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How to achieve profit growth with a killer assortment plan

(Source: Supplied)

With customer demands coming in hotter and the stakes higher than ever, assortment planning is the key to profit growth. Here, we help you avoid profit margin mayhem with a considered, data-driven assortment plan.

Flying by the seat of your impeccably tailored pants when it comes to your product assortment is never the best use of time. But imagine your store is missing out on 10 per cent of profit simply because you haven’t invested in an assortment plan.

An assortment plan provides:

  • A solid structure around how many options of styles or colours to buy
  • and at what price,
  • gives buyers guidance when buying inventory, and
  • gives merchandisers a financial plan and confidence in the sales budgets.

What is assortment planning?

Assortment planning, sometimes referred to as option planning, is the process of selecting the number of different styles of products to be ranged, determining how much of each product to buy and the pricing of these products for a specific time period. 

It’s basically the harmonious union of merchandising, product placement and store layout (online or physical) to get the most bang from the season and provide a competitive advantage. 

The assortment plan occurs after the budgets are set and the open to buy (OTB) has been agreed.  It can be either be an excel spreadsheet or created in software such as Style Arcade, where essentially the Buyer and the Merchandise Planner (aka Merchandiser) join forces to agree on:

  1. How many options (style-colours) to buy in each category to reach the sales budget.
  2. The pricing hierarchy of each category to optimise profit.
  3. Depth of buy per option.
  4. High/mid/low volume tiering options.
  5. Continuity options (what you might call your “core styles”) – options that last all year round, never go on sale and must always be in stock – a plain white tee for example.
  6. Store grading – retail stores all come in different sizes and locations with varying customer demands: fashionability, location and price for example. This is all managed by the store grading. More on this later.

Why is assortment planning important?

Having an assortment planning strategy is pretty much up there on your most important list because assortment planning allows you to see what’s driving cash flow, and how you can keep driving growth and revenue while you manage customer demand.

Through accurate and considered planning, you can:

  • Optimise sales by meeting customer demand.
  • Reduce inventory waste by not over-buying.
  • Optimise profit through careful profit margin planning.
  • Increase customer conversions through buying the in-demand options/categories.
  • Reduce markdown activity through planning width (number of options) and depth (units per option) of range.
  • Set targets that can be referred to throughout the season to track performance.
  • Reduces out-of-stock scenarios.

Particularly on the last point, if Black Friday Cyber Monday has taught us anything, it’s the importance of a well-oiled supply chain. And if you were to put a number on the impact this can have, according to the retail analyst IHL retailers around the world generally lose $1 trillion in revenue due to out-of-stock situations.

There are so many ways you can benefit from a mix of data-driven and intuitive assortment planning. Hello, retention!  Keep those loyal customers coming back, and keep them satisfied with styles you know they love, and new styles you know they’ll want to try on. 

Not only that, but reap the benefits of controlled inventory spending by avoiding misallocation and having to move aged inventory.

Best of all, you can leave the competition in your wake by being the first to offer the most-wanted styles, silhouettes and colours.

For the 7 Steps on how to create an assortment plan, read the full article originally published at For more retail insights like this, sign up to Style Arcade’s blog today.

About the author

Charlotte Mackenzie is an expert in merchandise planning with over 12 years of experience in working at brands such as Topshop, The Iconic and Stylerunner, and now as a Style Arcade consultant helps growing brands become global brands.