Range planning is a foundational discipline within retail merchandising, serving as the strategic blueprint for a business’s product offerings. It is the structured approach that determines the optimal mix of products to present to the consumer. This process governs the financial investment in inventory and dictates how product assortment aligns with broader business goals. Understanding range planning requires examining the strategic decisions, data inputs, and sequential steps that transform market analysis into physical inventory.
Defining Range Planning in Merchandising
Range planning, sometimes referred to as assortment planning, is the proactive decision-making framework used by retailers to curate their product selection. This framework determines precisely which items, or stock-keeping units (SKUs), a business will carry for an upcoming selling season. It also includes decisions on the depth of stock for each item and the specific price points offered.
The range plan acts as a formal commitment of capital, specifying the quantities of goods to be produced or purchased. This strategic foresight ensures the product mix aligns directly with the financial targets and the defined brand identity of the business. By carefully managing the range, merchants seek to optimize the balance between offering variety to the customer and maintaining efficient inventory levels.
Strategic Objectives of Range Planning
The aim of effective range planning is to maximize the profitability generated by the product inventory. This is achieved by ensuring that every unit of stock purchased has the highest probability of being sold at its intended full price. Minimizing financial risk is a parallel objective, which involves balancing the inventory pipeline to prevent costly overstock situations and lost sales due to stockouts.
Successful planning directly contributes to customer satisfaction by aligning the product offering with anticipated market demand and emerging trends. The curated selection must reinforce the retailer’s brand promise, ensuring the range accurately reflects the desired quality, style, and value proposition. This strategic alignment turns the inventory into a competitive asset.
Essential Data Inputs for Planning
The foundation of any robust range plan rests entirely on the quality and analysis of preparatory data. Merchants analyze historical sales performance, broken down by product categories, size profiles, colorways, and selling periods from previous seasons. This backward-looking analysis provides a statistical baseline for forecasting future consumer behavior and identifying past successes and failures in product assortment.
Current inventory levels across all distribution channels must also be assessed to determine what stock can be carried over and what must be liquidated before the new season begins. Understanding the age and location of existing stock prevents unnecessary duplication of purchases and frees up capital. Simultaneously, teams conduct thorough market trend analysis, studying competitor activity, runway influences, and broader economic indicators to forecast shifts in consumer preference. These insights are constrained by financial boundaries, such as the open-to-buy budget, which dictates the maximum spend available for new product investment.
The Step-by-Step Range Planning Process
Financial Budgeting and Forecasting
The process begins with financial budgeting and forecasting, where merchants establish high-level targets for total sales revenue, gross margin percentage, and desired stock turn for the entire season. These top-down financial goals are translated into specific inventory targets, such as the average stock value required to support the projected sales volume. This initial step provides the financial guardrails for all subsequent product decisions.
Category Review and Allocation
Next is the category review and allocation phase, where the total budget is distributed across different product groups or merchandise categories. Planners determine the proportional investment for each category based on its expected contribution to the overall financial targets, allocating capital and physical space to ensure a balanced product mix. This often involves adjusting sales forecasts for individual categories until the collective projection matches the initial total budget.
Product Selection and Sourcing
Following the financial allocation, the team moves into product selection and sourcing, choosing specific SKUs that will populate the range within the set budget for each category. Buyers collaborate with designers and suppliers to finalize styles, color assortments, and material specifications. This ensures the chosen products align with the brand’s aesthetic and quality standards. This phase converts the abstract financial plan into tangible product units and purchase orders are issued.
Phasing and Timing
The final stage involves phasing and timing, which dictates the delivery schedule for the selected inventory and the intended pricing strategy. Merchandise is scheduled for staggered delivery dates to align with seasonal demand peaks and maintain freshness in the store environment, often utilizing planned drops or releases. Markdown strategies are planned in advance, setting predetermined dates and discount levels to ensure efficient stock clearance by the end of the selling cycle.
Structuring the Range: Understanding Merchandise Hierarchy
To manage the complexity of thousands of individual products, retailers organize their inventory using a standardized merchandise hierarchy structure. This tiered system provides a logical framework that allows planners to manage financial budgets and sales performance from a high-level view down to the individual product.
The hierarchy includes several levels:
- The Department groups products by broad function, suchs as “Womenswear” or “Home Goods.”
- The Category is a more specific grouping like “Dresses” or “Bedroom Linens,” often serving as the primary level for budget allocation.
- The Sub-category further refines the group, separating “Evening Dresses” from “Day Dresses.”
- The Stock Keeping Unit (SKU) is the specific product identifier defined by style, color, and size.
This organizational structure connects the top-down financial goals, set at the Department level, to the bottom-up execution of buying and selling, which occurs at the SKU level.
Key Performance Indicators for Range Success
After the range is launched, its effectiveness is measured using a set of financial and operational Key Performance Indicators (KPIs).
- Gross Margin Return on Investment (GMROI) evaluates the profitability of inventory investment by calculating the gross profit earned for every dollar invested in stock.
- The Sell-Through Rate measures the percentage of stock sold versus the stock received over a specific period, indicating how quickly the range converts to sales.
- Inventory Turnover, or Stock Turn, measures how many times the average inventory is sold and replaced during a period, reflecting capital efficiency.
These metrics, alongside the tracking of the final Markdown Percentage, provide the data necessary to inform and refine the planning cycle for the next season.