What is Merchandise Planning

Merchandise planning has been a tool and resource for the fashion industry for many years. It was developed out of the need for wholesale brands to be able to the speak department store language, and for both of those parties to focus as much on the science of the business as much the art of the product. The idea was that if both wholesaler and retailer could begin to talk the same language of sales, markdowns, receipts, and turn; both could flourish from speaking about sell-thru instead of sell-in.

Essentially we wanted to turn the process of buyers buying and sellers selling inside out. Prior to merchandise planning, buyers from department stores would go to a brand or manufacturer’s showroom to look at product and buy it as they saw it. Buyers didn’t necessarily know if they’d spend $1 or $1 million until they saw the product. Sellers only knew they had to sell as much as possible so they could buy a new car. Merchandise planning, on the other hand, was created to determine the ideal flow and placement of products by month and store so we could deliver sales growth with minimal markdowns and promotions that erode gross margins. Instead of buyers going to market and writing orders later, orders were planned before going to market and completed therein. Science was matched with art.

Strong merchandise planning was behind the rise of the biggest, strongest, and most profitable brands since the 1990’s. Poor merchandise planning is behind much of the weak conditions in the fashion industry today.

Shifting consumer habits and fashion trends have been an issue for 1000’s of years. Consumers today have more choices and places to buy goods than ever. We don’t have to travel to malls or stores to get what we want. We have tools and technologies that show us whats in and what’s out quicker than ever. And consumers also have other priorities by which to spend their money. So what? These are exactly the things that “merchandise planning” seeks to solve for–and it absolutely does not involve a crystal ball. Good merchandise planning starts with producing the right amount of goods according to the appropriate amount of sales possible. 

Technology is a remarkable thing; minutia is a terrible thing. At a time when we have more information and knowledge available to us at our finger tips than at anytime other time during our existence as humans on this planet, the fashion industry is going backwards instead of forwards. The single best question the fashion industry can ask itself is what is merchandise planning and how can we enable it so our businesses can thrive again? Designers should design, marketers should market, CEO’s should plan. Most brands and retailers have a process or team of merchandise planners in place. None are using it properly.

So what is Merchandise Planning?

Merchandise planning is the effort to optimally plan the amount and placement of product so it is prepared to generate the highest level of full-priced sales possible. Strong merchandise planning ensures that a brand’s assortment and sensibility is fully realized everywhere a fan or consumer of the products may find those goods. It places products into channels, doors, and locations so they sell-thru quickly; with few markdowns and promotions, and without the need to redistribute those goods elsewhere at a later date. What goes in, goes through quickly.

Products are awesome when they sell-thru. They’re “off-trend” when they don’t. Both of those functions are the result of the amount and placement of products more so than the product itself. Good merchandise planning seeks to find and forecast “real” sales potential and then matches, as close as possible, the amount of goods necessary to generate those sales at full-price by style, size, door, and location at the right time. Inventory is expensive when it has to be marked down; it’s a calamity when it’s stored forever, and it’s a shame when it’s redistributed.

Here’s what merchandise planning is not: merchandise planning is not a sales assistant; it’s not a buyer’s assistant. Merchandise planning doesn’t report to sales, nor does it report to buyers. It also doesn’t report to finance or merchandising. Merchandise planning is just merchandise planning. It’s as important as a sales team; as critical as a buying team, and as vital as any design and merchandising team. Merchandise planning drives net sales and gross margins.

Merchandise planning orchestrates How Much, When, and Where. If sales are strong and gross margins are high, it’s because of solid merchandise planning. If sales are weak and gross margins are stunted, it’s because of poor merchandise planning. If inventory turns quickly, it’s because of thoughtful merchandise planning. If inventory turns slowly, it’s because of careless merchandise planning. If you are delivering the products today that consumers want tomorrow, it’s because of an aware merchandise planner. If you are delivering products today that consumers likely won’t buy until next month or thereafter, it’s because merchandise planning has not be enabled.

Merchandise planning seeks to simplify. It doesn’t look to complicate. Merchandise planning uses history to inform and foresight to drive. Most importantly merchandise planning isn’t a “people”. It’s not a “technology”. Merchandise planning is a MINDSET. It gets the right goods in the right locations at the right time.

So how do you know if a brand or retailer has enabled strong merchandise planning? It’s really quite simple; sales would be strong, gross margins would be high, inventory would turn fast, and fans would be raving.

One thought on “What is Merchandise Planning

  1. Well written of course, you strike many important points. Balance, thoughtful practice, consistent process with superior human merchandising and merchandise planning wins the day. Sounds to me describing, AI.

    Thank you, Stuart

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    Like

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