Retail Glossary

Assortment optimization

The process of making SKU-level decisions within a category to maximize ROI and support the predefined strategic role for the category.

Determining the strategic role of the category is a prerequisite for assortment optimization. A category being carried as a convenience offering will be assessed for efficiency and a min/max analysis (minimum SKUs for maximum return), whereas a category that is considered important to make a variety or expert impression will carry more niche items to support the strategy.

Factors that are usually considered include inventory turns, % of sales, % of margin dollars, physical space constraints, ROII or GMROI, traffic and shopper satisfaction metrics if available, presence/influence in total market basket, and many others.

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