Who needs Merchandise Planning?

From large corporate entities to startups, every business goes through three main phases of growth: Entrepreneurial, Operational, and Strategic. 

-During the entrepreneurial phase, business spend their time learning who their customer is, deciding whom to spend time marketing to, and building their brand equity to a point where the market respects them. 

-In the operational phase, businesses spend time perfecting their operational processes. This can include managing the daily operations to keep the business going or finding ways to automate processes. The Supply chain should be solidified at this stage, and although bottlenecks may not have to be eliminated, they should at least be on the businesses radar. 

-In the strategic phase, businesses spend their resources to focus on initiatives and strategic ways to grow the business. THIS IS WHERE BUILDING THE MERCHANDISE FINANCIAL PLAN IS THE MOST CRITICAL. 

Merchandise planning in the strategic phase gives insight into forward-looking sales forecasts and how they compare against past performance. In addition to measuring multiple KPIs, you can ensure that your assortment is properly curated and primed to take advantage of growth opportunities.

The Merchandise Financial Plan is the expression of your companies business strategy in financial terms and metrics and typically projects the sales plan for your business at least 18 months out. The plan is used to forecast sales and receipts (purchases), usually in both retail and cost, in order to construct the buy. The Merchandise Financial Plan is the North Star for retailers to build merchandising strategies for the future, all while measuring current performance against the past.

Typically, the sales forecast is indicative of multiple quantitative and qualitative factors with the major stakeholders being the Buyer and the Planner. Most major retailers even see value in dividing the Planning role into Inventory Planning, Merchandise Financial Planning, and even Assortment Planning, all of which should have input on the sales forecast for the year being planned. Once sales have been forecasted, the Buying team typically uses the projected Cost of Goods Sold (COGS) from the forecast as a budget to go in to market and begin ranging product. However, the Planning person(s) is also busy at work building SKU counts by department and/or classification to ensure that the buy is balanced and non-duplicative so that clients have just the right amount of discernible choices in the offering. It is also highly recommended that the Buying and Planning team participate in range reviews during the buying season to facilitate conversations around white space opportunities to chase, while vendors are still open to having their orders amended.

Merchandise Planning’s influence doesn’t stop at just the Buyer relationship. Finance’s role in developing the Merchandise Financial Plan is also critical (FINANCIAL plan….). Finance typically sets the overall sales goal for the total company for the fiscal year for Planning to penetrate out into seasons/months for the time dimension, department/classification for the product dimension, and store locations/channel for the location dimension. The Merchandise Financial Plan can be used as a gut check to ensure that the sales targets are obtainable, and allows the Buying/Planning team to reverse engineer the sales targets into a viable product mix.

Download our FREE Merchandise Plan Template below and START PLANNING!