Page 150 - DMGT550_RETAIL_MANAGEMENT

Unit 9: Merchandise Management

9.2 Process of Merchandise Planning Notes

The foundation of this planning process is the six month merchandise plan.

9.2.1 Define Your Merchandise Policy

Every retail organization must have a vision in order to provide it’s buyers with some insight
into the following business components:

1. Demographics of current and potential customers.
2. Store’s image.
3. Merchandise quality levels.
4. Price point policy.
5. Marketing approach.
6. Customer service levels.
7. Desired profit margins.

This will allow you to develop a clear merchandise policy that outlines buying goals and
objectives.
Communicating this policy effectively will not only provide direction, but should also drive all
decision making throughout the merchandise planning process.

9.2.2 Gather Historical Information

In building your six month plan, the objective is to prepare a month-by-month total dollar-
purchasing schedule for the company. Then, repeat this process for the next level of detail
(i.e. the departmental level). Depending on the sophistication of company information systems,
each department can then be broken down into smaller segment “classes”, for which a similar
sales plan is prepared.
The first step in preparing these plans is to pull the sales information for the same period last
year. Not only should we gather actual sales numbers, but also statistics on returns, markdowns
and any inventory carry-over. Unless your store is computerized, detail of this nature will not
always be available. However, even a manual analysis of total merchandise purchases will
provide you with an acceptable level of data, which is far better than having no information at
all.

!

Caution One should not end at actual sales data but should also analyse the data on returns,
markdowns and any inventory carryover.

9.2.3 Perform Qualitative Analysis

Most professionals will agree that the buying process is 90% analytical and 10% intuitive. In
other words, you must do your homework to achieve any level of success. But your efforts will
be rewarded. As the most critical aspect of a successful operation, buying/merchandise
management is what retail is all about.
“Qualitative Analysis” refers to “identifying the proper components in a mixture”. In this case,
the mixture is the merchandise plan and the components that affect this plan are as follows:

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