Retail

Taking a customer-centric approach to assortment planning can help retailers optimize local assortment, resulting in increased sales, lower costs and an improved in-store experience. The future consumer demands customization in assortment, pricing and promotions. In a perfect world, the merchandise on a retailer's shelf exactly matches consumer demand. The closer a company can move its planning and execution to perfection, the greater its revenues, quicker its response and better its in-stock positions.

Retailers--regardless of product, market or geography--experience differences in customer behavior in their stores due to many reasons, including:

1. Demography (for example, households, income, ethnicity, age, children)
2. Regional brands (many local beer brands in Germany and Belgium, as an example)
3. Regional preferences (temperature, local products)
4. Store location (city, countryside, tourist area, high traffic)

These differences have always existed, and retailers have always taken up the challenge to offer the best assortment to their customers. We see retailers using simple store segmentations reflecting sales velocity or store size with the same assortments that are appropriate for the "average" store. Other retailers have given local store staff the task to customize the standard assortment to local needs. More advanced retailers customize assortments centrally for store size, and build central assortment "bricks" (or modules) to build more customized stores (for example, a choice of 3, 4 or 5 meters for a category or specific "add-ons" for specific stores such as an extra "boat paint" module in naval areas). Still, retailers are looking for better ways to optimize local assortment because:

1. Customers are more demanding and expect a customized offer.
2. Store staff is not always qualified enough to customize assortment to local needs.
3. Competitors continually improve and customize (local) assortment.
4. Better tools have become available to centrally customize assortment.

These trends leave today's retailers with the challenge to create customer specific assortment, and, at the same time, reduce the complexity of the assortment planning process and improve the time to market.

It is clear that many retailers have grown extremely successful by introducing a single brand and copying the format across the country, or even across the world. Still, even the strongest retail brands adjust their stores in some way for local customer demand, ranging from creating multiple channels and formats to accommodate different shopping trip purposes to customizing assortment on a store cluster or a store level. The key is to strategically decide on which levels differentiation is needed, while limiting the complexity and cost of differentiating assortment to local needs.

A customer-centric assortment planning process starts and ends with the customer. Analysis of customer trends and behavior is input to strategic plans that include strategic targets, but also guidelines for store segmentation and floor planning (for example, higher distribution or more space for specific categories). A plan is prepared for each category as the basis for the assortment planning process.
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