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3 Strategies for more predictable merchandise planning in an unpredictable world

With in-season planning and execution, retailers can get closer to their customers – By Richard Willis, Aptos No matter how adept retailers were at putting together highly… View Article


3 Strategies for more predictable merchandise planning in an unpredictable world

With in-season planning and execution, retailers can get closer to their customers – By Richard Willis, Aptos

No matter how adept retailers were at putting together highly accurate merchandise plans, nothing could have prepared them for the demand disruption that came with the COVID-19 pandemic.

Store lockdowns, changes in consumer shopping behaviours and dramatic shifts in what people were buying resulted in many retailers being stuck with a lot of inventory in the wrong places – at least for those retailers selling ‘nonessential’ items.

While we hold out hope that the worst of the crisis is behind us, we also recognise that there’s no going back to ‘the way things were’.

This is particularly true when it comes to retailers’ approach to merchandise planning. The list of merchandise planning challenges that retailers faced during the pandemic – and continue to face – is extensive. From disrupted and slow supply chains to low inventory accuracy and disconnected data across channels, too many merchandise decisions today feel like a gamble – a gamble retailers can ill afford to lose.

As retailers look ahead to the back-to-school and peak trading periods, having the right inventory, in the right place, will make or break the year.

We have no choice but to change how we plan and manage the entire merchandise lifecycle to better reflect new market conditions that are dictated by more uncertainty and disruption than most planners have ever faced.

Here are three ways retailers can infuse greater certainty into their merchandise planning processes and achieve better outcomes at the end of each season.

  1. Transition to in-season planning

The pandemic exposed the many shortcomings inherent in merchandise planning cycles that are completed many months before the selling season begins. In hindsight, many of those shortcomings are obvious. Most critically, consumer trends in our hyper-connected world of overnight TikTok sensations last only days, if not minutes. And yet, we ask planners to forecast which categories will be popular, in which regions, many months in advance.

Last year’s meteoric rise of athleisure wear is an example of just how expensive the old ways of planning months in advance can be: the swift shift to spandex caught virtually every women’s apparel retailer off guard. Stock outs were rampant, revenue opportunities were missed and markdowns in less comfortable categories were massive.

‘Fast Fashion’ should no longer be a category of retail, but rather a way of life for planners in every category. Fortunately, the barriers to in-season planning are far fewer than they were just a few short years ago. Because the same hyper-connectedness that fuels those frantic changes in consumer tastes also fuels our ability to see, analyse and understand what is happening (and where) as trends unfold. Imagine how much more effective planners would be if they were developing plans based upon sales trends rather than sales history.

  1. Allocate less and replenish more

Rapid replenishment is an important part of the transition to more in-season planning. Allocation has traditionally been managed as a ‘fire and forget’ process, with too many decisions made too far in advance. Consumer behaviours are shifting too quickly for that practice to continue. The resulting and often significant mismatches between demand and supply lead to serious stock outs in some locations and margin-killing markdowns in others.

Agile replenishment processes that are closely aligned to customer demand patterns are now critical to the success of each selling season. With merchandise planning and forecasting technologies, retailers can apply advanced data analytics to enable planners to stay closer to their customers and be much more capable of capturing and responding to demand signals in-season.

  1. A shorter, more digital supply chain

For many retailers, the pandemic exposed the cost of risk – including the cost of risk involved in a long, overseas supply chain. Lengthy supply chains that are vulnerable to disruption and delays are behind many of the product shortages and price hikes that have become an all-too-common occurrence.

To reduce this risk, many retailers are evaluating ways to make the supply chain shorter by bringing production closer to home. Equally as important, retailers are also focusing on supply chain digitalisation. With the right technology, retailers can connect all the links in the chain more closely by ensuring accurate, timely information at every step, and fostering better collaboration across the ecosystem.

Building a digitalised and resilient supply chain depends on replacing individual information exchanges with a multi-enterprise network. That enables participants up and down the chain to access information, analytics and real-time KPIs that transform the entire chain from reactive to predictive — so everyone can preview where bottlenecks might occur and where the risks ultimately sit.

Close the gaps in planning processes

As Gartner’s Robert Hetu wrote in the blog, Apparel Retailers Must Plan to Succeed, ‘Product selection, availability and pricing remain the heart of retail business, However, accuracy of procurement and placement, and consistency of best-practice execution, have never been more urgent’.

When used as part of a comprehensive merchandise lifecycle management strategy, science-backed and more automated merchandise planning can help retailers deliver on brand promises and free up planners’ time to focus on higher-value activities.

Retailers that have the ability to support in-season analysis and execution will get closer to their customers and make smarter, faster business decisions that optimise business performance.

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