Assortment Planning: How Retailers Build the Right Product Mix
Updated: Aug 21
Imagine you are a fashion retailer with 500 potential styles for the next season.
You have the design ideas. You have the trends. Buyers love the products.
But your stores don't have unlimited space. Your customers don't need 500 options. And your budget certainly isn't unlimited.
So the real question isn't:
"Which products do we like?"
It is:
"Which products deserve a place in our assortment?"
That's the role of Assortment Planning.
What Is Assortment Planning?
Assortment planning is the process of deciding what products, styles, colours, sizes, price points and options a retailer should offer to its customers.
It sits at the heart of merchandising because it connects:
Customer Demand → Product Strategy → Store Capacity → Financial Investment
And it's important to distinguish assortment planning from buying:
Assortment Planning = What should we offer?
Buying = How much should we buy?
The two work together, but they answer different questions.
Start With Your Commercial Core
One of the most useful principles in assortment planning is the Pareto Principle.
In many retail businesses, a relatively small proportion of the assortment generates a disproportionately large share of sales.
For example:
30% of the styles may generate 70% of net sales.
The exact ratio will differ by retailer and category, but the principle is powerful.
If you know which products are driving the majority of your business, those products should form the foundation of the assortment.
Think of it as building a house.
Your core commercial styles are the foundation.
Once that foundation is protected, you can use the remaining assortment to introduce:
Seasonal products
Fashion and trend products
Newness
Colour variations
Premium products
Experimental options
The mistake is starting with the exciting products and trying to fit the commercial core around them.
Start with what pays the bills. Then add excitement.
Width vs. Depth: How Much Choice Can You Actually Offer?
Two words are fundamental to assortment planning:
Width = How many different options or styles you offer.
Depth = How much inventory you carry within each option.
Imagine a store has a budget of €100,000 for a category.
You could potentially offer:
50 styles × €2,000 average investment
or
100 styles × €1,000 average investment
The second option gives customers more choice, but less depth per style.
The first provides fewer options but allows the retailer to invest more deeply in each product.
Neither is automatically better.
The right answer depends on customer demand, category behaviour, store capacity, and the role of the product.
Store Capacity Changes the Equation
This is where modern assortment planning goes beyond simply asking:
"How much budget do we have?"
The better question is:
"How much can this store realistically display and sell?"
Imagine a store has capacity to effectively present 300 active options in a category.
Your financial plan might allow you to buy 400 options—but that doesn't mean you should.
Too many options can:
Overcrowd the sales floor
Reduce product visibility
Dilute inventory
Make the assortment harder for customers to navigate
Increase operational complexity
So the assortment needs to balance three constraints:
Budget + Store Capacity + Customer Demand
For example:
Store capacity: 300 options
Commercial core: 180 options
Seasonal: 70 options
Fashion/newness: 50 options
Total:
300 options
The financial investment can then be distributed according to the expected productivity and role of each group.
This is why assortment planning isn't simply a financial exercise.
A store has physical capacity as well as financial capacity.
Core, Seasonal and Fashion: Finding the Balance
A healthy assortment usually needs different product roles.
Core / NOS
Products customers expect to find consistently.
They provide stability and often generate the majority of sales.
Seasonal
Products designed around a specific season, event or trading period.
They create relevance and freshness.
Fashion / Trend
Higher-risk products driven by trends and changing customer preferences.
They create excitement and differentiation—but demand is less predictable.
The objective isn't to maximise one of these groups.
It's to create the right balance between:
Certainty + Commerciality + Newness
Too much core can make the assortment predictable.
Too much fashion can increase markdown and inventory risk.
Price Architecture Matters Too
Assortment isn't only about which products you offer.
It's also about where they sit on the price ladder.
For example:
Price | Role |
€29 | Entry |
€49 | Core |
€69 | Premium |
€99 | High-end |
A strong assortment gives customers different price points without creating unnecessary duplication.
The objective is not simply to have a €29, €49, €69 and €99 product.
It's to understand why each price point exists and which customer need it serves.
Don't Forget Colour, Size and Local Demand
Once the styles are selected, the next decisions become even more granular.
Which colours?
Which sizes?
How many options?
Which products should every store carry?
Which products should only go to selected stores?
A black T-shirt and a neon seasonal T-shirt may both be part of the assortment, but they shouldn't necessarily receive the same investment.
Historical sales, customer behaviour and store characteristics should influence those decisions.
This is where assortment planning starts connecting directly with allocation and inventory planning.
The MerchFlow Assortment Framework
At MerchFlow Consulting, we think about assortment planning as a simple sequence:
CUSTOMER → CATEGORY ROLE → PRICE → PRODUCT → OPTION → CAPACITY → INVESTMENT
Start with the customer.
Understand the role of the category.
Build the right price architecture.
Select the products.
Define the options.
Check store capacity.
Then allocate the investment.
This prevents one of the most common merchandising mistakes:
Starting with the product instead of starting with the customer.
How Assortment Planning Connects to the Bigger Picture
Assortment planning doesn't operate in isolation.
It connects directly to the other parts of the merchandise planning process:
MFP determines how much the business can invest.
Demand Forecasting estimates what customers are likely to buy.
Assortment Planning determines what products should be offered.
OTB controls how much additional inventory can be purchased.
Allocation determines where the products should go.
Together, these decisions turn a financial plan into a customer-facing assortment.
Final Thoughts
The best assortment isn't the one with the most products.
It's the one where every option has a reason to exist.
Protect the commercial core.
Use customer demand to guide the range.
Respect the physical capacity of each store.
Balance width with depth.
Then use seasonal and fashion products to create newness and excitement.
Because ultimately, assortment planning is about one simple question:
How do we create the right amount of choice without creating the wrong amount of inventory?
At MerchFlow Consulting, we believe great assortment planning sits at the intersection of customer insight, commercial performance, financial discipline and physical reality.
How does your organisation build its assortment?
Do you start with historical sales and commercial core styles, or does buyer intuition and trend direction play a bigger role?
We'd love to hear how you approach it.
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