Lessons in Retail: Merchandise & Assortment Planning post- Pandemic: How to Anticipate the “New Normal”
It feels like we have turned a corner and are moving towards a post-Covid state by Summer. Mall traffic is up, and stores are busy for the first time in a year. Brands and retailers are reporting an uptick in apparel and footwear sales as consumers prepare to return to the office, take summer vacations, and make other post-vaccine plans.
But, is this just a “blip”? What does this new found optimism and spending mean for 2022 when we return to a “new normal”?
It means business still isn’t normal, and planning in this kind of environment isn’t normal either. Anticipating consumer demand across brands, classifications and channels is a massive challenge. But, with the right combination of data, performance history and instinct, it is possible to create realistic merchandise assortment plans. The key is knowing WHAT data points to use, and having the vision and experience to create and commit to the pla
Given the uncertainty in the market, I recommend a bottom-up approach to enable a higher level of visibility and more accurate financial projections for 2022.
To do that:
Where do you have big dips or peaks in sales?
Where can you plan for improvements? And by how much?
When you establish the monthly sales and inventory plans, you can plan the assortment.
The CLASSIFICATION MIX
Over the past 12 months, as a restful of the pandemic-induced lifestyle and WFH, consumers have significantly shifted their spending. While some of the changes will remain, other adjustments may be a symptom of the pandemic. The challenge for brands and retailers is anticipating how this will play out in the next 12 months.
To begin, I recommend starting at a high level:
What current trends will remain?
Then, using data for 2-3 years (PRIOR TO 2020 YE, and including 2021 YTD) analyze the following:
The analysis should result in a plan that reflects your vision of what you hope business will look like when the current crisis is more or less over, and we return to a “new normal” in 2022.
The BRAND MATRIX
Determining which brands to keep in your assortment lies at the intersection of customer demand and profitability - prior to 2020 and currently in 2021.
Rank the brands by GROSS MARGIN DOLLARS and you may be surprised to learn your highest revenue brand is not your most profitable, and may need to be reduced. Invest in the brands that meet or exceed customer demand, and reduce or temporarily eliminate the ones that do not.
We had a mantra at Nordstrom “sales are the truth”. If the customer did not vote for a brand or product with their hard earned dollars and buy it at regular price, we did not keep investing in it.
The KEY ITEMS
In my role as EVP of Women Apparel at Nordstrom, when I met with store managers, my first question was “What is your number one item?”. I would follow it with “How many units did you sell last month? Are you in stock?”. Every department had a top item, and the managers understood the importance of being in stock to maintain the rate of sale.
In every segment of the business, there are “must have items”. Whether you are a large or small retailer, identifying what those items are, editing them based on your CUSTOMER needs, and investing in them is a key component to a productive assortment.
When your budgets are finalized, and your assortment plans solidified, it is time to get visual.
To ensure we had focus in our assortments at Nordstrom, I instituted a monthly checkpoint titled “What Will You Stand For?”. The 12 functional departments I supported declared a “theme” and invested a portion of their inventory dollar to effectively present it in the store. This process was adopted by every other area in the company, and today guides the monthly product features throughout the merchandising organization.
Forecasting is a leap of faith, and 2022 may be the ultimate test. But, if you gather the correct data and focus on the things you can control, you can succeed during the most turbulent times. It requires instinct, vision and experience.
One of the most important lessons I learned over the years was to PLAY OFENSE, NOT DEFENSE. Decide what you are going to offer to the customer, and do it with conviction. Don’t try and be a jack of all trades as you will be the master to none.
If you need help getting this going, or if you are stuck midstream, call me. The clock is ticking and 2022 will be here before you know it.
In 2007, during the Global Economic Meltdown, as EVP of Women’s Apparel at Nordstrom, I led a $2B division through a strategic turnaround while sales dropped 25%. We maintained profitability while sales declined by commensurately reducing inventory and working with our vendor partners. I developed a consumer-centric merchandising strategy that was later adopted by the entire Nordstrom merchandising organization.
Turnarounds are when leadership matters most. Managers can stem losses with a few bold strokes, such as slashing inventory or consolidating jobs. But putting a retail organization on a positive path toward future success also requires leaders to adjust their behavior and leadership style.
Prior to 2020, many executives, operators and leaders in high-growth companies were focused on fostering innovation, driving revenue, and gaining market share. Today, many of those same leaders have had to shift their focus and make rapid decisions about things like reducing inventory, closing stores, consolidating headcount and managing expenses. They are facing time sensitive issues, and have to move to a more operational position which drastically alters the scope of their roles and priorities.
This is not an easy transition., Those in charge will be tested in ways where they have not developed their leadership skills, and the learning curve will be steep. They will need regular coaching from their bosses or outside advisors to succeed.
When I was a senior executive at Nordstrom navigating the 2008 economic meltdown, I searched far and wide for an expert to provide outside counsel and help me develop strategies for turning my $2B business around. What I found were either CEOs that were still working in the industry and unavailable to help, or consultants well-versed in academic answers without hands-on experience. I needed guidance from a leader that had “been through it” and had practical solutions for me. I found my coach in a non-executive board member who, to this day, I credit with much of my learning and leadership development. Gratefully, today I am that person.
For the past 9 years, I have worked alongside buyers, managers, CEOS and investors in all types of consumer goods. No matter what the segment of business, or whether it is thriving or failing, leadership is at the core. The quality and capabilities of the leader directly correlates with the level of success. And these four behaviors have been present in all the successful leaders I have worked with.
1: Practice Speed in Decision Making
2: Be Nimble and Adaptable
3: Measure Performance and Provide Recognition
4: Connect and Communicate
If you can model these behaviors, daily issues and crises are much easier to solve and the road to recovery is much smoother.
Behavior 1: Speed in Decision Making
The environment is changing by the day. Information may be incomplete, but it is important to process the available information quickly, align with your new priorities, and make decisions with conviction.
Determining how decisions will be made in this new environment, and by whom, will enable speed. Some decisions will need to be top down while others can and should be made within the organization.
Behavior 2: Adapt regularly without Flip-Flopping
In times of uncertainty, it is imperative that you decide what NOT to do. This could mean what classifications you will no longer buy, what marketing projects you will put on hold, or what regions / channels you may no longer pursue. Whatever they are, put large, costly initiatives on hold and save expenses until you solve the immediate issues of today.
Create an interim set of priorities and focus , and align organizational talent, performance metrics, capital and human resources accordingly.
But, if this new playbook is not yielding results, and new information becomes available, do not be afraid to course correct and adjust.
Being nimble is one of the most important behaviors leaders can possess during these times. I was occasionally accused of “flip flopping” when in reality I was constantly learning and adjusting to make progress.
Behavior 3: Adjust Performance Metrics and Celebrate Success
How you measured success in the past is probably irrelevant in the current state.
It is important you:
Behavior 4: Be Transparent and Available
In times of crisis, no job is more important than taking care of your team. In my experience, frequent, honest and positive communication is critical.
I held weekly meetings with my direct reports immediately following the executive meetings I attended with the Nordstrom family.
My purpose was twofold:
Sometimes these meetings were only 15 minutes but they were motivating.
Additionally, I made myself more available and reached out daily to check the “pulse” on the team. However you can, find ways to connect and support your employees.
Leading during a crisis will reveal a great deal about you and your organization. When the immediate problems are under control and you get to the other side, there will inevitably be another crisis to conquer. If you work on these behaviors you will be much better equipped to handle whatever comes your way.
The time is now!
Contact me directly to help you navigate your turnaround plans @ Lorettasoffe@live.com