Assortment forecasting: the challenges of a successful strategy
In a sales space, whether it is a small specialty store or a mass distributor, the assortment is not only a set of products offered on different shelves. On the contrary, an assortment is one of the most important resources a company can use to improve its performance. To ensure that the list of products offered for sale is efficient and optimized, the company must make assortment forecasts.
But what is assortment forecasting? What are the challenges related to assortment and how can a predictive intelligence platform help? We propose you to discover the objectives of assortment and the best way to set up an efficient and personalized assortment strategy.
Definition and challenges of in-store assortment
Inventory management and organization, price negotiation with suppliers, supply frequency, number of sales and average basket price, the stakes of the assortment are numerous. Indeed, an assortment impacts the financial results of a company, as well as its marketing plan or its supply chain.
What is an assortment or an in-store offer?
The assortment is an essential notion for the mass distribution, but also for the retail, the specialized stores, etc. Indeed, all the points of sale must work on their offer or their assortment. An assortment is a list of products offered by a point of sale at a specific time.
This means that, within the same company, the assortments can differ from one store to another. They can also change according to the time of the year and according to the geographical area. For example, the assortment of a store located in a rural area will be different from the assortment of a store located in a large metropolis.
What are the dimensions of an assortment to consider?
There are three dimensions of an assortment. These dimensions will characterize the list of products and are adapted to each store. Here are the three dimensions that characterize an assortment:
- the width for a wide or narrow assortment;
- the depth for a deep or superficial assortment;
- the breadth to characterize a vast or limited assortment.
Width is the number of departments or product families. The depth is the number of sub-families or products in each department. Finally, the breadth is the total number of products in the store, which is the width multiplied by the depth.
What are the objectives of the in-store assortment?
Before moving on to the merchandising stage, the assortment must therefore meet various objectives. Indeed, it is the very basis of a store's offer. In this respect, it plays a determining role in the overall performance of a store. The objectives of the assortment in store are:
- increase in the number of sales;
- improving margins;
- supply chain management;
- customer satisfaction.
Finally, thanks to its assortment, a specialized or mass-market store can take new market shares and get ahead of its competitors.
What are the reasons for doing assortment forecasting?
Assortment forecasting allows a company to improve its performance in a global way. Indeed, the impacts of the assortment are numerous: turnover, number of sales, customer satisfaction, market position, sales area layout, stock management, supply chain, supply planning, etc.
But how does forecasting help to improve the assortment? Why have forecasts become essential in the management of a sales area, its stock and its assortment?
If forecasts are necessary, it is because they allow:
- anticipate and automate decision-making;
- plan the allocation of resources;
- optimize sales prices, purchase prices and promotions;
- detect customer behavior;
- optimize the launch of new products;
- better manage financial flows.
Assortment forecasts meet a strategic need and provide a global vision of a company's business. But what process should be launched to obtain reliable assortment forecasts? After having seen the advantages of forecasting, we will analyze the most efficient method to set up an efficient and personalized forecasting strategy.
How to set up an assortment forecasting strategy?
As we can see, the assortment is a real challenge for the sales areas. The assortment forecast is the only solution to create an assortment in accordance with its different objectives.
Analyzing data to make an optimized assortment forecast
Forecasts are based on data analysis. Indeed, it is a multitude of data that must be accurately analyzed to provide correct indications. A software able to propose assortment forecasts processes different types of data:
- data internal to the company;
- data external to the company.
The first group of data mainly includes information about customers. It is the analysis of the sales receipts, cancelled orders, orders in progress or abandoned carts for an online business.
The forecasting software integrates the most frequently purchased products, the references with a low turnover rate, etc. It will also be able to determine the periods during which certain items are the most sold.
The second group of data corresponds to contextual and socio-demographic data. For example, depending on the time of year, such as school vacations, certain products will be sold more. Similarly, depending on the weather, orders may include specific categories of items.
To summarize, assortment forecasting integrates a very large amount of data to optimize the product offer in any type of store: a small store or a large store, a downtown store or a country store, a seasonal or non-seasonal activity, etc.
Opting for machine learning to create a true assortment forecasting strategy
For a complete assortment forecast, manual data analysis is not possible. The data has to be integrated in a specific software, a predictive intelligence platform. This platform is designed for the mass distribution, the retail industry or online stores. It generates highly accurate forecasts in order to compose an assortment that corresponds exactly to the market's needs and the company's objectives.
As the forecasts are calculated in real time, it is possible to use them to set up new promotional operations. Thus, in just a few hours, it is possible to know which items to order, in what quantities, at what price to offer them for sale, etc.
The production, logistics and marketing departments can integrate data directly into the platform and launch calculations. It is a true collaborative tool that brings together all the data related to a company's business. The predictive intelligence platform allows to obtain reliable and real information to create an efficient assortment that responds to the evolution of customers' buying behaviors.
To conclude, using artificial intelligence and communicating relevant information in real time, the assortment prediction platform is an essential growth and performance lever for a company.
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