How Retailers are Using Product Assortment Optimization
Online retailers are quickly becoming aware of a number of changes coming to the industry, and the hyper-competitive environment that is starting to take hold. Price optimization, for example, has upped the bar by forcing product carriers to continuously monitor the supply and demand of their products and to price it accordingly. Sometimes multiple times a week. Brand awareness and brand presence have also begun to be carefully cultivated by even the smallest retailers. However, one of the major aspects affecting online retailers seems to have more or less gone under the radar until recently – Product Assortment Optimization. Product Assortment Optimization refers to picking and choosing which products to add to your catalog and when. Some retailers deal with thousands of possible products. Choosing which items to highlight and which to carry can make a huge impact in the type of consumer you attract and the sort of loyalty you breed.
“It’s easy to spot the dogs in your assortment, but it’s far from obvious what slow sellers should be replaced with.” – Harvard Business Review
Many businesses had operated under the simple notion that carrying a product that was turning even a small profit was a smart venture. On some levels that is true, but product assortment optimization is geared around maximizing the profitability of your offerings through less straightforward avenues. A well known example is the McRib, or maybe Pumpkin Spice lattes – these products are widely profitable for the times that they are sold, but they are suddenly cut from the market after a short period of time. Simple logic would hold that carrying a wildly profitable product year round would make sense – but would that product maintain that profitability year round, or is its exclusivity part of the reason it does so well for that short time? The brains behind the data seem to think the latter. While those product’s profitability are tied heavily to marketing and exclusivity, elements smaller retailers are most likely unable to emulate; it does demonstrate that the logic of just offering everything all the time may not always be the best choice. Many of us know the paralyzation that comes from too many options.
Simply withholding a product from the market is far from the goal of assortment optimization. Many of the most effective elements of the software deal with evaluating the products offered by your competitors and how you can either differentiate your lineup or increase its depth according to retail assortment planning and optimization insights by Upstream Commerce. You will also be able to quickly determine which product categories most retailers are failing to adequately supply and take advantage of these holes in the market. The planning tools available give you descriptions, prices, images and the date of introduction of products. You can take this and the vast array of additional information, such as social media dynamics and Amazon rankings, to make informed decisions about when to carry a product. The end result is a streamlined offering engineered to help you stand out from competitors and maximized to bring you the greatest return.
Are you introducing products to the market in a timely fashion? How long do you and your competitors each carry the product? How do you price along the product lifetime, and how does this compare to the competition? When you begin to break down these trends and patterns, you will start to see a clearer path to a more optimized store. These insights will allow you to select your merchandise more objectively. They may also help you with different strategies of content distribution according to this article by eTraffic. You will also be able to easily track the outcome of your strategic decisions.
Product Assortment Optimization software is just one piece of the growing puzzle of the E-commerce struggle, but it has become an increasingly more important one. You need every advantage you can get to edge out the competition and ensure you are offering a diverse and desired selection of products. This is an obvious first step to maintaining a successful online presence.
You need to look into these sorts of money saving and profit building pieces of software today, because your competitors definitely will be.