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Objectives for merchandise plan

What is Merchandise Planning?

Merchandise planning in retail is crucial to meeting financial goals by having the right products at the right place, time, and price. Here’s a breakdown of the main objectives of merchandise planning.

Merchandise Planning Objectives:

1. Sales and Profit Objectives

  • Purpose: Ensure each category contributes to the store’s sales and profitability targets.
  • Goal: Set specific sales targets and gross margin objectives that align with company-wide financial goals.
  • Example: A retailer might aim for a 15% increase in sales from a specific product category within the next quarter. The aim is to match demand while maximizing profitability.

2. Inventory Turnover Rate

  • Purpose: Maintain an efficient flow of products, minimizing overstock and stockouts.
  • Goal: Achieve an optimal turnover rate where inventory is sold frequently, allowing fresh merchandise to be introduced.
  • Example: Targeting a turnover rate of 8 times per year for staple goods means the retailer expects to restock that inventory every six weeks.

3. Assortment Balance

  • Purpose: Offer a balanced variety to meet customer needs while avoiding excessive or insufficient stock.
  • Goal: Ensure each product category has the right mix of styles, sizes, and price points to satisfy diverse consumer preferences.
  • Example: A clothing store planning winter merchandise would aim for a good balance across jackets, sweaters, and accessories, catering to different style and price preferences.

4. Product Availability

  • Purpose: Minimize out-of-stock situations for key items, especially for high-demand or best-selling products.
  • Goal: Set and monitor service level targets to ensure the desired stock levels are maintained.
  • Example: A retailer might aim for a 95% product availability rate, meaning that essential items are almost always in stock for customers.

5. Cost Efficiency and Gross Margin

  • Purpose: Control costs related to purchasing, storing, and discounting products to protect margins.
  • Goal: Negotiate favorable terms with suppliers and plan markdowns strategically to optimize profitability.
  • Example: Using historical sales data to determine when and how much to discount seasonal items helps retain maximum gross margins.

6. Customer Satisfaction and Market Trends

  • Purpose: Align product offerings with customer preferences and emerging trends, ensuring relevance in the market.
  • Goal: Regularly adjust the merchandise mix based on customer feedback and sales data to boost satisfaction and loyalty.
  • Example: If data shows a trend toward eco-friendly products, a retailer might introduce more sustainable options to meet customer demand.

Effective merchandise planning helps retailers meet their financial targets, improve inventory efficiency, and respond proactively to market changes. By balancing inventory turnover, product availability, cost management, and assortment variety, retailers can achieve a profitable, customer-centered merchandise plan.

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