First, the bare basics.
According to the retail consulting service Parker Avery, assortment planning in fashion is how products are selected to maximize sales and profit, over a specific period of time.
In simpler terms, assortment planning is the process of determining what merchandise is best for sale in your store, done to induce optimal sales and maximise possible profits.
It sounds simple enough, but in the cut-throat world of fashion, assortment planning can make or break a business. It doesn’t matter if yours is a brick-and-mortar store, or if it’s an online-only e-retail model—assortment planning in fashion is an undeniably tricky business to get right.
Let’s delve a little deeper, and try to understand why. For the purpose of this discussion, we’ll refer to assortment planning in fields other than fashion as basic assortment planning.
SKUs, Or Stock-Keeping Units – Breadth and Depth
These are a means by which retailers can keep tabs on their inventory; merchandisers at any store organize products by category and subcategory. In basic assortment planning, the focus is mainly on inventory levels—the number of products kept in stock at the store.
In fashion, however, the categories and subcategories themselves are of equal importance; getting the ‘product mix’ right is as important as simply making sure there are enough clothes for sale.
In the fashion retail industry, this responsibility falls to the fashion buyer who works for the store. They are in charge of categories and subcategories (for breadth), as well as SKUs (for depth, or how much of a product is available at a given time). The latter is decided by following trends in the fashion world, keeping tabs on the competition, previous sales and their degrees of success, and the buyer’s personal experience.
Not an easy job by any means.
Seasonal Inventory, And Staying On Top Of Trends
This refers to the changing up of the inventory in a store, based on the currently prevailing trends in customer preference. With the close relationship that fashion has with trends and fads, seasonal inventory adjustment is an indispensable part of fashion retail.
Buyers working for fashion stores need to be at the very top of their game, all the time. Assortment planning in the world of fashion tends to be rather complicated; forecasting consumer demand is as tricky as it gets.
One slip-up in your prediction of buying trends can end in mass disruption of retail sales, because you stocked up on too many products that no one wants, or because you didn’t stock up on enough products to satisfy customer demand. This can cut into subsequent inventory budgets, causing cumulative losses.
To avoid such situations, you can make use of retail assortment planning software; in US, organizations like Intelligence Node offer inventory management software that can help retailers make changes in assortment planning on the fly.
This way, errors in judgement can be corrected as and when they occur.
Substitutions and Predicting Consumer Behaviour
In retail and assortment planning, ‘substitution’ refers to the customer’s willingness to go for an alternative product when their first choice isn’t in stock. An important part of the assortment planning process is the prediction of consumer behaviour when a certain SKU runs out, or isn’t acquired by the store.
In general, there are two types of consumer substitution behaviour. Stock-level substitution is when a consumer regularly buys from a certain brand, and settles for a similar item from a competitor when their preferred SKU is unavailable. This is more frequently seen in the groceries market.
In fashion, you’re more likely to encounter preference substitution. This is where a customer wants a certain product based on brand recognition, loyalty, and competitor marketing, but instead chooses the most similar SKU because the retailer didn’t stock their original preference.
For instance, a customer might prefer your store’s Levi’s stone-wash jeans. When you don’t have these in stock, they might go in for a pair of bootcut jeans (still from Levi’s) instead. That’s preference substitution.
In big-box and fashion retail stores, buyers and merchandisers need to understand consumer substitution behaviour, and make sure that preference substitution is accounted for.
Following Local Market Trends, And Store Location
Even if you work for a large chain of retail stores, assortment planning needs to be customized for each store. Especially in the world of fashion, consumer preferences at, say, a store in New York City will be very different from another outlet in New Jersey.
Core products could be the same for the most part, but promotional items need to be stocked according the predominant local trends.
Store Volume Is a Factor Too
Consider two stores, for instance. Let’s say one of the stores is a high-volume seller, while the other sells lower volumes of product. This difference in store volume actually has a real impact on your choice of stock.
Assortment planning, therefore, needs to take into consideration the volume of stocks pushed out by each outlet as well. Categories, subcategories, and SKUs need to be picked according to the value of retail real estate in the specific outlet.
As you’ve probably realized by now, assortment planning in the world of fashion is no joke. You can’t get away with guessing here. A thorough knowledge of these factors will go a long way towards the success of your assortment planning strategy.
A bit of luck helps too!