Merchandise planning is one of the most essential pieces of the retail planning process. You could say that merchandise planners are the backbone of a retail planning strategy. With such an important role, it can be strongly advised for retailers to adopt a technology to optimize their merchandise planning process. Let's uncover what merchandise planners do, how they contribute to the bottom line of the retailer, and why a technology solution can make a huge impact on not only their productivity, but performance.
Merchandise Planners are the bridge that connects the Finance team to the Merchant team. Within most retail companies, you will have the senior leadership that creates the long-term financial goals for the company. Beneath leadership, you have Merchants and Buyers that create the assortment mix for the company. Merchandise Planners are the bridge that connects these two teams.
Merchandise Planners are responsible for taking the high level goals and breaking them down into department, classification, and even style level plans. This becomes the road map for the Buyers to execute their vision and strategy. This balance of atop-down/bottom-up approach is highly effective in creating a strong plan.
The strategy first begins with hindsight and what information the merchandise planner already has. A merchandise planner will start to analyze the following information:
· How did we get where we are today?
· What is the mix of departments, classes, selling prices and margin rates that made up our sales last year, last season or even the prior week?
· What are the areas with quick turns and high margins that we can grow, and what are the areas with the highest margin liabilities that we can decline?
· What are the basic core items of the business that we need to maintain to ensure the stability of our sales?
Once the planner has established the basic strategy of growth, maintenance, and decline with their Merchant partners, the merchandise plan begins to take shape. There’s an art and a science to merch planning, and they start with the science. Next, the merchandise planner dives deeper into each segment.
Merchandise planning relies heavily on scenario planning. When it comes to the unknown, it's important to assess the following variables:
· What happens if you grow this core classification, but decline this seasonal category?
· What if you reduce the amount of core product to introduce more seasonal categories – does that support the Merchant’s vision and still meet your high-level goals for sales, turn and profit?
· What happens if your price structure has drastically increased – how many fewer units are needed to meet your sales plan?
· What if the company is moving to offer more promotions to the customer – how much more inventory will you need to achieve your goals at a lower selling price?
This ever-changing kaleidoscope of "what-ifs" is what makes Merchandise Planning exciting and challenging. When you have the proper technology, such as Anaplan, these scenarios become data-driven and instant, making the merchandise planner's job a lot easier.
After the sales mix is balanced, the merchandise planner is tasked with planning the correct inventory balance. With inventory being a key factor in a retailer's bottom line, this step is crucial to the retail planning cycle. The merchandise planner considers:
· How much do you need to purchase to support the sales plan?
· What is the current mix of inventory you own?
· What should the inventory mix be to support your turn and GPROI (Gross Profit Return on Investment) goals?
· What about the balance between core product and seasonal product?
· How do you adjust your inventory based on higher costs?
· Do you have pockets of aged inventory that need to be addressed?
· Have your sales shifted to a larger percentage of online sales, and how does that affect the inventory you need to carry?
· Are you opening new locations and have you accounted for that additional inventory?
The inventory landscape is always changing and evolving, so finding that balance is paramount to successful merch planning.
When I was in the merchandise planner role, our plans were exclusively in Excel. As you can imagine, this was time-consuming and prone to inaccuracies. The big box planning systems didn't store data and allow us the visibility into the SKUs and categories we needed. -Tricia Lemond, Manager - Retail Planning
Within the retail organization, most positions have goals and targets to achieve in order to make the top-level financial quotas. As your sales and inventory plans become clearer, the merchandise planner must consider costs and goals.
· Have you met your margin goals?
· Do you need to push your Merchant partners to sharpen costs?
· How does the promotional strategy affect your profit?
· How should you adjust your planned selling prices to account for increased costs?
· Have your major marketing events shifted from last year – perhaps to a different quarter, or has the length of the event changed?
All of these layers need to be explored and adjusted to create the foundation for a strong Merchandise Plan. This becomes the roadmap that the Merch Planner and Buyer will follow to deliver their company goals.
The art of Merchandise planning can be strengthened with strong science in the form of technology. At Accelytics, we can show you how we can leverage technology to give you a clearer vision with a fully connected planning environment in Anaplan. A space where you can easily create different scenarios, compare them and adopt the one that best represents your plan. A space where we can create custom planning horizons to reflect specific marketing events or capture holiday shifts, without having to rely on Excel. A space that is fast and efficient, as well as, aesthetically exciting. A space where we can help shape your planning landscape with streamlined process improvements. A flexible place where Merchandise Planners can create, revise, and continue to evolve their plans as the retail environment changes. Anaplan provides the canvas, you provide the Merchandise Planners, and Accelytics provides the expertise to create your connected Merchandise Planning environment!
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