How to Supercharge Your Sales by Optimizing Your Assortment
You can be more strategic about assortment optimization when you’ve got a team reviewing and analyzing all of the data. Startup companies that try to run lean by expecting one person to handle demand planning on their own often do themselves a disservice. Expert support (even temporarily!) can help you avoid costly mistakes.
You’re likely in the thick of holiday sales right now, which means there’s A LOT to do. But as you handle the day-to-day challenges that come with running a retail business during its most impactful season, we also want to impress upon you just how powerful this time of year is—one that sprouts tons of insights that can help define your business’ future for months and years to come!
So, as you rush to coordinate displays and backfill products, we also wanted to encourage you to spend some time digging into the valuable data you’re collecting over these next few weeks. Because looking beyond the obvious categories clues you into important insights that can take your sales from subpar to sensational.
Below we dive into the demand planning best practices, from how often to look into your assortment to how to slice and dice your analysis. Plus, we provide a special bonus below to make things even easier for you (we promise, you won’t want to miss out on it!)
Enter your email address and we’ll send you the tool, toot sweet!
HOW OFTEN SHOULD YOU REVIEW YOUR ASSORTMENT?
By now you know that every retailer is different, so your assortment review cadence might not look exactly like others in your network. But here are a few factors to consider when determining how often to review your SKU assortment:
How many SKUs do you have?
For businesses handling a small number of SKUs, and therefore unlikely to face cannibalization issues, inventory reviews can be done less frequently than businesses with a large variety of products that might compete with each other. The same can be said for any and all carryforward items—if they’re not being replaced or marked down to make way for new items on a regular basis, then assortment optimization may not need to occur as frequently—but that doesn’t mean you should go without it completely!
Before committing to product from a vendor, assortment review should be completed, assessed during the selling period, and recapped after the selling period ends. Since forecasting is a combined art-and-science, reviewing before, during, and after helps empower brands to invest their inventory dollars most wisely.
Do you sell a trend-forward or more evergreen product?
Product type plays an important role in your assortment review—customers expect fashion items to change quickly and want to jump on trends quickly—especially if they’re relatively inexpensive. If your product falls in that category, you may need to review your sales as frequently as daily and assess your assortments monthly. Other product categories that update more slowly, that customers only really buy when they run out of their supply (think furniture or skincare) are better suited to a sales review after a longer selling period so they can better assess the health of their assortment.
While your assortment review will depend on a variety of factors, it is important to determine a regular cadence that works for your inventory and business.
WAYS TO REVIEW YOUR INVENTORY
Reviewing your assortment (prior to actually committing to inventory) yields valuable insight into what your customers will experience when shopping both in-store or online, and empower you to plan achievable sales goals. But HOW you look at your inventory can depend on your product, sales channel, customer needs and sales goals. Here are some standard practices for reviewing your SKU assortment.
Identify best sellers + slow movers:
This might sound obvious, but you want to identify your top-performing items so you can fuel their sales with inventory. From there, look into slow-moving items, those performing below expectations, so you know where you can save inventory dollars, and potentially optimize your assortment by eliminating these items.
Trend Analysis
You don’t always have access to actual sales numbers when it comes to trends, but keeping an eye on market trends, seasonal changes, and emerging product categories helps you keep up with your competition and gain insight into what your customers might want.
Competitive Benchmarking:
Going hand in hand with trend analysis, comparing your assortment with that of your competitors can help you identify gaps in your current inventory and opportunities for differentiation. This can also help you assess the value of your items and your pricing strategy.
Overall category review:
When all your data exists in one big lump, it can be hard to tease out and understand certain types of performance. As you plan sales and inventory, you’ll more easily be able to assess your plans if you review them in smaller segments of your business. We love looking at a category level, but how your categories net out will depend on even smaller segments and attributes of your business. Taking time to review sales history and forecasted demand by subcategory and product attribute can help you identify trends and patterns that might otherwise be missed. Summarizing in a really general way like ‘tops’ could hide the insights that reviewing sales by ‘crop tops’ and ‘blouses’ might reveal.
Balance:
Whatever your product offering, customers will likely not be able to use or need 100 of the same thing. You want them to shop with your brand to satisfy as many of their needs as possible. Analyzing your assortment for balance can help you assess if you’re planning sales and inventory based on providing solutions for what your customer truly needs. This can help you avoid carrying 20 different long dresses and only 1 shorter style- because let’s face it, your customers will probably need a variety of different dress lengths during any seasonal timeframe. Also, when considering balance, think through the purpose of your items. It can create excitement and interest to offer some limited availability items alongside your core, carryforward ones.
SKU and category productivity:
When trying to meet budget goals, create plans, and meet vendor minimums, it can be difficult to decide which items to carry forward, limit, or even stop carrying. By analyzing an item or category’s productivity, it can help you make these types of decisions based on fact rather than feeling. Think of it like this, if SKU X generates $1,000 in sales on a weekly basis and accounts for 3% of your shelf space (or inventory cost for eCommerce retailers) and SKU Z generates $400 in weekly sales by accounts for 10% of your space or cost, SKU X is more productive. You’d be wise to prioritize SKU X in your assortment and consider strategic ways to limit your expense or increase overall sales on SKU Z. Repeating this same type of evaluation with other segments of your business is advanced, but a key demand planning tactic used by the biggest retailers. (We can help you do it too!)
Cannibalization:
If you’ve added a new item to your assortment and you’re noticing a decrease in sales in another existing category, it can be an indicator that you’re stealing sales from the original product. Double stating an item or category in your assortment does not always equate to incremental sales—usually it means the same sales, just spread across more items and it’s not a wise use of your inventory dollars.
Sales channels:
Many retailers have at least two different assortment strategies—one for their e-commerce channel (which is larger and includes various colors, sizes, and more) and one for their in-store channel (which is somewhat smaller based on the size of the physical space). This allows them to meet more of their customer’s needs, so they don’t shop with someone else, without paying the expensive costs for shipping items and merchandising and maintaining their presence in a physical store. From an assortment optimization view point, this is an instance where as a retailer you’ll want to get the most bang out of your buck. Feature your most productive and popular items in-store AND online so that your customers can get what they most want wherever they’re shopping, and reserve some of your larger, slower-moving items for online-only sales to save space. From a demand planning view point, it requires that you segment your plans a bit since items being sold in multiple channels should have higher and more productive sales than those sold in only one channel. Additionally, lead times need to be considered since in-store inventory will need to make an extra stop on it’s way from your vendor to your warehouse, and then on to your sales floor.
Pricing variety and strategy:
If you’re a larger business, it’s important to look at the variety of price points you offer. Think of it from good, better, and best levels and make sure you have a variety of price points in any given category to serve your customer range. Think basic 200 thread count sheets, fancy 400-600 thread count sateen sheets, AND super-high thread count, Egyptian cotton luxury sheets!
Margin:
Understanding which parts of your assortment are the most profitable can help you choose which items you want to invest in most heavily and/or which items can mitigate profitability risk when you put them on promotion. The higher the margin, the less profit loss when on sale!
GET AHEAD AND PLAN FOR NEXT HOLIDAY NOW
It might be hard to hear, but you’re probably already on the verge of buying the inventory for next holiday season! For most retailers, raw material sourcing and production requires a long lead time, so completing an assortment review well in advance, enables you to be as strategic as possible. Blindly buying inventory now freezes your cash flow, limiting your ability to bring in exciting new items to delight your customers.
Remain nimble and responsive to your customer by diligently reviewing last year’s performance, re-forecasting, and projecting performance as this year actualizes and continually use those insights to forecast and plan for the new year.
This time of year is also when it’s easiest to compare actual performance to your forecast. You can look day-by-day or even hour-by-hour to see how items are selling compared to what you’d planned initially. Tracking this progress as you go can be more digestible than reviewing data long after sales have stopped.
Now is also the time when all those non-numerical details are freshest in your mind—your POS system probably isn’t tracking the impact of weather or things like your website’s load time, or unexpected influencer trends. These are learnings you’re getting now that can help you adjust future plans—if you wait for a season to go by, you probably won’t address these contextual impacts as accurately.
MEASURING FACT ALONGSIDE FEELING
We get it—we talk A LOT about sales and analysis. But we also understand that it’s easy to get carried away with how exciting a new product opportunity can be and how much in love with your assortment you are. But understanding your sales with data (and with non-numerical context) informs your assortment review in the best way possible—it grounds your analysis in fact. Just looking at your product without the data to back it up leads to trouble. But if the thought of analyzing all of that data gives you the heebie jeebies, then let us help!
PLAN FOR A SUCCESSFUL YEAR WITH THE SUPPORT OF BOON
One of our prime tenets is making best-in-class planning accessible to all businesses. SO! Because it’s the holiday season, we’re gifting you with easy analysis by sharing our downloadable sales recap template FOR FREE!
Here’s how it can seamlessly fit into your process and make a BIG difference for your business:
It works in both Google Sheets and Microsoft Excel, meaning there’s no additional software purchase necessary!
Built to work with the world’s largest e-commerce platform, Shopify, our tool seamlessly analyzes reports, allowing you to drop the data into a tab and get to work. It’s super fast, and all the calculations happen for you!
You don’t have to spend a bunch of time learning retail planning theory or Excel—our easy-to-follow instructions will guide you through navigating every aspect of the report.
The tool can easily be adjusted to look at whatever time period is most valuable for our business.
It showcases roll-ups, allowing you to easily see subcategory summaries and category performance with as much or as little detail as you need.
