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Lecture 2

Merchandise planning involves forecasting sales, determining inventory needs, and developing an assortment plan. It is a critical process for retailers to balance customer expectations with business strategy by offering the right products at the right price and location. The key steps are forecasting sales, creating a merchandise budget based on the forecast, controlling inventory to avoid overstocking or understocking, and planning product assortments by category. The goal is to ensure products are visible and convenient for customers while considering the financial, marketing, logistics, and store operations implications.

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52 views

Lecture 2

Merchandise planning involves forecasting sales, determining inventory needs, and developing an assortment plan. It is a critical process for retailers to balance customer expectations with business strategy by offering the right products at the right price and location. The key steps are forecasting sales, creating a merchandise budget based on the forecast, controlling inventory to avoid overstocking or understocking, and planning product assortments by category. The goal is to ensure products are visible and convenient for customers while considering the financial, marketing, logistics, and store operations implications.

Uploaded by

marium aslam
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Merchandise Planning

MERCHANDISE PLANNING

Merchandising is defined as offering right kind of product at right place and


in right price. 

Merchandise planning is defined as “Planning and control of merchandise


inventory of the retail firm, in a manner, which balances between the
expectation of target customer and strategy of firm”.
Components of Merchandise Planning:
Following are important components of merchandise planning:

• Product
• Price
• Range
• Assortment
• space
Retailer has to priorities the place for different products:
i. He has to ensure that the products are visible.
ii. Customers have convenience and comfort in picking the products.
iii. Merchandise planning is planning of product price, range and assortment.

It has following implications:


• Finance
• Marketing
• Warehousing and logistics
• Store operations
Process of merchandise planning is as follows:
1. Forecast of Sales:
Merchandise plan or budget is dependent on estimated sales.
2. Merchandise Budget:
Estimate of merchandise required is made based on expected sales.
3. Merchandise Control:
Retailer has to balance between purchase and sale of merchandise. It is
necessary to avoid either over or under stocking of merchandise. 
4. Assortment Planning:
Assortment is arrangement of products category wise.
MERCHANDISE PLANNING
STAGE I : DEVELOPING SALES FORECAST
• Forecast may be made by the merchandiser , based on targets given by the top management
• Sales forecast is the first step in determining the inventory needs of the product or category
• Forecasts are typically developed to answer the following questions:
1. How much of each product needs to be purchased?
2. Should new products be added to the merchandise assortment?
3. What price should be charged for the product?
• A sales forecast is usually made for a specific period of time, this may be weeks or a season or
a year
• The person who is to make forecasts for the product group or category needs to be aware of
1. The changes in tastes and attitudes of consumers
2. The size of the target market
3. And the changes in their spending pattern
PROCESS OF DEVELOPING SALES FORECASTS

1. Reviewing past sales


• Review of past sales is necessary
• It helps establish a pattern or trend in sales figures
• Sales of the past year for a period will give an indication of the sales in the current year for
the same
2. Analyzing the changes in economic conditions
• Necessary to consider the changes happening in the economic front
• It has a direct link consumer spending patterns
• Economic slowdowns, increase in unemployment levels, etc. all effect business
3. Analyzing the changes in the sales potential
• It is now necessary to relate the demographic changes in the socioeconomics
• Demographic profiling is essentially an exercise in making generalizations about groups of
people.
4. Analyzing the changes in the marketing strategies of the retail organization
and the competition
• For forecasting sales the marketing strategy to be adopted by the
organization and that of the competition is to be considered
• Is there any line of merchandise to be introduced ?
• Any new store to be opened?
• An existing store to be renovated?
• All the above factors need to be taken into consideration
5. Creating the sales forecast
• After considering he above mentioned points an estimate of the projected
increase in the sales is arrived at
• This is then applied to the various products/categories to arrive at he
projected sales figures
STAGE II : DETERMINING THE MERCHANDISE REQUIREMENT

Planning in merchandising is at two levels


1. The creation of the merchandise budget, and
2. The assortment plan
There are two methods of developing the merchandise plan
3. Top down planning, and
4. Bottom up planning
• In top down planning , op management works on the sales plan and passes
it down to the merchandising team
• In bottom up planning , the individual department managers work on the
estimated sales projections
• The are then added to arrive at the total sales figures
STAGE II : DETERMINING THE MERCHANDISE REQUIREMENT

After the sales forecasting has been completed, the inventory levels need to be planned
 The merchandise budget is the first stage in the planning of merchandise  It is a
financial plan
 It indicates how much to invest in product inventories, stated in monetary terms The
merchandise budget usually comprises five parts:
 The sales plan: how much of each product needs to be sold department wise division
wise or store wise
 The stock support plan, which tells us how much inventory or stock, is needed to
achieve those sales
 The planned reductions, which may need to be made in case the product does not sell
 The planned purchase levels, ie., the quantity of each product that needs to be
procured from the market

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