AI & Retail Assortment Planning: A Perfect Combination  

June 4, 2024

By Nick DeSanti, Senior Analytical Consultant, HIVERY

As a Business Consultant at HIVERY, I have the privilege of helping retail and CPG companies harness the power of their data through AI. This transformative technology allows businesses to make informed, dynamic decisions that would otherwise be impossible without it. Our webinar on “Measuring Assortment Impact with AI” recently sparked significant interest, highlighting the growing recognition of AI’s potential in retail. Today, I want to share insights into how AI revolutionizes retail by enhancing decision-making, optimizing assortments, and ensuring effective execution.

The Growing Importance of AI in Retail

AI has become an indispensable tool in modern retail strategy. Retailers today face the daunting task of managing vast amounts of data from various sources, including sales transactions, customer feedback, and market trends. Traditional data analysis methods often must catch up, leading to missed opportunities and inefficiencies. This is where AI comes into play.

AI can quickly and accurately analyze massive datasets, turning raw data into actionable insights. This capability is precious in assortment planning, where determining the optimal mix of products for each store is crucial. By leveraging AI, retailers can tailor their assortments to local preferences, boosting customer satisfaction and sales.

Enhancing Decision-Making with AI

One of the most significant benefits of AI in retail is its ability to enhance decision-making processes. Traditional assortment planning is labor-intensive and relies heavily on historical sales data and intuition. This approach often results in suboptimal assortments that fail to meet customer demands.

AI changes the game by using advanced algorithms to analyze past purchase behaviors and predict future trends. These algorithms consider factors such as seasonality, local preferences, and economic conditions. The result is a more accurate and dynamic assortment plan that adapts to changing circumstances that allow retailers to be more proactive, rather than reactive.

For example, AI can identify which products will likely be popular in specific locations, allowing retailers to tailor their assortments accordingly. This enhances customer satisfaction, boosts sales, and reduces excess inventory.

Optimizing Assortment Planning

AI-driven assortment planning goes beyond data analysis. It involves sophisticated simulation and optimization techniques to model different assortment scenarios and predict their outcomes. This capability allows retailers to evaluate various strategies and choose the one that best meets their objectives.

Consider a retailer looking to optimize the assortment for a chain of stores. The AI system can simulate multiple strategies, such as focusing on high-margin products, increasing product variety, or emphasizing local favorites. Each scenario can be evaluated in terms of expected sales, profitability, and customer satisfaction.

One of AI’s strengths is its ability to balance competing goals. For instance, a retailer might want to increase product variety while reducing overall inventory levels. AI can identify the optimal mix that achieves both objectives, something that would be incredibly challenging with traditional methods.

Moreover, AI enables continuous improvement. As new sales data comes in, the AI system refines its models and predictions, ensuring that assortment plans remain relevant and effective. This iterative process helps retailers stay agile and responsive in a fast-changing market.

Ensuring Effective Execution

Effective execution of assortment plans is crucial for realizing the benefits of AI-driven strategies. AI’s ability to provide real-time insights and recommendations is invaluable here. Retailers can use AI tools to monitor sales performance and inventory levels, helping them adjust. For example, suppose a product sells faster than expected in one location. In that case, the AI system can recommend redistributing stock from other stores, expanding the item’s facings, and/or increasing orders from suppliers. Conversely, the system can suggest markdowns or promotions to clear the inventory if a product is underperforming.

AI also plays a significant role in planogram compliance and shelf execution. Planograms outline the placement of products on store shelves and are essential for maximizing space and ensuring a consistent shopping experience. AI can analyze store-level data to create optimized planograms tailored to each location’s specific needs and constraints.

Furthermore, AI-powered tools can track compliance with these planograms using image recognition and other technologies to ensure shelves are stocked correctly. This helps maintain the integrity of assortment plans while simultaneously enhancing the overall shopping experience.

The Future of AI in Retail Assortment

The potential of AI in retail assortment planning and execution is vast. We can expect even more sophisticated and powerful tools to emerge as AI technologies evolve. These advancements will further enhance retailers’ ability to understand and meet customer needs, optimize their assortments, and execute their plans effectively.

Looking ahead, integrating AI with other emerging technologies, such as augmented reality (AR) and the Internet of Things (IoT), will create a seamless and highly responsive retail environment. AR can enhance in-store experiences by providing interactive product displays, while IoT devices offer real-time data on inventory levels and customer behavior.

In conclusion, AI is revolutionizing retail by transforming strategic assortment planning and execution. It empowers retailers with enhanced decision-making capabilities, optimized assortments, and effective execution strategies. As the retail industry evolves, those who embrace AI will be well-positioned to thrive in an increasingly competitive landscape. The enthusiastic response to our recent webinar underscores the growing recognition of AI’s transformative potential. Retailers who leverage these technologies will meet and exceed customer expectations, driving growth and success in the digital age.

I would love to hear from you and your thoughts! Connect with me on LinkedIn here.

About the Author 

Nick DeSanti is a Business Consultant at HIVERY, specializing in leveraging AI to helpretail and CPG companies optimize their data-driven decisions. With a background in finance and entrepreneurship from Indiana University and extensive experience in the consumer goods industry, Nick excels in data analytics, public speaking, and business development.