With eCommerce leading growth in retail and growing much faster than in store sales, retailers must move quickly to stay ahead of the competition in a highly dynamic world. Retailers need to make sure that clients find what they are looking for whenever they come to shop. If they don’t, they may shop elsewhere, and you lose a client, while if they do – there is typically an upside as they buy additional products, too.
This is where “assortment intelligence” comes into play. By leveraging AI-driven insights, retailers can fine-tune their product mix in near real time. But what is the “return on investment (ROI)” of assortment intelligence, and why should retailers prioritize it?
Understanding Assortment Intelligence
Assortment intelligence refers to the use of data analytics, AI, and competitive intelligence to optimize a retailer’s product offerings – named Assortment. It involves tracking competitor assortments, benchmarking it to your assortment, and identifying gaps or opportunities in product catalogue.
With the assortment intelligence tools, retailers can:
- Benchmark their product mix with competitors
- Optimize pricing and promotions
- Understand trends in the category
- Grow revenue by offering the right products
Investing in assortment intelligence can be costly, as it involves complex technologies:
- Product matching to benchmark product catalogue across competitors
- Product attributes extraction to benchmark private label product catalogues
- Big data processing
- Timely competitive data collection, so the data is fresh and accurate
The ROI of Assortment Intelligence
Here’s how retailers can achieve a strong ROI on their investment:
1. Increased Sales and Revenue
One of the most direct benefits of assortment intelligence is increased sales. By analyzing gaps vs competitor offerings, retailers can ensure they offer the right products. This leads to:
- Higher conversion rates: When customers find what they’re looking for, they’re more likely to make a purchase
- Improved cross-selling and upselling: Typically, when consumers find what they were looking for they are open to look at other items or consider upsell offers
2. Optimized Inventory Management
Getting stuck with unsold inventory is not fun. Assortment intelligence helps retailers minimize this phenomenon by aligning inventory with demand, and by bundling lower demand stock with higher demand items.
3. Gaining Market Share
Retail is highly competitive, and assortment intelligence provides a critical edge, especially if done continuously and in real time. By continuously monitoring competitor assortments, retailers can quickly bridge gaps in missing products and build a reputation for staying at the edge of trends.
4. Improved Pricing and Profit Margins
Pricing is a crucial factor in retail success. Assortment intelligence helps retailers optimize pricing strategies by:
- Identifying price gaps: Retailers can adjust prices to stay competitive while maintaining healthy margins
- Enhancing promotional effectiveness: Retailers can determine which discounts and promotions drive the most sales without eroding profitability
5. Enhanced Customer Loyalty
When consumers that are buying from you get used to finding what they need at relevant prices on your digital shelf, they are more likely to return and not look elsewhere, which can be leveraged for:
- Higher customer satisfaction
- Increased brand loyalty
- Better personalization
Calculating the ROI of Assortment Intelligence
To quantify the ROI of assortment intelligence, retailers should track key performance indicators (KPIs) such as:
Sales growth:
- Compare revenue before and after implementing assortment intelligence
- Analyze revenue coming from baskets that include added products due to gap analysis
- Analyze revenue coming from returning buyers (increase loyalty)
Inventory turnover rate: Measure how quickly products are selling and amount of stock kept and excess inventories
Gross margin: Assess improvements in profitability due to bundles, lower stock, improved pricing
By analyzing these metrics, retailers can determine the direct financial impact of assortment intelligence. As you can see the upside is substantial and thus the potential ROI is quick
Conclusion
In an increasingly competitive retail environment, assortment intelligence is a must do. By leveraging data-driven insights, retailers can optimize their product mix, improve pricing strategies, enhance customer satisfaction, and ultimately drive higher profitability and take market share.
The ROI of assortment intelligence is clear and substantial. Growing 1% of revenue for a retail business could mean 7 figures annually.
But more than that, Retailers that fail to embrace assortment intelligence may not survive today’s dynamic market. Investing in the right tools and strategies today will pay dividends in the form of sustained growth and long-term success.
