Merchandise Planning

This is the last article of our series on Merchandise Budgeting & Planning and the many tasks that this function entails

We started by learning how to conduct a complete Market Analysis to learn about our target customer’s profile and preferences and our direct and indirect competitors’ strengths and weakness.

We talked about how knowing what the customer wants and needs and how our competition is meeting those wants and needs allow us to identify products and services gaps that exist in the market that we can help fill and that can give us a competitive advantage. We then learned how to conduct a proper Store Positioning Analysis to determine what kind of store we want to be, what we want to sell, at what price and with what kind of service. Basically, we learned that first and foremost we need to decide what we want to be known for because that will guide us in all our business decisions, including what product to buy and at what price. After learning to define our brand/store unique identity we then had to learn how to let the customer know what we are all about. Promotion Planning (also called Marketing Planning) is our opportunity to reach out to our target and potential customers to let them know what we stand for, what we offer and to get them excited about our products and services.

We do this through our windows, sales promotions, the media (newspapers, radio, web and TV ads), etc. We then delved into the complex world of

Sales and Stock Planning or the ‘science’ of forecasting the amount of business – dollars and items sales – that we are gong to generate in the next 6 months and year. Sales forecasting is the most critical component of the plan. Based on it we can plan our inventory requirements and place our purchasing orders. Sourcing, Shoeline Building and Assortment Planning are the fun part of a retailer or buyer’s job. You get to see lots of exciting products. But it’s not just fun, as we saw when we talked about it earlier. It requires discipline and analytical skills to make sure you build assortments that are exactly in the sizes, styles, colors, prices, etc. that your customers will want. You literally have to put yourself in your customers’ shoes and buy only what your customers want and need. Easier said than done! Well, what we are going to talk about in our last article of our Merchandise Budgeting & Planning series, is what you do when you made a mistake and if and how you can correct it. As well, we are going to talk about how you plan your future growth based on the lessons learned on your past performance.

In Season Stock Analysis & Actions

The objective of an in season stock analysis is to review inventory performance in order to take action that will improve sales while you are still ‘in the middle’ of it. Here are some of the actions that you can take based on your sales numbers:

• Ship additional supply to the store/s – when sales are strong for a particular product or category, more product can only make them even stronger. You can ship additional product from a DC or warehouse if you have one or if you have multiple stores and are overstocked in other stores from these stores.
• Increase orders of the best sellers – hopefully you were ‘conservative’ in your open-to-buy budgets and now have money available to order more of what sells the best and maximize your sales opportunity of those products.
• Revise assortments of products on order – based on how certain products are selling you might want to adjust your quantities on order to reflect sales performance. You will want higher quantities of what sells and lower quantities of what does not sell as well.
• Cancel orders of slow sellers – no reason for you to receive product from suppliers that the customer doesn’t want. Your ability to cancel an order free of charge will depend on the terms that you negotiated with your vendors.
• Add new products to replace slow sellers or older fashions – you must always be up-to-date on new trends and new products and make sure you showcase them in your store to get your customers back for the latest and the newest. Remember: you want to give your customer a reason to come back to your store over and over again and carrying new product is the best way.
• Transfer products from stores – if you have multiple stores, analyze your sales by store. Chances are that some slow movers sell very well at a different location and you want to be able to transfer them where you can maximize your sales potential.
• Recall products from stores – these are products that don’t sell at all. It could be because they are defective or just the wrong product. You might want to discuss the issue with your vendor and arrange to have them sent back to them at no charge. They lose but you lost, too, by tying up valuable real estate with product that doesn’t sell.
• Reduce products of slow sales performance – we talked about this earlier.
• Execute sales promotions according to the plan – products that sell less than predicted need to be auctioned off through promotions or sales. Don’t rush putting them on sale right away, though. It might very well be that they just need to be placed in a more prominent position in the store for the customer to notice them. How often has it happened that a customer asks you if you just got a particular product in just because they finally saw it after you moved it from another place?

Accurate and regular reviews of the stock performance in the store allow you to take immediate actions that will ensure better sales. You can’t expect to get the Five Rights of Retail right the first time, but you must be able to correct mistakes and take advantage of all the opportunities that arise.

Here is a list of sample reports your POS can help you generate that will allow you to conduct your in season stock analysis and take corrective actions.

Type Details
Sales and Stock Report Sales, stock, orders standards, margins, etc. by product
DC Stock Status by Article/Size (if you have a DC) Stocks remaining in DC by size at end of season
Purchase Order Report Total season orders by sub-category, size, cost, retail value
Merchandise age by category / sub-category Lines, pairs and values of old stocks at season end

Store performance by sub-category Store classification and sales potential
Quantity purchased by supplier Orders, sales, margin by article and stock turn
Sales and Stock by price Sales by price, article with season end by sub-category
Open to Buy Orders placed with margin
Weekly Control Performance Last year sales and stock by week

Season End Analysis – “Post Mortem”

While an in season stock analysis allows you to identify mistakes that were made, correct them and possibly save the day (or should we say ‘the season’?), season end analysis is focused on helping you plan for the future. You now know what works and what doesn’t work and can make more informed decisions on what product to carry next season, what sizes, what colors, what styles, etc, based on your customers’ votes (sales). You can also decide what promotions got your customers excited and buying and which ones didn’t make a difference in their life and, of course, your bottom line.

More specifically, the objective of a season end stock analysis is to determine:

• What were the sales and stocks for the past and at least two prior seasons?
• What was the actual compared with the estimate (above or below estimate)?
• Were there external factors involved?
• Was the promotional calendar effective?
• What promotional events worked and will they be repeated?
• Were inventory levels adequate (not over or short)?
• Was the merchandise flow proper (not early or late)?

At season end, you will do what is sometimes referred to as a post mortem. You will examine what happened during the season, and identify what worked and what did not work with the goal of learning from this to make next season better.

Again, your POS will generate the reporting documentation that will help you conduct your analysis. Most of the reports are the same listed above for the in-season analysis adjusted to your results for the end of the season.

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