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Assortment Planning for the Fashion Industry

An apparel retailer’s assortment is defined by the type of products that are carried in each store at a particular point in time.  Assortment planning is the process of determining the most appropriate merchandise to make up the stores assortment.  The primary goal of assortment planning is to specify an assortment that will maximize the clothing stores sales or gross margin.  Many issues must be considered for a store to make a proper determination.  The thought process and decision is typically subject to several various conditions.  These conditions may include issues such as a limited budget for purchase of products, limited available shelf space for displaying products, seasonal items, holiday selling cycles, and a variety of other miscellaneous constraints.

Clearly the assortment of merchandise a retailer carries in their brick & mortar store or online has a significant impact on sales and profit.  Obviously a buyer does not want to have a large inventory of Christmas sweaters for sale in July.  Determining “what product" and “how much product" is critical to success.

Due to this apparent importance assortment planning receives a high priority from retailers, software suppliers, and retail industry consultants.

Fashion retailers engage in assortment planning because they need to periodically revise their assortment.  Several factors require a retailer to change their assortment, including seasons (the fall

assortment for an apparel retailer will be different from the spring assortment), the introduction of new products, brands, and trends based on changes in consumer tastes.  Obviously, determining consumer tastes is not easy.  Merchandisers often turn to professional trend forecasting companies to help them with decision making in this regard.  Comments from these agents should be taken into account when planning the stores assortment.

Most retailers segment the stock keeping units (SKU) they carry into groups called categories.  For example, a boutique may have a category for women’s accessories.  Within that category, they may define subcategories such as purses, scarves, eyewear, etc.  (terminology used varies across retailers for example; department, class and subclass may be used instead of category and subcategory, but the practice of grouping SKUs with similar attributes for planning purposes is for the most part universal.)

Retailers focus much of their energy on deciding what portion of their racks, wall space, or shelves are available at a particular time.  They also must put much thought into their purchasing budget to determine how much money can be allocated to each department or category.

Given fixed store space (not an issue for online retailers) and financial resources, assortment planning requires a tradeoff between three elements:

  • how many different categories does the retailer carry (called a retailer’s breadth)

  • how many SKUs do they carry in each category (called depth)

  • how much inventory do they stock of each SKU (which obviously affects their in-stock rate).

The breadth verse depth tradeoff is a fundamental strategic choice faced by all retailers.

Department stores, elect to carry a large number of different categories. Others, such as shoe stores, jewelry stores, beauty product stores, specialize in a smaller number of categories.  A shoe store will specialize in categories such as men’s shoes, women’s shoes, or children’s shows.  But unlike a department store they can go into great depth in these primary categories.

Assortment planning has been around for a very long time, but we are now starting to study it in more clever ways.  Technology has played an important role for sure.  The academic approach to mastering this process is never ending.  Each store has constant changing factors.  Therefore, retailers must continuously study their plans and alter their plans based on changing conditions.

Here are a few key issues and terms to keep in mind.

  • Assortment refers to the number of SKUs within a merchandise category, group or department.
  • Assortment planning is the process to determine what and how much should be carried in a merchandise category.
  • The Assortment plan is often a trade-off between the breadth and depth of products that an apparel retailer wishes to carry.

Questions to be considered:

    1. Which SKU’s drive sales and profits?  Keep in mind that the goal for the store is to make a profit, not to sell product.
    2. What criteria should be used for adding and deleting items?  Continuous change to a plan is required.  Don’t be afraid to add, revise, or delete.
    3. Is the retailer missing opportunities by not carrying certain items?  Watch the market.  If other stores are on fire with a particular product, make sure you don’t miss out on all of the sales opportunities.  Get that product for your store (if it is appropriate for your store).
    4. Which items represent true variety?  Be cautious of duplication via similarity.
    5. Which items are critical to consumer loyalty or category image?  Don’t destroy your marketing efforts with the wrong product.  Send a consistent message.

We hope that this introduction to assortment planning has been of help to you.  If you are knowledgable about assortment planning and fulfillment please join in the discussions at the Fashion Industry Network or on one of the discussion areas here on Apparel Search.

You may also find the following pages of interest:

Retail Point of Sale Software

Fashion Retailer Software

ML10914

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