Style and Statistics

Chapter 2 Merchandise Financial Planning

Assortment” is a term used to describe the product offerings carried by a retailer. Managing this assortment is a critical piece to creating a successful and profitable business. This assortment needs to change with the seasons. It needs to change with the recent fashion trends and consumer trends. Assortments need to reflect what is going on in the marketplace. If people are no longer buying Kodak cameras or overalls, then you definitely don’t want them in your assortment. But assortment management is also about having a business plan and meeting financial goals. At the end of the day, no matter how beautiful an assortment is, it has to drive profitability for a retailer or designer to stay in business.

Management of assortment starts at a high level. Specific financial targets must be met. Quite often, these high-level initial targets are determined by a finance department. Companies have certain targets that must be met to keep the lights on, keep investors happy, and make money. Finance departments typically determine a high-level annual revenue target. From there, a planning and allocation team typically takes that number from finance and breaks it down to consumable and actionable levels.

We call these levels hierarchies. A “hierarchy” by definition is a ranking system where items are classified into different levels. From a merchandising hierarchy perspective, three different hierarchies are utilized. One hierarchy is for merchandise, ...