What is Product Planning?
Product planning is a systematic approach to planning, purchasing, and selling based on consumer demand. This means that if a customer wants to buy product X in color Y and size Z from your store, you should have that product available when they come.
Understanding Product Planning in Retail
Changes in the retail industry have complicated the business landscape. Global sourcing, intense competition, and product diversity are some challenges retailers face. There is one framework that product planners follow to focus on the right issues.
The five elements of retail marketing include: price, product, promotion, place, and people.
Issues like lost sales due to stockouts or having excess inventory after the season ends are exactly what product planning aims to address. The goal is to ensure the right product is available to customers, regardless of when or where they shop.
How to Develop a Product Plan
The core idea of the product planning process consists of three equally important steps: post-season analysis, pre-season planning, and in-season adjustment.
You can define the season as any time period you prefer; it largely depends on what exactly you are selling. If it’s Christmas jackets, your season lasts only a few months; for ice cream, it lasts all year round (although demand will be higher during the warmer months).
When you sell products that vary significantly by season, it makes sense to have separate, more detailed plans for all the product categories you work in.
Other factors that affect the process include the size and structure of your retail business, the type of store – outlet, online, multi-channel, etc. – and the type of products.
Product planning for a men’s clothing company with multiple retail locations across the country is entirely different from the same process for a company selling tea online.
With tea, your decisions revolve around the types of tea you wish to sell and then stock. With men’s clothing, you have the added fun of forecasting how many pairs of pants of size X and waist Y you will sell and at what time of year, and then going through the same process with your entire collection.
It’s fortunate that the amount of work required for product planning varies significantly based on your industry, but the core concepts of how to conduct product planning remain the same regardless of company size. Step 1: Post-Season Product Analysis
The first step is understanding your performance during the previous selling season. Again, it depends on how you define the season. What’s important here is diving deeply into the data, looking not just at total sales numbers, but also at monthly and even weekly results by item, category, department, and store.
Next, you should compare those numbers to the planned figures from the same year to get a true understanding of how your actual results measure up. Simply put, you are performing a sales gap analysis.
It’s important to have the same data available for several previous sales seasons, as it will give you better insight into what is going on, which is critical for future planning.
When looking at past and current sales data, you should take the context into account. If sales have not grown recently, it may be due to something you did or did not do. (For example, perhaps you closed underperforming retail stores or opened new ones.)
When trying to understand the numbers, it is never advisable to look solely at raw data without any context. Your business does not operate in a vacuum – everything is connected and plays a role. This means external forces, such as the economy, as well as internal forces, such as marketing.
You will
You ultimately get an analysis not just of the numbers but also of the context behind those numbers. This will make planning for future assortments much easier.
Step 2: Pre-Season Product Planning
This is where the fun starts!
Using the data from the previous analysis, it’s time to plan for the upcoming season. It’s crucial to involve sales and marketing teams, and even visual merchandising teams from the outset.
Without their involvement, you’ll miss the context. For example, you might look at historical data showing steady growth but not differential growth for a particular product. You’ll just add that multiple and call it a day.
What you may not know is that marketing has seen the same numbers, looked at margins from previous years, and plans to invest three times the spending this time around.
Good for sales. Not good for keeping up with the product.
Another thing to monitor during this phase is the impact of opening new sales channels on your business – particularly: wholesale and selling through social media.
With new channels, it’s always difficult to plan ahead, as you don’t have actual sales data to back up your assumptions. In such situations, it’s worth looking at industry sales data for each channel and using that for your forecasts.
Even with all of the above in mind, you will definitely encounter situations where you find yourself with either too much or too little inventory. Smart business owners plan for every possible scenario, so they have backup plans for everything, and you should too.
When faced with inventory issues, they have plans for liquidating them. This could mean creating a newsletter with attractive prices for things that aren’t selling, or using secondary marketplaces like eBay, discounts, or flash sales.
The concrete tactics are up to you; the idea is to have a plan for the scenarios that arise so you know exactly what to do. When the problem is that you have more orders than you have stock, companies that do drop shipping could be your savior.
Step 3: Adjusting Products During the Season
Big box retailers like Target have realized that the way supplies are managed currently is dead, and there are smarter ways supported by new technology to handle this.
The technology is called “Open to Buy,” or OTB for short.
OTB is a financial planning tool designed to facilitate inventory management for businesses. It helps avoid over-purchasing and under-purchasing by ensuring that product is always available.
The OTB system looks at your current inventory alongside your planned sales, comparing that data to actual sales data. The system then makes automatic adjustments to your future purchase orders to ensure you don’t run out of product or that you don’t have excess inventory of items you’re already overstocked on.
Many inventory management systems have an OTB system integrated or available as an add-on. Since there are many different systems, it’s hard to provide links or more specific information about each. Your best bet is to talk directly with your system provider.
The APIs of Shopify Plus make it fairly easy to integrate with many OTB systems. There’s also
Source: https://www.shopify.com/enterprise/108429702-prevent-out-of-stock-how-to-create-a-merchandise-plan-that-rocks
Leave a Reply