MKT320 Retailing - Developing Merchandise Plan

Introduction to Merchandise Planning

  • A merchandise plan is a strategic blueprint for retailers.
    • Ensures the right products are available at the right time, in the right quantities, at the right place, and at the right price.
    • Objectives include:
    • Align inventory with customer demand.
    • Optimize sales and gross margin.
    • Manage inventory turnover effectively.
    • Avoid overstock or stockouts.
  • Examples:
    • Carrefour UAE uses merchandise planning tools for seasonal demand spikes (e.g., Ramadan focuses on food and gifting).
    • Zara employs a fast fashion model with updates every two weeks based on customer feedback.

Steps in the Merchandise Planning Process

  1. Sales Forecasting

    • Involves analyzing past sales data, considering market trends and seasonality.
    • Example: Namshi uses historical data and Google Trends for category forecasts during key periods (like back-to-school).

  2. Establishing Merchandise Budgets

    • Set financial targets and plan Open-to-Buy (OTB).
    • Example: Lulu allocates budgets by product category according to past performance.

  3. Assortment Planning

    • Focuses on breadth (number of product categories) and depth (variants per category).
    • Example: Max Fashion plans wider assortments for flagship stores versus smaller assortments in community malls.

  4. Inventory Turnover Planning

    • Calculate expected stock turnover and balance holding costs with availability.
    • Example: Sun & Sand Sports maintains higher turnover in athletic wear compared to equipment.

  5. Allocation and Replenishment

    • Involves stock distribution across locations and real-time replenishment based on sales.
    • Example: Amazon uses AI to dynamically reallocate stock between warehouses.

  6. Monitoring and Evaluation

    • Continuous tracking of KPIs (e.g., sales, margins, stock levels).
    • Adjust plans using ERP systems and Power BI for merchandise tracking.

The Retail Buying Process

  • Procedure by which buyers determine what products to purchase, from which suppliers, in what quantity, and timing.

Key Stages of the Buying Process:

  1. Identifying Customer Needs
  2. Selecting Suppliers
  3. Negotiating Terms
  4. Placing the Order
  5. Receiving, Inspecting, and Stocking Merchandise
    • Based on Open-to-Buy budgets and assortment plans.
    • Ensure correct quantities and quality upon receipt.

Key Factors in Merchandise Planning

  • Sales Forecasts: Use historical data and trends for demand prediction.
  • Innovativeness: Integrate new products to attract early adopters.
  • Product Assortment: Balance between breadth (range) and depth (variety).
  • Brand Selection: Choose between national, private, or exclusive brands.
  • Timing & Seasonality: Align purchases with key retail events (e.g., Ramadan).
  • Inventory Allocation: Distribution based on local demand.

Summary of Merchandise Planning

  • Focuses on acquiring the right products at the right time and place, driven by data and customer insights.
  • Success in retail, such as seen with Zara and Carrefour UAE, relies on a solid merchandise strategy.