Successful Merchandise Management

Jochen Schnell

August 29, 2023

Portrait of smiling young woman with shopping bags looking back

From Strategic Long-Term Planning To Efficient Seasonal Management

In today’s fiercely competitive market, retail companies are confronted with the task of providing the right products in the right quantities at the relevant points of sale with the help of demand-based Merchandise Planning and the accurate forecasting of seasonal requirements in order to create the greatest possible customer satisfaction. Shorter product cycles, rapid trends, and a lack of resilience in global supply chains are external factors to consider, but so are internal organizational and systemic requirements. Effective Merchandise Management is based on clearly defined processes, organizational anchoring, and appropriate systemic support to optimally master the complexity of Merchandise Management.

What is Merchandise Management?

Merchandise Management refers to the process of strategic planning, management and control of a retailer’s or company’s product range. The goal of Merchandise Management is to have the right mix of products in the right place at the right time to meet the customer’s demand and maximize revenue potential.

It includes several aspects:

  1. Product Selection: Selecting the right products is crucial. Factors such as customer needs, current trends, seasonal demand and sales history are taken into account. 
  1. Inventory Management: Merchandise Management ensures that inventory is optimally managed. 
  1. Pricing: Merchandise Management defines the pricing strategy in terms of market competitiveness and product positioning. 
  1. Placement and Presentation: Merchandise Management takes care of the optimal presentation of goods (both in the brick-and-mortar store and in online channels). 
  1. Promotion and Marketing: Merchandise Managers work closely with the marketing team to plan promotions, discounts, special offers and other marketing activities. 
  1. Analysis and Reporting: By constantly analyzing sales data, Merchandise Management can forecast trends and short-term developments, as well as evaluate the effectiveness of measures. Based on these findings, planning is adjusted on a continuous basis. 

Merchandise Planning as an integral part of Merchandise Management

Merchandise Planning is an integral part of Merchandise Management. In fact, the terms are often interrelated and sometimes even used interchangeably. However, they refer to different aspects of the core retail process.

Everything starts with the strategic planning where the company’s long-term goals are defined. Here, sales data and market and customer trends are analyzed to forecast demand, determine their product assortment and the right quantity of goods, and formulate a pricing and advertising strategy for the sales period concerned.

Merchandise Management, on the other hand, is a broader term that covers the entire process of planning, managing and controlling the product range. It includes not only planning, but also implementation of planning, inventory management, warehouse management, product presentation in the store or online store, pricing, marketing, and analysis of sales data to evaluate the success of strategies and adjust them as necessary.

Effective Merchandise Planning is critical to successful Merchandise Management, as it serves as the foundation for all subsequent processes and ensures that the right products are available at the right time in sufficient quantities to meet customer demand and thus capitalize on sales opportunities.

Merchandise Planning plays a crucial role, especially for seasonal products, to ensure merchandise availability in the event of significant fluctuations in demand. It involves analyzing past sales data, identifying trends, forecasting future demand, and planning inventory replenishment according to customers’ seasonal needs using appropriate algorithms.

Effective Merchandise Management with well-integrated Merchandise Planning and the appropriate systemic support is a key success factor for retail companies. It is a complex process that goes through different phases, from strategic long-term planning to in-season management. The individual phases are examined in more detail below.

Merchandise Management: Merchandise Planning

1. Strategic Long-Term Planning

Strategic long-term planning is the cornerstone of successful Merchandise Management. In this phase, the company defines its vision, mission and overall goals. Management analyzes market trends, customer behavior and competitive factors to make strategic decisions. This includes defining target groups, developing new markets, identifying growth opportunities, defining product range priorities and positioning the brand.

Strategic planning also includes defining KPIs (key performance indicators) to measure success. This could include, for example, increasing sales, improving customer loyalty, or increasing profit margins.

2. Pre-Season Planning

Pre-season planning is about implementing the strategic targets at a tactical level. This is where the detailed planning for the upcoming sales season takes place. Merchandise Management defines specific goals and targets for the product range, based on the company’s overall objectives. The main point of departure is the development of a top-down plan in line with the defined planning hierarchy.

It includes assortment planning, in which the product offering is divided into various categories and subcategories. Products are selected that meet the needs of the target group and reflect current market trends.

Inventory planning is another important aspect in this phase. This involves defining the optimal order quantity. Delivery times, seasonal fluctuations and sales forecasts are taken into account. The purchasing budgets (OTB = open-to-buy) are derived from sales and inventory planning. OMS management system can help streamline this process by coordinating order processing and inventory control, ensuring stock levels are accurate and timely.

Pricing and promotions are also planned. The company defines the pricing strategy and plans marketing campaigns, which are taken into account in Merchandise Planning.

3. In-Season Management

In-season management refers to the ongoing management of product offerings during the selling season. It is an agile process that enables the company to respond to current market trends, customer behavior and other changes.

During the season, Merchandise Management constantly monitors sales performance, inventory levels and current sales data. It analyzes sales and inventory data and creates permanent plan/actual comparisons in order to evaluate the performance of individual products and categories and to be able to react promptly. This allows inventories to be actively managed to avoid bottlenecks and reduce excess stock.

The company responds to new demand trends and adjusts product allocation, pricing or promotions as needed.

Communication with suppliers is crucial during this phase to ensure that deliveries are made on time and that fluctuations in demand can be responded to.

The coordination of phases and the success of Merchandise Management

The success of Merchandise Management depends on the smooth coordination of all phases. Strategic long-term planning lays the foundation for tactical pre-season planning, while in-season management ensures ongoing success.

Ongoing communication and collaboration between the central management team and POS managers are critical to breaking down strategic goals to the POS level and responding to current market developments.

A data-driven approach and continuous analysis of sales data enable Merchandise Management to optimize performance, meet customer* needs and drive long-term growth.

Through effective implementation, a retail company can significantly increase its competitiveness and achieve long-term success in the market.

valantic supports E2E with the implementation of an efficient Merchandise Management process

The valantic group, with its expertise, supports companies in establishing a successful and value-adding Merchandise Management process. The starting point and basic prerequisite is highly efficient data management. With our experience and many “good practices” from various industries, we derive the necessary process steps as well as the organizational anchoring for Merchandise Management within the entire Merchandise Management system from the specific requirements and thus create the prerequisite for the implementation in a suitable planning system.

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