I was just curious when sales budget is planned for the next season how is the budget proportionately allocated between full price sales and markdown sales? Is it based on past sales data for a similar product or is it just an industry average the retailers follow? And what other data a planner/category manager looks at for a pre-season planning?
It would be interesting to know how pre-season planning is done when most of the time only information a planner would have is past seasons' sales data. If our pre-season plan is off by a large number then it would be a lot of in-season corrections for the planner! Let me know what you guys think.
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Nice Article Pushkar. As per my experience in Retail,the majority of the decisions were made based on the past sales history, the current demand and the current trend to plan the future stock allocations during pre-season planning.However, the retailer closely monitors his pre-season plans during in-season execution and make the necessary changes when and as required.
ReplyDeletePlanning process consists of 90% analytical and 10% intuitive efforts by the planner. A step by step approach is always required for any planning process. In the case of Planning in retail is considered, before starting the merchandise planning the first and foremost starting point will be 1) Defining the merchandise policy. This would consist of your price point policy, desired profit margins, merchandise quality levels, customer service levels and more. Once policy is understood in true sense 2) History data as granular as possible should be gathered. The level could be either department or the class depending on the level of computerization in the organization. 3) Qualitative analysis, this will enable to connect the policy which is very subjective and history data which is only the numbers. This qualitative analysis should be done for sales, promotions, shrinkages or any other activities in the chain.
ReplyDeleteStock to sales ratio is good indicator for fore seeing the kind of inventory levels required for coming period sales. Such process would enable efficient pre season planning than in season planning.
Thanks Anil & Bharani. As Bharani said pricing strategy also plays a crucial role in initial stages of pre-season planning. But history data in addition to planner's intuition about the coming season seems to be the key.
ReplyDeleteSo do retailers also do some kind of market analysis or sample survey etc before the start of every season. Or such market testing is mostly limited to newer products (this may be more applicable to apparel industry)?
Market analysis by retailers will vary from vertical to vertical. In apparel retailers majorly depend on the manufacturers and closely follow the trends exhibited during fashion shows. Whereas other verticals manufacturer’s driven analysis will be followed. Normally retailers will match their growth potential to manufacturers growth and competitors penetration in that market area.
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