Importance of Merchandise Planning:

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The merchandise planning process allows the retail buyer to forecast with some degree of accuracy what to purchase and when to have it delivered. This will greatly assist the company in attaining its sales and gross margin goals. Buyers must rely heavily on historical sales data, coupled with personal experience and their own intuition about market trends.

The primary goal of most retailers is to sell merchandise and services. Nothing is more central to the strategic thrust of the retailing firm. Thus, deciding what to buy and how much is a vital task for any retailer. It takes time to buy merchandise, have it delivered, record the delivery in the company records, and properly display the merchandise; therefore, it is essential to plan. Buyers need to decide today what their stock requirements will be weeks, months, a merchandising season, or even a year in advance.

Through a merchandise plan a retailer attempts to offer the right quantity of the right merchandise in the right place at the right time while meeting the company’s financial goals. As planning occurs, it is only logical that the retailer exercise control over the merchandise (rupees and units) that it plans to purchase. A good control system is vital. As in any business, a retailer’s ultimate objective is to achieve an adequate return on the investment to the owners. Financial objectives trickle down the merchandising organization, and, are used to make buying decisions.

Retailers cannot hope to be financially successful unless they preplan the financial implications of their merchandising activities. Financial plans start at the top of the retail organization and are broken down into categories, while buyers and merchandise planners develop their own plans and negotiate up the organization. Top management looks at the overall merchandising strategy. They set the merchandising direction for the company by (1) defining the target market, (2) establishing performance goals, and (3) deciding, on the basis of general trends in the marketplace, which merchandise classifications deserve more or less emphasis. Buyers and merchandise planners, on the other hand, take a more micro approach. They study their categories’ past performance, look at trends in the market, and try to project the assortments for their merchandise categories for the coming seasons.

The resulting merchandise plan is a financial buying blueprint for each category.

It considers the firm’s financial objectives along with sales projections and merchandise flows. The merchandise plan tells the buyer and planner how much money to spend on a particular category of merchandise in each month so that the sales forecast and other financial objectives are met. After concluding the rupee amount of inventory needed for stock requirements, the other merchandising decisions facing the retailer are: calculating the rupee amount available to be spent, managing the inventory, choosing and evaluating merchandise sources, handling vendor negotiations, handling the merchandise in the store, and evaluating merchandise performance.

 

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