix. Our AI-driven solution is designed for digital B2B distributors and retailers, and provides data-driven optimized product mix and assortment. It is a low-code platform with the flexibility to quickly onboard new product categories/countries/channels and allows for fully managed services, streamlined set-ups, and robust data delivery.

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