What is Merchandise Planning?

Ask 10 retailers “what is merchandise planning?” and you will probably get 10 different answers. We define merchandise planning as the systematic approach to maximizing a retailer’s profitability and return on investment through accurate sales and inventory forecasting.

Merchandise planning in action:

Merchandise planning increases profitability by maximizing sales potential and minimizing losses from “stock-outs” and markdowns. In order for a retailer to do this, it is vital to track, measure, and respond to customer “votes” (purchases) by classification (i.e., tops, denim, accessories, etc.) A well-defined classification structure is the key to gaining the insight needed to take full advantage of your store’s sales potential.

Inventory Classifications:

You need a solid classification structure: In fact, we base our merchandise planning on those specific classifications as each one represents a mini “business” within the confines of your store. Managing each of those “businesses” or classifications separately will lead to the proper flow of merchandise in your store. As we know, every season the fashions change, and vendors offer some great and some not-so-great merchandise; classifications allow you to look beyond these highly variable factors (such as fashion trends) and gain long-term understanding across the marketplace to recognize what is actually in demand at your store.

Connect with The Wealthy Retailer® to learn more about Inventory and Cash Flow planning