Assortment: how to manage the business to increase its profitability

Assortment is one of the key success factors in business. Effective assortment management can significantly improve a business's profitability and satisfy the needs of diverse consumers. In this post we will explore the meaning of assortment, its types, management methods and successful assortment strategies.

An assortment is a set of products united by various features, such as type or model. An assortment may include several subgroups. For example, the assortment of clothing in a store may include types and styles:

• T-shirts;
• jeans;
• dresses;

The more such homogeneous subgroups, the wider the assortment. It has not only width, but also depth, which is the number of items in each subgroup. Another characteristic of the assortment is its height, which is determined by the average price of products in the subgroup. The concept of "nomenclature" is also related to the assortment and is a complete list of products available in the assortment of a trading or manufacturing enterprise.

The assortment is divided into several types, each of which has its own subtypes, about which we will explain to you now:

Industrial assortment - includes goods and materials produced within a certain industrial sphere. Industrial assortment, which is a type of industrial assortment, is a list of products manufactured by a particular production within its industry.

Trade assortment - covers products intended for sale in stores.

By width:

A simple assortment includes a small number of subgroups and products.

Complex assortment covers a large number of subgroups and a variety of goods.

A group assortment includes goods that are similar and have homogeneous characteristics.

An elaborate assortment covers a large number of subgroups and items.

Depth:

A species assortment, like a group assortment, includes goods that are similar and have homogeneous characteristics.

Branded assortment includes goods of only the same brand or manufacturer.

Optimal - products that perfectly meet current needs.

Rational - products that meet the current requirements and improve the quality of life.

Main - corresponds to the profile of a production or trading company.

Related - complements the main assortment, performing auxiliary functions.

Mixed - includes a variety of goods of different types, kinds and varieties presented in the assortment.

Assortment management is the strategic and tactical process of selecting, implementing and controlling the range of products or services offered by a company. The main objective of assortment management is to optimize the product offering so that it best meets the needs of the target audience and the goals of the organization.

Assortment management is important for several reasons:

Improved customer satisfaction: By providing a more appropriate range of products, customer needs and preferences can be better met.

Increased profits: By effectively managing assortment, more profitable products can be identified and costs of ineffective products can be reduced.

Competitiveness: Constantly updating and adapting the assortment allows you to remain competitive in the marketplace.

Inventory Management: Accurate assortment management helps reduce inventory and related costs.

Marketing Opportunities: The assortment can be used in marketing campaigns and strategies to attract customers.

Assortment management includes the following key points:

Assortment replenishment: inclusion of new products in the list of products offered in the outlet

Expansion of product categories: adding new categories or product items to diversify the offer

Assortment updating: adjusting the assortment to the preferences of the target audience and changes in demand

Assortment reduction: eliminating from sale products that are not profitable or have lost demand

Brand extension: introducing new brands and branding products to advertise and increase profits

The assortment can be analyzed as follows:

Data collection: Gather information about the products you have in your assortment. This includes data on sales, stock balances, prices, margins and other characteristics.

Product Segmentation: Divide products into categories or groups based on their common characteristics such as type, brand, price segment, seasonality, etc.

Sales Analysis: Evaluate which products in your assortment are most popular with customers and which are less popular. Use metrics such as sales volume, sales dynamics, market share.

Margin Analysis: Determine which products generate the highest margins and compare them to products that have low margins. This will help identify the most profitable and less profitable products.

Competitor Analysis: Study your competitors' product range to determine what products they offer and their strategies in this regard.

Seasonality assessment: Conduct a seasonality analysis to understand which products are more popular during certain seasons or events.

Analyze consumer preferences: Research consumer preferences and requirements to understand which products meet their expectations.

Calculating Performance Indices: Implement performance measures such as ROA (Return on Assets) or GMROI (Gross Margin Return on Investment) to assess which products or categories generate the most revenue at the lowest cost.

Forecasting and planning: Based on the analysis, develop a strategy to manage the assortment. This may include adding new products, eliminating ineffective ones, changing prices and marketing actions.

Monitoring and adjusting: Continuously monitor the effectiveness of the changes implemented and adjust the strategy according to changing market conditions and consumer preferences.

Product differentiation strategy: Companies can successfully manage assortment by offering unique products or services that differentiate themselves from competitors. For example, Apple differentiates its products in the smartphone and computer market by focusing on design and app ecosystem.

Assortment reduction strategy: Sometimes reducing the number of products in an assortment can improve inventory management and focus on the most profitable items. This is applied, for example, in retail chains to reduce costs.

Assortment expansion strategy: Adding new products or categories can help a company attract new customers and expand the market. For example, Amazon started as an online bookstore and then expanded to a variety of products and services.

Seasonal Adaptation Strategy: Many companies successfully manage assortments by adapting them to seasonal changes in demand. For example, clothing manufacturers change collections according to the seasons.

Margin management strategy: Companies can actively manage margins on products by adjusting prices, offering discounts or promotions on products to maximize profits.

Marketing support strategy: Effective product promotion involves the use of marketing strategies such as packaging, advertising, promotions and seasonal campaigns.

Residuals management strategy: Companies can successfully manage residuals by using discounts, promotions, and sales to quickly sell goods before expiration or model refresh.

These strategies can be successful if they are well customized to the specific business and market. In addition, the use of specialized assortment management software, can enhance the effectiveness of the strategies.

In an era of rapidly changing market conditions, assortment management is becoming a key factor in business success. Competent formation and management of assortment allows the enterprise to meet the needs of diverse consumers and increase its profitability. The right combination of different types of assortment and management strategies becomes an important competitive advantage.