What Is Assortment Planning in Retail? 9 Ways to Optimize

Mark Jackley | Content Strategist | June 27, 2023

Success in fashion retail depends on offering the right seasonal styles through the right sales channels. To achieve this goal, retailers rely on assortment planning, a complex process made easier when following a few best practices. With budgets and relevant data to guide planning decisions, any retailer can build fashion assortments that shoppers crave.

What Is Assortment Planning?

Assortment planning is how fashion retailers plan their assortment of seasonal styles and allot them to each store and other sales channels. The idea is to offer the right styles, in the right sizes and colors, through the right channels. While tied to retail planning at a higher level, assortment planning is tactical, responsive to local market conditions and sudden shifts in demand.

Key Takeaways

  • Through assortment planning, fashion retailers stock the seasonal styles their customers want—across stores, ecommerce sites, and other sales channels.
  • Key to assortment planning is complete, accurate data, mainly sales data going back several years, along with data on product attributes.
  • Savvy retailers use assortment planning to increase sales, cash flow, and profitability.

Assortment Planning Explained

Assortment planning is complicated. But it’s easier to understand when you look at the bigger picture, especially in the context of another planning activity, merchandise planning.

Retailers create a merchandise plan to set a budget for seasonal merchandise, the total selection for all channels. The merchandise plan works at the level of product categories—for example, women’s tops—without drilling down into the products themselves.

But fashion retailers don’t sell categories; they sell products and styles. And this is where smart retailers can gain a competitive edge. Mindful of the budget and data analysis (mostly involving current and historical sales information), they plan the fashion assortments for each store and channel.

A fashion chain will scour the wholesale market to find the best product styles for categories such as women’s tops. Long-sleeve blouses surely will be in the product mix, offered in styles such as button-down, scoop neck, and pullover. Shortly before a season kicks off, the retailer sends each store its allotment of blouses and other products in a range of sizes and colors. Naturally, higher-performing stores get more of the assortment.

Not every fashion retailer follows the same process, but the most successful ones start with a merchandise plan that guides the assortment plan. The assortments are where the higher-level plan comes to life on delivery trucks, store shelves, and bulging shopping bags.

See how Oracle solutions help fashion retailers plan assortments with ease.

Assortment planning and merchandise planning are both key aspects of the broader planning process.

How Does Assortment Planning Work?

Often, assortment planning occurs at least six months before a season begins. Using a wealth of data, especially data on past sales transactions, planners create assortments of styles for all channels—each store, website, and catalog. As the season kicks off, the styles are allocated to individual channels, taking into account factors such as channel or store performance over time, space limitations, and geographic location.

For example, a planner might include three-season jackets in the fall assortment. But fall starts earlier in Minnesota than in North Carolina, so stores up north will receive jacket deliveries earlier, and likely in greater volume. If the data shows a store in St. Paul, Minnesota, has trouble moving fleece jackets, the planner might allot it only one or two styles, in limited colors and sizes. Even if market trends show strong potential for fleece jackets, ground-level demand dictates the decision. If a certain fleece isn’t selling, the planner might cancel restock orders.

These factors show why assortment planning tends to be so tactical. Preseason planning is the equivalent of a football team gearing up to have a successful season. When the season arrives, it’s game time—retailers monitor current demand, daily sales results, and fluctuating inventories to make any needed adjustments. While the overall plan won’t change in season, most retailers have the flexibility to modify it—for instance, by ordering extra quantities of black jeans if they’re flying off the shelves.

Why Is Assortment Planning Important?

Assortment planning is important because it determines the precise mix of products each store gets—assortments that fit in its space, work to its strengths, cater to its customers’ tastes and buying habits, and drive sales. A one-size-fits-all approach doesn’t work for most retailers. Stores vary in size, sales potential, and customer demographics. When each store offers the right styles in the right amounts, they sell more and are better able to plan, control their inventories, and avoid cluttered or empty store shelves. Ultimately, assortment planning matters because when it’s executed well, it increases sales, cash flow, and profitability.

What Does Assortment Planning Include?

This question deserves a two-part answer: what the plan itself includes and which tools and methods are used in the planning process.

Let’s start with the key parts of any final plan.

  • Product variety
    Product variety refers to an assortment’s span of products and styles. A fall assortment plan might feature 10 types of dresses; for example, shifts, maxi dresses, shirtdresses, and so forth. Variety matters when stores sell to different types of customers: bargain hunters, people looking for premium brands, or shoppers who value a wider set of choices.
  • Product variation
    Product variation refers to the depth of an assortment. The above retailer might include in its plan four brands of shirtdresses in seven colors and five sizes. Variation on top of variety makes an assortment richer. Many shoppers appreciate this comprehensiveness, though some might feel overwhelmed, too paralyzed to make decisions. To strike the right balance between variety and variation, retailers must know their customers in each market, store, and channel.
  • Assortment balance
    Most retailers balance assortments across category, type, color, size, and seasonal trends. For instance, a fashion retailer’s mix of men’s summer shirts might include traditional button-downs along with beachy prints. Even if traditional styles aren’t always bestsellers when the temperature rises, they’re traditional for a reason—someone always wants to buy them—and usually have a place in a seasonal assortment along with trendier styles.

Now let’s look at useful planning tools and methods.

  • Consumer segments
    To craft the best assortments, planners should look at customer segments—groups of shoppers with similar needs based on personal, physiological, or economic factors. People shopping for inexpensive, petite-sized blouses have different priorities from size-medium people who don’t mind spending more. Retailers should make sure assortment plans reflect the needs of real customers.
  • Store clustering
    Store clustering is a way to simplify assortment planning. Instead of customizing plans for each store, retailers group, or cluster, certain stores together, commonly by size and sales volume, and produce a similar plan for each cluster. If a fashion retailer has 20 stores and five of them sell way more than the others, those five would form a cluster and share one basic plan.
  • Consumer decision trees
    Although most shoppers don’t know it, they generally work their way through product hierarchies, which are the way products are grouped or organized. Assortment planners use charts that branch downward (hence trees) to visualize the paths that buyers take in making decisions. For example, a decision tree might start with dresses, under which a customer would see dress types such as formal and casual, and under those, cocktail dresses and sun dresses, respectively.
  • Seasonal financial goals
    Since retailers do assortment planning for every fashion season, they also often set seasonal financial goals. These short-term goals can change according to factors such as the economy, weather, and holidays or special events. Since beach-town stores sell less in winter, seasonal financial planning takes that into account. On the other hand, stores that sell expensive down parkas and the latest ski pants may have more aggressive goals in the fourth quarter.

Assortment Planning Models

Assortment planning models aren’t cookie cutter. But even fashion retailers that customize their plans tend to start the process with one of the following models.

  • Wide
    A wide-model assortment plan features a wide variety of products and styles, something for every shopper. Large stores and national chains are most likely to use this model.
  • Deep
    A deep-model assortment plan typically results in fewer products but more variations of each. For example, a men’s store might offer three styles of business-casual pants, chinos, dress slacks, and dark jeans, each in a range of brands, colors, and sizes. Boutiques and specialty shops find this model useful.
  • Scrambled
    Retailers looking for ways to generate extra sales use scrambled assortments to offer products outside their business line. A sports apparel retailer might plan an assortment that includes power bars, nutritional supplements, and discounted gym memberships.
  • Localized
    Assortment planning often includes products from local vendors. A fashion retailer might offer jewelry or silk-screened T-shirts from local artisans who make everything by hand. It’s a creative way to round out assortments and spur additional sales.
  • Mass market
    Mass-market assortment planning goes both wide and deep, offering lots of products and plenty of variations within each. A national chain of men’s stores with square footage to spare and a sophisticated ecommerce site might sell 15 different brands of neckties, each with a deep assortment of stripes, solids, patterns, materials, and widths.

When to Use Assortment Planning

Strategically, retailers use assortment planning to meet financial goals by offering the best assortments of seasonal fashion styles.

Tactically, retailers do assortment planning to tackle common challenges, such as boosting sales at a smaller store with an assortment of styles tailored to its sales potential and space restrictions.

Optimally, assortment planning should be an ongoing effort, but it is especially critical in certain scenarios:

  • Seasonality: Retailers begin assortment planning usually at least six months out, allowing ample time to produce an effective plan for the upcoming seasons and the climates in certain areas. Seasonality also includes planning for holidays.
  • New Store Grand Opening: Assortments available at new retailer locations are influenced by many factors. Assortment planning should consider the store's location, the demographics of the local population, and the presence of competitors in the area.
  • Changes in Market Trends: Just like seasons change, so do trends. Assortment planning keeps retail stores “on trend” with the latest technology, preferences, and economic shifts.
  • Supply Chain Volatility: Supply chain disruptions like natural disasters or economic changes mean sellers may need to adjust their assortment planning options to include what they can receive and stock reliably.
  • Assessing the Effectiveness of Suppliers: If a certain supplier’s products are not selling well or are being returned at a higher rate, it may be time for a retailer to reassess their assortment plan to find a different vendor with a better reputation.
  • Moving to Online Sales: Shopper behavior can differ online versus in-person. Retailers may need a different or wider assortment for ecommerce than brick-and-mortar.

Getting Started with Assortment Planning

Assortment planning starts by reviewing the merchandise plan, the higher-level plan that sets budgets for each product category. The merchandise plan guides decisions on seasonal product styles to include in the fashion assortment for every store and channel.

In executing the merchandise plan, assortment planners begin with data. Comprehensive, accurate data in fine-grained detail is the key ingredient in a successful plan. What products have sold well over the past few years? It’s not enough to know that a dress flew off the shelves. Was it a shirt dress? A shift? Which sizes and colors were popular? And which stores sold the most? Seasonal sales data going back a few years gives planners insight on fashions likely to sell this season.

Assortment Planning Examples

In the real world, fashion retailers use assortment planning to get results.

Mr Price, a South African fashion retailer for women, men, and kids, used assortment planning to make midseason adjustments during the pandemic. When stores reopened after being closed for several months, cautious shoppers favored local stores over those in crowded malls. With demand higher in smaller stores, Mr Price changed tactics by allotting them more products than before and reducing quantities to larger mall locations. Doing this let Mr Price revive sales, reduce unsold inventory, and protect the bottom line.

Ulta Beauty, a national chain that sells cosmetics, fragrances, hair care products, skin care products, and more, uses assortment planning to stock more than 1,300 stores. A more carefully planned assortment has improved merchandise displays by stocking the right quantities of products. It has also helped coordinate orders from hundreds of suppliers.

Forever 21, the women’s fast-fashion retailer, uses assortment planning to zero in on styles that will sell. It analyzes data from hundreds of stores to make planning decisions, down to the level of color, size, fabric, and even neckline.

9 Assortment Planning Optimization Tips

When retailers use the following tips, they enter the fashion season with robust assortments that set them apart from the competition.

1. Study the merchandise plan

This higher-level plan sets the budget for seasonal products. Knowing spending limits helps assortment planners decide which product styles to offer.

2. Use historical data

When planning an assortment, retailers analyze seasonal sales going back at least two to three years. They need to see which styles sold well or didn’t, which types of customers bought them, and which stores or ecommerce sites sold the most units.

3. Know thy customers

Study customer segments and demographics to make informed decisions about which styles to stock for whom, and where.

4. Use the right planning model

Use an assortment planning model that fits the merchandise plan and thus helps reach financial goals. Wide planning models feature more product styles, deep models more sizes and colors.

5. Simplify plans with clustering

Group stores into clusters by size, sales volume, or other attributes important to the business. It’s easier to create assortment plans for a smaller number of clusters instead of every store.

6. Balance staples and trendy items

Most fashion retailers balance their assortment between perennial bestsellers and promising new styles. If women’s V-neck sweaters are a perennial favorite, a retailer might add roll-neck sweaters in fun colors or patterns.

7. Think about going local

Shoppers love to support local artisans and manufacturers. Fashion retailers often round out product assortments with clothing styles and accessories made nearby.

8. Plan to cross-merchandise

Add complementary products to seasonal assortments. A retailer selling kids’ sneakers during the back-to-school timeframe might stock up on sweatpants for stores to display them together. Historical point-of-sale data reveals which products people buy in the same transactions.

9. Plan for impulse buys

Round out the assortment plan with hard-to-resist styles. For instance, inexpensive earrings displayed on endcaps or near checkouts can lift sales.

Experts point to nine strategies, including using historical data, knowing your customers, and mixing the classic with the trendy, for optimizing fashion assortments.

Simplify and Optimize Assortment Planning with Oracle

Fashion retailers rely on Oracle Retail planning applications to plan assortments, refine assortment strategies, and anticipate in-season trends with ease. A highly visual workflow helps define and execute local market and microsite assortments, improve conversion of traffic into higher sales/margins, and increase customer satisfaction. The application suite makes it easy to include data such as sales history, one-off buys, and style and color preferences across retail locations. Sophisticated logic lets retailers complete their assortments quickly and effectively, freeing retail planners to innovate to boost in-store and online traffic. With a standardized assortment planning process and centralized data, retailers can improve inventory management and maximize their investments.

Assortment Planning FAQs

Why is assortment planning important?

Assortment planning matters because it helps fashion retailers offer the right products in the right channels at the right time.

What are the two key factors in assortment planning?

Variety within a product category and variations of each product (style, size, and color) are both key to assortment planning. Some experts believe that having a balanced assortment of classic and trendy styles is just as important.

How do you make an assortment plan in retail?

When making assortment plans, retailers review their merchandise plan, financial goals, and budget, plus analyze copious amounts of data to guide decision-making.

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