Omnichannel Assortment Planning: A Retail Primer

Hey #retailfam! A common question that we keep hearing is around omnichannel and assortment planning, so we decided to write a post on this topic. As you all know, the retail industry has undergone significant changes in recent years, with the rise of e-commerce and the increasing importance of a seamless shopping experience for customers. To keep up with these changes and remain competitive, retailers must adopt an omnichannel approach to their assortment planning. In this post, we’ll explore what omnichannel assortment planning is and why it’s crucial for success in today’s retail landscape.

What is Omnichannel Assortment Planning?

Omnichannel assortment planning is a retail strategy that involves coordinating the product offerings across all sales channels, including brick-and-mortar stores, online marketplaces, and mobile apps. The goal of this approach is to provide customers with a consistent shopping experience, no matter where they choose to shop.

Why is Omnichannel Assortment Planning Important?

There are several reasons why omnichannel assortment planning is crucial for retailers in today’s market. First and foremost, customers expect a seamless shopping experience across all channels. If a product is unavailable in one channel, but available in another, this can lead to frustration and lost sales.

Another key benefit of omnichannel assortment planning is the ability to gather and analyze data from all channels. This data can then be used to make informed decisions about product offerings, promotions, and pricing. By using data to guide decisions, retailers can ensure that they are offering the right products in the right channels, at the right time.

How to Implement Omnichannel Assortment Planning

Implementing an omnichannel assortment planning strategy requires careful planning and coordination across all departments and channels. Here are the key steps to take:

1. Assess current offerings: Start by evaluating the product offerings in each sales channel. Identify any gaps or overlaps and make a list of any changes that need to be made to align offerings across all channels.
2. Determine key metrics: Decide on the key metrics that will be used to guide decisions about product offerings. This might include things like sales data, customer feedback, and inventory levels.
3. Develop a cross-functional team: Assemble a team that includes representatives from all departments, including merchandising, marketing, and IT. This team will be responsible for implementing the omnichannel assortment planning strategy and making decisions about product offerings.
4. Create a centralized database: A centralized database is essential for tracking product offerings, inventory levels, and other key metrics across all channels. This database should be accessible to all members of the cross-functional team.
5. Use data to make informed decisions: Regularly analyze data from all channels to identify trends and make decisions about product offerings, promotions, and pricing. Easy to use artificial intelligence (AI) solutions for retail merchandise planning can come in handy here.
6. Monitor and adjust: Continuously monitor the results of the omnichannel assortment planning strategy and make adjustments as needed.

Example Calculation: Determining Inventory Levels for a New Product Launch

Let’s consider a scenario where a retailer is launching a new product across all channels. To determine the optimal inventory levels for this product, the retailer could use the following calculation:

1. Forecast demand: Forecast the expected demand for the new product in each channel, based on sales data from similar products and customer feedback.
2. Calculate safety stock: Safety stock is the extra inventory that is kept on hand to protect against stockouts. To calculate safety stock, the retailer could use the formula (one of many that are available):

Safety Stock = (Maximum Daily Demand * Lead Time) + (z-score * Standard Deviation of Daily Demand * Lead Time)

where z-score is a statistical measure that represents the number of standard deviations away from the mean, and Lead Time is the time it takes to receive a shipment of the product.

3. Determine reorder point: The reorder point is the inventory level at which a new shipment of the product should be ordered. This can be calculated using the formula:

Reorder Point = Maximum Daily Demand * Lead Time + Safety Stock

4. Allocate inventory: Based on the forecast demand and reorder point, the retailer can allocate the optimal inventory levels for the new product across all channels.
   
5. Monitor and adjust: It’s important to regularly monitor sales data for the new product and make adjustments to the inventory levels as needed.

By following these steps, the retailer can ensure that they have the right amount of inventory on hand to meet customer demand, while also avoiding overstocking and unnecessary waste.

The Bottom Line (TL;DR) – Omnichannel assortment planning is essential for success in today’s retail market. By coordinating product offerings across all channels and using data to make informed decisions, retailers can provide customers with a seamless shopping experience and drive growth for their business. Whether you’re a small retailer or a large chain, taking the time to implement an omnichannel assortment planning strategy is a valuable investment that can pay off in the long run.