Data For Merchandising and Planning: A Case Study and Checklist

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At Each Step Along the

Merchandise Planning

Cycle: Which Data Points Should

You Be Examining?

Ongoing Performance

Evaluation

Develop Your Buying Plan +

Forecast

 Allocation

Review Past

Performance

Define Exit Merchandise

Strategies

Ongoing Performance

Evaluation

Develop Your Buying Plan +

Forecast

 Allocation

Review Past Performance

Define Exit Merchandise

Strategies

1) Looking at last year's sales, what were your volume drivers?   2) How did both core and trend items perform?  Specifically, did you buy too little or too much into a particular trend or key item? 3) In which categories (and sub-categories) were you left holding excess inventory? 4) What sold out at full-price versus deeper than anticipated discounts? 5) Where did you miss sales opportunities because you couldn't convert customers? Where in the funnel did the drop happen? 6) What were external regional and seasonal events and trends that impacted the top- and bottom-lines?  7) What are relevant shifts and changes taking place in both the competitive landscape and customer demographic for which you need to be prepared?

This is one part looking backwards at historical performance and another part looking forward at your strategy for leveraging market opportunities and navigating the general e-commerce environment. 

Delve into the data to understand the following:

How does the merchandise planning life-cycle look in the real fashion world and what tools are available to help?

Pretend, for instance, that you are an established e-commerce retailer in the womenswear business. In both 2015 and 2016 you offered a limited swimwear collection. After seeing profitable seasons and positive customer reaction, your

company would like to expand the assortment for 2017. Since swimwear is a highly seasonal item, there are challenges to executing the planning lifecycle. But there are tools you can use to overcome these challenges and successfully meet

your expansion goals.

Not only is your company’s past sales data useful to planning your future assortment, but so are your competitor’s patterns within the same category.

 Swimwear has a short seasonal selling period and is also trend driven. Getting the assortment right

begins with reviewing what happened last year not only within your own company but competitors in

the space. With your past sales data you can understand which products sold out the fastest and which were left on heavy discount at the end of the

season. But one key question to ask is when did your competitors introduce new products - was it the beginning of March or the end of April? When

did they stop introducing products? Looking at the beginning of March, the swimwear assortment has still not peaked and new styles have been steadily entering the market. It would still be okay to bring

new styles in!

Review Past Performance

1) Drilling down to the product attribute level, what are the products and their features will maintain customer retention and drive new customers to your brand? 2) How much of the assortment should be core products and how much should be dedicated to new and trend offerings? 3) Looking at the competitive landscape, are there any gaps in existing product categories that should be filled?  Are there any new categories that you should be represented in but aren't currently? 4) By season, what are the new trends that must be represented in the assortment and when should they be introduced to maximize sell-through?  5) How deep will your offering of trend be, specifically in which categories will you represent these trends?  Should there be differences in allocation by geography?

Ongoing Performance

Evaluation

Develop Your Buying

Plan + Forecast

AllocationDefine Exit

Merchandise Strategies

Review Past

Performance

Now that you have a clear understanding of historical performance, it's time to roll up your sleeves and set your assortment plan and forecast.

Swimwear season comes and goes. You looked at last year. But what does this year's assortment look like?

Swimwear, again, is focused on trends. On one hand, you can stay abreast of influencers to understand

what is trending early. But also being able to identify these trends on an attribute level is significant to setting up your assortment intelligently. Straps or no straps? What about color? Understanding this

granularity is key to getting your expanded swimwear assortment right. Which styles year-over- year have performed well and that competitors are

introducing again this year? Find out!  Looking at the total assortment, it appears that one-piece

swimwear is almost as important as having an extensive top offering. We can also tell you

that cerulean blue is the trending accent color - next to the ever popular black and white. 

Develop Your Buying

Plan + Forecast

Ongoing Performance

Evaluation

Develop Your Buying

Plan + Forecast

Allocation

Define Exit Merchandise

Strategies

Review Past

Performance

1) At the item and category-level, is your pricing aligned with the market?   2) With your target consumer in mind, for which specific products should you be pricing at a premium, and where should you operate on narrower margins? 3) What is the average number of days it takes for items to sell-through? 4) What are seasonal events that can lengthen or shorten the average number of days to stock-out? 5) What is the average number of days, for both core and trend items, between product drop and first price cut? 6) At the category and item-level, historically and relative to the competitive market, have you marked down too early or too late?

You have an assortment framework in place at both the category and item-level, so how do you plan for how to move product through seasons at maximum profitability?

You know what your costs and target margins and volumes are.   But how do you know if your price positioning is optimized relative to the rest of the competitive market?

Now you need to carefully price your assortment, especially because you only have

a short period to move through stock. You don’t want to be stuck with swimwear

inventory in September that will no longer be relevant in the following seasons because of

over-pricing. Yet preserving margins are essential to a successful albeit short

swimwear selling season. Looking at the current market, pricing a bikini set around $53

and a one-piece around $128 would placeyourself in the middle of the market. Have rooms in your margin to move inventory

faster? Try $49 and $119 to make yourself even more competitive. 

Define Exit Merchandise

Strategies

Ongoing Performance

Evaluation

Develop Your Buying

Plan + Forecast

 AllocationDefine Exit

MerchandiseS trategies

Review Past

Performance

1) Is your allocation strategy based solely on location? Grouping by geography and historic sales volume is the first level, but there are also deeper shopper level insights that should guide allocation (and marketing initiatives). 2) Are you considering the local competitive environment into your allocation plans? 3) Are there trends which are showing more activity and traction regionally?  How are you going to allocate (and work with marketing to promote) them accordingly? 4) Which regions are consistently over- or under-performing on key categories and items?  Where do you need buffer or less stock in place? 5) Are you accounting for weather (historic and forecasted) and local events into your allocation plans? 6) Do you have a plan in place to replenish and shift merchandise, as needed, mid-season to markets that show higher sales volume? 

Proper allocation requires not only a forecast underpinned by historic data, as well as the flexibility to shift as the market does.  

So what does an allocation strategy that maximizes your profits take into account?

Your e-commerce business is global and runs 24/7.   But how do you tailor assortment and messaging to hit the right local notes?

A specific category like “swimwear” may overperform in a country like Australia and underperform in, say, Norway. But

recognizing the patterns in global performance is tricky when considering allocation. Cultural preferences, climate,

and local competitors are factors heightened in the swimwear space. Take

for example the swimwear assortment across three very different markets below. Being able to pull this data quickly allows you to react mid-season if your allocation is off. In this case, there may be more of an opportunity to increase allocation in

Australia as opposed to Spain.  Allocation

Ongoing Performance

Evaluation

Develop Your Buying

Plan + Forecast

 AllocationDefine Exit

MerchandiseS trategies

Review Past

Performance1) Have competitors introduced a product or category that you need to fast-track into your assortment?   2) Have they taken a discount on a category that you're still maintaining at full price? 3) Which items are selling through at full-price?  Can you replenish them quickly while still in demand? 4) Which item-level attributes are common across items selling out at full-price?  Can you iterate these in-season to leverage this opportunity? 5) Aligning with marketing, is your promotional activity resulting in a corresponding up-tick in sales?  Are they aligned in volume and amount with the market?

A retail executive's work is never done.  By now you've utilized a lot of data to get your business primed for success.  Now it's time to get a systematic plan in place to keep tabs on the market

and your products' performance.  Here's what you should be constantly checking.

Of course, the cycle is never complete after introducing a new assortment. Monitoring sell-through is key to replenishing accurately and not leaving money on the table. 

For swimwear, this should happen quickly to capitalize on peaks in the short selling

season. Knowing which types of swimwear and specifically which styles, according to

location, are selling out is helpful in informing these decisions. But following this information from your competitors can help you pivot even faster and react if necessary. Looking at the most recent sales patterns, the penetration of the bikini and two-piece

set assortment is higher than other subcategories in terms of sold out styles.

Looking further into this data, you can determine which particular styles are selling out amongst competitors in the space to see

if it is an item you should be carrying. 

Ongoing Performance

Evaluation

With the right tools and data insights, smarter and faster category decisions along the merchandise planning cycle are within your reach.

Take our example of swimwear. What decisions would we have made? In our expanded 2017 assortment, we would be continuing to add new styles into March, beginning as early as January to leverage vacation-goers needs. The expansion of our previous offering would

include a focus on black and white styles and a healthier assortment of one-pieces in addition to our typical mix-and-match bikini styles. The bikini separates would be priced around $49 a piece and $119 for a one-piece, so that our prices are in that competitive sweet spot.

 Looking at the global market, we would be sure to target countries such as Australia that seem to be under-assorted by our competitors.

Once this assortment starts seeing sales, we can identify all-stars (and any assortment gaps) and respond to competitor activities.  In this case, bikini and two-piece sets are selling through faster than the rest of the market - and now we know where to to focus our

replenishment!

Takeaways