Merchandise
Planning
Meaning
• Merchandising is defined as offering right kind of
product at right place and in right price.
• A retailer has to plan to have in his store the product
that is desired by the customer.
• Success of any retail organization depends on its
merchandise planning.
• Merchandise planning is defined as “Planning and
control of merchandise inventory of the retail firm, in a
manner, which balances between the expectation of
target customer and strategy of firm”
Merchandise Planning
• Merchandise planning is one of the biggest challenges that
any multi store retailer faces.
• The main objective is to make consumer finds the right
product, at the right place, right time and right price.
• The entire merchandise planning lifecycle in a systematic
and integrated way in order to facilitate an end to end
merchandising functions including
1. optimizing merchandizing assortments,
2. allocating products,
3. providing planning and analytics capabilities and
4. providing solutions to maximize value from promotions
and price
Components of Merchandise Planning
i) Product
• Products may be broadly classified into:
1. Staple- Like food and clothing that have regular demand. Adequate
stock of that is to be maintained.
2. Seasonal products- that are in demand during the season. Adequate
inventory of that is to be augmented before the season and the stock
is to be maintained to sustain the season.
3. Fashions- Goods that are in demand until the fashion prevails.
Retailer has to estimate the quantum of demand to last the fashion
trend.
4. Fads- the kind of products that have limited period of demand.
Retailer has to be careful to estimate the demand and buy the fad
products.
ii) Price
• Another important component of marketing mix.
• Price is an important variable in a country like India, where
people are price sensitive.
• Retailer has to determine his segment and the price range to
which they belong.
• Broadly it can be classified as low, medium and premium range.
• Retailer has to offer the product that meets price range of his
target customers.
iii) Range and Assortment
• Range refers to width, breadth and depth of products
offered for sale.
• Customers should have opportunity to make choice or
selection depending on the type of retail store like:
1. Specialty store - deep assortment within a narrow line:
Furniture stores
2. Catalog killer - Walmart
3. Departmental store
Assortment Planning
• Customer demands and expectations for retailers are increasing
faster than ever in recent years.
• Therefore, retailers need to have a well-developed assortment
planning, or retail planning strategy to provide the best customer
experience and achieve your sales targets.
• Assortment planning in retail is the process of selecting the products
that a retailer wants to sell during a particular period to maximize
profitability.
• In other words, it means that retailers decide what merchandise they
should buy and market to their customers.
• It is all about having the right goods in the right place at the right
time.
Steps in Assortment planning
• Analyze each branch and store’s historical sales
performance
• Localize product assortments and promotions to meet the
customers’ demand
• Decide the breadth and depth of assortments
• Create a visual merchandising plan
• Execute the plan
Reasons for merchandise planning
• Merchandise planning can help in stock in warehouse to handle inventory
turnover ratio.
• It decreases inventory carrying costs as there is less unwanted inventory
in the warehouse and hence less labor, less maintenance cost, less loss
through obsolescence as most of the stock is sold, less depreciation of
inventory, etc.
• Brings value addition to the company as customer very rarely goes empty-
handed and has enough options to compare products to make a purchase.
• No need to provide more discounts to get rid of old inventory, and there
are very few out of stock situations.
• Planning merchandise smartly leads to smart investment in inventory
• Revenue increases as there are fewer markdowns, and products are
always available for sale.
Challenges in merchandise
planning
• Maintaining a balance between an online and offline retail
business
• Blindly believing the historical data
• Answering How much of the right product is enough to
store?
• Unpredicted demand
Benefits of assortment plan
• Retain loyal customers
• Control inventory spending
• Stand out from competitors
• Cross-merchandising
Merchandise sourcing
• The process of merchandise planning takes the buyer
through to the stage of determining the products that he
needs to have in the store and the quantities that he needs
of the same.
• A key decision to be taken by a buyer is to determine
where he has to buy the merchandise from.
• Determining the source who would supply the products as
required by the retailer, in the quantities needed by the
retailer, as per the requirements of the retailer, is an
integral part of the buyer’s function.
Meaning of merchandise sourcing
• The term sourcing means finding or seeking out products
from different places, manufacturers or suppliers.
• The importance of sourcing in a retail environment can
best be understood from the fact that sourcing of
merchandise is a key element of cost.
• In recent years, sourcing and supply management has
emerged as one of the greatest focus areas in the retail
business, for suppliers as well as for retailers.
• Sourcing is not without its risks, but at the same time, it
holds the key to improving service, product offer, and
overall profitability.
Steps in merchandise sourcing
1) Identifying the sources of supply
2) Contacting and evaluating the sources of
supply
3) Negotiating with the sources of supply
4) Establishing vendor relations
5) Analyzing vendor performance