Consumer-Centric Merchandise Planning

By Violet Jaramillo, Sr. Solution Architect

What is Consumer-Centric Merchandise Planning?

Merchandise Planning is a systematic method of forecasting inventory based on historical data.  It’s a blend of data-driven forecasting along with the art of predicting trends, so that the right product is at the right location at the right time. 

Today’s reality is one where retailers must consider including consumer-specific data and analytics in the merchandise planning process to remain competitive.  With all the technological resources consumers have today, from online reviews to social media and video marketing, customers are more informed and less brand loyal.

Consumer-centric merchandise planning shifts the focus from products to customers.  Decisions and reactions made throughout the planning process revolve around fulfilling consumer demand based on customer shopping behavior, lifestyle, and trends.

How Does a Retailer Shift to Consumer-Centric Merchandise Planning?

Shifting the focus to the consumer requires the planning organization to base their decisions and actions on the consumer. To do this, the collection and analysis of consumer-specific data is one of the most valuable assets a retailer can use. Point of sale transactions, online shopping habits, loyalty programs, surveys, and social media apps are a few of the avenues a retailer can use to collect customer-specific data.  By using this data, retailers can develop a better understanding of their customer preferences and behaviors.  The following are key areas that retailers can focus on to shift to consumer-centric planning.

Information Systems

Gathering customer data is crucial in a consumer-centric merchandising organization.  The right systems should be able to store large amounts of data and allow users to quickly and easily access and analyze this data to maximize end-to-end planning processes.  In addition, data should be readily available across applications.  When data is housed in silos, the ability to share data across applications is challenging. 

Planning by Customer Dimension

Consumer-centric merchandise planning incorporates customer attributes to enhance the planning process based on the profile of the customer and how/where the customer shops.  For example, does the customer prefer urban or classic wear, and at what price point?  Does the customer shop mostly online?  Are there trends that the customer follows? 

A consumer-centric planning system should have the ability to cluster customers based on customer attributes.  Planning by clusters of customers at a granular level (such as key item) maximizes the ability of a planner to react to trends in-season.

Omni-Channel Planning

Along with planning by customer attributes, today’s retailers must consider where the customer is shopping.  Is my customer shopping at a brick and mortar location, online, or both?  What is driving my customer to these channels?  Is an online promotion driving sales at brick and mortar locations?  Today’s consumers do not greatly differentiate between shopping at a brick and mortar location versus online.  This is especially true for Millennials and Gen Z consumers.

A consumer-centric planning organization should have the ability to plan product across channels while considering the customer trends that are driving sales.

Planning Organization

Finally, retailers will need to invest in their people.  Processes and training should be implemented that shift the planning organization’s mindset to one that focuses on making decisions based on consumer shopping behavior and trends.

In this environment, traditional Key Performance Indicators (KPI’s) such as sales and profitability should be augmented with customer-based KPI’s, such as shopping frequency, return rates, and basket size.  By holding the planning team accountable for customer-based metrics, it will help the transition into including the consumer when making decisions during the planning process. 

What’s the Next Step?

Now that you have started along the path of moving towards a consumer-centric merchandise planning organization, take the next step and partner with Vaco.  We can help guide you in building business processes and partnering with technology vendors.

We have worked with thousands of clients across a diverse set of industries.
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