By Jim Lewis, CEO
Recently we have received an uptick in inquiries regarding assortment planning. That usually happens when an inventory problem arises, not because someone is looking for fresh product. They go into analysis mode and try to figure out which decisions they made caused the problem. Retail is an imperfect science and requires Buyers to have vision- the ability to see what their customers want.
It’s About Curation
A buyer’s main role is curation. That’s what the assortment planning process is all about. That hasn’t changed in the 20+years since I was a buyer. Heck, it hasn’t changed in 5,000 years since the Forum was created. Having a balance of what the consumer expects to find and surprising them with something they didn’t know they wanted is key. That ratio is different depending on the type or tier of retailer. It’s kind of like giving gifts- you might give someone what they want or are expecting, or you may try to surprise them with something you think they might like. Sometimes you’re right and sometimes you’re wrong (hence the act of re-gifting).
Assortment planning tools have become more sophisticated and easier to use thanks to modern technology and abundant data. Buyers can get instant feedback on product choices they made and can adapt ranking and quantities quicker than ever. Robust POS reporting and dashboards enable them to gain insights that may have otherwise go unnoticed.
At ERS we believe in studying data at the lowest level- by SKU by Store. Geography and demographics should play a key role in assortment planning. It drives me crazy that some retailers still plan based on the size of a store and not the consumer tastes of the community in which the store is located. Having worked in stores in Florida I saw many examples- unwanted colors, garment weights, etc. There’s no reason for that anymore.
The Promise of AI
AI and predictive analytics are extremely helpful to inventory planners in forecasting continuing, replenishable items. Will it also help buyers track the ever-changing tastes of consumers? AI is good at picking up patterns, but taste is subjective and determining what action to take on the information still has a lot of risk. You see it at work on online stores. That little list of other things that might interest you. Ever share an Amazon account with someone else in your family? If someone else searches and buys under your account, you just blew up the algorithm to help predict what you might like.
Available cash goes hand in hand with assortment planning. Buyers must live within a budget and good discipline with open to buy is critical. However, other financial shenanigans can sometimes prove disastrous. In the early aughts the men’s department was a sea of khaki pants and polo shirts. It was the same look in every brand. Why? Suppliers would only show buyers “safe” product. What they knew they could sell. They wouldn’t take a chance on something exciting because of the margin games retailers were playing with them. Regardless of the presentation, level of commitment, or promotional plans, retailers required suppliers to guarantee them a specific level of profit. Buyers were no longer presented with the best assortment for them to curate. I know it still happens today and I don’t know how they get away with it.
To me, assortment planning should begin with a blank sheet of paper each season. What is the consumer reacting to in your current assortment? What’s going on at your competition? Buyers must also be shoppers- putting on their consumer hat. Don’t forget to look at the clearance rack- it usually contains a buyer’s mistakes.
Risk in Change
There is risk in changing assortments. You must quantify how much risk will be tolerated before making changes. There are many examples of assortment changes in the market right now. Bed Bath and Beyond is about to find out whether their steps at re-curating will pay off. In several key categories they have completely changed their assortment- mostly in terms of branding. As always, the customer will vote with the dollars.