The concurrent growth of e-commerce with digitised retail solutions have resulted in increased customer expectations from retailers. Most retailers have only one opportunity to satisfy their customer’s needs, as unavailability of a certain product will potentially result in them moving to their competitors. In addition, customers are now more price conscious than ever with loyalty becoming harder to secure.
Given these trends, Retail Assortment Management Applications (“RAMAs”) are seen as increasingly essential when looking to meet customer demand with the best possible assortments of products. Retailers are moving from annual or semi-annual category review processes to more frequent adjustments that eliminate disruptive floor resets and take advantage of market opportunities when they occur. Moreover, with the over 30% of Tier 1 retailers still using Excel as their assortment management tool, there currently exists significant growth potential for companies providing assortment management applications.
For this brief update, we take a combined view of assortment for both long and short life cycle products. While differences exist, the aim with both is to close the gap between financial planning and store planning and accurately identify optimal merchandise mix. Thus, both solutions primarily leverage embedded data to provide an effective strategy to maximise return on inventory investment.
Implementation of RAMAs
Automating existing processes is the key when it comes to creating efficiencies that free up time for individuals to perform other roles. As such, the following key activities would need to be performed to support any business during this transformation:
- Procuring and implementation of cloud-based solutions with embedded analytics, algorithms, and AI capabilities
- Breaking down of organisational silos to promote collaboration within the organisation to ensure greater understanding of retail
- Integration of financial targets with the quantity and depth of products being offered
Requirements of RAMAs
Given the above changes which would need to be undertaken for the implementation of Retail Assortment Solutions, customers would need to ensure that these applications provide a base level of functionality to achieve its expected outcome.
- Customer centric assortment through data-driven clustering/ grading – Dynamic clustering enables retailers to shift the mix of stores across clusters based on seasonality or market growth/decline trends. Further, clustering is used to deliver localized assortment plans that meet customer demand.
- Management of promotional strategies – Effects of promotions are modelled to ensure they are being executed in an optimal way. The solution should support building markdown models to help maximize margin at the end of an item’s life, assisting planners in moving through potentially unproductive inventory at the right price and the right margin.
- Holistic Assortment plans across regions and channels – High-level strategic changes to the assortment plan should be made at a holistic level, reducing the number of touches a user has to make in order to execute those changes in the assortment plan. This feature is critical to making both high level and granular plan adjustments.
Outcomes expected through RAMAs
Retailers who fail to embrace RAMA may find themselves significantly disadvantaged in comparison to competitors that do. As mentioned earlier, to compete and win, there is a growing imperative for retailers to tailor their assortments by neighbourhood to respond to local preferences and offer shoppers the right products at the right place and the right time.
- Improved Inventory Turn – As retailers navigate in the new post-COVID-19 marketplace, even a slight improvement obtained from the merchandising processes of selection, distribution and pricing can have a positive impact on sales, margin, inventory availability and turnover, and the resulting customer satisfaction.
- Promote customer loyalty – In the long term, adopting an assortment planning strategy effectively will help you to better retain the loyalty of their shoppers.