How To Create A Merchandising Plan

A merchandising plan is one of the key parts of a business. It is the most critical plan business teams can come up with besides the business plan. Benjamin Franklin said, "Failing to plan is planning to fail." Of course, it was with regard to something else entirely, but it works for businesses too.

What is a business without buying and selling? A detailed plan for buying the materials needed to make products and selling the products ensures one has a business.

What is a merchandising plan?

A merchandising plan is a systematic approach meant to maximize ROI (Return On Investment). Maximizing ROI is done through the data-driven planning of selecting, buying, showing and selling merchandise to ensure customer satisfaction. In simple terms, it means when a customer wants to buy a product A in size B and color C, and three of product X in color Y, they are available.

A good merchandising plan will make a business worthwhile and profitable and ensure its success in the market. A poor merchandising plan will restrict a business, drain assets, ruin investments and put the business' reputation in the gutter.

How to create a merchandising plan

A perfect merchandising plan is created by doing three important things:

1. Post-season analysis

After the current business sales season, the team analyzes what is sold, in what forms and sizes, and through what platforms. For example, if the online shop sold 30 fall-scented candles and two bath bombs while the physical shop sold 50 fall bath bombs and only three candles, then this needs to be stated clearly.

Remember, the business' selling products defines its seasons, be it clothing, home decor, games, gifts, food, or furniture. Each business has a different definition of "season." Some businesses have two important seasons a year, others go with the classic calendar seasons, while many have only one since they open for specific months.

What is important here is that the analysis is based purely on data and cold, hard facts. It is not about what was planned to sell, but what actually sold and by how much. Compare this data to previous seasons, and the marketing plan's expected sales. Compare it across different sales platforms if the business has any. Also, remember to analyze the numbers in the context of that sales season's environment, not just the season and previous sales.

2. Pre-season planning

Before the next sales season, use the post-season analysis data to meticulously plan for the next season. This step involves the sales and marketing team, the social media team, and the finance team - basically everyone in the business.

This is the season to consider the five key factors of the plan:

a. Product: What is the shop planning to sell?

b. Range: Is the business going to sell varieties of the product(s)? If so, which varieties? This could be in terms of size, color, flavor, fit, weight, and so on.

c. Assortment: This is all about the combination and presentation of products sold. For example, this could mean pairing two similar products for a discounted price or suggesting certain products together. This factor determines both an online and physical shop's arrangement by grouping similar products and allowing for a seamless flow for customers as they browse.

d. Price: The product's price is governed by the cost of production, cost of labor, desired profit margin, competition analysis and cost of living.

e. Space: This is especially necessary for a physical business, but can also include storage space for online businesses.

After this step, the business will open for the new season.

3. In-season adjustments

Based on real-time data analysis, businesses can make adjustments to their merchandise. Some products may sell out faster than planned and thus need quicker restocking, while others may be selling more in a particular color or size, and so on. Make sure to pay attention to market and customer trends as well as changes in the business environment during the season and stock inventory.

The benefits of a good merchandising plan

1. Less waste of resources

A lot of resources are wasted due to a lack of planning. It might be excess orders of packaging material, unnecessary buying due to bad record-keeping, or something else. A good merchandising plan will explain in clear terms what is needed, what will sell, how to display each product and what to buy. This will ensure the business avoids suffering losses by wasting resources.

2. Increase inventory turnover

The point of stocking something in business is to sell it. If the stock is not sold, it expires, dilapidated and takes up space in the warehouse. A merchandising plan helps reduce unwanted inventory and specify "hot" inventory. This makes sure the warehouse is never overflowing with unsold items.

3. Increase returns on investment

A good merchandising plan will show the team where to put money in terms of buying stock and marketing products. Any stock that sells fast and is always restocked quickly secures continual support from clients. Client support comes in the form of free marketing and continuous buying of products. This, in turn, equals a return on investment through big profits.

4. Improves stock availability

Nothing is worse than continuously seeing items listed as out-of-stock. A data-driven merchandising plan will highlight products that appeal to customers and the seasons in which they appeal. This means that more resources - financial, human and physical - will go into stocking up these items ahead of their peak seasons.

Conclusion

A merchandising plan may involve a lot of figures and analysis, but it is not an exact science. The point is to have a plan to guide the business through buying and selling to reduce overhead and increase returns. A good merchandising plan will make this process easier and more efficient for a business.