The Individual Product Level Approach to the Active Product Assortment Management of Fast‐Moving Consumer Goods

Scientific literature offers four different approaches to management of an active product assortment: (1) supply variety, (2) shelf space availability, (3) product inventory and (4) consumer perception of supply variety. All these approaches share one similar characteristic: they are not capable of assessing individual products’ sales efficiency, which would help retailer determine which sales‐efficient products to keep in, and which sales‐inefficient products to remove from, an active product assortment. The reason for such a state of affairs lies in the common characteristic of the mainstream approaches to sales efficiency measurement: they focus mainly on defining and measuring sales efficiency at the retail outlet level. As such, these approaches are of very limited help with the active product assortment management. This highlights the need for an advanced model designed for active product assortment management based on sales efficiency measurement at the individual product level. In this paper, we propose such a model, show its practical implementation using the real‐life product assortment data, and discuss the minimum, typical, as well as optimal conditions for its use. From the managerial perspective, the model provides a financially grounded decision‐making support tool that enables retailers to identify underperforming products, quantify their profit shortfalls, assess the economic consequences of retaining them within the assortment, and prioritize assortment optimization actions that improve overall profitability beyond what can be achieved through traditional sales volume analyses and other possible analytical approaches.