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Assortment Strategies

Plans that retailers use to determine the optimal product mix for their daily inventory

What are Assortment Strategies?

Assortment strategies refer to the plans that retailers (in-store and e-commerce) use to determine the optimal product mix for their daily inventory. They are important to the retail industry since customers directly interact with the product mix on display and make purchase decisions based on what they see.

 

Assortment Strategies

 

Components of Assortment Strategies

Assortment strategies are defined according to two main factors:

 

1. Product Width

Product width refers to the range of product lines that a retailer offers. For example, a supermarket may offer product lines ranging from food items to cosmetics and over-the-counter medical supplies. They are all the product lines that are available to customers and combine to make up the product width offered by the retailer.

 

2. Product Depth

Product depth is the variety of products offered under each product line. For example, if the retailer in question is a specialized cereal store, they are likely to offer hundreds of options for cereal. The variety determines the product depth.

 

Assortments strategies are determined by the product width and depth that a retailer chooses to offer, and ideally result in optimal product mixes that drive sales and increase the likelihood of customers making positive purchase decisions. The strategies employed may be dependent on the physical capacity of stores – smaller stores generally lack the space for high product width and depth and tend to focus on one or the other.

For example, a specialty retailer, such as a cereal store, is likely to show narrower product width (few product lines), but high product depth (numerous options for each product line). That is, they are likely to offer only cereal but will also provide many options of cereals to choose from.

On the other hand, a wholesaler, such as Costco, is likely to demonstrate high product width (lots of product lines ranging from fresh fruit to clothing, household furniture, and accessories), but lower depth (only a few options in each product line, e.g., offering).

 

Types of Assortment Strategies

 

1. Wide assortment

A wide assortment strategy is used when retailers aim to offer a lot of different product lines or categories, but with lesser depth in each category. It aims to provide more variety in the types of product lines offered but does not provide a high number of products in each product line.

For example, a grocery store that provides a lot of different products, but only stocks one or two brands for each type of product, is employing a wide assortment strategy.

 

2. Deep assortment

A deep assortment strategy aims to provide a large number of options within a particular product category. It is common for specialty stores that focus on one or a few products to utilize a deep assortment strategy.

For example, a supplement store is likely to offer many options for buyers of protein powders – it is using a deep assortment strategy by focusing on fewer product lines but with high depth and variety within each product line.

 

3. Scrambled assortment

Retailers using scrambled assortment strategies aim to offer products that are outside of their core business operations in order to attract more clients from different markets.

For example, a store that is famous for its smoothies starts selling fresh fruit and packaged food, which allows it to target a wider audience, including people who wish to make smoothies at home.

 

4. Localized assortment

A localized assortment strategy allocates the product mix based on the preferences of the local population and the characteristics of the geographical region. This allows the retailer to cater to different demands according to geography and thereby increase sales.

For example, a clothing retailer like Zara does not sell the same clothing inventory in a store in Mumbai, India, as it does in Vancouver, Canada. This is because the population in Vancouver requires warmer clothing for snow and the winter season, whereas the population in India exhibit different clothing preferences and requirements.

 

5. Mass-market assortment

Mass-market assortment strategies are used by stores with large physical storage capabilities, such as Walmart and Amazon. They aim to appeal to the mass-market and offer as many products and varieties as possible, catering to a much bigger customer base.

 

Importance of Assortment Strategies

If used effectively, assortment strategies can boost sales and help the retailer grow its customer base. They are important because they determine the goods that a customer interacts with, which leads to a purchase decision. Assortment can vary according to seasons – an ice cream store may offer different flavors in the summer and different flavors in a monsoon season.

Similarly, a clothing retailer is likely to stock different clothes in spring and in summer (probably more beachwear) than it does in winter (more jackets). This caters to the public demand and increases sales. Similarly, in supermarkets, complementary goods, such as toothbrushes and toothpaste, are assorted strategically so that customers are persuaded to buy more than they intended to.

However, assortment strategies can be disadvantageous if the product mix and allocation doesn’t appeal to the population visiting the store (or the website, for e-commerce retailers). For example, offering too much variety within a product line can frustrate customers because it makes it harder to make a decision. At the same time, providing too little variety can be disappointing to some customers and can negatively impact sales revenue.

Therefore, it is important to conduct extensive market research related to a number of factors, such as the target customer group, location, climate, and other customer-based preferences, before designing the appropriate assortment strategy and product mix.

 

Related Readings

CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant CFI resources below:

  • AIDA Model
  • Consumer Products
  • Demographics
  • Product Differentiation

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