The assortment matrix is a structured list of a company’s entire product range, where every item is economically justified and aimed at maximizing return. In essence, it’s an analytical tool for strategic assortment planning.
Origins and Development of the Concept
The concept of matrix-based assortment analysis traces back to the work of the Boston Consulting Group (BCG). BCG founder Bruce D. Henderson created the BCG matrix in the late 1960s as a method for analyzing a company’s product relevance based on market position. The matrix rests on two theoretical foundations: the product life cycle and the effect of production scale (the learning curve).
Classifying Products in the BCG Matrix
The classic BCG matrix sorts products into four categories:
- «Stars» — products with high sales growth and a high market share. They bring in significant revenue but require substantial investment to sustain their growth rate.
- «Cash Cows» (also called «Moneybags» or «Cream») — products with a high market share but low growth. They need no further investment and provide a stable stream of income.
- «Problem Children» (also known as «Wildcats», «Dark Horses», or «Question Marks») — products with a low market share but high growth. They call for analysis and a decision: invest to turn them into «stars,» or drop them.
- «Dogs» (or «Losers,» «Lame Ducks») — products with low growth and a low market share. They typically have poor profitability and require a management decision to discontinue them.
Practical Retail Applications
In retail, the assortment matrix helps with:
- building and adjusting the product range;
- classifying products into groups and categories;
- tracking inventory and planning stock;
- forecasting sales and profit;
- drawing up a purchasing plan.
The Structure of a Modern Assortment Matrix
In modern practice, a matrix might include the following parameters:
| Parameter | Description |
|---|---|
| Product name | The product’s full name |
| Characteristics | Color, size, weight, and other properties |
| Brand/manufacturer | Trademark or maker |
| Quantity | Units held in stock |
| Shelf life | For perishable goods |
| Prices | Wholesale and retail cost |
| Product role | Its place within the overall assortment |
| Suppliers | Supplier information |
| Seasonality | Period of peak demand |
Roles Within the Assortment
When building an assortment matrix, products are assigned specific roles:
Traffic-Driver Products
The core of the assortment, accounting for up to 80% of sales, with high demand and fast turnover.
Complementary Products
Round out the core assortment and boost sales of the main products.
Status Products
The priciest items, meeting demand for high-quality goods.
Substitute Products
Add variety to the assortment and fill gaps when traffic-driver products run out.
Complex/Bundle Products
Round out other items, raise the average purchase size, and drive demand.
Building and Adjusting the Matrix
Building an assortment matrix typically involves:
- Defining the store format and product category
- Profiling the target customer
- Studying demand and competitors’ assortments
- Assigning roles to products
- Calculating the optimal purchase quantity
Historical Context
In early-1990s Russia, amid the shift to a market economy, the concept of an assortment matrix was new and little known, which made mastery of this tool a significant competitive edge for the emerging class of entrepreneurs and businessmen.