Merchandise Planning

Hasan Nasir

Merchandise Planning

What is Merchandise Planning?

Merchandise planning is an inventory management concept. Merchandise are goods which one aims to sell. Merchandise planning is to make available these goods at the right time, place, and quantity. It aims at meeting customer demand while maximizing the return on investment.

It includes selecting, buying, and selling products that satisfy customer needs, enhance brand value, and maximize returns. It also helps in avoiding over or under-storage of inventory.

How to undertake Merchandise planning?

Different businesses carry out merchandise planning in different ways. This depends upon the specific need of that business. For example, an apparel retail firm may offer limited products but in maximum sizes and designs. However, a supermarket aims at making available the maximum number of products. It aims to satisfy the maximum needs of the customers at any given time.

Components of Merchandise planning:

To start with, let us understand the essential components of merchandise planning:


One needs to have something to sell it. Thus, the product is the first component of merchandise planning.

Products can be of several types. They can be routine, seasonal, or fashion-based in nature. Thus, one needs to understand the kind of product to maintain the inventory.

Demand for routine products is constant. Thus, one needs to maintain such stock throughout the year. Demand for seasonal products is limited to a particular season. Thus, one needs to maintain adequate stock throughout the season. Demand for fashion-based products is usually short-lived and is influenced by some event.

We can understand this with the help of an example. Demand for a pair of jeans is routine. Demand for winterwear is seasonal. At the same time, demand for a specific design of jacket may be influenced by a movie or an event. It may thus be short-lived.



After the right product comes the pricing aspect. Even if the right product is available, it will not sell if the pricing is not correct. Thus, pricing is another critical component of merchandise planning.

The price of a product depends upon its target customer segment. One needs to offer a product that meets the expectations of its target customers. Apart from routine pricing, one also needs to consider various pricing schemes. These could be discounts, product bundling, and buy-one-get-one offers. These depend on the demand for the product and its available stock.


Product range:

Product range refers to the variety of a product a company offers. It refers to various options a customer has while buying.

Variety can be the type of products, their designs, colors, brands, sizes, etc. It depends upon the business one is into. A kids’ retail store may sell only clothes. However, it may offer a wide variety of clothes. On the other hand, a retail mall will have many products. It offers clothes, footwear, household items, furniture, etc. But variety within these product categories may be limited.



It refers to the display of products. Products are classified into various categories for ease of purchase.

The display should be such that it attracts customers. It should also make buying a convenient process. One can use various fixtures and tools to display the products.



Assortment refers to the collection of products under a category. One aims at offering similar products under one category. Offering such a collection provides choices to the customers.

Say, for example, offering various toiletries together under one section. Thus, customers can meet all their demands quickly, which helps in increasing sales.


We have understood the various components of merchandise planning. Let us now understand how to undertake this process.

Following are some of the steps we should follow for undertaking merchandise planning:

Sales forecast: The success of any business depends on the accuracy of its sales forecast. An accurate sales forecast streamlines all other functions of the business. Merchandise planning is also based on this. Forecasting indicates the need for modifications in the product range. It also helps in the pricing of products.

Merchandise planning is a systematic data-based approach. One can analyze past sales trends, present economic conditions, customer preferences, etc., to forecast sales. Market research also helps in sales forecasting.

Budgeting: Along with the sales forecast, one also needs to prepare the financial budget. It is aimed at calculating the total investment required for the merchandise. One needs to ensure that the business earns an adequate return on this investment.


Merchandise controlling: Once the merchandise is bought, maintaining it becomes equally important. One aims at maintaining an optimum level of merchandise in the business. Thus, it is essential to monitor the stock level constantly. This is done to avoid scarcity or over-stocking of goods. One also needs to maintain the assortment under each product category.


Need of merchandise planning:

Following are some benefits one reaps by carrying out merchandise planning:

  1. It increases sales and maximizes return on investment
  2. It improves brand value as it aims at increasing customer satisfaction
  3. It reduces inventory holding costs as it aims at avoiding overstocking
  4. It reduces situations of stock-outs and limits obsolete inventory
  5. It improves profit and cash flow



Every business aims at keeping its customers happy and earn good returns. Merchandise planning is a method to achieve this. It aims at making the right product available in the right quantity, time, and place, to the customers. This helps in increasing sales while keeping costs under control. Merchandise planning enhances brand value, improves customer satisfaction, and maximizes returns.

The main components of merchandize planning are product, product range, price, and display. To get the desired results, one needs to carefully forecast sales, make a budget, and control the merchandise.