Assortmentis the set of products a store or company offers its customers. People go to specific stores for a wide selection of goods and fresh products. However, not all items in the sales are equally effective: some products bring stable profits, while others only take up shelf space and create additional costs.

Assortment optimization is the process of analyzing and adjusting the product portfolio to help retailers increase sales, reduce costs, and better meet customer needs. Assortment management is no longer just an operational tool, it's a way for businesses to compete and achieve their goals. The store's main focus is to sell all the purchased goods and not to have problems with spoilage of products in the warehouse because it freezes the profit and margin of the retail chain. So, category managers build assortment management strategies, remove inefficient products, and revise SKUs.

To deeply analyze the assortment, a category manager needs a set of analytical reports that will allow him not just to see the numbers but also to identify patterns and relationships. He should be able to segment data by various criteria (category, brand, supplier), compare data for different periods, assess the contribution of each product to the overall results, and visually track the dynamics of key indicators.

Basic methods for estimating the assortment of a store chain

1. ABC analysis - a method of classifying goods into three categories (A, B, C) according to their profitability for the business. This method can be done on a store-by-store or chain basis. The main purpose of ABC analysis is to structure the assortment to highlight the most popular and profitable goods and categories.

Three categories of goods:

Category A- priority goods that bring about 80% of profit. The availability of these goods should be mainly controlled, and some stores create excessive stock for this category.

Category B- ordinary goods, which account for about 30% of the range and 15% of sales. These goods are also essential, but their availability is less critical than in group A.

Category C- the least important goods that provide 5% of profits. These categories of goods may be in low demand or unprofitable.

Benefits of ABC analysis:

• Identification of products that generate more profit;
• assortment optimization;
• identification of goods that sell well/poorly;
• rational management of pricing.

2. XYZ analysis is a method of categorizing goods and resources according to stability.

Category X - goods with stable and predictable sales (everyday goods: milk, eggs, bread).

Category Y - goods with slight fluctuations in sales, some trends (olive oil, chocolate, seafood).

Category Z- goods with the greatest fluctuations in sales and chaotic and irregular demand (holiday goods, exotic fruits).

Advantages of XYZ analysis:

• demand forecasting and production (purchasing) planning;
• identification of goods of category Z with the highest risk;
• optimization of marketing campaigns (additional promotions and discounts);
• improving the efficiency of inventory management;

3. “Marker Comparison” report. You can analyze the sales dynamics of products united by specific characteristics (lactose-free products, products for children). As a result, it is easy to evaluate the effectiveness of particular categories, optimize the assortment for each store, and make informed decisions for network development. This report allows you to:

• control sales dynamics: compare the dynamics between two periods and trace the dynamics in advance.
• analyze in detail at each level, from general categories to SKUs (specific products).
• improve assortment management: personalize the assortment for different locations.

• visually track the dynamics of specific indicators over a certain period.

How to identify unprofitable products?

A category manager should easily find and remove ineffective goods from the assortment. The main signs of unprofitable goods are:

• low turnover rate;

• low margins;

• high storage costs;

• high level of returns;

• seasonality;

• irrelevance.

An integrated combination of assortment evaluation methods makes it possible to optimize the assortment and increase the income of the store chain. This allows you to find products that are taking up shelf space but are not profitable or are selling erratically.

Step 1- ABC analysis.

Category C items generate the least profit, up to 5% of revenue. Therefore, it is worth reconsidering the relevance of a product featured in the store but not very popular.

Tip: if the products have high margins but don't sell well, it is worth applying promotions and additional demand stimulation.

Step 2-XYZ Analysis. The main focus should be on category Z products. They have chaotic and erratic demands that are impossible to predict.

Two analysis methods should be combined to select goods for withdrawal better.

Goods of group CZ (unprofitable + irregular) should be excluded from the assortment.

Goods of group BZ (average profitability + irregular) - you need to change your marketing strategy and add promos or discounts.

Getting rid of unprofitable goods should be done in stages to reduce losses. The ideal scenario is to apply discounts and unique placement in the store for a quick sale.

How to prevent new unprofitable SKUs?

• Optimize purchases. Reduce the purchase of products with questionable demand and consider seasonality and demand for products in different locations.
• Use ABC/XYZ analysis regularly. Performing the analysis once a quarter will allow you to see sales dynamics and prevent significant losses.
• Test new products before significant purchases. A strategy of test sales in several stores will allow you to understand if there is demand.
• Analyze trends and seasonality. Irrelevant products often become unprofitable.
• Edit marketing strategy. Additionally, it stimulates demand for goods with low turnover.