Data-Driven Product Assortment Optimization for Online Retailers
One of the trickiest things in retail is having the right product assortment. But it's possible to create a good product assortment with the right data and a deep understanding of the buying pattern of the customers.
The current pandemic is a rather challenging situation for the industry players. But the ones who can power through the coronavirus crisis, with the implementation of data-driven tools and technologies, will be able to serve their customers in a better way and will perform positively.
Customer taste and preferences, as we know, are dynamic. Understanding their pulse and keeping yourself informed of the changing trends is vital to developing a sound assortment, pricing, and promotion plan. It is tough to work around it, but when you have the data that highlights the money-making products, you can prevent losing shelf space and implement strategies to provide the right product at the right time.
But how would you use the numbers in a way that benefits you? The trick is to know which data gives a solution to your immediate problem and your next step according to the data. You should also see how to incorporate data into daily planning activities.
As a retailer, you should remember that it may all seem a lot at this moment, but things are not how they were in the past. Before selecting the product for a particular season, retailers went with past experiences or intuition. However, customers' behavior in the 21st century is different and will evolve more in the coming years. To deal with this constant change, you as a retailer will need to evolve your strategies.
This blog will brief you on assortment planning and optimization and offer tips that can help you in the process.
Product Assortment optimization techniques for online retailers
The one-size-fits-all concept does not plan a product assortment strategy as every store is different. But there are a couple of pointers to be aware of when developing a strategy.
1. Get clarity on your brand image and purpose
You should first recognize who you are and what your brand means to your customers for an optimal product assortment strategy. Then look into who are these customers? What do they think of your store and the purpose it serves? Finding answers to these questions will help ascertain the right product breadth and depth for you to implement.
For instance, souvenir shops attract people from different walks of life -- local shoppers, travelers, young and old. It leads to stocking various product types. When there's clarity on the purpose of your existence in the business and what customer expectations you are fulfilling, you'll make better assortment choices. Failing to get a sense of this will drive away your buyers. If your customers love a deep assortment, but you suddenly start stocking things outside your core categories, you could lose out on valuable customers.
But deep assortments in select categories aren't a wise move for all. When your customers belong to a diverse demographic, it's best to go wide with your assortment.
However, if you pander to a wide customer base with not enough varieties, you may end up driving these shoppers in the direction of your competitors.
2. Analyze your inventory data
Sales and inventory data help know how many units to order and stock and contain pieces of information to develop a product assortment strategy.
For example, if a product from a particular brand or designer is in high demand, it's an intelligent option to stock a range of products from that designer. Or, if you find that shoppers are buying a particular product in different colors or variants, you could use this insight to deepen your range and have more variants.
Go through the data thoroughly and pay attention to what's selling once you have this information, capitalize on it, and then have a wide or deep assortment strategy.
3. Study customers' buying habits and patterns
Apart from having data on stock levels, you need to study in-store and online shopper behavior. It will help you figure out the type of product mix you should implement in your stores.
a) In-store shopper observation
Pay attention to the way shoppers move around in your store. Which product section do they spend most of their time on? What are their concerns? Insight into these things will understand how much to stock or what to stock.
For instance, if shoppers are always asking for different sizes or colors of certain items, it may be time to deepen your range. On the other hand, if they buy the same colors and ignore the rest, then pull down the non-movers. One other thing to observe is whether the shoppers buy any items together. For example, say you sell hair care products and notice that your shoppers purchase conditioners while buying shampoo and serum. In this case, it's wise to consider offering a range of conditioners.
b) Online shopping behavior
It would help if you also studied people's browsing behavior. One area to look into is your on-site search. Observe the keywords they are typing into your site's search box. What is showing up? Are there brands, product types that pop up? Use this information to decide on what items to stock up.
4. Observe the local and national trends
It's not that the one assortment strategy you developed will hold good throughout the year; specific trends can change your assortment at any given time. The best way to explain this is the current pandemic scenario. Health care, safety concerns, worldwide lockdowns, and remote work conditions resulted in the shift in behaviors and needs of consumers. It eventually caused an increase in demand for certain products like face masks, sanitizers, loungewear, home office equipment, etc. Retailers that adapted to this change and came up with assortments based on the needs of shoppers managed to reap profits.
5. Don't forget to track seasonal trends
Your product mix will depend on the seasons in a year. The year can determine which product category stays or gets shelved. As a result, you may either have to narrow down the assortment for specific categories while making sure to widen others.
For instance, you offer a wider and deeper assortment of outfits that match the summer season during summer. If a holiday like Christmas, Easter, or a shopping event is coming up, you have to tweak your assortment strategy accordingly. During the back-to-school season, shop owners offer more variants in school supplies -- pens, markers, bags, and notebooks.
6. Use the right tools
The right product assortment is not as easy as it may seem, but there are lesser troubles to fix with the right tools. By having a brilliant inventory management system in place, you'll be able to track stock levels, add variants, and count your merchandise. Therefore, it is good to invest in assortment planning tools to streamline the process.
Product optimization requires a combination of data and intuition. However, it is possible when you have a deep understanding of your market and your customers' buying behavior, backed with sales and inventory data. And once you have these data in your arsenal, you'll be able to come up with the right kind of product assortment that can bring in traffic and sales.
However, it would be best if you also had tools to optimize your assortment to achieve success truly. Because quality data will lead you to make informed decisions, obtaining better data will always be continuous.
The insights thereby obtained helps you present the customers with the right products at the right price. In addition, Datahut can look out for all the data needs that will aid you in making a more competent product assortment and demand-driven sales strategies and keep you one step ahead in the retail game.
Eager to learn how? Contact Datahut now!