About Merchandise Planning – A definition of the planning process
Merchandise Planning seeks to get the Right Product in the Right Store at the Right Price. It is a numerical planning process that takes financial targets and generates two broad types of plan:-
- Weekly Stock and Sales Intake plan. Revenue targets are pushed down through the retailer’s product, store and seasonal hierarchies to create a stock intake plan for each product for each store by week.
- Open To Buy. Open To Buy represents the budget given to the merchandise buyers within the retailer to buy new stock. It is broken out by sub-category and has to be phased to allow for manufacturer lead times.
Merchandise Planning exists at the interface between the creative process of building a product mix that will attract the customer and the numerical process of generating revenue and profit. Merchandise planners tend to be both mathematical and creative, and good ones are highly sought-after. With the appearance of the PC and spreadsheets, merchandise planners started automating their plans, and a retailer’s methodology could be found enshrined in their Excel spreadsheet applications.
Merchandise Planning however is a multi-dimensionality challenge and tends to work by taking the three proportional curves that exist across weeks, products and stores within the plan and superimposing a top-down target upon them. The plan is then reviewed from the bottom level up, assumptions are made and locked and other numbers are varied. In every case, a revenue number is achieved by generating sufficient volumes of unit sales, and in-season re-planning is used to minimise discounting while shifting end of line stock.
Once the merchandise plan is complete, it can then be used to generate an Assortment Plan, which dictates what stock goes to which store according to the plan and local demand, and there are various space and store plans which build a visual representation of what the store will look like.
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