Retail assortment planning is a topic that has increasingly gained attention and momentum within retail executive suites and merchandising system vendors’ future development and enhancement plans. With the wider interest and use of advanced analytics – as well as more robust tools for supporting these capabilities and increasingly demanding and fickle customers – wider attention to assortment planning is inevitable.

Clustering is a foundational element of effective assortment planning. This practice involves appropriately clustering stores and channels, enabling retailers to maximize sell-through and margin potential. However, this key capability is rarely given top priority – often viewed as a mundane, analytical effort and is assumed to be “built-in” to the assortment planning solution.

Effective retail clustering provides the ability to unleash the true potential of assortment planning capabilities, bringing with it significant financial benefits in terms of sales, margin, and inventory utilization. Further, retailers can expect improved customer satisfaction, due to being better able to provide the “right” mix of products for customers, across locations and channels.

In one of Parker Avery’s most popular publications, “Retail Clustering Methods: Achieving Success with Assortment Planning,” we discuss how clustering for assortment planning is an intricate undertaking with a variety of approaches and elements to consider. Granted, there are simple, straightforward clustering methods, but these tend to have significant shortcomings, and typically fail to create assortments that drive meaningful results. Conversely, more sophisticated approaches usually require more skilled resources, solid data integrity, and appropriate supporting solutions to take advantage of the potential these methods can deliver.

In this paper, we explore ten different clustering approaches in-depth and highlight the advantages, disadvantages, and circumstances in which each should be used. This understanding, coupled with clearly defined assortment planning objectives, will help retailers understand which clustering approaches are most appropriate to employ.

If you have any questions about assortment planning, clustering, or any other merchandising topic, please don’t hesitate to contact us.

Published On: August 20, 2015Categories: Assortment, Assortment Planning, Events, Merchandising, Merchandising & Planning