Project Description

Developing the Appropriate Assortment Plan and Inventory Level to Maximize Sales and Profit

Assortment planning is a key retail process whereby products are selected and planned to maximize sales and profit for a specified period of time. The assortment plan considers the financial objectives and seasonality of merchandise to ensure proper receipt flow. Outputs of assortment planning include initial purchase quantities and the receipt flow across time that will inform the allocation process. The level of detail in the assortment planning process will differ depending on the type of product being planned. For the purpose of this discussion, products are categorized into one of two product types: fashion or basic.

The purpose of assortment planning is different for fashion product versus basic product. Fashion product follows the concept of assortment planning, with the objective of developing a product mix, whereas basic product utilizes the process of category management, with the goal of determining inventory levels.

Check out our Expert Guide to Assortment Planning

Fashion Product Definition

Fashion product can be either softline or hardline and is identified as fashion if its lifecycle is short, i.e. the product’s lifecycle will include a single selling season or less. Fashion products change frequently; the product delivered for a new season may be similar to product delivered in the past, but it is not the identical product. For example, colors may have changed for an outerwear jacket, or features may be updated for a boat. Fashion products require the assortment planning process to determine the amount of required receipts, which once derived are input to the allocation system.

Fashion product utilizes the full assortment planning process that includes the following steps:

  1. Conduct the seasonal process of SKU rationalization (keep/drop/add)
  2. Calculate the recommended number of options per location cluster
  3. Plan to average per store units for sales and receipts, based on historical results
  4. Develop the assortment ‘wedge’ – the process whereby the planner narrows the selection by location cluster
  5. Plan by attribute, e.g. by vendor, percent new or color
  6. Plan sales and receipt flow over time

Basic Product Definition