What is fashion merchandising?

The buying-selling cycle of fashion retail is in constant flux, and expert merchandising is the key for every brand looking for profitable, sustainable growth. It is the art and science of retailing. Harking back to 1927, retail merchandising has long been divided into the five rights of merchandising: 1) the right merchandise, 2) in the right quantities, 3) at the right time, 4) at the right price, and 5) in the right place.

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Often subject to misinterpretation, let’s make merchandising make sense. Here, we deep dive into exactly what fashion merchandising is, and what merchandisers need to achieve for sales success. 

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What is fashion merchandising in retail? 

Merchandising or merchandise planning involves the strategic selection, management, procurement, display, and pricing of products to optimize returns on investment and enhance brand value by meeting consumer needs while minimizing excess inventory. It revolves around ensuring the correct product is available at the appropriate time, location, quantity, and price point.

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Why is fashion merchandising important? 

Without solid merchandise plans, you might just be throwing money at the wall and hoping for the best. In the early stages of a brand's growth, this approach might work to some extent. However, as the business grows and expands, with evolving customers and a changing retail landscape, effective merchandising becomes essential to keep operations running smoothly and ensure continued progress. 

Merchandising or merchandise planning can bring much-needed structure to growing fashion brands. Best practices in merchandising provide a strategic framework for teams to operate within and set parameters for measurement while maximizing sales and profit and managing inventory. 

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For example: a sales budget will provide numbers to aim for to ensure growth and profitability. An option or assortment plan tells you how many styles to purchase, at what RRP and depth. A range plan gives visibility of the product, and relevant financials for a particular collection. The WISSI ensures that stock levels are controlled and tells you how much stock you need at what time to make particular forecasted sales, and that is just the tip of the iceberg. 

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Large retailers rely heavily on detailed merchandise planning. For major multi-branded retailers and global brand giants, a single category or subcategory might have one buyer and one merchandiser, along with an assistant buyer, an assistant merchandiser, and administrative support for both. This setup highlights the complexity and importance of effective merchandising.

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Without structure, it’s impossible to provide context

While merchandising provides parameters to operate within, it's far from being a one-size-fits-all approach once your business is established. Every business operates differently, making context crucial in merchandising to deliver insightful strategies. There's no definitive right or wrong answer or a strict rulebook to judge what's good or bad in fashion merchandising; it's entirely dependent on the brand and how they choose to measure their business. What’s considered a fast mover in one business, may be slow in another. An overstock in one business may be healthy cover in another, the list goes on. 

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An experienced merchandiser will know exactly what is happening within the trade of their category. With access to correct data and systems they are able to pinpoint why a certain category's sales have suddenly taken a dip or the impact a particular product is having on your return rates. There are so many reasons for product failure and great merchandisers will be able to give answers as to why and then formulate plans to deal with them. 

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For example; there could be cannibalization within a range, a very similar product for a competing price point or high returns for a product due to poor fit, perhaps the styling of a product online is unappealing. 

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Without context, it’s hard to know what levers to pull 

Using a combination of performance metrics helps a merchandiser to analyze and understand their business health while managing your number one asset, inventory. Once they can grasp what’s going on, they are able to provide context to the wider business and then decide what levers to pull to effect change. 

All numbers in merchandising are intertwined. Great merchandisers are skilled in understanding the numbers and have many solutions in their tool kit to trade through issues and keep inventory in check. 

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For example:

1. A style might be slow-moving and tying up cash flow. So the merchandiser decides to add a discount to that particular style. They know that a discount will generally, a. drive sales up, b. decrease the stock holding, and, c. decrease profit. 

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2. Intake margin, markdown, and profit are all interconnected. It begins with the intake margin (initial margin before any discounting), followed by the markdown percentage, which ultimately determines the final profit percentage.

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3. When receiving a large shipment, stock will go up and sales will generally go up. 

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4. If you sell out of your best sizes, sales will go down and stock will go up and you may be left with the wrong sizes.

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Best-practice fashion merchandising steps

Merchandising can be divided into three phases: post-season, pre-season, and in-season. You'll find yourself working across all three simultaneously, often juggling different seasons and hemispheres and planning 6 to 12 months ahead. It's a real balancing act. You might be planning the next season even before the current one has ended, and organizing the launch of a new collection while managing clearance of the current season. 

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It can often feel like you have no time to come up for air. Trade actions, sign-offs, next season planning, phasing, Monday trade meetings, end of season sale, supplier emails, WISSI review, the list goes on. Fashion merchandising is a very fast-paced environment. 

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In saying all that, there’s nothing quite like the thrill of driving your category forward and watching your numbers grow (or decline, pending the metric you are looking at). If you have ever experienced an epic season you will know what I’m talking about. 

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1. Post-season

The post-season analysis is the first step in the merchandising and planning process. It involves collating all the previous season's data and presenting it in a format that is ready for analysis. 

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The post-season analysis will cover performance by category, product, color, size and price. It gives you a clear picture and detailed understanding of how that season performed. You will take note of the strengths, weaknesses, opportunities and threats from a macro and micro perspective to form the basis for the following season planning. 

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2. Pre-season

Budgets and strategy planning: This covers the sales the business wants to achieve, the stock the business needs to purchase to achieve the sales, and the profit that will be delivered. Off the back of the PSA, you will decide the next season strategy containing which categories or customer base to grow and create building blocks that outline how you will achieve the growth. 

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Assortment planning: Planning your assortment is next. The learnings are applied to decide which categories to grow, how many products to range,at what depths and price to give a top line view of category growth. 

For example, sweaters over performed last season and achieved a high full-price sell-through, so this season I plan to grow the category by offering more sweater options and increasing the depth behind my best selling styles.

Market analysis, competitor and trend forecasting: This provides the foundation for making informed decisions regarding product selection and range building. 

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Range planning: This involves selecting the correct mix of products  that appeals to the target customer while considering seasonality and abiding to the assortment plan. 

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Pricing: Ensuring you deliver products at the right price using a pricing hierarchy strategy. Pricing strategies help brands understand profitability. 

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Once the products are selected and priced, the merchandiser or buyer will decide the quantities or forecasts for each item and then apply accurate size ratios before providing the orders to the suppliers.

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3. In-season 

Inventory management: Balancing the correct stock in the right amount, to ensure sales are hit however never becoming over or understocked. Stock phasing refers to the timing the stock drops. For example, you don’t want to drop your sweaters too early while the weather is still warm.

Trade actions & replenishment: Weekly actions based on current in-season performance

Promotion: This includes mid and end-of-season clearance.  

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What are the challenges of fashion merchandising? 

Merchandising faces significant challenges due to working with long timelines, outdated seasonal schedules, and coordinating across opposite hemispheres, which require constant adaptability. Effective data management is crucial as the overwhelming amount of available data can become confusing and misleading if not properly handled, leading merchandisers to spend excessive time on reporting instead of strategizing. Additionally, the fast-paced nature of the industry demands quick access to accurate information for timely decision-making.

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In today’s retail landscape, the fashion merchandising field attracts both analytical and creative minds; those looking to ensure product design meets commercial success. Investing in merchandising experts is crucial to avoid poor, brand-damaging decisions that result in excess inventory and missed opportunities. When you have someone who can align your business with trends and consumer demand, your brand will have the best chance of increasing profits and long-term success. 

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Image credit: Friends with Frank