The Process of Merchandise Planning

Customers visiting a retail shop, very often, know what they wish to purchase; they may however, be unaware of the specific size, variant or type of product that is best suited for their needs. After an initial assessment of the products available, they may arrive at a decision in terms of the specific product that they wish to purchase. It is at this stage that the merchandise that the retailer has on offer in the store plays a critical role in determining whether the purchase is made or the customer takes his search for the products elsewhere.

We understood the function of buying and merchandising varies from organization to organization, depending on the size of the organization, the region that it operates in, the products sold etc. The significance of this function stems from the fact that the product is to integral part of the retail function. The products to be retailed in the stores have an impact on all other functions and therefore this function, immaterial of the size of the organization, can never work in isolation.

The Concept of Merchandise Planning:

The retailer’s reason for existence or his vision and missions for being largely dictates the business strategy adopted. A part of this strategy is also the retail model that he chooses to operates in, which in turn determines the type of product, the price etc., that is retailed in the store. Therefore while the retailer’s business mission dictates merchandise planning the starting point of merchandise planning is in analysis. Merchandise planning can therefore, be defined as the planning and control of the merchandise inventory of the retail firm, in a manner which balances the expectations of the target customers and the strategy of the firm.

Merchandise planning is beneficial to the customer and to the retailer. It benefits the retailer as it enhances the possibility of the right assortment of goods, with the adequate amount of depth, to be available at the stores where it is needed. The process of merchandise planning further enhances the possibility of increased stock turns, thereby releasing important working capital. From the point of view of the customer, it is beneficial as it increases the choice available to him and reduces the possibility of facing a situation when the store is out of stock of the merchandise needed.

As indicated Figure below the business strategy dictates the merchandise strategy which in turn influences the planning of merchandise in terms of the type of product, the price, the range and then the assortment. Planning or the number of retail stores and the space available for the display of merchandise are also taken into account for the purpose of allocating the merchandise to the stores. The next stage in the planning process looks at the sourcing of merchandise and then, its actual allocation to the retail stores. The last stage is the monitoring of merchandise and vendor evaluation.


The process of Merchandise Management

Store (Format) Strategy>

Business Strategy>>

Merchandise Strategy>

Merchandise Planning >>

1) Product
2) Price
3) Range
4) Assortment
5) Space


1) Make or Buy
2) Vendor identification
3) Negotiations
4) Placing the order

Allocation of merchandise to stores

Performance monitoring & evaluation

Store Operations Planning