Having limited shelf space doesn’t necessarily mean limiting profit. An effective Assortment Optimization solution solves a growing retail merchandising problem.
While some retailers are building larger superstores, others are scaling down. Many retail and grocery chains are building smaller format stores with the most essential and fast-selling SKUs being offered. When space is an issue, retailers must make decisions on what items to carry, where to display, and how it affects total store inventory. Cutting the wrong or too many SKUs will result in lost sales. Using traditional demand and forecasting methods will not provide enough insight into this issue, which means retailers are stuck guessing. When it comes to profitability, no retailer should be taking guesses.
4R’s Assortment Optimization solution positions retailers to model demand for products in a category by their attributes to find the best set of products. This optimal mix of inventory will maximize sales and profit. Assortment Optimization also helps determine the optimal number and type of products for a retailer’s omnichannel inventory.
By leveraging behavioral analytics and machine learning, Assortment Optimization enables retailers to accurately determine consumer demand. Further, the solution can accurately predict which similar products shoppers will select when the first choice is unavailable. As a result, retailers gain much greater insight and can determine if new products should be carried. Having the first choice is key but having the right second choice for shoppers means fewer sales will be missed, which can further increase profits for retailers.
The Assortment Optimization solution moves far beyond traditional SKU rationalization to optimize, and not just reduce, assortment. When shelf space is limited, there are five major benefits to using an assortment optimization solution:
- The Assortment Optimization solution uses actual store sales history and advanced behavioral analytics to accurately determine consumer demand for products.
- Assortment Optimization doesn’t just identify products that should be dropped, it suggests products that should be added to the assortment and calculates the financial results of the optimal assortment. This function is missing from most Assortment Optimization solutions.
- Assortment Optimization enables retailers to determine the optimal level of assortment localization for their business and the best assortment for each location in the entire retail chain.
- Assortment Optimization incorporates market basket and other data sources into its optimization logic to find assortments that improve, not reduce, sales results.
- Assortment Optimization, like all solutions developed by 4R, is cloud-based. It requires no capital investment, no additional staff, and minimal IT resources.
Retailers will see improved efficiency and better decision-making capabilities with this assortment optimization solution. The real win here is increased profit in short order for the retailer. Having limited shelf space doesn’t necessarily mean limiting profit. In fact, having limited shelf space obligates retailers to optimize that space. Often, retailers with limited space can be more profitable per linear foot than retailers who may not put the effort into optimizing their assortment.
To learn more about 4R’s Assortment Optimization solutions, check out the full product brochure here (hyperlink TBD).
Have any questions or need more in-depth information? Email Ken Belanger and he will get back to you ASAP.