Merchandise planners and buyers use years of experience in fashion retail to develop just the right product mix for their customer base. But as the pace of change in the industry accelerates, retailers need a more efficient way to develop productive inventories and build optimal assortments.
Fortunately, technology advancements have brought new capabilities to the table. Planners and Buyers can now create and optimize their product assortments by augmenting their knowledge and skills with science backed by AI.
Getting to your customer of one
Personalization is a top buzzword, and the concept is increasingly important in developing product assortments. In fact, according to a recent study by Coresight, misjudged inventory situations, including buying the wrong assortment and then misallocating, account for 53% of all unplanned markdowns. Achieving strong performance requires understanding how your store, product, and customer attributes align to build the perfect mix of products. Leading technology solutions such as AssortSmart add AI to the optimization process, empowering retailers to identify how important attributes drive assortment needs at a granular level.
- What’s influencing in-store variances?
- How does localization affect your mix of product to ensure you get each customer the product she wants?
State-of-the-art optimization tools can uncover the attributes that matter most, giving you better insights and helping you deliver the right product to the right customer at the right place and time. Understanding the attributes that matter to your customer also support searchandizing your website, driving a more positive and personalized user experience. According to Econsultancy, visitors who intend to buy something are 91% more likely to use search than those who are just browsing.
Vertical intelligence clustering
Advanced tools drive localization through vertical intelligence clustering.
- What’s the propensity to sell certain attributes as certain locations?
- How do those trends change across time periods?
AI can capture that variability and it’s important that you do—it correlates directly to what the customer wants at a given location at a given time. With that data, you can then build your product assortment around those desires.
How granular should your attribute data be? Using pants as an example, your assortment optimization tools should bubble up the most relevant product attributes to use in creating your assortment mix. Culling through the last several years of history to identify the top attributes—fit type, prints or solids, color families, etc.—the right technology will tell you which attributes are most significant, and your assortment can be structured around them.
Forecasting, simulations, and the push toward better optimization
In today’s environment, assortment planners can’t rely on LY when mapping out the future. Instead, forecasting is the next step after localization and tools that allow you to forecast based on multiple metrics and to run simulation scenarios to find the best product mix are crucial to success.
Forecasting algorithms must be agile enough to account for volatility in the market and refreshed frequently enough to remain relevant as trends, consumer behaviors, seasonality and assortment spend changes. A robust forecasting engine will be able draw in internal and external factors to predict what the customer will want, when she will want it, and where she will purchase. AssortSmart is backed by Ada, a powerful forecasting engine, pulling in both external and internal demand influencing factors.
Simulations reveal how adjustments to your assortment are likely to influence your forecast and identify impacts across sales, margins, and other factors. Modern tools can quickly run thousands of simulations to help develop budget allocations that fit your brand’s goals.
This level of optimization isn’t possible using spreadsheets and manual tools. But today’s technology automates these time-intensive tasks and provides timely insight to build your perfect product assortment.
The big question: How do you deal with 2020?
By any measure, 2020 was an outlier of a year. Retailers may not want to incorporate data from that period due to the potential for skewed results.
- Did some of your departments take a harder hit than others due to the pandemic?
- Were your brick-and-mortar stores open, closed, or a mix of both during regional shutdowns?
- Have you added products or brands to satisfy pandemic-triggered needs that you’ll likely phase out as things rebound?
It’s important that your assortment planning solution can isolate 2020 data. You may choose to include the information, but you might also prefer to exclude metrics gathered during the pandemic. With a next-generation tool such as AssortSmart, you can do either.
You should also incorporate more recent trends as part of your optimization and forecasting activities. If a category has grown or displayed notable stickiness, for example, that data should be captured and reflected in your assortment development modeling. In a rapidly changing retail environment, a higher weightage to recency is one of the most important aspects of ensuring your forecasting engine is accurately predicting what will happen.
Get the benefits that matter most
A powerful assortment development platform enables your business to navigate changes in customers’ behaviors and purchasing preferences. It offers valuable insight to help trim your assortments and right-size your inventory as you make it more productive.
You can also maximize your sales and gross margins. We’ve seen retailers enjoy as much as a 7% increase in gross margin when they elevate their current processes and implement the AssortSmart tool.
Over the past few years, retailers have seen the complexity of their businesses increase while the team size has remained the same or gotten smaller. AssortSmart enables planners to reduce the time to plan assortments by leveraging AI and eliminating inefficiencies. Managing data in Excel and manually moving information consumes time and opens the door to data errors. With the right technology, those tasks are automated, allowing your team to create an assortment in as little as 30 minutes instead of the days or weeks needed with traditional methodologies. This enables these teams to focus on more driving business initiatives.
Innovative technology providers are also reducing retailers’ deployment timelines for assortment optimization solutions. Legacy systems required months of planning, architecting, and fine tuning. Today’s leading platforms such as AssortSmart can be deployed in about eight weeks, with some follow-up time for change management. This leapfrogs many established solutions and gets your planners on the way to an optimal assortment in far less time.