What is an assortment strategy?
An assortment strategy is a retailer’s plan for which and how many products to carry and present to shoppers. It governs both the mix of different product types (breadth, or variety) and the number of variations within a given product (depth). The goal is to match customer needs, store constraints, and sales targets by choosing the right number of SKUs (stock‑keeping units), brands, and styles for each category.
Key concepts
– Breadth (variety): how many different product categories or distinct product types the store offers (e.g., canned cat food, cat toys, litter).
– Depth: how many SKUs or variations exist within a single category (e.g., 12 brands of canned cat food, or many flavors/sizes of one brand).
– Trade‑off: higher breadth and depth together require more space, inventory capital, and managerial effort; small stores must prioritize one dimension over the other.
How it works (practical steps)
1. Define the target customer(s). Who is the typical buyer? What do they value (price, brand, selection, convenience)?
2. Set business constraints. Note available shelf/warehouse space, working capital for inventory, supplier lead times, and staff resources.
3. Choose focus: prioritize breadth or depth based on strategy. Specialty shops often go deep within a narrow category; big‑box stores can afford both wide and deep assortments.
4. Allocate SKUs by category. Use sales history, margins, and turnover to assign more space to high‑velocity items.
5. Plan presentation. In physical stores, use planograms (shelf diagrams); online, prioritize placement, filters, and merchandising categories.
6. Monitor and iterate. Track sales per SKU, gross margin return on inventory (GMROI), and customer feedback; cut or test new SKUs accordingly.
Why assortment strategy matters
– Drives sales by ensuring customers find what they expect.
– Enables upsell and cross‑sell when complementary items are grouped together.
– Targets demographics by stocking items that match the needs of specific customer segments (e.g., new parents vs. college students).
– Affects inventory carrying costs and turnover; too many slow SKUs tie up capital and shelf space.
Potential disadvantages and pitfalls
– Choice overload: too many options can confuse shoppers and reduce conversion.
– Poor placement: mixing unpopular items with popular ones can dilute appeal.
– Cannibalization: similar SKUs can take sales from each other rather than increasing total sales.
– Operational complexity: more SKUs raise ordering, stocking, and forecasting difficulty.
Short checklist for building an assortment strategy
– Identify primary customer segments and their needs.
– Determine available space and inventory budget.
– Decide whether to emphasize breadth or depth (or a hybrid).
– Rank categories by expected sales velocity and margin.
– Allocate SKU counts and shelf/online space per category.
– Create planograms or digital layouts for merchandising.
– Set KPIs: sales per SKU, turnover rate, GMROI, stockouts.
– Schedule regular reviews; prune low performers and test new items.
Worked numeric example: SKU allocation and basic pruning
Context: A small specialty store has room for 100 SKUs and targets