Which Products Should You Stock?

Getting product assortment right isn't easy, yet it's absolutely critical to retail success. Unlike inventory management and pricing, where retailers have lots of data and analytical tools to guide decision making, assortment optimization is still much more art than science. And making the wrong call can be disastrous. A new approach to assortment planning addresses this deficiency. The foundation for the approach is the notion that most of the time customers don't buy products; they buy a bundle of attributes. For instance, when customers consider buying a TV, they think about screen size, resolution, price, LCD or plasma, and brand. The new method uses sales of existing products to estimate the demand for their various attributes and then uses those estimates to forecast the demand for potential new products on the basis of their attributes. This technique helps retailers do a better job of replacing slow sellers with new ones, understanding whether customers are likely to settle for another choice if they don't find their ideal product, and customizing assortments of individual stores or clusters of stores. [ABSTRACT FROM AUTHOR]