Several times as a retailer, there might have been scenarios where you are left wondering which one of your marketing or advertising worked. You've either got the right audience where the target customer is in your store or e-commerce channel with the correct item at the right price, and they're ready to buy. Sounds good, right? You're about to make a sale when the customer clicks to add the item to their cart or physically selects the item from the store. But the story unfolds when the dreaded "sold out" message appears,z or an empty shelf in the store greets the customer.
Another example that can create a negative impact on your store: is a feared "overabundance" of goods left over at the end of the season, with a consequent loss of margins due to excessive devaluations or, worse, devaluations to empty the warehouse.
While the causes of these issues can be elusive and complex, one thing is sure: a comprehensive cross-channel merchandise planning process is a must when managing your assortment from initial idea to order. Below is a checklist of the merchandise planning process that should be on the retailer’s top priority list:
1. Set up a multi-channel merchandise planning process
This may sound like the first step, but some retailers need a formalized process to begin with the process. Goal setting, followed by a "pre-season" merchandise finalization with high-level financial goals from the finance organization. These goals are usually at the highest level of the organization, multi-group or category level, and usually consist of top-level sales and margin goals. A dealer must take these goals and develop a high-level plan, usually with metrics such as sales, markdowns, cash flow, inventory levels, margins and percentages, gross margin/return on investment, or GMROI.
These plans should be developed through analytics, including the past performance of the item, macro market trends, and targeted customer data. Once an initial plan has been developed, a working session should be held with the wholesaler, the demand planner, the financial/commodity planner, and other required data.
Furthermore, the plan and each metric should be reviewed in detail and, if necessary, adjusted to arrive at the desired margin and ROI. This step should be iterative as it may take multiple iterations of the plan with each category to resolve any queries and resort to a final plan for that particular season. The result: a plan signed and agreed upon by all levels of the planning and mercantile organizations.
However, the process shouldn't stop there. An in-season checkpoint should be established between retailers and the planning organization to ensure that business trends are exploited, or problems are avoided. Depending on the frequency and the demand of each product of the store, this reviewing and checking process should take place at least once a month and include a review of crucial store vitals: sales, discounts, document flow, and stock levels.
Only through this "in-season" detail plan can opportunities be taken advantage of or potential inventory issues minimized. The point is to increase your chances of meeting and exceeding sales and profit plans by establishing a consistent pre- and mid-season planning process, such as the merchandise planning process.
2. Create a multi-channel merchandising planning organization
The importance of a merchandise planning process with people and analytics working to make decisions cannot be underestimated. This provides the necessary checks and balances between the art of merchandise selection and the science of merchandising analysis. Regardless of the structure of this organization, members of this team should be assigned and physically positioned with their sales representative counterparts to encourage daily dialogue and healthy interaction.
From a reporting perspective, this group should ideally sit outside the commercial ranks and report through the financial organization, emphasizing the ability to provide an independent and objective point of view for planning before and during the season. The point: create an objective organization that can guide the planning process and ensure consistency in the development and execution of the merchandising planning process.
3. Define exit strategies for all commodities
Every item comes with life, and one of the first lessons for any retailer is to treat their inventory like food - you need to eliminate products that have gone bad or have been outdated! Therefore, each article must have a shelf life and an exit strategy. The exit strategy is simply based on the sales targets.
The release strategy process should ensure that each item is subject to a category-specific discount cadence once the merchandise has reached a certain point in its lifecycle, defined by a specific sales target or date. planogram expiration. The point: every article has a life cycle; Make sure your merchandising planning process has a pricing cadence to tap remaining stock most profitably while making room for new products.
4. Place Products Strategically
Developing fully diversified store racks is extremely difficult and expensive due to the supply chain tools required; it makes sense for retailers to identify logical groupings of stores by category or item classification. These groups must first be assigned based on store volume, customer characteristics, and geography. As tools and capabilities become more analytically engaged, deeper demographics of buyers and competitive groups need to be engineered. The bottom line is: inventory is a valuable and expensive commodity. Shipping the right merchandise to specific clusters increases your chances of maintaining margin and ROI.
5. Get the right tools
A retailer's most important asset is data, preferably from a trusted source. Retailers should consider at least one set of essential tools to improve their ability to plan and manage their merchandise. These include:
● Business Planning: The tool that enables the development of top-down and bottom-up category plans
● Enterprise Data Warehouse: The fundamental data source from which the enterprise can be planned and managed
● Assortment Allocation/Planning: More advanced tools that enable the development of store-specific and customer-specific assortments.
You'll undoubtedly reduce the frequency of wasted products by creating a cohesive pre-season and seasonal merchandise planning process supported by a dedicated team with the right tools - and it'll keep your customers coming back.
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