What is the importance of planning in retail? Enumerate various steps in the planning process.

 The ongoing challenge for every independent specialty retailer is the constant need to increase sales, control expenses and improve profitability. Because of these key business factors it is more important than ever for today’s retailer to effectively manage their largest investment: inventory. Maximizing the return on inventory investment is the key to profitability in retailing.

Profitability is achieved by optimizing stock turn rates by merchandise classification to assure that the inventory dollars are moved from slower turning under-performing classes to existing or new classes which represent profitable sales opportunities. Merchandise, which is ordered months before delivery must be timed to meet sales demand and optimize cash flow. Without an effective merchandise plan in place, managing these factors is hit or miss. 

When a retailer is able to optimize their inventory total inventory levels and markdowns are reduced while cash flow, margins and sales are increased. The result of proper inventory planning is a store wide increase in profitability. The best measurement of inventory profitability is the annual Stock Turn Rate. Increasing Stock Turn rates leads to a smaller investment in inventory with lower carrying costs, better cash flow and improved opportunity costs/investments. As inventory is reduced, gross margins increase as a result of lower, controlled markdowns. With a well planned initial inventory commitment, the retailer is in a position to take advantage of off-priced, in season opportunities to increase the initial markon.

Most importantly, sales levels are retained in under performing classes while inventory dollars are better invested to take advantage of better sales opportunities. No question, a better balanced inventory results in increased sales – not just from reducing lost sales, but by being in position to react to changing trends and maintaining fresh and exciting merchandise selections. Yes, planning takes time and discipline. A merchant wears more hats in one day than most people wear in their lives. With an effective planning tool, this time is minimal and certainly a priority for all independent retailers.

The only effective retail software system goes beyond tracking inventory to provide information and management tools designed to allow for efficient and effective merchandise planning.

Steps in the planning process are following:

1. Understand the need for a strategic plan.

2. Set goals.

3. Develop assumptions or premises.

4. Research different ways to achieve objectives.

5. Choose your plan of action.

6. Develop a supporting plan.

7. Implement the strategic plan.

1. Understand the need for a strategic plan

The first and perhaps most important step of the planning process is understanding that there is a need for a plan.

2. Set goals

Setting goals is the second step of the strategic planning process.

3. Develop assumptions or premises

When you make a plan for your business, it should be done with the future in mind,

4. Research different ways to achieve objectives

There are usually several different ways to achieve a goal. You will need to take the time to research various ways your team could work toward completing a set objective.

5. Choose your plan of action 

Once you have set your objectives, developed your premises and identified or evaluated different solutions for completing your goals, you can then decide which course of action to take

6. Develop a supporting plan

Once you know which plan you are going to implement, you may also need to develop a secondary plan to help you institute the primary plan.

7. Implement the strategic plan

The final step of the strategic planning process is implementing the plan.

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