Merchandising Planning Strategies for New Retail Stores

Planning for a new store location? If so, choosing the right strategies is critical to success. Here are various options that merchandise planning teams can consider.

Inventory Planning for Your First Store

If your company is preparing to launch its very first store, it’s an exhilarating and exhausting time. It’s also the time when your brand gets to venture out into the market and gauge consumer reception. With this in mind, here are some of the best ways to approach inventory planning as the launch draws near:

1. Hypothesize the ideal product mix.

Your first store should be the testing ground for consumer demand, and the key to testing it well is to predict the best mix of core and fashion products. Over time, you’ll be able to use data points gleaned from your store to make future decisions. For now, you'll need to make informed hypotheses.

2. Ensure your turn is tight.

A high rate of inventory turnover helps you maximize profit and minimize risk. It also helps cash flow and keeps you from tying up working capital in slow-moving or surplus inventory. As such, work to identify trends and demand so you can turn inventory quickly.

As you do, your products will better serve your customers and you can be more nimble in responding to the changing market. It will vary from brand to brand, but a best practice for most new stores is to aim to have four weeks of supply on hand. Make sure to analyze your initial weeks’ sales regularly so you can restock in real time.

Inventory Planning for an Additional Location

So, what if you already have existing stores and are laying the groundwork for your next location? It’s still essential to have a thoughtfully crafted inventory plan in place. Here are some strategies to try:

3. Implement the 80/20 rule.

This merchandising approach is a popular one because it keeps profits high and risks low. The gist is that 20 percent of a retailer’s products are responsible for 80 percent of its sales — i.e., a select group of core best-sellers drive the most revenue. Therefore, as you open a new location, make sure you have plenty of your brand’s core best-sellers in stock. Although your old faithful products sell, they’re also … kind of boring. Therefore, be sure to weave in fashion products at the forefront of the store and on your most prominent displays. Change out the fashion often to keep the store looking fresh and exciting so shoppers come back time and again.

4. Implement like-for-like strategies.

There are a few ways you can use existing data to project helpful inventory numbers. Here are two:

• Like-for-Like Categorical Distribution: Your brand probably has its own method of grouping products together, from color to fabric and beyond. When you add up your sales from all channels, you can easily see what ratios should be reflected in your store inventory. For example, if you usually sell 60/40 adult/kid products, this is the split of inventory you should also plan for in the store.
• Like-for-Like Geography Using Online Sales as Proxy: Online and in-store buying behaviors differ, but one can still help shed light on the other. When you analyze online sales, you should be able to at least gather an idea of trends in a given geographic area, like customer demographics, which can then help you select similar products in a new store in the same place. Are your most expensive styles outpacing in the suburbs of D.C.? When you open your store there, you may want to push higher price point items.

When retailers plan to open a new store, it’s crucial they create effective inventory plans. By following the guidelines outlined here, merchandising planners will be well on their way to starting new stores off on the right foot, positioned for sales and success.

Lacey Rotsaert is the head of planning and merchandising solutions at Toolio, a cloud-based merchandise planning platform built to help the next-generation of retailers make faster, data-driven merchandising decisions.