The success of a retail business relies on having the right products available at the right time and place.
To do so, having a solid retail planning strategy is key. Before you launch an online business and sell products, you need a plan of action first if you want to make profit.
In this article, we’ll break down the steps of proper retail planning, why it’s important, and how ShipBob can help with the “logistics” side when it’s time to execute.
What is retail planning?
Retail planning is the process of developing a strategy for retailers to meet customer demand while maximizing ROI using data and other resources.
Taking the time to plan ensures businesses have the right amount of inventory available to meet demand while minimizing risk of having too much inventory tied into capital.
It also involves pricing and observing competition to ensure products are priced right and are delivered quickly and affordably to meet customer expectations.
Why is strategic retail planning important?
47% of consumers are willing to pay more for an exceptional customer experience.
Strategic retail planning is crucial if you want to consistently meet consumer demand and deliver a great experience.
On the flip side, the same number of consumers would be willing to switch to a different brand or retailer after a frustrating experience. This frustration could result from issues like stockouts, delivery delays, and high prices.
Take for example, how Montgomery Ward had to shut its doors after 128 years in business. The store was struggling to survive in a highly competitive market without anything distinctive to offer.
While there were many factors leading to the demise of the retail chain, the renowned retail brand failed to stock the right kinds of inventory that was in demand.
Strategic retail planning helps retailers stay competitive and foresee challenges and risks, so they can adjust their retail strategy accordingly to meet demand and stay relevant.
What steps are involved in retail planning?
There is a lot that goes into retailing planning, but here, we break down the steps into three main major phases.
Merchandise financial planning (MFP)
First, you start by mapping your financial goals against your retail procurement and sales strategy, which is known as “merchandise financial planning (MFP).”
Merchandise financial planning involves sourcing and buying products your customers want to buy, then pricing and distributing them strategically to yield maximum returns on investment.
Financial planning helps to optimize your inventory investment to satisfy consumer demand while preventing excess stock. With careful financial planning, you’re spending your money only to procure the inventory you need in a given period of time to meet demand.
Next, you put the above process into action by deploying a sales strategy that allows you to meet your financial goals. This stage is all about coming up with a plan to sell inventory and turn it into profit.
Sales planning involves accurate demand forecasting, so you can project the amount of inventory that will be sold in a given period of time. It also involves SKU management and deciding what SKUs will sell and which SKUs might be slower moving.
The best way to plan for sales is to look at your competition, research customer buying behavior and trends, and look into historical order data.
Finally, you have the inventory planning process, which involves optimizing your inventory to meet demand and optimize internal costs.
Inventory planning consists of understanding what SKUs perform the best through multiple channels, such as location and sales channels (social media and through other retailers).
For example, if you sell summer apparel, you’ll want to consider where to store the most amount of inventory based on seasonality. You most likely would sell more inventory throughout the year in warmer climates (like California or Florida), then in the Midwest year round.
6 steps to create a strategic retail plan
Considering the key role it plays in ensuring customer satisfaction and boosting your bottom line, a strategic retail plan is crucial for your business.
Here, we break down the six steps to take before execution.
Step 1: Assess the market
A solid understanding of the current market is one of the first steps in retail planning.
By seeing what’s out there in the market and what your competitors are doing, you can better assess where you stand and develop a plan of action.
The SWOT analysis method is a great way to see exactly what challenges and opportunities exist. This involves identifying the strengths, weaknesses, opportunities, and threats when analyzing your competitors, so you can find your unique space in the marketplace.
For example, your competitor’s strengths may include product quality and exceptional customer service. They may also have a strong reputation that contributes to better recognizability and brand trust.
Meanwhile, their weaknesses may include the lack of multiple payment options. They may also be selling only through a couple of sales channels, which could make their products less accessible to some consumers.
As for opportunities, you may identify internal ones, such as the use of automation to streamline your processes or the opportunity to expand into multiple fulfillment locations to deliver orders to customers faster.
Threats may be in the form of competitors offering faster and more affordable shipping options. It may also involve disruptions in the supply chain, such as a shortage of raw materials, due to new legislature affecting imports and exports — which impacts the entire market.
Closely analyzing all these factors will help you identify ways to strengthen your retail operations and get ahead of the competition.
Step 2: Understand customer behavior
Without a proper understanding of your target audience, you won’t know which products to sell or how to sell them.
A thorough analysis of customer behavior is essential to understand their needs, pain points, preferences, and motivations.
Some questions to consider include:
- Are you selling the products customers want?
- Can customers buy your products through the sales channels they prefer?
- Are you offering desirable shipping options, such as free or 2-day shipping?
Ideally, you should employ both quantitative and qualitative research methods to get a 360-degree view of your customer behavior. You could conduct surveys, collect feedback, use online analytics tools, look at historical data, or work with focus groups.
For example, the brand Innocent Drinks was receiving complaints about having too many banana-based smoothies. The brand listened and came up with a new banana-less smoothie to cater to the demands of customers who still wanted to buy their drinks but craved variety.
If you’re constantly stocking up on items that you assume your customers would like without understanding what they do like, you could face a risk of becoming irrelevant in the market and accumulating unsellable inventory.
Step 4: Set objectives
What gets measured gets managed.
When business objectives are defined, your team will be on the same page in terms of what success looks like for the business.
Make sure to get as specific as possible when creating goals. That means you want to avoid generic objectives. To do so, refer to the SMART goal setting model:
- Specific: It should answer questions like what you need to accomplish and who is responsible for it. For example, your goal may be for the sales department to close 30% more sales compared to the previous quarter instead of just aiming to “increase sales.”
- Measurable: Your goal should be quantifiable by having a specific number to work toward. For example, you may aim to drive 1,000 new signups for your product by the end of the quarter.
- Achievable: It should also be realistic enough to achieve. Consider whether you have the time and resources to accomplish the goal. For example, a 15% revenue growth may be more realistic to achieve than a 50% revenue growth considering the lack of resources.
- Relevant: Your goal should also make sense considering your bottom line. For example, a 10% increase in sales will significantly contribute to your revenue growth.
- Time-bound: Make sure you specify the timeline by which the goal should be achieved. For example, you may aim to achieve the goal by the end of the current quarter or within two months’ time.
Step 5: Create and implement strategies
Creating and implementing your retail plan can be extremely time-consuming and challenging because there are many moving parts involved.
Before implementing the strategy, be sure to carefully consider factors such as product type range, pricing, placement, marketing and advertising spend, and staffing, among many others.
You’ll need to pay extra close attention to your merchandising mix as you need to offer the right assortment of products to appeal to your audience. Perhaps you want to specialize in a small variety of high-end products to maintain exclusivity.
Or maybe you want to keep your merchandising mix broad to appeal to a wider variety of buyers. Regardless, it’s important to be strategic with your decision.
For example, as one of the largest footwear retailers in the market, Zappos has an expansive footwear merchandising mix. Their customers can choose from hundreds of thousands of options in multiple categories and from hundreds of brands.
Additionally, your pricing strategy should be carefully planned to help you drive more profits. Apple’s pricing ladder, for example, is well optimized to maximize revenue. If you opt to spend an extra $X to increase your storage, now you’re only another extra $Y away from a superior device.
Step 6: Monitor performance and iterate accordingly
Finally, once your retail plan has been implemented, it’s time to keep track of performance to see how well the plan is working.
Be on the lookout for any errors or optimization opportunities, so you can quickly take action. Similarly, identify what’s working, so you can incorporate it into your future retail planning.
Real-time data access and inventory analytics are crucial parts of this step.
Monitoring inventory levels in real time will help you keep track of stockouts, improve inventory efficacy, and adjust inventory levels as needed.
ShipBob’s analytics are a huge bonus for a merchant looking to partner with a single 3PL that has a built-in order management tool. I was so stoked about being able to see the optimized layout of where you should be distributing your inventory is great.
Having inventory and warehouse management capabilities built into your 3PL is such a value-add, especially for smaller companies.”
Juliana Brasil, Director of Operations at Food Huggers
ShipBob takes the legwork out of retail planning
ShipBob is an omnichannel fulfillment provider with a global fulfillment network, powered by a centralized proprietary platform for real-time inventory tracking, order management, SKU management, and much more.
When it comes to retail planning, ShipBob can help you execute by providing retail fulfillment expertise and retail distribution resources, such as fulfillment capabilities and inventory management data.
ShipBob’s fulfillment platform makes it easy to track inventory flow as it moves through the retail supply chain. It closely monitors demand data and inventory levels, so you have data to make better decisions on inventory replenishment and distribution.
Off the bat, I liked that I would be able to control multiple warehouses through one page with ShipBob. With my old 3PL, I could never just open a page and get the info I wanted. I had to click several times, then export it, and try to make sense of it. ShipBob lets you manage your inventory while providing important data in a very digestible way.”
Wes Brown, Head of Operations at Black Claw LLC
To learn more about how ShipBob can help you with logistics planning, click the button below for more information and to request custom pricing.
Retail planning FAQs
Below are answers to the most common questions about retail planning.
What are the four Ps in retail?
The four Ps in retail are product, price, place, and promotion.
What are common retail challenges?
Some of the most common retail challenges include attracting new customers, keeping up with changing consumer demand, keeping an eye on competition, and retaining existing customers.
How are retailers transforming in 2022?
In 2022, retailers are undergoing a supply chain transformation that digitizes logistics and makes it easier to sell across channels to reach more customers.