Obtaining and Leveraging Off Assortment Optimization
Michelle Ai
on Dec 17 2016

Assortment maintenance and management in an online e-commerce context faces a different set of challenges when compared to the traditional brick and mortar world. E-commerce retailers are not limited by space – adding a new product does not mean you have to remove another. With the availability of vast amounts of consumer and competitor data, online retailers have more opportunities to differentiate themselves, and compete effectively through optimizing their investments within their business.

In today’s market, it is critical for retailers to understand their customers’ wants and needs, and be ahead of the curve when it comes to the retailer’s assortment to maximize sales or margins.

Factors to consider

  • Strategy - What does the company stand for – deep assortment in a handful of categories, a strategy focused on unique items, or a broader selection to maximize variety across a wide range of categories?
  • Customer - Which customers are being targeted, across which channels, and during which part of the shopping journey?
  • Product - What do consumers want? How does seasonality affect the categories, and how fleeting are consumer tastes?
  • Competitiveness - Are products being introduced within an appropriate timeframe? How is data being used to effectively launch products, for example, at the ‘right’ price? After launching new products, are testing and learning processes being incorporated to propel product and company performance?

It is important to periodically review and revise the assortment across categories and sub-categories driven by the above considerations. Further, nuances around vendor relationships, time to market, and budget make the assortment problem more interesting and complex. We think about this through an assortment maturity journey that is continuous in nature.

Traditionally, these assortment decisions were made by infrequently (and manually) examining and comparing the retailer’s assortment against their competitors’ assortment. However, with the growth, and the increasingly transparent world of e-commerce, to be highly effective, retailers need to attack this problem at scale and in a timely manner. This means keeping abreast of changes to the competitor’s assortment, identifying best selling items on their websites, and implementing ways to onboard sets of products – all at scale.

Timing is critical. These exercises need to be conducted in conjunction with the close monitoring of trends in the market, in particular, incorporating insights from vendors, competitors and customers. Moreover, retailers need to stay relevant by identifying hot products, and remaining knowledgeable around any product development innovations. By having a customer-centric viewpoint, retailers can then determine what makes sense for their business – the decision may be to stick with drop ship as a solution, or it may be to onboard and internally fulfill immediately. Through this assessment, a retailer may also decide to cut items that have not been popular, and instead, focus on investments that may reap greater rewards.

Further, this ties into a retailer’s competitive positioning. Acknowledging that we live in a world with price transparency, launching new products within an expanded assortment in a competitive fashion is critical, helping to cement a retailer’s reputation on price and value.

Acting quickly to capture trends during peak demand and to get ahead of competition, whilst staying true to the company’s strategy can mean the difference between an assortment that’s designed to capitalize on customer demand, and one that is off the mark. A thoughtfully curated assortment can deliver significant incremental top-line growth if launched in a competitive fashion.

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