Retailer’s Guide to a Profitable Product Assortment (2022)
Getting people into your store is one thing. Getting them to make a purchase? Quite a different beast.
You might think that if you gave them lots of product options, they’d be more likely to buy. After all, Amazon offers thousands of versions of a single product type and it works for them.
But customers can get overwhelmed with too much choice: one popular study reveals that more customers make a purchase when offered six flavors of jam instead of 24, or six types of chocolates versus 30.
In this guide, we’ll unpack product assortment strategies and tips to help you run a profitable, sustainable store.
What is product assortment?
Product assortment, also known as merchandise mix, is the range and variety of products you offer to your customers. It defines the product types your customers ultimately know you for.
The best product assortment strategy is one that maximizes sales, profit, and customer experience. Getting there isn’t simple; there are factors that can make a big difference, like current and future demand, the size of your shelf space and storage, and supplier relationships.
If you hold a product range that’s too wide, you risk diluting your image and ending up with stock that’s hard to sell. But if you only sell a narrow product range, potential customers might leave your store empty-handed because they couldn’t buy everything they needed at once—and go to your competitor instead.
Intentional product assortment lets you minimize dead stock, stockouts, and unhappy customers.
The only way you make money in retail is through your product assortment; by selling the stuff that you buy.
Product assortment components
Before we get into product assortment strategies, let’s look at two main components of product assortment: product breadth and product depth. Understanding them will give you essential context for understanding different types of assortment strategies.
Product breadth represents the number of product lines your store offers. It indicates your product line variety.
For example, the product breadth of a luggage store can include product lines like duffel bags, travel totes, hard-shell luggage, soft-shell luggage, backpacks, and travel garments. Every product this store sells belongs in one of these six categories.
Product depth is the number of product variations in each of your product lines. Variations can include different sizes, colors, flavors, materials, and more, depending on the type of products your store offers.
In the luggage store example, product depth is the number of different pieces of luggage you’ll find in each of the categories. Under the hard-shell luggage category, you may find suitcases made of either PVC or aluminum, each in 10 color options and three sizes. Product depth for this line, then, is 60 product variations.
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Types of assortment strategies
- Wide assortment
- Deep assortment
- Localized assortment
- Mass-market assortment
- Scrambled assortment
Let’s look at each of these types of assortments individually.
Wide assortment strategy, also known as broad assortment, is one that includes a large number of categories with fewer product variations within each.
Hypermarkets are the strongest example of a wide assortment strategy. In Target, for example, you can buy everything from groceries, clothing, and furniture to electronics, office supplies, and camping gear.
With this strategy, retailers can appeal to broad audiences and become a one-stop shop for many of their buying needs.
Deep assortment strategy focuses on offering a smaller number of product lines, but with a greater product variety.
Retail stores that emphasize depth in their product assortment often attract a more dedicated, loyal customer base. Specialty retailers that offer dozens or hundreds of variations within a product line help passionate customers find exactly what they need.
For example, a shoe store that sells boots, heels, sandals, slippers, and trainers might only offer a few variations of running shoes. On the flip side, a specialty running store offers options for road running and trail running, as well as for different running styles, lengths, and from dozens of brands in each category.
Localized assortment strategy is one that tailors the store’s product mix based on its location. It adapts to the needs of the local community and the specifics of the region.
For a clothing brand, the product assortment during spring will vary between its Seattle store and the one in Austin. There’s around a 20°F difference in daily temperatures in March between those cities, so selling identical clothes in both wouldn’t make sense.
Localized approach gives a personalized touch to product assortment.
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Mass-market assortment is one that appeals to broad demographics and is typical for large stores like Walmart, Target, and Home Depot.
This approach is both wide and deep. It offers a vast range of product categories and hundreds (or thousands) of product variations in each. Mass-market assortment aims to serve as many people as possible with as many products as possible.
For most retailers, mass-market assortment is unreachable. It requires immense storage capabilities and is typically only feasible for large retailers.
Scrambled assortment offers products that are outside of the retailer’s core focus. The goal behind scrambled assortment is to attract customers from outside the existing target customers.
An example of this are grocery stores that also sell electronics, books, toys, and clothes. Their product depth for these categories usually isn’t on the level of specialty stores, but they offer enough variety to encourage new customers to consider those products—and grab their groceries while they’re there.
Importance of product assortment
Product assortment is important because it can increase sales and have an impact on customer experience.
It can increase sales and profit margin
Offering the exact products your customers need seems like a logical way to go. It means you can regularly sell most of your inventory and minimize the losses that come with dead stock.
McKinsey found that improving your product mix based on underrepresented customer needs, a simplified supply chain, and better supplier negotiations can increase profit margin and revenue while reducing procurement costs. In fact, the assortment planning work McKinsey did with an online grocery retailer resulted in 36% fewer SKUs and an up to 2% growth in sales and gross margins.
Assortment optimization means you can remove the cost of holding unnecessary stock, double down on product merchandising for the right inventory, and reap big rewards.
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It impacts customer experience
The products you sell in your store shape your customer’s experience. The store layout, the ease of finding the right products, and the trust that they can buy those same products again and again all play a role in how satisfied your customers are after coming to your store.
Two thirds of customers expect brands to understand their needs and expectations—and offering the right products at the right time is just about the best way to make that happen.
Product assortment tips
- Review inventory data
- Review customer data
- Account for seasonality
- Consider staples and loss leaders
- Pay attention to trends
- Complementary products
Let’s take a closer look at each of these product assortment tips.
1. Review inventory data
Your inventory data holds plenty of clues about how your product assortment has performed so far.
It’s worth digging into those clues to understand different approaches to your product assortment, like deepening a product line or adding more product categories.
Here are questions you can use to analyze inventory data:
- Is there a product category that makes up the majority of your sales?
- Are there individual products that customers rarely buy?
- Are there products that customers often ask about while they’re out of stock?
- Is there a product category that you frequently have too much stock in?
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2. Review customer data
Data about your customers complements your inventory data because it adds a layer of insights about why products do (or don’t do) well with customers.
Everything you need is in your POS data, including how long someone’s been your customer, their purchase frequency, specific products they’ve bought, and their spend.
Thanks to this data, you can learn:
- Which products or product categories are frequently bought together
- Which items are the first item a customer bought (i.e. the product that made them become your customer)
- The frequency at which customers buy different products or product categories
- The differences in product demand between customers who buy in-store versus online (if you also sell through an ecommerce storefront)
💡 PRO TIP: To see how much a customer has spent with you when shopping both at your store and online, select their customer profile in Shopify POS.
3. Account for seasonality
Holidays, events, and weather changes drastically impact customer needs. This is why it’s important to keep your product assortment as flexible as it needs to be to adapt to seasonal fluctuations.
Let’s look at a home decor store example. Most of the year, this store will have categories of similar product depth, including living room, bedroom, kitchen, home office, bathroom, dining room, and the outdoors. But during summer, product assortment for the outdoors goes much deeper and makes up a quarter to a third of all products in the store.
Seasons that focus on skiing, surfing, school, weddings, festivals, Halloween, 4th of July, and more all drive a surge in consumer demand—make sure you keep them in mind.
4. Consider staples and loss leaders
Loss leaders are products that aren’t profitable, but have the power to attract new customers to whom you can sell other products. Loss leaders are often staples—items that people buy on a regular basis out of pure need, rather than desire, like shaving cream, laundry detergent, or diapers.
Going broader or deeper in your product assortment with loss leaders can help you get more customers into your store and increase their basket size with other relevant, profitable products.
5. Pay attention to trends
You don’t have to look far to find examples of large-scale events that altered demand for certain products. When the COVID-19 pandemic hit, the demand for products like bread makers, blue light glasses, nail kits, and green screens skyrocketed. The need for products like heels, perfume, eyeliner, and alarm clocks took a massive dip.
Of course, you can’t prepare for trends and shifts in customer demand until they happen, but it’s worth staying on your toes and keeping an eye and ear out for signals. This will allow you to tweak your product assortment and meet your customers where they need you.
6. Complementary products
Getting your product assortment right means helping your customers get everything they need from their shopping trip. This is where complementary products—products that work well together and help the customer reach their goal—are effective.
For a shoe retailer, complementary products could include shoe care products like polish, brushes, and wipes. For a cookware brand, there might be options like cheese grater, garlic crusher, cutting board, and pasta drainer.
A recent study confirmed that complement-based assortment organization (i.e. organizing products by their goal rather than their physical characteristics) increases purchases and customer spend, especially with less involved consumers and for consumers with less specific shopping goals.
Future of product assortment
Two major trends influencing the future of product assortment are endless aisles and omnichannel shoppers.
Endless aisles is a strategy that allows in-store shoppers to order their products online during their visit. Its goal is to bring the best shopping experience to your customers no matter where and how they want to buy.
Retailers like Walmart and Oakland Athletics already implement endless aisles through solutions like interactive kiosks and QR codes. This approach can transform your retail assortment planning because you can hold less inventory—and take fewer risks in your limited-space store—but still have a wide product catalog and attract loyal customers.
Don’t forget to integrate your sales and inventory data if you choose to take this route, so you can always work with accurate stock levels. You can do this with Shopify POS.
Over two billion people are now shopping online. Even if you’re a small store with no massive growth goals, letting your customers seamlessly shop online and in-person is worth investing in.
This can include options like buy online, pickup in-store (BOPIS), virtual shopping, social commerce, and contactless transactions. The key is to connect all your shopping channels in the back end. This will allow you to rely on inventory and customer data to make the best product assortment decisions.
💡 PRO TIP: Offering in-store pickup as a delivery method at checkout is a great way to get more online shoppers to visit your store. To get started, enable local pickup availability in Shopify admin to show online shoppers whether a product is available for pickup at one of your stores.
Set up the right product assortment
You don’t need to offer every product under the sun. What you need is the right number of product categories and variations to make customers feel great at every visit.
That’s where you should start—with what your customers need and what your inventory and sales data tells you about them. Approach your assortment strategy as an experiment and adjust as you go.
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