The Evolution of Retail // From Traditional to Tech-Driven Merchandise Planning

A Historical Timeline of Merchandise Planning

Merchandise planning is the backbone of retail. It’s the process that helps retailers decide what products to stock, in what quantities, and at what times. But, it wasn’t always the high-tech optimised process we see today.

The Early Days
In the early days, merchandise planning was all about intuition and experience. Store owners relied on their gut feelings, their understanding of the local community, and years of experience to decide what to order. If you owned a store back then, you’d probably have a pretty good idea of what your regular customers wanted. But, it was far from precise.

• Gut-driven decisions: Retailers would order stock based on what they thought would sell, often with little to no data to back it up.

• Manual tracking: Inventory was often tracked by hand, leading to a lot of guesswork and potential mistakes.

• Seasonal planning: Retailers planned for seasons, but without the help of advanced analytics, this planning was largely based on historical sales and a bit of hope.

The Rise of Department Stores
As retail began to scale, so did the complexity of merchandise planning. Department stores brought a wider range of products, and with that came the need for more structured planning. Retailers started to pay more attention to trends and customer behaviour. They still relied heavily on past sales data, but now they were beginning to look for patterns.

• Data-driven insights (sort of): Retailers began to use past sales data to predict future demand, but it was still a slow and labour-intensive process.

• Catalogues and mass marketing: With the rise of catalogues, retailers could reach a wider audience and gather more data, but it was still a far cry from today’s digital insights.

The Digital Revolution
Fast forward to the late 20th century, and things started to change—fast. Computers entered the scene, bringing with them new opportunities for data collection and analysis. Suddenly, retailers had access to vast amounts of data that could be analysed to make more informed decisions. But, it wasn’t just about having data; it was about how to use it effectively.

• Point of Sale (POS) systems: These systems allow retailers to track sales in real-time, giving them insights into what was selling and what wasn’t. This was the beginning of a more analytical approach to merchandise planning.

• Inventory management software: As inventory management software became more sophisticated, retailers could better track stock levels and optimise their orders. This reduced the risk of overstocking or running out of popular items.

• Customer Relationship Management (CRM) systems: Retailers could now track customer behaviour and preferences, allowing them to tailor their product offerings more precisely.

The Birth of E-commerce
Then came the internet, and with it, a whole new world of possibilities. E-commerce exploded onto the scene, and suddenly, merchandise planning wasn’t just about what would sell in a physical store, but also online.

• Online analytics: With the rise of e-commerce, retailers could track not just sales, but also customer behaviour on their websites. This opened up new avenues for understanding customer preferences and predicting trends.

• Personalisation: Technology allowed retailers to personalise their offerings in ways that were previously unimaginable. From recommending products based on past purchases to customising marketing messages, the possibilities were endless.

• Omnichannel planning: As customers began shopping both online and in-store, retailers had to develop strategies that took into account all channels. This added a new layer of complexity to merchandise planning, but also offered more data and insights.

The Role of Technology in Modern Retail

Today, technology is at the heart of merchandise planning. What was once a labour-intensive process driven by intuition and manual data entry has become a sophisticated, tech-driven operation.

But what exactly does this look like in practice?

Advanced Analytics and AI
Artificial Intelligence (AI) and machine learning have brought a level of sophistication to merchandise planning that was previously unimaginable. Retailers can now analyse vast amounts of data in real-time and make predictions with incredible accuracy.

• Predictive analytics: AI-powered tools can predict future demand based on a wide range of factors, from historical sales data to current trends and even weather patterns.

• Automated replenishment: With AI, retailers can automate the replenishment process, ensuring that the right products are always in stock without the need for manual intervention.

• Dynamic pricing: AI can also help retailers optimise their pricing strategies, adjusting prices in real-time based on demand, competition, and other factors.

Cloud-Based Solutions
The cloud has revolutionised how retailers manage their merchandise planning. Cloud-based solutions offer flexibility, scalability, and real-time access to data, making it easier for retailers to stay agile in a fast-paced market.

• Real-time collaboration: Teams can collaborate in real-time, regardless of location, ensuring that everyone has access to the latest data and insights.

• Scalability: As a retailer grows, so too can its merchandise planning solution, without the need for expensive infrastructure upgrades.

• Integration: Cloud-based solutions can easily integrate with other systems, such as POS and CRM, providing a seamless flow of data and insights.

Data-Driven Decisions
In modern retail, data is king. Retailers are leveraging data from a variety of sources to make more informed decisions and optimise their merchandise planning strategies.

• Customer insights: Retailers can now track customer behaviour across all touchpoints, from online browsing to in-store purchases. This data is invaluable for understanding what customers want and predicting future demand.

• Supply chain optimisation: Data-driven insights can help retailers optimise their supply chains, ensuring that products are delivered to the right place at the right time.

• Trend analysis: By analysing data from social media, search engines, and other sources, retailers can stay ahead of the curve and identify emerging trends before they hit the mainstream.

Looking Ahead: The Future of Merchandise Planning

So, what’s next? As technology continues to evolve, so too will merchandise planning. Here’s a glimpse of what the future might hold.

AI-Powered Forecasting
While AI is already playing a significant role in merchandise planning, we’re likely to see even more advanced AI-powered forecasting tools in the future. These tools will not only predict demand but also suggest new product ideas, identify potential risks, and optimise supply chains with minimal human intervention.

Hyper-Personalisation
As data collection becomes even more sophisticated, retailers will be able to offer hyper-personalised shopping experiences. Imagine walking into a store or logging onto a website where every product recommendation is tailored specifically to you, based on your preferences, past purchases, and even your mood.

Sustainability
Sustainability is becoming increasingly important to consumers, and this will be reflected in merchandise planning. Retailers will use technology to optimise their supply chains and reduce waste, ensuring that they can meet the demands of eco-conscious consumers without sacrificing profitability.