“Making CENTS of It All” – Industry Insights with Susan Martin

This really is the burning question, and it's something I often get asked!

I think we’re all familiar with Merchandise Planning being referred to as the “right product, at the right place, at the right time, at the right price”.

I’d like to challenge this thinking from the perspective that those are the results of great planning - and not planning alone. It’s what happens when an entire retail ecosystem functions holistically.

I came up with a definition after a very long time that Merchandise Planning exists to:

“Maximize sales and profit, through optimizing inventory”.

I think if we keep that front and centre, then we really do understand what Merchandise Planning is striving to achieve, and all the activities are with that end goal in mind.

Just focusing on the ultimate endgame of “right product, right place, right time, right price”, isn't enough to make Merchandise Planning work, and it doesn't unpack the activities and thinking behind this scientific artform.

Contrary to popular belief, or what people might have encountered before, Merchandise Planning…

• should not be rigid. It should be commercial.
• should bring a measure of objectivity, but not at the price of commercial outcomes.
• should not simply be an extension of finance. There's a very close relationship and there are inputs and outputs that flow both ways, but it's more than an extension of finance.
• should not be striving for perfection, it should be focused on precision. 
• should not be overly controlling, it should be dynamic like its environment.
• should be about the future, informed by the past.

I’m going to answer this with some analogies that I think capture the way Merchandise Planning operates really well …

By now, we’re all very accustomed to hopping in the car and relying on Google Maps to tell us how to get from our current location to our destination.

Along the route we expect the map to recalibrate and to anticipate what is on the path ahead and adjust accordingly, keeping in mind we want to arrive in the fastest, most cost-effective way.

We've reached the point that we almost couldn't get from ‘A to B’ without Google Maps, and we’d be very frustrated if it wasn't being responsive and dynamic to our rapidly changing needs.

In many respects that’s just what Merchandise Planning is, particularly at the early stages: The Merchandise Financial Plan.

It sets the path for where we want to go, and then as the business is trading and we get newer information, we're course correcting and being responsive to the insights.

Stock is the single biggest investment that we make in retail. If you think about it simply, it would be quite irresponsible to do that without a clear plan.  

Would you build a house without a plan? 

No plan equals burning money, making the wrong decisions at the wrong times, and ultimately being inefficient.

The Merchandise Financial Plan means we can adapt to change in an informed and controlled way.

My top tip is that you must familiarise yourself with your Merchandise Planning cycle and establish an operating rhythm that supports those activities.

There are six main phases that support the overall retail cycle of ‘Buy-Move-Sell’:

1. Strategy: What are you trying to achieve? That could be over the next year or the next three years, whatever is relevant to your business. What are you working towards?
2. Plan: The Merchandise Financial Plan or “The Plan”, is simply the financial expression of your strategy. It puts it into numeric terms so that you can self-check and validate your intent. It allows you to answer critical questions such as, “Can we do this? Will it take us where we need to go? If it won't, what can we adjust to get us there?”
3. Buy: When we get to the buying stage, “The Plan” supports those decisions again; “How much is too much? How many choices do we need? How can we ensure that our buying decision is using the most current information we have available?”
4. Move: Then onto allocation, “How do we send our stock out to stores making sure that that right product is in the right stores at the right time?”
5. Sell: Once the product starts trading, it's about comparing that performance against “The Plan”. Crosscheck by asking, “Do we need to take markdowns or promotions to speed up performance? Do we need to buy more of something that’s overperforming? Do we need to cancel or pull back on stock in the pipeline?”
6. Review: then of course having a review where you capture your learnings, recognize your opportunities, and feed that back into the strategy again, and so the cycle continues!

We work with a lot of small businesses, in addition to some of the really big guys. It’s very difficult for the smaller operations, where cost management is crucial, to have the resources needed to implement these stages to the nth degree.

In that case, my advice is rather than trying to spread across every planning activity possible, focus on the key objectives that will yield the most bang for your buck. Zoom in on those activities and do them really well.

That’s probably going to be some things around your initial stock investment in the ‘Buy Stage’ (3), then also in the ‘Sell Stage’ (5), around your markdown management and making some considered decisions.

Retail Fest will be the perfect environment to unpack the points I’ve touched on above even more. I could talk about Merchandise Planning for days, so hopefully I manage to keep to my panel discussion and keynote presentation!

I’ve also created a free E-book called “Making CENTS of It All”, which will be available at the trade show or scanning the QR code below. It is a mission at SMART IN PLANNING to give back to our community, so I also invite you to join The Planning POD, our FREE “Secret Garden”, where you can explore loads of content on all things Merchandise Planning. Enjoy!

Hear from Susan Martin live at Reed Gift Fairs Sydney's Retail Therapy stage on Monday 20 February at 14:10 - 14:40.