When a customer heads to your store to buy a much-awaited video game on release day, the last thing they want to hear is, “Sorry, we’re sold out.”
If they do, it’s unlikely those folks will come back to shop with your brand – especially if your competitor has that product in stock.
In fact, 58% of shoppers take their money elsewhere due to 1 poor customer experience (like going out of stock). Luckily, a little retail planning can sidestep this worst-case scenario completely. Here’s how.
Retail planning is the business process of creating a data-based strategy to meet customer demand and maximize their return on investments (ROI). Put simply, retail planning helps you accurately anticipate and prepare your business for the future.
That’s because retail planning is key to competing in an ever-changing market and ensuring sustained growth. How? One way is through demand planning.
Demand planning is a genre of retail planning that ensures you have the right amount of inventory to fulfill customer demand. And so so without racking up expensive holding costs or stocking out.
Market shifts, changes in consumer demand, and various other factors conspire to make it impossible for retailers to maintain optimal inventory levels.
In a 2017 study, 34% of retailers admitted to shipping an order late because they unknowingly sold a product that was out of stock. But the impact goes far beyond a few late orders.
Stockout costs North American retailers $129.5B annually. And retailers worldwide an estimated $1T annually.
So, how do you start retail planning to avoid stockouts? It’s easy – just follow the 7 steps we’ve outlined below to begin your retail planning journey.
The first step in retail planning is doing your homework on your market (AKA conducting a market analysis).
This means deeply researching the marketplace (including your competitors, consumer interests, target persona purchasing habits, DTC trends, and alternate product offerings) to gain valuable insights about your customers and industry.
Here are 4 essential steps to conducting your market analysis:
Where do your customers like to shop? Are they budget-conscious and always looking for a good deal? Do they get recommendations on what to buy from friends and family?
Knowing how your customers behave gives you insight into what influences their buying decisions, like pricing, alternate products, brand loyalty, culture, beliefs, and customer journey stage.
For example, say your customers are part of the 67% of shoppers that now shop more online than they did pre-pandemic. In this case, you should invest more in your direct-to-consumer experience.
Or, if you learn your customers are price-sensitive, try stocking up on low-priced items or offer deals (like product bundles).
Once you know your customers’ habits, you’ll be able to identify service gaps, revise your marketing tactics, plan your inventory, and cater to their specific needs.
But how do you analyze your customer’s behavior to find this information?
Start by looking at past historical sales data to predict future inventory needs. Meaning, look for patterns in your historical sales data. For instance, are there products they love (or typically don’t buy)? When and where do your customers shop? What’s their average order value?
Not seeing any obvious trends? You can always go to the source and conduct customer interviews. Quick 20-minute-or-so conversations with your best and worst customers are an easy way to understand what drives their behavior.
Then, funnel those findings into your demand forecasts to ensure you stock the right amount of inventory.
Alternatively, you can use a demand forecasting tool (like Cogsy) to analyze this data for you. This can be the smarter, more cost-effective way to go. Why? Because it removes common forecasting mistakes that typically lead to overstock and stockouts. That way, you can confidently maintain optimal inventory levels.
Now that you have all these great data points, it’s time to set specific, measurable, achievable, relevant, and time-bound (SMART) goals to help you organize your priorities.
So, what does a SMART goal look like?
🤿 Dive deeper: A complete guide for writing SMART goals.
The retail industry is often unpredictable. Luckily, short-term planning can help you handle immediate priorities, such as seasonal fluctuations, while getting you closer to your long-term goals.
That said, short-term planning doesn’t mean last-minute planning. Instead, it means getting a jump on things for shorter time periods – all while working toward your long-term vision.
Having a long-term plan is crucial because it guides all your short-term efforts. After all, how would you know if you’re heading in the right direction without this big-picture goal?
For example, say your store sells school supplies, and your big-picture goal is to generate more revenue outside the peak back-to-school season. Then, identify other smaller sales peaks throughout the year.
Perhaps tape sales might go up around the holidays when everyone is wrapping gifts. If so, spin up a targeted marketing campaign to further increase demand for those SKUs.
If that doesn’t work, you can always diagnose what went wrong, return to the drawing board, and rework your plan based on your learnings.
A retail strategy is a plan to promote your products to the right customers at the right time.
That’s where the 7 Ps of marketing come in:
Many retailers leverage some or all of the 7 Ps when compiling their retail strategy. One example is Warby Parker, which created a customer-centric DTC model. The company relied on strong branding, a new model for selling glasses, and upfront pricing—all of which contributed to the company’s astounding growth.
“The thing that was immediately clear the second I met [the co-founders] was how thoughtful they were about the consumer,” said Ben Lerer, Lerer Hippeau Ventures Managing Partner. “The way they thought about going into retail [was] they listened to the customer like no other brand I had ever seen.”
Now it’s time to test your strategic retail plan. Once you’ve settled on your product mix, the pricing strategy, how you’ll promote your products, and your store layout, you can start implementing your plans to see if they help you meet your goals.
For example, suppose your goal was to increase foot traffic in your new retail location by 5% in the next quarter. So you want to experiment with retail space planning. Try a unique store layout or visual displays as part of your strategy.
Effective implementation is critical in determining if your retail planning strategy is working. In fact, brands like Glossier and Allbirds reopened “experiential, Insta-friendly stores” despite plenty of success with online sales during the pandemic. Why? Because both brands believed shoppers wanted these offline experiences.
“Consumers aren’t looking to visit stores simply to transact – they’re hungry for meaningful and memorable experiences that can’t be recreated online,” said Kristy Maynes, Glossier’s SVP of retail.
And it turns out that Kristy was right. Glossier’s Seattle location saw more than 35,000 visitors in the first 2 months alone!
Now that you’ve implemented your retail strategy, it’s time to measure your results. Take a close look at your success metrics to evaluate the performance of your retail plan.
Retail analytics are key to interpreting the success or failure of your strategy. So, the more accurate metrics you access, the easier it will be to measure outcomes and tweak your plan in the future if needed.
These metrics will entirely depend on your goals. But they might include total sales, revenue, amount of foot traffic, average cart size, average transaction amount, and any change in sales for specific products.
As we’ve established, retail planning is a challenging task. But the right retail planning software can make it a whole lot easier.
Cogsy takes the guesswork out of production planning and helps with your inventory management needs – without pesky human errors or time-consuming manual work.
With it, you can visualize your inventory health, know when you’re in short supply, and proactively adjust your orders if your planning seems off track. Then match your inventory needs with your annual growth plans without relying on a spreadsheet. Instead, you can identify your hot-selling products quickly, and Cogsy will alert you when any SKUs need to be replenished.
That’s not all. With accurate and advanced analytics, you’ll be able to provide suppliers with predictable purchase orders and build better relationships. If you were doing this manually, it’d be almost impossible to know in advance if you’ll be overstocking or under stocking – but Cogsy runs these calculations with plenty of time to plan.
This reliability can earn your supplier’s trust and even move you up in the production line if needed. But don’t take our word for it – try Cogsy free for 14 days.
Retail store planning ensures the efficient use of your retail space, which allows you to attract new customers, improve the in-store and point-of-sale (POS) customer experience, and ensure they enjoy spending time at your store.
Production planning and allocation (P&A) in retail is the process of setting sales, inventory, or financial goals and tracking results to determine if you’ve achieved them or to help you identify where you didn’t meet the intended performance.
A ladder plan in retail merchandising refers to sales forecasting for specific products, including the projected timeline and current supply. It combines historical pricing, sales, and order data with future projections and product availability.
Strategic plans are big-picture, long-term goals that provide the overarching direction for your retail business. In contrast, operational retail plans are more granular and involve tactical steps to achieve your overall strategy.