Two opinions on retail assortment planning

I was spending some time today catching up on my reading at HBR’s ‘Future of Retailing’ site, and noticed two posts that take contradictory views on the importance of analytics in assortment planning.

First, there is an entry by Dieter Brandes, former managing director of ALDI, who makes the following statement:

Don’t leave it to computers. If there is one clear culprit behind today’s lack of competence in assortment management, it is the computer. Too many retailers in the world think that their computers, by analyzing point-of-sale data, can generate all the answers. But with 10,000 or more items to manage, it is impossible even to get reliable answers to specific queries, the huge amounts of data notwithstanding. To comprehend the bigger picture, we need to use our brains first, and talk to our colleagues. Then we can put the computers to work.

A blog entry by Marshall Fisher, a professor at the Wharton School and author of The New Science of Retailing, takes quite a different view:

Assortment-planning processes vary greatly across retailers and product segments but have one thing in common: They rely too much on human judgment and not enough on hard data that might allow a retailer to predict how customers will react to a change in the assortment.

Based on Fulcrum’s experiences working with clients, I tend to side more with Dr. Fisher in this dispute. Assortments present a very complex problem, as the interactions between categories, brands, SKUs, customer preferences, seasonality, pricing, substitution effects, and other factors make it difficult to arrive at intuitive decisions about assortment, at least ones that are likely to have a positive effect on sales. [For the more technically-minded, Fisher includes a link to an academic paper of his that explores a potential methodology for modeling assortment scenarios. It also references other works in the field, such as that of Peter Fader, also of Wharton.]

However, I also see some truth in Mr. Brandes’ views. Analyses can become a substitute for strategic thinking, and sometimes organizations get so immersed in the details, that the larger picture is missed. Yet such failings are hardly caused by the availability of data or analysis. Rather, they would seem to be the result of management decisions that ignore useful information.

I’d be interested to hear other opinions on this topic. Chime in below.