Assortment Strategy – Definition

Cite this article as:"Assortment Strategy – Definition," in The Business Professor, updated December 9, 2019, last accessed June 4, 2020, https://thebusinessprofessor.com/lesson/assortment-strategy-definition/.

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Assortment Strategy Definition

An assortment strategy refers to a technique used by retail shops to plan their daily merchandise, this strategy entails displaying a number of products that can be purchased by customers. Assortment strategy is often used to allocate products in a company’s inventory that will be displayed for sale.  When an assortment strategy is used, details of products such as the depth, breadth, and width of products must be given by the retailers.

Assortment strategy helps businesses make merchandise decisions as to the number and type of products that will be displayed for sale on a particular business day.

A Little More on What is an Assortment Strategy

The use of assortment strategy by retailers requires certain technicalities because this strategy requires a large amount of space and knowledge of products in inventory that will enable the retailer to choose products through the deep assortment.  The depth of products offered by a retailer refers to the variations of the product offered by the retailer while the width describes the types of products a store has in its inventory for sale.

While assortment strategy is often used big-box retailers, some small retailers can also use this strategy to target consumers at a particular demography. There are different ways to use assortment strategy which is often determined by the goal of the business or the target area.

Usually, the depth of a product which indicates the variations of a particular product a store carries appeal to customers. Depth as a component of the assortment strategy targets customers based on what their needs are. A well-utilized assortment strategy is good for business, it can increase the sale and profit margin of a business.

However, there is some important factor that retailers must consider when using the assortment strategy. For instance, if the products allocated for particular merchandise are wrongly placed or wrong for the target customers, it might lead to poor sales. An enormous assortment also has a downside, it might result in difficulty in finding items or products by customers.

Reference for “Assortment Strategy”

https://www.investopedia.com › Small Business › Entrepreneurship

https://en.wikipedia.org/wiki/Assortment_strategies_(retail)

https://smallbusiness.chron.com › Advertising & Marketing › Product Strategies

https://specialties.bayt.com/en/specialties/q/179522/what-is-assortment-strategy/

https://www.foleyretailconsulting.com/assortment-strategy-and-customer-centricity/

Academics research on “Assortment Strategy”

Retail assortment: more≠ better, Broniarczyk, S. M., & Hoyer, W. D. (2006). Retail assortment: more≠ better. In Retailing in the 21st Century (pp. 225-238). Springer, Berlin, Heidelberg.

Efficient retailer assortment: a consumer choice evaluation perspective, Amine, A., & Cadenat, S. (2003). Efficient retailer assortment: a consumer choice evaluation perspective. International Journal of Retail & Distribution Management31(10), 486-497. This research shows that to reach their prime goal of building an efficient assortment, retailers need, beside increasing the outlet’s cost‐efficiency, to evaluate shoppers’ assortment perceptions so that what the store actually offers can be tailored to meet customers’ needs and expectations. Our findings reveal that consumers’ perceptions of the assortment range stems from the combination of few indicators, mainly the number of stock‐keeping units proposed and the availability of the favorite brands. Also demonstrates that consumers evaluation of the overall store assortment draws on the perceived choice within the product categories where they are highly sensitive to the assortment range.

How to launch a high-tech product successfully: an analysis of marketing managers’ strategy choices, Hultink, E. J., & Schoormans, J. P. (1995). How to launch a high-tech product successfully: an analysis of marketing managers’ strategy choices. The journal of high technology management research6(2), 229-242. The launch strategy for a new product is a crucial decision issue for marketing managers. Little agreement exists however about the content of a launch strategy and about the individual and combined effects of its constituent parts on new-product success. In this study, the relative importance of some launch strategy tactics (pricing, promotion, product assortment and competitive advantage) on the expected success of the new product is investigated by using a one-third fractional conjoint-analysis design. All respondents (N = 28) were product and marketing managers in the Dutch consumer electronics industry. The results of the study showed that two clusters of managers can be identified with distinct preferred launch strategies. The first cluster of managers preferred a penetration pricing strategy, a small product assortment and a customer oriented promotional campaign. The second cluster of managers preferred a skimming strategy while keeping the product assortment small. We discuss criteria for assigning managers to one of the two clusters and discuss implications of the study for further research.

 

The retail accordion and assortment strategies: an exploratory study, Hart, C. (1999). The retail accordion and assortment strategies: an exploratory study. The International Review of Retail, Distribution and Consumer Research9(2), 111-126. Retailer merchandise assortments need to be constantly reviewed and developed to retain existing and attract new customers. Diversification and specialization are two extreme assortment strategies which are periodically pursued by retailers, forming the basis of the retail accordion theory. While this theory attempts to synthesise the patterns of diversification and specialization, empirical research into the factors explaining variations in diversification and specialization decisions tends to be sparse and anecdotal. This paper focuses on the rationale behind the contrasting assortment strategies of two retail sectors. It presents an exploratory study of ten UK retail multiples. The results of in-depth interviews with senior managers are discussed, the possible constraints on portfolio innovation are determined and the retailer perceptions of the extent of diversification are identified.

 

Category management and coordination in retail assortment planning in the presence of basket shopping consumers, Cachon, G. P., & Kök, A. G. (2007). Category management and coordination in retail assortment planning in the presence of basket shopping consumers. Management Science53(6), 934-951. This paper studies the assortment planning problem with multiple merchandise categories and basket shopping consumers (i.e., consumers who desire to purchase from multiple categories). We present a duopoly model in which retailers choose prices and variety level in each category and consumers make their store choice between retail stores and a no-purchase alternative based on their utilities from each category. The common practice of category management (CM) is an example of a decentralized regime for controlling assortment because each category manager is responsible for maximizing his or her assigned category’s profit. Alternatively, a retailer can make category decisions across the store with a centralized regime. We show that CM never finds the optimal solution and provides both less variety and higher prices than optimal. In a numerical study, we demonstrate that profit loss due to CM can be significant. Finally, we propose a decentralized regime that uses basket profits, a new metric, rather than accounting profits. Basket profits are easily evaluated using point-of-sale data, and the proposed method produces near-optimal solutions.

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