Merchandise planning and buying refers to retailers' systematic approach to forecasting merchandise inventory requirements and negotiating the best deals with suppliers. Typically, retailers have a centralized buyer or team of buyers who manages this process for the chain. They may have more local or regional merchandise managers who oversee the implementation of merchandise in stores.
All facets of merchandising are integral to retailer success since holding inventory and selling it to end customers are primary functions of retailers. Buyers have to consider how much space is available in stores for each department and product category. They also have to plan for volatility in sales and other effects on inventory demands. Buyers also negotiate with suppliers to make the best deals, to plan for efficient inventory replenishment and to manage other aspects of ultimately satisfying the needs of end customers.
Planning and buying includes a number of critical tasks. Retail buyers commonly use merchandise planning software solutions to coordinate them all. The merchandise system typically begins with a buying plan. This includes consideration of supply partners. Selection of merchandise to carry, establishment of retail prices, ongoing ordering processes, management of supplier relationships, strategic merchandising and in-store promotion are all important tasks with the merchandise planning and buying process.
Getting the best deal from suppliers and managing ordering processes are important ongoing buyer responsibilities. When ordering product for hundreds or thousands of stores domestically or globally, saving even a few dollars per item can have dramatic bottom-line effects. In their chapter on "Merchandise Planning Systems" in the seventh edition of their "Retailing Management" textbook, Levy & Weitz say buying staple products and fashion are completely different. Staple products are typically more consistent and predictable, while fashion is more trendy and evolving. Constant products afford the buyer historical sales for use in planning, while constantly changing fashion is harder to forecast.
Supply Chain Management
The emergence of stronger collaboration with suppliers and the system known as supply chain management has revolutionized 21st century merchandise systems. Companies have cut down on the number of suppliers they use to form more mutually beneficial partnerships. Both supplier and retail share an end goal of giving the customer the best value. This typically means electronic data integration where retailers and vendors link computer systems. This allows for automatic inventory replenishment at store levels to improve just-in-time inventory processes. This has reduced manual merchandise buying components, helping cut costs and improve value to customers.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.