By  on October 8, 2008

As retailers get squeezed by the eco-nomic downturn, it becomes even more important for them to match product offerings to consumer wants and needs — and increasingly at the local level. More retailers are adopting assortment planning processes and software to identify local tastes and then match product shipments to them.

Historically, the assortment planning process works from the top down “because that’s the way the software works,” said Theo Rose, a consultant on assortment planning software with Basking Ridge, N.J.-based Applied Retail Technologies Inc. who organized a seminar on the topic in New York last month. Typically, assortment plans are based on one or two years of historical sales data. Based on that information, assortment planning says which stockkeeping units will be offered in each store, when, and in what quantities.

A number of software vendors offering assortment planning packages are in the process of updating their programs to take into account additional considerations, such as sizes, shelf space, customer segments and graphics. Assortment planning software includes JDA’s Arthur Planning, Compass, Da Vinci, Maple Lake, Oracle, Pyramid, SAP, SAS, 7thOnline, Visual Retailing and many others. Retailers, meanwhile, are developing store clusters that go beyond square footage and sales velocity to account for customer preferences for sizes, local weather and lifestyle needs.

“Most stores are product-driven,” said a planning executive with a 200-store chain who requested anonymity. “We need to be customer-driven.”

When he was hired several years ago, the company did financial planning and buyers were in charge of allocation, but there was no assortment planning. The executive added it used Excel templates that tie into software program Arthur Planning. Later, he added space planning and store planning.

Now when the merchant planners say denim will be hot this year and want to take a big position in denim, the system takes into account that the retailer’s New York City stores always do better with career merchandise.

In the future, the executive would like to replace the Excel templates with shared software that fits its process. He also is looking for enterprise resource planning software to tie all the processes together.

Having some kind of software to handle assortment planning is important for any organization with more than 50 stores, said Rose, because it’s impossible for a person to keep track of them. First, retailers should figure out their process and then go shopping for the right software to support it, he said.

A national women’s chain added seven clusters to its assortment planning process in November. The clusters take into account space, volume and productivity. In the future, the retailer plans to add more attributes. It’s too early to see the effects, said the manager, who previously worked for a regional department store that segmented stores by customer profile. These detailed snapshots described variations in income, career and local weather patterns.

Assortment optimization software, a new category, “uses a number of advanced analytics, especially on the forecasting end, to predict what sales are going to be like so the retailer can create a better assortment plan,” said Hung LeHong, retail and merchandising analyst with Gartner Inc. of Stamford, Conn. Oracle’s ProfitLogic software offers optimization, which tries to reflect true demand for size and color combinations, he said.

Oracle, Visual Retailing and Compass, among others, offer visual capabilities, such as the ability to view a photo of merchandise in an assortment planning spreadsheet.

There is a growing movement to group stores by customer segment. “For example, if a university segment is really important to an apparel retailer, they could group stores that way. It makes sense if the retailer is working with multiple segments,” said LeHong. Typically, retailers use a separate customer analytics tool, then use that information to create store clusters in an assortment planning program, he said.

Manufacturers are also using assortment planning tools. At Phillips-Van Heusen Corp., 7thOnline assortment planning software has helped the wholesale divisions of Izod, Calvin Klein and Timberland be more efficient, said associate director of wholesale systems, Debbie Beer-Christensen.

The company can get an earlier read on how orders are lining up. “It gives us the ability to recap information early on, to see what’s selling and maybe make drop decisions earlier than in the past, and do substitutions more easily,” she said. Another benefit is that orders are sent directly into the order processing system without being rekeyed, which saves time and cuts down on mistakes.

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