Choosing the right mix of products to sell is of paramount importance to a retail business. Some products are sales magnets, drawing customers, while others are included to facilitate the profit-loss margins that define a company. Faced with intense competition, an ever-changing market and dodgy customer loyalty, retailers must choose the right mix of products to stay ahead of the curve.
The competition is increasing!
Present day retailers have started to look towards demand driven assortment strategies to optimise their inventories and maximise profits. With more and more SMEs (small and medium sized enterprises) entering the online retail market, competition has become fierce.
72% more retailers participated in the Black Friday sale in 2018 than in 2017, and the price cuts were deeper. (source)
Your Assortment Strategy
Analysing trends in the market help companies make timely decisions in regard to ideal inventory. Assortment is a major factor determining the ROI for these retailers. To ensure they stay afloat, retailers have begun to turn to competitor monitoring.
Quick fixes and small stock changes, facilitated by real time updates, can go a long way. It also helps retailers formulate concrete business strategies and enhance their public image and perception.
Some tips worth keeping in mind while devising your assortment strategy:
- Utilise the opportunity to identify and price your USP (Unique Selling Proposition) products. USPs and exclusive products are then stocked and priced differently compared to other stock keeping units, to increase profit margins and drive the name of the brand.
- Analyse your competitors’ past trends, to accurately forecast demand by SKU and calculate the optimum stock quantity and inventory. Excess inventory and supply chain inefficiencies cause losses, and optimising this helps turn a profit.
- Determine the assortment gaps between your competition. White spaces may exist in terms of product category, brand or price tier that you are attempting to fill. Accounting for these gaps by adding to their inventory prevents companies from being out-muscled by their competition.
- Private Label Products are consumer products which are manufactured for the sole purpose of being sold in a specific retail store. Analysing competitor trends can help determine how much shelf space to allocate to such goods, over say exclusive brands or KVIs (Key Value Items).
- To keep customers interested, retailers often refresh and add novelties to their product assortment. While the new products themselves depend on the retailer, tracking the frequency with which such novelties appear is important. Too many jarring changes can lead to customer dissatisfaction.
Can AI help here?
While making comparisons, some things need to be kept in mind. Different suppliers use different taxonomies to classify their products (e.g. trousers vs. pants). Also, retailers have unique product codes, colour categorisations and sizes, leading to clashes and uneven comparison. AI can come in handy here. It allows software to compile, categorise and condense the plethora of data running through the market in real time.
Hence, understanding your competitors’ product assortment is integral before making any decisions on your own inventory. By combining assortment planning with pricing insights, retailers can ensure an excellent shopping experience, while maintaining good revenue and profit margins.
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