It’s Time For Strategic Merchandising

A former boss of mine used to say, “This strategy works…until it doesn’t.”  His specific point was that all merchandising strategies eventually fail.  Hopefully, your CEO or GMM can anticipate that moment and create a new strategy, but even if they tell you to hit trend, cover entry price points, fend off Forever 21 and H&M, grow knit tops by 3x, become a wear-to-work destination, etc. – will you know how?

Let’s face it, merchandising as practiced by the major chains today is tacitly tactical.  Buyers are buried in data (TY and LY) and managing multiple deliveries – concurrently – from concept to liquidation.  Retail is detail, and those who thrive are inevitably detail-oriented multi-taskers.  Most do not have the time, or the wiring, to think strategically.

Most of the merchants we’ve worked with (even some chief ones) act reactively, think incrementally, and choose to focus on the short-term.  They define their function narrowly and tend to look inwardly.  Their plan is a line plan.

Merchandise strategy depends on the business, category and season.  Strategic merchandising, however, is a way of thinking and doing that is repeatable – and teachable.

Tactical vs. Strategic Merchandising

Tactical Merchandising Strategic Merchandising
Mandate Incremental change Strategic, large-scale change
Decision-making Reactive Proactive
Time Horizon Short term Medium and long term
Primary Inputs Own historical data, fashion direction Include business strategy, consumer insight, direct and aspirational competition
Functional Scope Merchandising only Include design, marketing and stores
Key Planning Output Line plan Business plan, with emphasis on the key business drivers and variables that aggregate to broader company strategy

Why Now?

It was not so long ago that consistent tactical execution was sufficient for success.  In the ‘70s and ‘80s, disposable incomes, mall space and mall culture grew rapidly, propelling geometric growth in secular demand.  If it was new, it sold.  The “professionalization” of vertical specialty store retailing in the ’90s and ’00s sustained growth, and the Gen Y boom fueled teen concepts in particular.

But demand and “A” space are now shrinking, and ecommerce and social networking are diverting traffic.  In this tough, low-growth environment, even the national, professional operators are struggling.  Merchandising mistakes show up quickly in quarterly earnings hits and lost share. “Breakout” strategies are needed, requiring changes in thinking and doing.  Strategic merchandising may be a solution.