Unpacking Merchandise Planning

The concept of “merchandise planning” is among the murkiest in the retail lexicon. Everyone struggles to understand its limits and component parts. That makes it tricky to define.

Here’s a primer on the stuff.

What is merchandise planning?

Merchandise planning is the process whereby retailers look to efficiently leverage inventory investment.

Merchandise planning offers retailers an organized way to set a product strategy, and to evaluate its probable success, through a series of simulations based on historical trends, increases to store counts, demand forecasts, calendar shifts, business shifts, and even data metrics like weather and social behaviour.

Ultimately, the goal is to align product selection with customer demand through a systematic approach that’s aimed at maximizing ROI and sales potential while minimizing losses.

Why’s it important?

 There’s no bigger investment for a retailer than inventory. Getting the product mix right, understanding what the customer wants and endeavouring to furnish it, is the surest route to profitability. And profitability is manna to shareholders looking to secure a return on their investment.

What is assortment planning?

Whether you’re a brick-and-mortar retailer, cataloguer, e-commerce company or wholesaler, your assortment is key to your success. Assortment planning is the process by which merchants strategize their merchandise offerings by selecting products designed to maximize sales and profit for a set period. That means picking those things that hold the most appeal for consumers, and distributing them mindfully across outlets and channels.

Assortment planning is particularly key for fashion retailers and their efforts to develop a product mix. For retailers of basic merchandise, it’s more about determining inventory levels. Across the board though, the ultimate goal of the exercise is to achieve the most profitable outcome.

What’s to consider in assortment planning?

There’s lots to think about when it comes to discerning a smart mix for your store inventory. They include: your brand strategy, your business model, market trends, your sales and margin history, your channels of distribution requirements and the organization’s financial plans.

At the end of the day, a retailer engaging in assortment planning needs to think about who their customers are and who they want to be to them. They need to have an external appreciation for market trends, and an internal appreciation for sales histories. And they need to adopt a business model that speaks to all of that.

CBMS Merchandise Planning Cycle