Merchandise Planning and Allocation in Fashion Retail 

Are you a fashion retailer who usually stocks up on the latest styles and trends, but fail to sell them? Your inventory keeps piling up in the warehouse, taking up space and collecting dust. You are certainly at a loss here, since the chances of your customers not being interested in the products you are offering are probably high.

It’s a common tale in the world of fashion retail. However, there is an effective way to ensure that your merchandise flies off the shelves instead of getting cobwebs. The answer lies in merchandise planning and allocation- where you plan which product to stock, how many to order, and when to restock. As a business owner, you need to make sure every item in your store is a winner. For that, you must choose every piece of your inventory carefully to appeal to the target audience. 

Though it might sound simple, it can be challenging to implement. Below, we will lowdown on how to make data-driven decisions about your inventory and get your fashion retail business booming. 

What is Retail Merchandise Planning and Allocation? 

Retail Merchandise planning is a process of determining the types and quantities of products that you must stock in your store. It’s generally based on consumer demands, market trends, and sales history.  

Whereas, merchandise allocation refers to the process of distributing the merchandise across different stores and channels. It ensures that each location has an appropriate mic and quantities of products to meet the local demands. 

The basic goal is to maximize profits by having the right products available at the right time, in the right quantities, and at the right place.  

Challenges in Fashion Merchandise Planning and Allocation 

When it comes to planning and allocating merchandise, fashion retailers face unique challenges. While technology has brought significant advancements, there are still some challenges that need to be tackled smartly. 

  • Unpredictable Trends 

Fashion trends can be notoriously unpredictable, posing challenges for retailers to accurately anticipate customer preferences. It requires a level of flexibility in fashion retail planning to adapt to constantly changing trends and consumer preferences. 

  • Supply Chain Disruptions 

Global events, such as natural disasters or pandemics, are yet another challenge that can disrupt the supply chain. It impacts the availability of products and to ensure and to ensure a steady flow of inventory, retailers must have contingency plans to address supply chain challenges. 

  • Regional Variations 

Merchandise planning becomes complex when dealing with diverse regions and cultures. What works well in one location may not resonate with customers in another. Retailers need to strike a balance between a standardized product assortment and localized offerings. 

Key Steps in Fashion Merchandise Planning and Allocation 

  1. Market Analysis 

Before even starting merchandise planning for fashion retail, you must conduct a thorough analysis of the market. You can start by studying your competitors, identifying ongoing and upcoming trends, and having a thorough understanding of your target audience. 

By staying acquainted with these market dynamics, you can make informed decisions about the types of products that will resonate with the customers. 

  1. Assortment Planning 

Assortment planning refers to selecting the products based on customer demands. To achieve this, you need to have a solid understanding of the target market, seasonal trends, and your overall brand image. 

As a business owner, you must ensure having a perfect balance between staple and trendy products. This will lead to having a versatile and right product assortment, which in turn generates more sales thereby producing profits. 

  1. Demand Forecasting 

One crucial step of having successful merchandise planning is to forecast future demands accurately. This can be achieved by leveraging historical data, analyzing market trends, and considering other external factors like economic conditions. 

By having a reliable retail planning solution at your disposal, you can follow a data-driven approach to anticipate demand and stock your shelves accordingly. 

  1. Store Profiling 

Suppose you have multiple fashion retail stores, all located in different locations. Each of them has its own characteristics, including location, climate, and local customer preferences. 

With store profiling, you aim to understand the unique challenges and nuances of each location and assort your merchandise accordingly. For instance, a store in a colder climate would need more winter apparel compared to that in a warmer climate location. 

  1. Inventory Turnover 

Running a successful fashion retail business requires a healthy cash flow. You can achieve this by leveraging a balanced inventory method that helps prevent stockouts and overstock situations. 

Inventory turnover refers to the number of times inventory is being sold and replaced within a given time. As a fashion retailer, you must aim to achieve an optimal inventory turnout rate to prevent excess inventory and minimize the risk of markdowns. 

  1. Seasonal Adjustments 

The fashion industry is highly influenced by seasonal trends and your merchandise planning allocation should reflect it. As a fashion retailer, you need to be agile enough to adjust your product mix based on seasonal demands. This process helps in stocking the right apparel and accessories for each season. 


To be successful in the over-competitive and dynamic fashion retail industry, effective merchandise planning allocation is highly crucial.  As trends continue to evolve the ability to adapt and leverage retail planning solutions will be the key for retailers seeking sustained growth and customer loyalty.