Market Awareness

A Modern Guide to Assortment Optimization

Assortment Optimization

Since the beginning of retail, it was all about having the right products. You might have the best store location or a great social media presence, but if potential customers get to your store or website and don’t see relevant products, then they’ll be gone and may never return.

The stakes are even higher when it comes to online retail because competitors are just a click away. That means that retailers who want to position themselves for success must make assortment optimization a priority. Let’s go over the action items that make up the modern guide to assortment optimization:

1. Do Your Research 

If you’re thinking of revamping your assortment (which you should be doing consistently), you need to know which brands are doing well in each category for your top competitors. Some retailers choose to do this manually, but for retailers who recognize that as too time-consuming, there are third-party solutions to help with competitive monitoring and analytics.

The data you collect transforms your assortment planning from art into science. Generally, art is subjective and science is fact-based. Having a concrete strategy for collecting and analyzing competitor data is the first step toward having an optimized assortment.

The kind of data that will help retailers find potential new product opportunities is called longitudinal data, which tracks the same information for a sample of products across different points in time. It is a comprehensive way to measure whether a product is worth carrying or not. You’ll need current trends but also historical inventory trends. The brand or subcategory could be popular right now, but it may be on the downswing. Going back through the data gives a better idea of its volatility. Why subject your team to the work of rolling out a new product if it’s going to be a rocky experience and ultimately not worthwhile?

2. Benchmark Against the Competition

Once you have competitive data, you’ll need to analyze it depending on your specific context. You can’t sell everything to everyone, so ask yourself what products and categories make sense with your established brand identity. If Forever 21 suddenly introduced a couture line with prices in the thousands, that simply wouldn’t jive with what they’ve worked so hard to become. Don’t add a product line just because others are doing it.

Discover the assortment gaps between you and your competitors. Find out where they are lacking. There could be white spaces in terms of product category, brand, or price tier that you could be filling. You could create your own category and solidify your retail legacy. But remember to focus—even mega-retailers like Walmart know that there are logical limits to what they can carry. It’s a matter of having deep customer preference knowledge and combining that with competitor data on the categories you’re interested in trying out.


Another way of looking at it is monitoring the products competitors are adding to their assortments. If there’s a sharp increase in products in certain categories, that can tell you they might be aiming to steal market share or want to become the go-to source for those items. It could be that they’ve seen massive success with certain products if you’ve noticed them adding more and more to those categories over time. That could be the signal you need to add those categories or items in order to not be muscled out by competitors. Still, make your decisions based on your desired margins. It doesn’t make sense to add some items to your assortment, and knowing which ones those are saves headaches down the road.

3. Act on Assortment Data

Keeping your assortment fresh and on the forefront of your industry means analyzing data often and jumping at good opportunities as they arise. This requires a proactive approach, as well as an in-depth understanding of demand patterns and historical data.

Assortment planning gets major retailers ahead because they’re no longer reacting to the market—they’re driving it. Sure, that means making some mistakes along the way, since not all new products are bound to be successful. But that’s okay because there’s no such thing as reward without risk.

Planning out your assortment is a very individual process because no two companies operate exactly alike. And that’s precisely why you need accurate and timely data. Otherwise, you’re just left with your intuition. No matter how many years of retail you have under your belt, your gut is not the most effective when it comes to choosing what to stock. Only assortment analytics will remove natural biases that everyone has and allow you to make better decisions, faster.

Assortment planning gets major retailers ahead because they’re no longer reacting to the market—they’re driving it.

Effective assortment planning creates an environment that fosters better communication across your team and extends to your suppliers as well. When you have a thought-out vision (backed by data!) of what you want to carry and what you want to get rid of, there will be much more clarity and transparency across your team.

The telltale signs of an effective product assortment are customers welcoming your new products with open arms and significant growth based on that bump in sales. A great example of this is Target’s guest lines. They are always met with excitement and a certain amount of obsession. They often sell out in minutes and sell for several times their original price on secondary markets. Target has admittedly had some hiccups around their website during these launches, but what holds true is that they pick the right designers and offer new products that become must-haves from the moment they’re announced.

Why Assortment Optimization Matters Now

Maintaining an optimized assortment can have a positive impact on your pricing strategy and bottom line. If you have unique products and a strong brand value, then you won’t have to enter into a price war and resign your business to bargain basement prices. Instead, shoppers will see the value in shopping with you and will choose to do so, even if you don’t have the lowest price.

Looking back at what’s worked in the past simply isn’t enough. Assortment optimization is a scientific process that combines knowledge of the past and present, but remember to keep experimenting with categories that could be big hits in the future. Modern assortment strategy requires a holistic view of internal, external, past, and present data.

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Better decisions can only come from better data.

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