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Merchandise Planning: How to Develop a Merchandising Plan


Merchandise Planning: How to Develop a Merchandising Plan

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According to American President Benjamin Franklin, “failure to plan is planning to fail”, or, as the old army saying goes “prior planning and preparation prevents poor performance." Either way, the message is clear: planning is everything, especially when it comes to the retail industry. If the merchandise you order and so diligently display in your store/shop/online shop (the list is endless) does not align with what your customers demand, if you run out of popular items, or if you order the wrong merch, you’re basically planning to fail.

This is where retail merchandise planning comes in.

What is merchandise planning?

Retail merchandise planning is exactly what it sounds like – a way to select, manage, purchase, display, and price merchandise in an efficient way that ensures you have the right products available at the right time. By doing so, you increase your potential for a maximum return on investment (ROI). You also cut down on excess inventory, and maintain (and build) goodwill and your reputation with customers who know you’ll have what they want when they want it.

The five rights of retail product merchandising as defined by Paul Mazur are:

  • The right merchandise,
  • In the right quantities,
  • At the right time,
  • At the right price,
  • In the right place.

Problems like lost sales because of stockouts or having excess inventory after the season has ended are exactly the issues that merchandise planning is meant to solve. The goal is to ensure the right product is available for customers, no matter when or where they shop.

 How to develop a merchandise plan.

The basic concept of the merchandise planning process consists of three equally important steps:

  1. Post-season analysis
  1. Pre-season planning
  1. In-season adjustment

A season can be defined as any time period you prefer, and this largely depends on what you are selling. If it is Christmas jumpers, your season will only last a couple of months, if it is ice cream, it      is all year round with higher demand in the warmer months.

Another factor that affects the process is the size and structure of your business, the type of store or outlet, and the type of merchandise. Planning merchandise for a menswear company that has multiple retail locations around the world is vastly different than the same process for a company that sells cosmetics online. Fortunately, while the amount of work that goes into merchandise planning varies tremendously depending on your industry, the basic concepts of how to conduct merchandise planning stay the same no matter how big or small the company.

Step 1: Analyze post-season merchandise

The first step is to understand how the company performed during the previous season, and here you must really dive into the data.

  • Look at total sales and go deep into monthly, weekly, and even daily results on an item, category, department, and store.
  • Next, you should compare those numbers to the planned numbers from the same year to understand how your actual results measure up, which will give you a gap analysis.
  • When looking at data, be sure to take context into account; it will help you make sense of the numbers. Your business doesn’t operate in a vacuum, everything is connected, which means all outside forces, including the economy, and inside forces, like marketing.

This will give you an analysis of the numbers and the context behind them, which will help with assortment planning for the future.

Step 2: Plan pre-season merchandise

Using data from your previous analysis, it is time to plan for the season ahead. The sales, marketing, and visual merchandising teams should be involved      in this process to help give you context. Keep an eye on any new sales channels during this process that can impact your business, such as wholesale and social selling. Having new channels makes it hard to plan ahead because you have no previous sales data to back up your assumptions. In this case, it pays to look at channel-specific industry data to make projections.

Step 3: Adjust in-season merchandise

Open to buy or OTB technology has revolutionized merchandising planning. It is a financial planning tool designed to make it easier for businesses to manage inventory      and helps avoid both overbuying and underbuying. An OTB system looks at your current stock       plus your planned sales      and compares that data with data from your actual sales. The system then makes automatic adjustments to your future purchase orders to make sure you never run out or that you don’t overstock on items of which you already have plenty.

If you want to become a Merchandising Planner, the best thing to do is secure      a good foundation. The right education can set you on a path to use your talents in a business context so that you are equipped to navigate this highly competitive industry successfully. Combined with your own personal talent, an education from a highly respected institute, taught by experienced professionals, can truly offer you a competitive edge. 

For information and advice about this and any other courses on offer, please feel free to get in touch and one of our experts will be happy to guide you.

 Istituto Marangoni, Dubai.

In September 2022, International Design School Istituto Marangoni inaugurated its new campus in Dubai. A creative melting pot of Italian heritage, UAE tradition, and international influences, its campus is located inside the Dubai International Financial Centre, and offers a variety of undergraduate and professional courses in Fashion, and the various branches of design. All the courses are taught by the Institute’s team of professionals from Italy.

The school of design at Istituto Marangoni offers an exciting opportunity to fuse Italian expertise with local talent, with a view to shaping the future of the UAE fashion, design, and creative industries. Its strategic partnerships and international outlook make Istituto Marangoni the ideal place to develop your skills and learn from industry experts. With its unique network of international schools, Istituto Marangoni also offers enriching study abroad opportunities for students looking to broaden their horizons in every sense. We offer a wide range of courses, and whilst the links below are Merchandise Planner specific, there are many other paths that Istituto Marangoni can help you pursue. 

For information and advice about this and any other courses on offer, please feel free to get in touch and one of our experts will be happy to guide you.

Istituto Marangoni Dubai Professional Course in Fashion Entrepreneurship BA in Fashion Business
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