What is assortment optimization?
Assortment optimization is the process of selecting the right mix of products to stock on your shelves, whether in a vending machine, a fridge at the checkout or in the 14th aisle of a big-box retailer. The next part of the process is arranging your chosen products to ensure that you sell as many as possible. It’s as simple and as complex as that.
What are the benefits of getting assortment optimization right?
Assortment optimization is an ongoing and time-consuming process that can seem impossible to achieve with conventional methods given the volume of data, rules and constraints. But, if you get it right, the rewards are there for the taking. You’ll be able to identify and swap lower profit for higher profit products without a decrease in volume. You’ll be able to group partner products together, increasing the probability of additional sales and that’s just the beginning. Overall you’ll increase sales, reduce costs and significantly add to the bottom line.
How do you do that?
To perfect assortment optimization, it’s essential to analyze historical data along with an array of complex operational rules and business constraints. You need to be sure that a product swap you’re considering will not result in a reduction in sales volume or breach those important rules and constraints. The more data you analyze, the more accurate your analysis will be. For example, while a brand may currently be selling well, you might be able to spot a decline if you extend your horizon to include more historic data over the last few years. This could perhaps indicate a lack of investment from the brand itself or even a general decline in the category. The more data you have to review and the more complex your rules and constraints, the more likely you need to invest in software to help you navigate these decisions. The more you know about your sales trends, the better you can predict and get ahead of changes, before they get ahead of you.
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