Product assortment: meaning, examples and strategy
The retail industry can be ruthless. While a business might be able to get customers into its store, keeping those customers around is an entirely different challenge.
A key factor in determining whether a customer sticks around lies in a company’s product assortment.
In this article, SPS Commerce defines product assortment and explores the key components involved, while offering examples and strategies for improving product assortment.
What is product assortment?
Product assortment simply refers to all the different products a business offers for sale to its customers.
Also known as a “merchandise mix” or “product catalog”, it is essentially the range and depth of products offered by a business – with successful retailers striking a balance between variety and specialization to appeal to customers. It is used for business planning between suppliers and buyers/merchants when aligning on the merchandising mix and what will be set in stores and online.
Product assortment is a useful tool in building a product collection, brand awareness and loyalty, which can also lead to increases in sales, site or store traffic and increased customer satisfaction.
What is an example of a product assortment strategy?
Nearly every retail business can make use of a varied product assortment. There are many examples of how a good product assortment strategy can positively affect a business by boosting sales, increasing product exposure and fostering a loyal customer base.
Using Coca-Cola as an example, we can see how a product assortment strategy can lead to increased sales and a positive customer experience. Ultimately, Coca-Cola is known for a single product – its original carbonated drink. But the brand actually offers an assortment of products to meet various customer needs. This includes a range of flavor varieties of the original drink, as well as different sizes of products to serve multiple purposes – for example, large 2-liter variations for sharing with the family at home, and smaller 500ml products for enjoying on the go.
This variation – or product assortment – means there is likely something for every taste and requirement.
What are the key components of a good product assortment?
Two key components make up a product assortment:
Product breadth
This refers to the number of product lines a store offers. Toys R’ Us represents an effective use of product breadth. It offers a range of products, from action figures to playhouses to children’s bikes. Every product this store sells comes from 14 over-arching, yet entirely separate categories, despite all being targeted at children.
Product depth
This represents the level of variation in each product type. For example, Coca-Cola effectively uses product depth by offering its sodas in a variety of sizes and flavors, from Cherry Coke to Coke Zero.
What are some assortment strategies?
Mass market assortment
This strategy focuses on a wide range of products. It allows the retailer to appeal to a wide array of people with multiple product lines and brands. For example, at a hypermarket it is possible to buy a variety of products, from food or clothing, to electronics, kitchenware and cleaning products.
Deep assortment
This strategy focuses on a smaller array of products, but a larger amount of product variety. Clothing stores, for example, only sell clothes, but the variety of clothes they sell is vast in style and size. Stores that focus on a deep assortment strategy often achieve a loyal support base and greater brand awareness in that field, improving the consistency of return customers.
Localized assortment
This strategy tailors its product assortment toward a particular location. For example, a clothing store in the US and one in the UK are likely to sell different products that are more suitable to their respective environments – based on local weather, fashion and more. This creates a more relevant product mix, but may limit the pool of customers available.
Wide assortment
This strategy appeals to broad demographics across all ages, socio-economic backgrounds and locations by offering a wide range of product categories (although not great depth). An example of this strategy would be a general-purpose DIY and home improvement store. The benefit of this strategy is casting the widest possible net within a certain field.
Scrambled assortment
This strategy adopts the idea of selling products that are outside of the store’s main focus, to attract a new customer base. For example, a gourmet market that typically only sells prepared foods and groceries, may begin selling household supplies, local furniture and gifts.
The product assortment strategy chosen by retailers is often the result of assortment planning, which takes into account the key considerations around what customers want and what is viable to offer.
Find out more about assortment planning in our guide.
Why is product assortment important?
Product assortment helps define the range and variety of products that a company is selling. It allows retailers to capitalize on interest and demand without wasting money and inventory.
For this reason, a product assortment strategy may be agile and evolve. For example, if a retailer feels it is getting interest from a new demographic, it may switch to a scrambled assortment strategy. Similarly, a decline in interest from a particular region or country might result in a focus on localized assortment.
Ultimately, an assortment plan is designed to increase sales, raise profit margins and improve customer satisfaction. And it works: according to studies on grocery retailers, a merchandising assortment plan can help reduce the number of SKUs by 36% while increasing sales and gross margins by up to 2%.
How to determine the right product assortment
Research and data are key in choosing a successful product assortment strategy. Key considerations and actions include:
Review inventory data
The performance of a particular product will be recorded through inventory data. It’s essential to delve into this information to understand the areas in which a product is struggling – for example, among key demographics or geographic areas.
This data can then be used to propose resolutions, which may include strategies like deepening existing product lines, creating a more diverse array of products or attempting to widen product assortment.
When analyzing this data, consider:
Which product categories account for the most sales? Is it worth investing more to deepen those product lines?
Which products do customers rarely buy? Is the ROI worth it?
Which products are out of stock due to popularity, and which have overflow? Would it be a good idea to increase or decrease these?
Review customer data
Customer data should always be reviewed in tandem with inventory data, as the two often inform one another. For instance, they can be used to identify which products a certain demographic prefers over others.
Customer data may include information like how long a certain customer or demographic has been using a service, which products they buy, how much they spend on average and how frequently they purchase.
When analyzing customer data, consider:
Which products do customers buy together? Can anything be done to facilitate more bulk purchases?
Are there any products that the customer bought initially that triggered repeat purchases?
How often do people buy different products? Are there any product categories that are under- or over-performing?
What is the demand for a product online versus in-store? Is it worth keeping enough in-store stock around for a product mainly purchased online?
Account for seasonality
There are many reasons for fluctuations in purchasing decisions – like holidays and festivals, weather and more. For example, a clothing line meant for the summer is unlikely to sell in the winter, and customers are much more likely to spend more around the winter holidays than in January.
Flexibility is a core trait of any successful business, and retailers can capitalize on demand and reduce waste year-round when, with the help of sales data, they’re able to adapt and change throughout the year.
Realize the power of your retail data and arm yourself with the insights to make key assortment decisions with SPS Analytics.
Consider staples and loss leaders
Loss leaders are products that are less profitable but have the potential to attract newer customers – for example, essentials or “staples” like toilet paper and toothpaste.
While they aren’t great moneymakers on their own merit, offering them alongside other items attracts customers to visit the store.
Pay attention to trends
Like seasonal sales, trends are important. What is new right now? What is the current topic of conversation? Tapping into trends can boost sales and avoid waste.
For example, the Covid-19 pandemic drove up the price of essentials like toilet paper while driving down demand for other vanity items ill-suited for social distancing restrictions.
Complementary products
Customers often visit stores for more than one product, and offering complementary products helps customers reach their goals faster, all while increasing sales.
For example, a bicycle retailer that stocks bicycle pumps, lights and bells alongside actual bicycles may boost sales when customers buy these additional, related products alongside their new bicycle.
How can you improve your product assortment?
The most effective way to improve product assortment is through the use of data. Retail data equips businesses with the insights needed to make decisions around their product assortment.
Which products are selling, and which are overstocked? Are there certain regions or local areas in which products sell more or less? Do two specific products regularly sell together?
This data allows retailers to meet consumer needs with informed stocking decisions and capitalize on real-world consumer buying habits – all while reducing waste and overstocks while maximizing sales.
SPS Analytics turns retail data into actionable insights that inform product assortment decisions.
Access historic and real-time data on intuitive dashboards and capitalize on seasonal trends or react to emerging buying patterns instantly.
Get all your data in one place and improve confidence in decision-making today.
How will product assortment change in the future?
There are two main emerging trends in product assortment that are expected to shape future strategies:
Endless aisles
This is a growing list of technologies that allow shoppers to order products online during their visit in-store, using things like augmented reality and QR codes. Endless aisles will mean that the store itself won’t need to display as much inventory but will still need to carry a wide range and variety of products.
Omnichannel shoppers
Retail is increasingly moving online, and brands need to evolve with this trend – connecting the in-store and online experience. Tools like click & collect, social commerce and contactless transactions are facilitating this trend. The idea is to connect all resources on the back end to create a seamless transition from online shopping to in-store shopping, with the same variety of products, all while collecting essential customer data from all avenues.
What types of products are consistent best-sellers?
According to Top Amazon Product Categories, the top best-selling product types are.
1 – Home & Kitchen
2 – Beauty & Personal Care
3 – Clothing, Shoes & Jewelry
4 – Toys & Games
5 – Health, Household & Baby Care
6 – Baby
7 – Electronics
8 – Sports & Outdoors
9 – Pet Supplies
10 – Office Supplies
Frequently asked questions (FAQs)
Q: What does assortment mean in retail?
A: Assortment refers to the variety of products a store offers to its customers. It’s the range of items a company holds in stock to meet customer preferences and individual needs. A strong product assortment strategy is essential if you want to make sure your product catalog is optimized for the right audience, time of year and location.
Q: What is the difference between product line and product assortment?
A: Product assortment refers to the complete set of products or services offered by a retailer. Product lines, on the other hand, are items that customers often buy together, or think of as similar products.
Q: Why is an assortment strategy important in retail?
A: Assortment strategies are important as they help retailers maximize sales by offering the right breadth and depth of products based on real-world customer data, while simultaneously minimizing wasted spend.
