ASSORTMENT

PLANNING


RETAIL BUYING and CATEGORY MANAGEMENT


Objectives:
To understand the need for Assortment Planning.

To understand the components of Assortment Planning.

To understand the factors affecting an Assortment Plan.

To understand the process of Assortment Planning.



Stock outs & non-availability
Excessive Inventory
Low Service Levels
Promotions negative ROI
Lost of Revenue

Long
Manufacture
Lead Times
Promotions
Fluctuate
demand
Poor collaboration
between Sales,
Marketing, Demand
Management,
Operations
and with
CUSTOMERS Multiple
Product
attributes make Demand
Planning challenging
Sell in Vs Sell
through
New customers
Planning
New lines & Products
High Inventory
Costs
The Chaos in the Marketplace
Real-Time Sales and Operations Planning
KPI and Management Dashboards
Demand / Supply Balancing
Sales and Marketing Forecast
Annual Budget
Shape Demand
Understand Demand
Plan for Demand
Respond to Demand
Demantras End-to-End Solution for
Demand-Driven Planning
Trade Promotion
Management &
Optimization
Event Planning
Funds Management
Volume Planning
Demand
Management
Forecasting
Collaboration
POS Monitoring
Assumptions Planning
Store Planning &
Replenishment
Assortment Planning
New Product Introduction
Replenishment
Openings
Optimization
Merchandise and Assortment
Planning (MAP) - COMPONENTS
Strategic
Planning
Merchandise
Planning
Assortment
Planning
Slow seller
Management
Location
Planning
Strategic Planning

In a strategic plan - also referred to as a business plan - a retail company
defines strategic retailing targets.
The business plan is created on the highest level for the whole company but
also for individual distribution channels or higher levels in the merchandise
hierarchy.
Some of the stock and sales data planned on the higher levels may sometimes
be transferred to the store and merchandise plans.
As the store plan and the merchandise plan are often created more or less
independently of one another, it must be possible to compare both plans to
ensure that the most important key figures are contained within a particular
tolerance range.


Merchandise and Assortment Planning
(MAP) is composed of the following
components:

Merchandise Planning

Like location planning, merchandise planning is used to create a more
detailed structure for higher-level strategic guidelines.
Operative processes such as reporting or allocation are hardly used in
merchandise planning.
The merchandise category hierarchy is used in the planning process but
the merchandise itself is not looked at in detail.
Therefore merchandise planning does not extend to product level.
Other important planning levels are the distribution chain, the season,
the purchasing group and, to some extent, the price margins.

Merchandise and Assortment Planning
(MAP) is composed of the following
components:

Assortment Planning
The aim of assortment planning is to create assortments and define
which products are listed for which stores and the quantity of these that
should be allotted to individual stores.
Within an article hierarchy , the buyer can plan several levels, for
example, product (style), color (variant) or the price band.

Merchandise and Assortment Planning
(MAP) is composed of the following
components:

Slow Seller Management
The aim of slow seller management is to ensure that at the end of the selling period
for merchandise - particularly for fashion and high fashion merchandise - only a small amount
of stock remains.

This means that markdowns can be reduced to a minimum.

Slow seller management is composed of markdown planning and controlling.

In markdown planning the markdown budget is defined on different levels.

For markdown planning one must define scaled price reductions in the form of a set of rules
(markdown profile).

This markdown profile provides products with a target sales curve. It is then possible to
perform markdown simulation (when will the product be sold, what quantity of it and at what
price?).

In markdown controlling, slow seller analysis is performed to monitor merchandise sales and
ensure that planned sales rates and gross margins are actually met.

Merchandise and Assortment Planning
(MAP) is composed of the following
components:

Location Planning

The location plan (store plan) is the concrete structure of the strategic plan
that takes into account different factors within the store hierarchy:
regional marketing,
competition,
demographic changes and preferences, as well as particular events.

Planning costs and income for retail is performed in line with the strategic
plan. These key figures are planned to store level or to store/division or
store/department level (for example, ladies' wear or men's wear), but not to
any further level of detail.
Merchandise and Assortment Planning
(MAP) is composed of the following
components:

Assortment planning -- which involves asking questions such as: Which product?
How much of it? What colors? What sizes? Where to place it? Who is the target
customer? and so forth -- although it directly affects product selection, price, timing
and micro-merchandising, has traditionally been de-emphasized due to hectic retail
schedules.

Meeting delivery schedules and marketing and financial planning obligations use
valuable time, forcing companies to take the easy approach to merchandising:
repeating assortment breadth and depth from previous seasons, creating store
assortments based on store volume and ranking items by sales volume alone.

Yet, to attract the right customer in today's increasingly competitive environment,
assortment planning must focus on creating appropriate product breadth and
depth based on the customer's desires and shopping patterns, taking into
account lifestyles, climates and trends. Furthermore, assortment planning must
present a compelling mix of products to illustrate the company's strategic vision.
Assortment Planning - Importance
The primary benefits of effective assortment planning fall into two
categories:
1. financial impact and
2. personal impact.

The financial impact is a result of matching product assortment with
market potential, while aligning inventory to sales. This leads to
increased sales, fewer mark-downs and improved margins. In turn, these
factors dramatically impact profit and shareholder value.

* The personal impact of effective assortment planning is improved
employee morale and overall efficiency. Increased store collaboration,
buying and planning groups, more complete analytical information, clearly
defined roles and responsibilities, and a detailed plan of action all work
together proactively for this improvement.


Assortment Planning - Importance
When implemented correctly, assortment planning is circular in nature. The findings and
analysis of one season become the input into the planning of the next. Given this
circularity, it is important to step back and examine the big picture to determine the
preliminary steps that should be considered before beginning the process.

Often relegated to senior management, the first step to successful assortment planning is
the development of a clear, actionable merchandising strategy based on the corporate
mission and current retail environment. During this stage, planners identify the right
customers and develop a plan to attract them.

Next, management should set corporate financial goals. It is crucial that these plans be
developed early enough to allow sufficient time for all parties -- buyers, planners and
designers -- to collectively coordinate a particular season's line, while maintaining the
flexibility to react to current trends.
Assortment Planning - Implementation
Assortment Planning - Implementation
Most companies rely on processes used year after year, regardless of the
realization that performance can be improved. The term "process" can instil
fear in the creative and instinctual worlds of design and buying, making it
difficult to implement a new assortment-planning process.

It is critical, therefore, to approach the implementation of the new process with
the same attention to detail as its creation.

The pain of implementation can be alleviated through effective communication.
In many cases, it may be best to implement the new process in small pieces -- by
company division, for example. Problems or issues resulting from the process in
one division will most likely be applicable to others. Therefore as the process
evolves, the problems can be corrected.

Assortment Planning - Implementation
The best test for the success of any process is time. As more parties utilize the
process and discover the benefits -- whether increased sales, margins or
customer satisfaction -- the company's culture will absorb the assortment
planning process into its daily activities, making it the normal way of
doing business.

Today's marketplace demands the right mix of products for the right customers.
Old methods for determining product assortments SHOULD NOT hinder
chance to succeed.

Defining an actionable strategy, setting financial goals early, developing
lines using appropriate breadth analysis and assign merchandise to stores
based on attribute matches. This will result in bottom line performance
growth.
Assortment planning turning strategy into action
Factors affecting a well-planned
Assortment
Quality of merchandise offered for sale.
Price Range
Choice of National Brands or Private Brands
Good Taste
Proper Timing
Product Life Cycle
Variety of Product Lines, and
Assortment Strategies
Key Concepts in Merchandise
Assortment Plans
Product Line : is a broad category of products
having similar characteristics and similar uses.

Breadth : the number of product lines carried or the
number of brands carried within a product
classification.

Depth : the number of choices offered to customers
within each brand or product classification.
Assortment Strategies
=
=
=
+
+
+
Faster Turnover
Ease of Stocking
Using less room & display
area
Ease of re-ordering,
checking & receiving
Simplified counting, and
Avoidance of Markdowns
Presentation of a wide
variety of goods
A high degree of stopping
& pulling power
A slant to those customers
of discriminating taste

Customers are not offered a
wide selection of products
Frequent re-ordering is
required which makes it a
costly method of inventory
Managing Assortments
In order to satisfy customers and remain ahead of
competition, new products must be continuously added
while others must be deleted.

Stock Breadth can be increased by adding other product
lines or additional items in an existing product line but
new products may divert sales from present assortments.

Cannibalization occurs when potential sales of existing
products are lost to new items.
Factors affecting Assortment
Planning Decisions
Merchandise Classifications
A merchandise classification system is needed to provide the means
for better planning and control of inventory.

Classification & Sub-Classification:

Classification: refers to the particular kinds of goods in a store or
department. E.g. Mens Shoe Department

Each of these broad product categories could be further divided into
Sub-Classification. E.g. Mens Dress Shoes, Casual Shoes etc.

The type/size of the store/dept. , the image , the target market and
financial resources available will affect the number of classifications
and sub-classifications needed.
Merchandise Classifications
Examples of Merchandise Classifications:

Mens Shoes Womens Shoes

Dress Shoes Dress Shoes
Oxfords High Heels
Slip-Ons Medium Heels
Low Heels
Casual Shoes Evening Shoes
Oxfords High Heels
Slip-Ons Medium Heels
Low Heels
Athletic Shoes Casual Shoes
Running Shoes Medium Heels
Court Shoes Low Heels
Cleated Shoes Wedge Heels


Merchandise Classifications
Selection Factors:

Each sub-classification of merchandise can also be broken down by
various selection factors, which are product characteristics most
important for the customers as they make their purchasing decisions.

Key selection factors include:

Brand
Price
Size
Colour
Material

Preparing an Assortment Plan:
The Concept of Model Stock
The unit assortment plans are not randomly selected collection of
merchandise.

Assortments of merchandise are balanced to customer needs while being
bound by the financial constraints of the merchandise buying plan.

It results in establishing a Model Stock, the desired assortment of stock
broken down according to factors important to the target market .

While developing model stocks, cues should be taken from Current
Trends as well as Previous Sales .

The Objective of establishing a Model Stock is to maximize the Sales
and Profits from the Inventory Investment.
Preparing an
Assortment Plan
A Model Stock does not have to be followed rigidly during selling
season.

It should serve only as a guide because demand in regard to various
selection factors will vary during the season.

Adjustments have to be made once the selling season is underway.
Re-orders also change the nature of Model Stock.

Fashion Buyers cannot be as specific as other buyers when developing
model stocks.

Preparing an Assortment Plan
STEP 1
Decide on Classifications & Sub-classifications.
By doing this, the breadth of the product assortment is determined.
STEP 2
Determine the brands and price lines that will be carried for each sub-classification.
Knowing the characteristics of the target market is crucial here.
STEP 3
Identify the general characteristics of an item that customers may consider while purchasing it.
It is not possible to plan for all the characteristics but it should allow the buyer to make purchases according
to the most important of these characteristics in relation to the majority of customers.
STEP 4
Decide on the proportion of one classification to another and the proportion in which each factor will be
represented in the stock.
For some selection factors like Size, past sales data can be used for calculation. For others like Colors, the
buyer must know how readily the customers accept new fashion colors as they are introduced.
STEP 5
Calculate the specific number of units to be purchased.
Preparing an Assortment Plan
- An Example
Department - Wristbands.

Past Sales show Maxi has been the most popular brand with
customers.

Buying plan indicates Rs 3000/- for buying the category.

The Buyer decides he only wants to keep Maxi.

Each Maxi wristband costs Rs 10/-

The total number of pieces that can be purchased is 300.
Preparing an Assortment Plan
- An Example

The wristbands are available in sizes from XS to XL in
20 colors.

Also available in 100% cotton or a polyester/cotton blend.

Embroidered and Non-embroidered options are also available.
Preparing an Assortment Plan
- An Example

According to past sales records:
1. The size distribution is as under-
S = 15%
M = 20%
L = 45%
XL = 20%

2. The higher selling colors are:
White = 20%
Gray = 35%
Black = 15%

The buyer decides to supplement these 3 colors with 2 new colors that are
predicted to be very fashionable for the Fall season.

Each of these will represent 15% of the assortment plan.
The Unit Plan looks like:
SIZE
Total number of Units to
be bought S M L XL Total
300 15% 20% 45% 20% 100%
45 60 135 60 300
COLORS
White 20% 9 12 27 12 60
Gray 35% 16 21 47 21 105
Black 15% 7 9 20 9 45
Green 15% 7 9 20 9 45
Garnet 15% 7 9 20 9 45
TOTAL 100% 45 60 135 60 300
A well-balanced Assortment is the Cornerstone
of Retail Success