Transforming 5 Retail Merchandising Challenges into Opportunities

Merchandise financial plans have many moving parts—enormous amounts of data to distill, applying advanced analytics for better decisions, building long and short-term plans, etc. These plans can take weeks to develop.

In addition, top-down and bottom-up alignment to the overarching company financial and strategic plans is crucial for merchandise financial planning. The top-down plans set the high-level goals while the bottom-up plans come from granular detailed data—and both have to be clear and unified.

However, keeping these plans updated when minor details change is challenging, leading to missed opportunities. For example, an out-of-stock item translates to lost sales and frustrated consumers.

Inaccurate data leads to either overbuying or running out of bestseller stock—both can cause a company to miss financial targets. In 2024, IHL reported that the total cost of inventory distortion was projected at $1.7 trillion.

Along the same lines, inaccurate forecasts cause overbuying (excess inventory) or underbuying (stockouts). In fact, of IHL’s aforementioned $1.7 trillion in inventory distortion estimate, out-of-stocks accounted for $1.2 trillion and overstocks totaled $554 billion.

There is a saying, ‘data rich, insight poor,’ meaning the retailers and brands that are drowning in data are unable to build merchandise plans that accurately reflect what and where to invest.

Manual processes result in data silos and inhibit the ability to work at a granular level—e.g., identifying SKUs down to an individual store level. Without unifying the data, the decision-making process slows down.

In fact, while McKinsey reports that operationalizing digital business models is important, ensuring they do not become siloed is equally critical as it limits the potential for cross-functional improvements.

So, what’s the value of working towards one version of truth? McKinsey estimates that applying integrated digital solutions to merchandising could lead to up to 50% faster time to market, an 8% rise in full-price sell-through and a 20% decline in manufacturing costs.

Finally, fragmented planning tools make it hard to align budgets with real-time sales data, creating a costly mismatch between what retailers have in stock and what consumers actually want to buy.
“Inventory distortion worldwide is a critical issue that continues to plague retailers worldwide, causing significant financial losses and operational challenges,” according to IHL.

Merchandise Financial Planning from Centric Software®  not only addresses these challenges, but it includes distinct advantages that enhance profitability and margins for retailers and brands while enabling streamlined retail operations.

“With the new Centric Planning solution, buying and merchandising teams can work more collaboratively and are saving time because manual data entry has been eliminated. Being able to create what-if scenarios empowers teams to make strategic decisions faster and achieve sales and margin targets,” according to Julia Lehmann, Senior Head of Merchandise Management at KaDeWe.

However, this just scratches the surface: Learn more in the “Right Product–Right Time Begins With the Right Plan” eBook and discover the right AI-infused technology that delivers the right product at the right time with real results.