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, created by Mike Skypala
What's next in Assortment Planning? - Preparing for the future
Grocery retail assortment software solutions have typically focused on optimizing assortment on a sales or profit per linear meter basis using sales, financial, product and increasingly customer data as inputs. Sophisticated algorithms have been developed to make recommendations and predict sales and profit impact.
The changing landscape
The move to online has changed the assortment problem to be solved from getting the most out of the space available to how to make it easy for customers to find the products they want, whilst encouraging them to take advantage of the (often) bigger choice available.
In other retail sectors, online has led to an explosion of niche retailers offering innovative new ranges, marketplaces bringing together hundreds or thousands of retailers and the big established players have scrambled to differentiate themselves by trying to bring more experience into stores whilst simultaneously expanding the product offering online. In these sectors, the key assortment challenge has become the curation of products - carefully choosing the best products to offer so that you become the go to place for shoppers. In fashion retail, the multi-channel assortment challenge is one of selling through inventory fast enough to allow you to constantly introduce new lines.
So assortment solutions have had to be tailored and focused on solving different problems.
Localization of Bricks and mortar
Grocery retail is still very bricks and mortar dominated, and with Amazon building or acquiring physical stores, that is not going to change anytime soon. The Food Marketing Institute and Nielsen expect U.S. online grocery sales to grow from $20.5 billion, or 4 percent overall, in 2016 to $100 billion, or 20% overall, by 2025, but 75% of online shoppers said they rarely or never buy groceries online according to a Reuters/Ipsos poll of 8600 online U.S. shoppers in August 2017.
The big shift in food retail is how the local food movement has started to change the assortment landscape. Increasingly more grocery shoppers are returning to their roots, seeking local food, supporting local farmers to reduce the environmental impact of transporting food from long distances. Independent retailers are better able to exploit this as they are not tied to centrally automated assortment and planograms.
A good example of this is CT Baker’s Budgens store who trades with almost 40 local suppliers operating within a 20-mile radius of Holt in Norfolk . Recent research in the U.S. shows locally supplied fresh produce experienced double the sales growth of total U.S. fresh produce in 2017 and 8-10% growth vs the previous year.
The larger chains have increasingly tried to incorporate local products, but it has proven to be difficult to do this at scale to achieve a good mix of centralized assortment planning as well as local community supporting products, and satisfy the core assortment metrics.
Keeping assortment relevant
Assortment solutions need to enable local store managers to source, validate and test local products - essentially supporting a curated offer of all that is local - and integrate this with a more efficient central assortment which takes into account the number of customers who will order online and therefore do not need to choose and purchase the product instore. In short, it requires a blend of the data-driven, machine assisted recommendations and human approach to truly enable Grocery retailers to deliver at a local level.
Those that get this balance right will enhance customer experience and grow like for like sales, as well as re-establish an influential role for the store manager which has also been lost in centrally run retail operations.