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.