Retail Excellence Unveiled: A Deep Dive into Retail Merchandise Planning Methods

Written By: Sudeshna Ghosh

Key Takeaways

• A multinational consumer goods manufacturing companyachieved a notable 4% expansion in brand share across marketplace listings for the connected toothbrush products after implementing Quantzig’s solutions.
• The client encountered challenges in optimizing their merchandise and assortment planning across digital marketplaces. Despite success in physical stores, they struggled to achieve fair market share online.
• Quantzig’s customized approach optimized the client’s assortment for digital platforms, resulting in enhanced sales and engagement through strategic alignment with consumer behaviour insights.
• Understanding and leveraging various merchandising planning techniques tailored to specific market dynamics and product categories is crucial for retailers to optimize inventory levels, anticipate demand fluctuations, and enhance overall sales performance.

Introduction

Merchandise planning process helps in selecting, organizing, and displaying a lot of products in a manner that it can bring maximum turnover on the brand names. It can be done by fulfilling consumer needs and desires. This activity seeks to fulfil consumer demands by making the correct merchandise available to the right place, time, price, and quantity. If you make the wrong purchasing decisions, you can end up doubling the merchandise purchasing costs for a month. This is the reason merchandising planning is crucial to make sure that overall expenses do not mount up, and the retailers are able to fulfil their customers demands the right way.

This case study underlines how Quantzigs Merchandising & Assortment Optimization solution helped a multinational consumer goods manufacturing company to achieve a notable 4% expansion in brand share across marketplace listings.

Quantzig Success Story

Client Overview

A multinational consumer goods manufacturing company, based in the USA with an annual revenue of over $1 billion.

Challenges Faced by the Client

The client recently launched Oral care products in E-commerce platforms. However, they encountered challenges in optimizing their merchandise and assortment planning across digital marketplaces. Despite success in physical stores, they struggled to achieve fair market share online.

Solutions Offered by Quantzig

To address these challenges, Quantzig implemented a tailored approach to optimize the client’s assortment for digital platforms. Leveraging consumer platform behaviour insights, the analytics support focused on several key areas:

• Improving Product Attributes: Enhanced product listings with tailored attributes like price profile, eco-friendliness, ease of use, and packaging to resonate with consumer preferences.
• Consumer Contextualization: Personalized offerings based on consumer behavior segments such as lifestyle changes, price sensitivity, and purchasing habits.
• Promoting New Releases: Strategically allocated screen space to showcase new products in proportion to customer purchasing trends, driving visibility and sales.
• Upselling Additional Categories: Targeted high-potential customers with cross-selling opportunities based on similar customer profiles.
• Clearing Stock Through Discounts: Utilized targeted discount strategies to appeal to deal-seeking customers during clearance and holiday sales.
• Displaying Recommendations: Customized merchandising to align with customer design preferences, enhancing relevance and engagement.
• Filling Basket Gaps: Identified and addressed product gaps in linked categories, optimizing visibility and purchase propensity through targeted channels.

Through these comprehensive solutions, Quantzig empowered the client to overcome E-commerce challenges and achieve greater success in digital marketplaces, driving sales and enhancing customer engagement.

Impact Delivered

• We helped the clients come up with effective and customized cross platform strategies that are tailored to Ecommerce different from their offline merchandising process.
• Improved Brand Share by 4% across marketplace listings for the connected toothbrush products.

Quantzig’s Expert Retail Merchandise Planning Solution

In the dynamic retail business, harnessing the power of data analytics is imperative. Leveraging Quantzig’s Expert Retail Merchandise Planning Solution, we integrate advanced algorithms to analyze the inventory-turnover ratio, providing actionable insights into consumer behavior and market trends. Through strategic collaboration with PPMS (Product and Merchandising Planner Company), we tailor product strategy and customer strategy to maximize profitability while ensuring alignment with the evolving retail landscape. Our approach emphasizes retail promotion and streamlining operations through automation, facilitated by retail specific apps, enhancing flexibility and responsiveness to market demands. With Quantzig’s solution, retailers can optimize their merchandise planning process, driving efficiency and achieving sustainable growth in today’s competitive market environment.

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Understanding Merchandise Planning in the Retail Industry

Effective Retail Merchandise Planning stands as a pivotal process that involves the strategic management of assortment, pricing, inventory, and product allocation to drive profitability and fulfil customer demand. Through in-depth retail planning methodologies, data-driven insights, and forward-looking forecasting, retailers curate their product offerings, determine optimal order quantities, and strategically time discounts and promotions.

This collaborative effort spans across various departments including finance, merchandising, and supply chain management, ensuring seamless coordination to deliver the right products, in the right quantities, at the right time. By refining this process, retailers can amplify sales, streamline costs, and elevate the overall shopping experience for their customers.

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Five strategies to help retailers succeed at Merchandise Planning 3.0

In the retail planning, store merchandising serves as the crucial component between front-end sales and marketing and back-end supply chain operations. Retailers must include the fundamental Four Ws (what to sell, when to sell, where to sell, who to sell to)—to achieve a balance between customer satisfaction, inventory management, and meeting future consumer demands promptly. Despite the established significance of these four Ws, many retailers grapple with their successful implementation. To effectively unravel these dynamics, retailers must formulate a comprehensive approach encompassing product strategy (Merchandise Planning 1.0), cross-channel strategy (Merchandise Planning 2.0), and customer strategy—culminating in Merchandise Planning 3.0. Neglecting any of these facets risks suboptimal retail outcomes. By adopting a customer-centric approach, retailers can steer clear of conflicts, optimize pricing strategies, and harmonize their product offerings across diverse channels, ensuring sustained market competitiveness and customer-centric retail success.

Here are top five strategies that help retailers succeed at Merchandise Planning 3.0:

1. Balance store inventory: Keep it light and fast-moving.

Inventory management remains a central concern for major retailers like Nordstrom and Macys, who employ a strategy of inventory restraint to mitigate the need for deep discounts late in the season, thus safeguarding their gross margins. However, this lean approach carries the inherent risk of revenue loss due to stockouts or misjudgments in consumer preferences. With the rise of online competitors encroaching on traditional brick-and-mortar sales, striking a balance between marketing imperatives and logistical efficiency has become increasingly challenging. Maintaining lean inventories poses a dilemma for retailers, potentially limiting their ability to fully capitalize on sales revenue to sustain physical store operations. Vertical integration, exemplified by companies like Burberry Group, presents its own set of challenges, as balancing the roles of supplier and retailer can lead to conflicting priorities. Burberrys strategic pivot towards leaner inventories and reduced discounting underscores its commitment to preserving its upscale brand image, even at the expense of severing ties with discount-driven retailers. As e-commerce continues to dominate retail sales, the dynamics between suppliers and retailers are undergoing a seismic shift, particularly in the apparel sector, where streamlined supply chains catering to fast-fashion companies drive consumer preferences towards lower-priced alternatives.

2. Balance merchandising volatility: External factors influence demand.

In the retail planning, it’s imperative for retailers to remain vigilant of fluctuating factors such as wages, employment conditions, and environmental and social climates. Recent events, such as Russia’s conflict with Ukraine, have compelled major brands to sever ties with Russia as a show of solidarity with Ukraine. The decision to completely withdraw from a significant market like Russia is bound to affect retailers’ financial performance, particularly as the unrest persists over time.

3. Balance fulfillment channels: Keep it customer centric.

As a response to COVID-19 safety measures, major retailers such as Wal-Mart and Target have implemented strategies to facilitate the pickup of online orders in their physical stores. This in-store pickup option aims to streamline the shopping experience for both retailers and customers, while also leveraging brick-and-mortar establishments as an advantage over online competitors. According to a 2021 survey by Raydiant, 75.4% of customers have utilized the buy-online, pick-up-in-store (BOPIS) service at least once. The management of inventory for both online and physical sales has posed a significant challenge for retailers, and as BOPIS becomes increasingly common, mastering this balance becomes even more crucial.

4. Align with the supply chain: Collaborate with manufacturers on pricing.

The escalating prices of commodities such as metals, grains, and crude oil pose significant challenges for producers and distributors. Furthermore, the surge in shipping and manufacturing costs adds to these difficulties, resulting in subdued forecasts for prominent consumer goods brands and an increased financial burden on shoppers. In response, retailers are transferring these costs to consumers, evidenced by a 5.4% year-over-year increase in consumer prices from 2020 to 2021. Given that fluctuations in commodity prices directly impact retail prices, maintaining alignment with suppliers becomes imperative to adjust prices accordingly and sustain profitability, even amid higher consumer expenditures.

5. Apply integrated technology to retail planning.

Technology plays a pivotal role in enhancing forecast accuracy and facilitating integrated business planning across all facets of a retailer’s operations. Through digital transformation, retailers can gain insights into the financial implications of various decisions and drive advanced decision-making processes in their planning endeavors. This necessitates a merchandising solution characterized by high performance, user-friendliness, and connectivity. Today’s retailers have the opportunity to shape the future of their businesses by leveraging integrated technology to assess the impact of decisions and planning scenarios comprehensively. The Anaplan platform offers a unified, real-time, cloud-based environment that empowers retailers to optimize plans accurately and adapt swiftly to change across departments or the entire organization, aligning seamlessly with overarching retail planning objectives. It serves as the cornerstone of Merchandise Planning 3.0, providing retail-specific apps that automate and streamline the planning process across sales, marketing, and the supply chain.

In the competitive Retail Industry, optimizing Merchandise Planning 3.0 demands a strategic approach that encompasses sales data, merchandising needs, and inventory-turnover ratio. Leveraging advanced Data Analytics and partnering with industry leading PPMS (Product and Merchandising Planner Company), retailers navigate the intricate Retail Landscape with finesse. By refining store merchandising strategies to address the “Four Ws (what to sell, when to sell, where to sell, who to sell to)” – and aligning with robust Product and Customer Strategies, retailers enhance customer satisfaction and drive revenue growth. Embracing strategic Retail Promotions and implementing a cohesive Cross-channel Strategy are essential components of success in today’s dynamic retail environment.

Read more: Boost Home Furnishing Retail with Strategic Assortment Optimization: Merchandising Analytics

Planning the Retail Merchandise Planning Process

Each industry, whether it’s clothing or grocery, has unique merchandising requirements based on the nature of their products. For instance, the clothing industry focuses on factors like colors, sizes, and designs, while the grocery industry must procure various edible items for consumer needs. Despite these differences, there are fundamental aspects to product merchandise and retail merchandising planning that apply universally across industries. Here, we provide an overview of these essential steps.

1. Analyze and Compare Previous Sales to Forecast Demand

The initial crucial step in merchandise planning involves analyzing historical sales data from the previous month or quarter. By carefully examining this data, retailers can make informed decisions about their purchasing needs and quantities.

2. Determining Merchandising Requirements

Once a retailer has projected demand and outlined the necessary purchases for the upcoming quarter, it’s essential to ensure the timely, strategic placement, and pricing of these products for customers. This involves finalizing the quantities required for retail stores and subsequently establishing the budget for procurement. By doing so, retailers can effectively address all financial aspects of their merchandising needs.

3. Assortment Planning

Assortment planning involves strategically determining the quantity of products to purchase to satisfy every customer’s demand. In the merchandising process and planning, attention to inventory details such as color, size, material, brand, and style is crucial. This meticulous approach aids retailers in accurately assessing the variety and quantity of each product required to meet demand effectively.

In summary, in theRetail Industry, success hinges on leveraging sales data, addressing merchandising needs, and managing inventory turnover effectively. Through advanced Data Analytics, retailers glean actionable insights to drive informed decision-making. Partnering with PPMS (Product and Merchandising Planner Company), retailers refine store merchandising strategies to answer the Four Ws (what to sell, when to sell, where to sell, who to sell to). By prioritizing customer satisfaction, implementing strategic promotions, and adopting a cohesive cross-channel strategy, retailers maximize revenue potential. Meticulous planning of the Retail Merchandise Planning Process integrates insights, ensuring optimized inventory management and sustained growth.

Read more: Retail Marketing Analytics Helps Retail Client Witness 10% Rise in Sales Margin

Conclusion

In the dynamic and fiercely competitive retail environment of today, effective Retail Merchandise Planning holds greater significance than ever before. By adopting a strategic stance towards inventory management, retailers can outpace competitors and effectively address the evolving demands of their customer base. For businesses seeking to enhance profitability in the retail sector, placing emphasis on merchandise planning is imperative as it stands as a pivotal element within their strategic framework.