Merchandise Planning : A Peek Behind the Curtain of Crafting a Successful Retail revenue stream (Part 2)

Recall our previous discussion on Dino's American Crew sales from last time? To refresh, in January, Dino had completely sold out his stock of Tea Tree after moving 12 units but was left with a considerable 81 units of Thickening Shampoo after selling 19. To gauge which product had better sales, we need to take into account how long Tea Tree was on sale, ie when did Dino ran out of his Tea Tree stock. If he sold out by January 29th, potentially only one more unit could have been moved. But if the stock was depleted by the 13th, sales might've doubled by month-end.

To effectively compare products sold over different durations, we use the Rate of Sale. For our example, Tea Tree shampoo registered a rate of 6 (12 units over 2 weeks), whereas Thickening shampoo clocked in at 4.75 (19 units over 4 weeks). It's crucial to remember this metric is most reliable when sales durations are similar.

Now, before diving deeper into the nuances of Merchandise Planning, it's essential to stress that this level of in-depth analysis and planning will be most productive when conducted annually or twice a year. Because while it's essential to set targets, review your stock, and plan out promotions, it's equally crucial not to hit the panic button too quickly. Let's say a new product is off to a slow start – give it a moment! You've got a plan; let it play out. But if things are genuinely off-track, then of course, switch things up.

The world of salon retail, spanning hair, nail or beauty salons, and spa retail, largely functions around continuity product. Your products, unlike fleeting fashion or footwear, are developed for longevity. While there may be periodic limited editions or sets, genuine product launches, true newness, are infrequent due to the substantial time and investment they demand.

When working on your 6-month sales and stock plans you should always set place holders for options that you may not know exactly what they are, but you know they will come. They could be your Christmas gift sets, or the discounted sets that your wholesaler will offer you every year for Black Friday

STEP 2 – STRATEGIC FORWARD PLANNING

With the insights from your retrospective analysis, you're ready to plan yout future. Start with your sales forecast for the forthcoming period, grounding it your historical data. Personally I always found using building blocks are very useful tool, that nowadays is made easier to visualise with the help of waterfall charts in Excel. Ideally, sales projections should be available at both total level and and department level.

Let'a look at Your Spa and their sales in three months in the run up to the New Year: Christmas is a pivotal retail juncture for spas. To estimate sales, juxtapose this year's performance against the preceding year. Suppose the sales from January to September this year are running a 6.5% ahead of the previous year. I could apply this 6.5% growth on the year to your Last Year sales of October to December. That would be easy, but you will be maximising your sales or minimising risks

It time to be strategic and commercial..

In your LY sales you should look for missed sales that you will not miss this time, you were out of stock of gift sets all December, you can write sales and buy the stock.

Product launches: you know that your best brand is launching a complete new range that will generate lots of interest and sales.

However, remember that forecasting isn't solely about adding, you will need to strip out the sales of the ranges that you are dropping to bringing in the newness, leaving you with the balance, which we have to assume will positive.

With a solid sales plan in place, the next challenge is determining the stock volume and its timely availability.

Stay tune for Part 3 as we zoom into how we get the right stock at the right time.

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