Susan Martin: The control is actually what gives you freedom. The control is actually what puts you in a position to innovate or grow. It doesn't matter whether or not you're selling fruit. Think of it like fruit. If you're not moving it through quickly, it's going to rot. It's going to smell really bad. I actually could see her face changing color and she said to me, I can just feel the weight dropping away from me when I think about what that would give me, that insight on my business.
[Voiceover]: Welcome to ADD to cart, Australia's leading e commerce podcast that Express delivers all you need to know in the fast moving world of online retail. Every week, Nathan Bush from E Suite and an e commerce industry expert will share the news, research and insights that you need to know to keep you at the top of your game and of course, keep your customers adding to CART
Susan Martin: Foreign.
Nathan Bush: Hello and welcome to ADD to cart. My name is Nathan Bush, host of Add to Cart and director at E Commerce talent agency E Suite. Have you ever wondered what the hell merchandise planners do? They're kind of like the air filters of the retail world. Everyone knows they're really important, but most don't actually know what they do. Today we have Susan Martin joining us who is not just a merchandise planner but but one of the best in the country with her experience at leading retailers such as Cotton on Best and Less and the Warehouse Group. Today, Susan is the CEO of Smart in Planning who consults with leading retailers on how to optimize their inventory and ultimately their profitability. Today we go deep into the world of stock and stock planning. We discuss in detail what what a stock plan and forecast should actually look like from starting with an Excel document right through to a specialized enterprise system. We also discussed the importance of planning even in these uncertain times like we have today, and why all retailers should be looking up to no one other than Con the fruiterer as their inspiration. Promise me it makes sense. So thanks to our partners Shopify plus and Signet. Here's our conversation with Susan Martin, CEO
Nathan Bush: of Smart in Planning. Susan, welcome to ADD to cart.
Susan Martin: Thanks Nathan. It's really great to be here.
Nathan Bush: Well, thanks for joining us. We are recording this at the start of November and obviously we've got Black Friday Cyber Monday coming up, which all of retail seems that they're obsessed with at the moment and they need to be. And your game is in merchandise and inventory. So we're really appreciative of your time at this crazy, crazy part of the year.
Susan Martin: Thanks, Nathan. It's going to Be a bit mad.
Nathan Bush: So what are you seeing most of at the moment? Are you seeing overstocks or are you seeing retailers struggling to get stock on the shelves?
Susan Martin: You know, it's, I want to say it's both but it's actually probably, you know, one of everything. I've sort of been looking across the different businesses that we're working with. I've touched it and with, you know, a few different, my team members to go, okay, let's really talk about what's going on out there. And I think there's so many different factors at play. I mean we know these, you know, these past 18 months, two years have been different to say the least. And whether a business is, you know, pure play E Com, whether it's a mix of stores in E Com they're dealing with different scenarios and almost sort of different strategies for each. The type of product, whether it's branded or vertical. Those are also affecting supply at the moment and also very much what position were they in when things went wrong? I feel that sounds like a board game but you know, and even what does, what does that when things went wrong mean? You know, like for some businesses, you know, different border closures where their store fleet actually sits. It's a totally different game for everybody right now. And so you've got businesses that have got their stock trapped in stores, wrong season stock trapped in stores. You've got businesses depending on their infrastructure and how ready they were for E Comm or how quickly they got into, you know, that E Comm path. They have or haven't been able to want to deal with what's coming. You know, supply chain. So different sluggish supply chains have become a real problem. People have been caught really flat footed there. And even the culture, you know, the culture of the business has been a factor I think in whether they facing overstocks, understocks because it's how quickly have they been ready to adapt and innovate, take a risk or taken too much risk. So one of our clients got massive overstocks. You know, they're a large variety retailer. Massive overstock sitting in stores. They've got so many late deliveries that summer is probably going to arrive late and then roll into winter. So it's not even just about right now, it's how much longer is this?
Nathan Bush: Yeah, the knock on effect.
Susan Martin: Yeah, the knock on effect and the lag. And then we've got another client that's pure play online. They're experiencing inbound problems and then they're also experiencing their own receipting so there's delays coming from their suppliers, heavily branded stock, they're having trouble with their own receipting and then that's creating a dual problem for them. On one hand, they sort of understocked right now, but if all of that stock comes after the cyber events, then they're going to be overstocked. If the cyber events don't perform the way they need them to, they're going to be overstocked. They've already seen a drop off as stores have reopened, they've already seen their demand drop. So, you know,
Nathan Bush: that's really the situation, isn't it?
Susan Martin: It is, it is.
Nathan Bush: Are there any tactics that you've seen from retailers to try and take back some control of either that inventory in or inventory out and try and get a little bit more planning and consistency around that?
Susan Martin: Yeah, look, there are a few things that they're doing. I mean, certainly in my space, merchandise planning, you know, replanning is fundamental. You know, having having a look at how things are performing and then reforecasting what things are going to look like, and not even only at the, you know, the granular skew level, but at a more macro level across categories. The business as a whole, that activity has become not just safety net, but I guess your main go to activity. So I think that's a really key one. And I think that a lot more businesses are using, even if they don't do a formal reforecasting or replan process, I think they've naturally fallen into a little bit more. So they, they're just going, going back and refreshing it more quickly, making contingency plans, working with multiple scenarios, really just trying to be, you know, on their toes and leaving decisions as late as possible. You know, that was something that I learned or that was very, very evident to me in the time that I was with Cotton on was how much they tried to make those go to market decisions as late as possible, getting as much information as you can before you have to lock things down. And I think that's become even more necessary now also, I suppose, putting more emphasis into your core offering, trimming away some of the peripheral stuff and doubling down on the things that you're known for, the things that are less risk. So you still got something on offer, you still got the stuff that's on brand for you. But if things go sideways, you're not as exposed.
Nathan Bush: What would you say to people? Because obviously 2021, who could have predicted inventory and stock in 2021 when you don't know what stores are going to be open and what the world's going to do. What do you say to people who say there's actually no point doing too much planning in today's world?
Susan Martin: Yeah, in a funny way, Nathan, I think I've been having that debate with people way before we entered this crisis. I think there's always been a little bit of a, you know, you can't know anyway, and you can't. But I think what, I think what it does is it. It takes you almost through that brainstorming process, it takes you almost through that scenario planning to go well, what are the things that could happen? And I think what happens with that as well is you anticipate what could go well and not so well. And it just leads you into that creative thinking around what could we do about that? And even that alone could lead you into some more creative idea of something that wasn't even on the table before. But you can dream something up and it could be awesome. So I think the process is just a good process. I think it's a good dynamic. I think it unifies cross functionally across the business. I think it forces you to think a bit more macro, understand how all of those different parts of the business are impacting each other. It forces you out of those silos. You can't just make plans on your own because those relationships are really heightened right now. But yeah, I think there's still a lot of value in planning ahead. I think you just have to be even more okay with the fact that they're plans. They're not facts, they're just scenarios, they're ideas.
Nathan Bush: And to your point around the process, it's just as important to have all those assumptions laid out really clearly so everyone can see, so that you can pick up any deviations away from the assumptions early on and get those signals so that you can make those decisions.
Susan Martin: That's exactly right. That's such a fundamental part of it, is that if you haven't planned what you're trying to do, how do you monitor how you're going? How do you know if you're on track? How do you know if you want to do more or less? So if you've got a plan and you can measure against it, it doesn't mean you know that everybody is then in trouble afterwards or you all sort of head down and feeling miserable that you didn't hit the number. It's just, it's part of their feedback loop. And I think that's a fundamental part of it. Yeah,
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Nathan Bush: For those who haven't seen a merchandise plan before or you know, spoken to a merchandise planner, it's not even part of their world. And I find that there's not as much talk around merchandise planning in an e commerce world as there is an omnichannel or physical world. Can you explain what a merchandise plan looks like?
Susan Martin: Sure. So I suppose I might even take a step back and give them even more context than that. So you've got your merchandise planners who are doing a whole lot of activities. But I'm talking a lot about the merchandise plan that you've just mentioned now because that is that vehicle for doing this forecast or the scenario planning. So that's the part that I'm really zooming in on. Even if they haven't worked with Merchandise Planner before, not covering all the other activities right now. But the merchandise plan is it's both a strategic long range tool and it is also a short term in the now trading enabling kind of tool. But I like to think of it as a means to put you really in the driver's seat so that you can you really get your bearings on the business. So what you'll see in a merchandise plan, it's also sometimes called a merchandise financial plan, which gets abbreviated to mfp.
Nathan Bush: We love abbreviations, don't we?
Susan Martin: Oh yeah. Seriously, you got to, you got to learn the language. You'll also sometimes hear it called a Wizi wssi, which stands for weekly sales, stock and intake.
Nathan Bush: That's catchy.
Susan Martin: It is catchy. Sometimes people think you're swearing at them though.
Nathan Bush: Have you got your whizzy?
Susan Martin: Yeah, it can sound a little odd. Sometimes you hear it called a mizzy, in which case it's just at a monthly level. And one of my clients actually they call it Miss Mizzy. So you know, I Guess it can get a little bit more fun. But effectively most of what happens in merchandise planning, you're looking at some intersection of product time and location and that can be at different levels. So you can be right down at a SKU level, you can be looking at a SKU day store level if you want to get really granular. But the merchandise financial plan tends to be at quite an aggregated level. So it's not down to sku, but you have got all of those dimensions in there. So you've got your time dimension, which is probably going to take you to at least, you know, week level, but you know, then month and aggregating up to your quarters, your seasons, your financial years. So you'll actually be able to see typically at least two financial years in this format, but more often three. So that's a lot of time to be getting your head around. But they are quite flexible documents or if they're in a system, you know, you can condense it down and see what you need to see. But you can. That's why I talk about it being a long range tool because you can see well into the future and you can reference historic periods at the same time. So you're in the now, you're planning for the future, you're referencing the history. So that's your time dimension, your product dimension. Like I said, it tends to be at an aggregated level. So you might be at your category level, that might be the lowest that you're going to go rolling up to a department or a division and then up to total company and then you've got your location. So typically if you're planning down to the detail of all of your products, you might have your, your locations condensed into total company and maybe your channel. So maybe ecom bricks and mortar or something like that. Different businesses have different structures, but those are your main dimensions that you're working with in there. And then you've just got a ton of, a ton of planning metrics. So you're going to have all of your sales measures, you're going to have your, your intake or your purchases. So what are you buying? You're going to have your stock position, you're going to have your, your margins, both what you buy your stock at and the margin that you realize after you've taken your markdowns, you've got all your markdowns in there, preferably different markdown types, you know, promotional markdowns or temporary markdowns, permanent markdowns, and oh my goodness, I'm going to, so Much detail. So please.
Nathan Bush: This is fantastic for someone. You know, we don't play merchandise planning all the time. And it's so important. It's critical to impact everything. Like, even as you're talking, talking about promotions as part of the stock planning shows, like, you've got to have marketing involved in this. You've got to have finance involved. It seems like, you know, this is almost like a business plan more so than a stock plan.
Susan Martin: It is. Because, you know, the whole thing about this merchandise plan is it's where all of those measures come together. And that's what I love about. You can probably hear how excited I get when I talk about it because it's so much. It's so much insight, it's so much visibility, it's so much control. And I know people sometimes get nervous when you. Or when I talk about control because I think there can be this connotation of planning being a little bit of, I don't know, a bit of a killjoy and a bit too restrictive and that sort of thing. But to me, actually, there's a. There's a funny little twist in that where the control is actually what gives you freedom. The control is actually what puts you in a position to innovate or grow. You can understand what's going on through. Through the control and the visibility that comes with that. With that tool. Yeah, from there you can do anything you like. No one's, you know, no one's making too many rules around that. And yeah, it brings all of it together because the starting point is actually your sales. Yeah, the end point is around that visibility to manage and control your stock profitably. But the starting point is your sales. And in order to develop a reliable and accurate hours, accurate as possible, it's always going to be flexible and sales plan, you need that input. You need to understand what's going on in the stores or in your market at the time. You need to know what's planned from a marketing point of view. What sort of response are they expecting from that? And you model all of that into the sales and then you sense check it and you go, are we just putting in what we want to hear? If we compare that to previous times that we've done similar activity or just anything in our history, does this seem completely out of whack? Like, is it just, you know, 10 times better than what we've ever done before? And it's okay if it is, you know, you might look at it and go, well, we must, you know, I don't know what was in our drink, like, how did we come up with that number? But the main thing is that you just ask yourself that question and then you might all go, you know what? It does look ridiculous. But it's doable because here are all the things that sit beneath it. Here are all the things that we're going to do to actually achieve that. And then you can do it. Then you buy the stock to go with it.
Nathan Bush: Do you normally find in organizations where you see it work the best, do you find that the merch planner takes control and puts out almost like a theory or a thesis around this is what we think we can do and then testing it with different departments? Or do you find that it's a collaborative piece?
Susan Martin: It can be both. So it depends a lot on the maturity of the planner, their own experience, maturity of planning in the organization. Ideally, what I like to see happen is that the merchandise planner collaborates cross functionally as part of preparing that merchandise plan. Typically they will need to do a little bit of work first rather than just sort of arrive with a blank page and kind of drag somebody through that very exciting process of replanning. It's good for them to have a first pass, update the actuals and have a little bit of a forward view that they can talk people through. But then I think, you know, it's good for them to actually pull all those people in, collaborate. And then there tends to be a sign off process where, you know, people are sitting around and having a discussion and the plan will actually present it, or maybe the planner and buyer together will present it and have the opportunity for, you know, the executive or people from other functions to validate some things and pressure test some things. So it's a bit, a bit of both.
Nathan Bush: Yeah. Great.
Nathan Bush: And in terms of the actual plan itself, are we talking an Excel spreadsheet where we open up a new tab for every year of planning, or are we talking some much more sophisticated system?
Susan Martin: Yeah, everything on the spectrum. So quite a few businesses that we work with don't have anything actually fulfilling this function. The one founder that I sat with at Online Business, when I sat and was describing it to her, probably a little bit less how I was earlier, but giving her a sense of what that merchandise plan would be. I actually could see her face changing color and she said to me, I can just feel the weight dropping away from me when I think about what that would give me that insight on my business. I could just sort of feel that, yeah, that would be so good. So the thing is that a lot of Businesses don't actually have that. Of course, they would be doing elements of that process to, you know, to be functioning at all. But a lot of them don't actually have it in that format. And with all of those metrics and the interplay between them that I was describing before, a lot of them don't have it at all. Then you've got some who are working in a version of Excel and yeah, probably, you know, either just the whole company or a tab per category and then they make a new one for the new year.
Nathan Bush: Yep.
Susan Martin: And then you go all the way up into sophisticated software, really sophisticated software that you can implement. There's some amazing stuff out there and more and more modules that go into all the other facets of planning, assortment planning and, you know, allocation and replenishment, markdown optimization. Their systems that, you know, all connect and, yeah, all of that beautifully.
Nathan Bush: Are they usually part of a large organization's ERP system?
Susan Martin: No, no. You'll sometimes find that an ERP system has elements of those things. You'll almost never hear them talked about in planning circles in any sort of meaningful way. Those systems that I'm talking about, they are independent software suites that are specifically around merchandise planning and inventory management.
Nathan Bush: Okay, cool. And so it sounds like these plans aren't kind of a static thing. That plan is create, get signed off and go. Great, it's done. It feels like it's a live, working document.
Susan Martin: Oh, Nathan, you make my heart so happy. Yes, yes. It's a live, working, dynamic document and I wish people would embrace that more and understand that more. And what would be the use of something static in retail? What would be the value of that at all? So it's very much something that is refreshed with new information and new thinking.
Nathan Bush: Yeah. Okay. And you mentioned before some of those metrics that go into this planning process. From your perspective, what are the most important metrics that you keep an eye on to know if a business is running at a healthy inventory level?
Susan Martin: Oh, this is exciting stuff. So I personally, I like to deal with a metric called call freshness, which not everybody has come across. And when I first learned it, you know, even off the back of my planning background from South Africa, where, you know, the way I learned planning was probably a few steps ahead of where Australia was at the time, at least. Although truthfully, I still think that there's some stuff that we did back then that was more advanced than what I've seen in certain environments here. And this is now 20 years on. Yeah, but, but so when I first learned about freshness from somebody actually here in Australia. I was a little bit skeptical about it and I thought, oh, I feel like you just made that happen.
Nathan Bush: It doesn't, it doesn't sound very technical, does it?
Susan Martin: Yeah, I'm not really sure about that one. But I used it where I was taught it, which is with the warehouse group when I was employed by them. And I don't know, the lights came on for me a little bit with that metric. And I've used it ever since. And I've, you know, any business where I've implemented planning, I've put in this freshness factor. And effectively, it's quite a simple little measure. It's really, it's looking at your receipts or your intake over the last three months as a ratio of your overall stock on hand. And so you just express that as a percentage.
Nathan Bush: Okay, and why three months?
Susan Martin: There is a tipping point. I don't want to quote numbers that people then take too literally, but loose rule of thumb, a freshness factor over 80% would be considered healthy. And if you think about what that really means, it's, it's pretty much saying the value of the stock that you receipted in the last three months represents 80% of what you've got on offer. And when you connect that through to other planning metrics like stock turn and sell through, you can see that it's bang on with where those good efficiency levels would be. So it kind of makes sense with hindsight. After I was like, what's that? I kind of go, oh, I kind of see where it sits. It's not dealing with aging. So of course, if you haven't dealt with your old stock and so on, you can have distortion. But what, what I love about that measure one is simple. You should be able to calculate it with the information you have available. Data can be really challenging at times, but that one should be able to be achieved. But I have found it to be such a powerful indicator for profitability. So there are times that that freshness factor should, should go up more. So, you know, for example, coming out to a peak season, you know, you're loading up your stock to do your big Christmas sales or your big, you know, cyber sales or whatever it is. And of course you'd expect your, your purchases to be a higher portion of that ratio. So you'd see a freshness factor going up closer to 100%. So you would expect it to move at different times. But looking at that freshness factor in relation to your profitability is gold. When you see it diving and, and you know you'll have it forecast into future, you know, six, eight, 12 months into the future. If you see that freshness factor dropping off, you know that you need to stimulate your markdowns, you know that you need to start, you know, maybe your open to buyers getting strangled and you need to release more money into the business. So it's a really great indicator for that.
Nathan Bush: Yeah, okay.
Susan Martin: In a similar way, closing stock margin, and it's another sort of quite fringy measure, but I use it heavily. Also a tremendous indicator for future profitability.
Nathan Bush: And what does closing stock margin look like?
Susan Martin: Effectively, margin is the same calculation wherever you apply it. So most people are familiar with the sales margin. You know, it's the difference between your retail and your cost divided by your retail value expressed as a percentage. But you can apply that same calculation onto your purchases. So you know you're buying something, what's the retail value of what you're buying? What's the cost value, the margin between the two, Divide that by the retail value. So, you know, you might buy something at a 70 margin, but by the time you've taken markdowns and so on, your selling margin or your gross profit might be 60, for example. Similarly, your closing stock margins the same calculation, but it is representing your overall stock that you own across your whole network, what's sitting in the dc, what's sitting in your stores, all taken together. And if you sum up the retail value of all of that stock and the cost value of all of that stock, do that calculation, you might find that your closing stock margin is maybe say 55. If you're buying in at 70 and you're trading at 60, for example, and somehow you're landing up in this really low closing stock margin scenario as you then try and plan forward your future sales margin. If you don't have strength in your stock on hand, from a margin point of view, it's telling you straight away you're dreaming if you think you can achieve a 60 sales result or for
Nathan Bush: 55 stock positions, it's all there in front of you. You just got to do the maths.
Susan Martin: Yep, you just got to do the maths. And you got to look at things relative to other things, like not take numbers as absolutes, but look at them relative to other things. So those are some of my favorites. I love a forward cover rather than a spot cover because again, it tells you something about the future. Spot cover just tells you right now
Nathan Bush: what's the position and what does spot cover mean?
Susan Martin: Spot Cover is just the relationship between your stock and your sales. So how many times does your stock cover the sales you just did? Whether last week or last month. But I prefer a stock cover that looks forward. So instead of using your historic sales in relation to your stock, you use your forward sales. And you can only do that if you have a forward sales plan, which a lot of businesses might not if they haven't got a merchandise financial plan in place or some type of plan
Nathan Bush: in place that makes sense. On the freshness piece, the question that I had going through my head is if I'm a retailer of say, foot spas and I go foot spas, they don't go off. I could store them forever. The technology is not moving anywhere. So I'll always be in fashion. I know that I can shift a certain amount per year. If I go, it's actually cheaper for me just to buy a big bulk lot of them and store it in a warehouse for two years and just get them, trickle them out. Where does freshness play a role in those kind of businesses?
Susan Martin: It doesn't necessarily. And that's. It's such a good question, Nathan, because not every measure is relevant in every situation. And in that situation, if you've done that maths and that analysis to go, actually there is a better benefit for my business in terms of buying in bulk. The volume discount that I got for that offsets what I'm paying in storage to hold it for that long. It offsets whatever the associated costs are of tying up my capital because I spent the money on that stock, now it's sitting there and not doing anything for me. If you've taken those sorts of things into consideration and that's a better decision, go for your life. And then freshness wouldn't be a factor there and it wouldn't be as much in heavily core or repeat type product because it's effectively the same thing. But you can still see a lag happening if you're OTB's become very constrained, so you can still take something out of it. But I wouldn't force a freshness factor into that scenario.
Nathan Bush: Yeah, but it'd have to. The points that you made in there were really good in terms of how it stack up financially because it's not just the cost of buying it, it's that you've got to see that stack of goods sitting there as a pile of money that you could be doing other things with that's actually costing you money because it's a warehouse that you're either renting or owning there's a lot of goods.
Susan Martin: And if you're borrowing money to pay for your stock, well, you're now paying interest on the money you borrowed. And also the longer you're sitting on something like that, and I'm not saying don't do that, I'm saying do your homework, the longer you sit on something like that, the more chance also that you do get caught in an, in an obsoletion, obsolescence position because you can't know what else is going to happen in the market. You can't know what your competitors are going to do. And even if they don't innovate into a wonderfully different foot spa, maybe they will go into some kind of price position that you can't follow them into. And now you're sitting with all of the stock that you actually can never go to that same price point. So there isn't indefinite safety in repeat product either.
Nathan Bush: It feels like it kind of ties back to your original point around the retailers that are doing well are those that can make decisions light and be more flexible?
Susan Martin: Yes.
Nathan Bush: If you've already locked into your position, then you take that kind of weaponry out of your, out of your tool belt already and it's done.
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Nathan Bush: So Susan, you see a lot of merchandising and inventory strategies across omnichannel, physical and E commerce. Is there anything that you're seeing, especially around E commerce businesses that are using inventory and planning to differentiate themselves?
Susan Martin: I suppose I am. I think the thing with E comm in particular is this question around width because you're not constrained obviously by the four walls, which we know. But while it might only be a digital presence, when you are an E commerce store, the stock is still physical so you still own it. And I think there can be a real risk there around width range width, because you don't have that kind of hard stop. And so I am seeing businesses that have been Struggling with that. Leaning more into merchandise planning as a solution for that now. So they might have started off and I think because so many E Comm businesses have been such almost overnight success stories, and I don't say it like that in a way to minimize the heavy lifting they've done to achieve what they've achieved. But so many of them actually did rise to popularity so quickly.
Nathan Bush: Oh, the growth rates have been phenomenal.
Susan Martin: Yeah, unbelievable. But they haven't had necessarily the opportunity then to put in place some of the infrastructure, some of the processes and the things that can support their growth. And even now I'm seeing some of them sort of running really fast to play catch up. And that's different to all the guys that have tried to play catch up just with having the E. Comm presence, I mean, literally the pure play guys going back and trying to figure out systems. Often people who've led those businesses didn't come from retail necessarily. They've done unbelievably well, but now they're kind of playing catch up on some of those things. And so that is where I'm seeing people actually embracing more and more of the merchandise planning activities and thinking to rein in some of what worked okay or well before that was a little bit more of a buy. What I know is on brand and because I am brand into putting a bit more of that, you know, science and analysis behind it. I have also in the past seen some e comm retailers slow to mark down. So I know they can also be the sort of the stigma of, oh, they're, you know, always promoting and, you know, giving away online and, you know, worried about sort of a bit of brand erosion with everything is available online and all the markdown stuff kind of gets flushed out online. But I have seen some pure play businesses that are quite slow to mark down. And again, as we sort of worked with them and really shown them again that that stock is basically sitting there preventing them from buying something else. There's been this readiness to move into. Okay, actually we need to do a bit of a cleanup here.
Nathan Bush: So discounting doesn't necessarily need to be a dirty word.
Susan Martin: It doesn't. You actually, you need to do it. Your stock needs to move. What's actually more of a dirty word, I don't know what the word is though, is having a standstill. So, you know, idle stock, that is. That is probably the worst case scenario. And again, that same very clever person who taught me about freshness used to use this expression of think of it like it doesn't matter whether or not you're selling fruit. Think of it like fruit. If you're not moving it through quickly, it's going to rot, it's going to smell really bad. You want it to move. And it's a visual that stayed with me. But another, but another area that I do think is becoming increasingly important for online businesses is around attributing. It's something that in merchandise planning we've always loved. We've always been the people that have wanted to go and put sort of extra attributes across the product. And it's always helped us with our analysis. But very often planners find themselves in environments where they've had to actually go and put all of that information in themselves. So, you know, they're busy doing a bunch of analysis and they're sitting there typing, short sleeve, short sleeve, long sleeve, long sleeve, you know, like full length, knee length, whatever it might be, and adding in all of this sort of rich information about the product. So that when we building up a range plan and trying to give the buyers a steer on what should they be shopping for and what performed well, that we've really been able to do that Rubik's Cube type number crunching to go, this stuff sold really well. This stuff sold well at full price. More of that, less of this. Tell me about your trends. Okay, this is the equivalent thing of that. So do more of that. And as we go through that whole activity, we've often been the ones that have had to fill in all the missing pieces on a product's attributes. But I think that that is getting more and more focused now. And there's some really great technology coming through there as well that's enabling that. And I think that's going to be pretty powerful because it goes into search and it goes into helping your customer navigate your website. And so I think that's quite important because it's offline. So you want to give the customer the best opportunity to understand that product, to find it, to know what it is and make that decision easily.
Nathan Bush: So if I'm an E commerce retailer listening to this and going, oh, geez, I don't have any of this merch planning stuff set up. I'm going a lot on gut feel at the moment. I know what's working, but it's not documented or it's not a process, what are a couple of simple tips that you would recommend for these businesses to get started in creating that process?
Susan Martin: First of all, I'd say, okay, well, you're not alone, so take a breath. But I think they probably are doing more than they realize. It probably doesn't have a label. I think one of the most basic first steps is actually around, is around the systems and the data. So even when a business does reach the point that they realize that they want more merchandise, planning, influence in their business, or more science behind what they're doing, the stumbling block often still will be data and systems. There's a lot of businesses that are working on Google Sheets, which I don't even like Google Sheets as much as I like Excel. But you know, there is a lot of stuff that's cobbled together and it's prone to error and it's heavily manual. And by the time you've put all the stuff together, you barely have a moment to actually think about what it means. It's not to say that they need to go and invest in systems as their first step, but I think that there is definitely a need for good data and you can achieve that in a manual way by putting some disciplines around what you do and just paying attention to it. But I do think also then trying to think more holistically around the stock and looking at it from different angles so that you can really see where the profitability comes in, having that top of mind more so than I think people typically do, not being overly sales oriented, of course you want to drive sales, of course you want to have sales growth, those things are key. But you don't want hollow sales growth, you don't want sales for the sake of sales. And it's not actually able to keep the business ticking. So I think having that awareness, just really lifting profitability up, getting a focus
Nathan Bush: onto data, thinking like a greengrocer, like
Susan Martin: a green grocer, understanding that that stock really needs to keep moving. There are some small steps that they can, that they can take and you know, and then you don't have to go and do end to end merchandise planning from day one. It's not even appropriate for every business from day one. So I think, you know, baby steps, keeping some records, you know, trying to think a little further forward even. I mean, it sounds really simple. Even a phone call that I got this week was a case of this business is online and I think about 20 stores. And it sounds like they're still just buy, they just go and buy stuff and I'm sure they know what they're doing with that. I'm sure they know what their customer wants and I'm sure that's actually really fine tuned in terms of their understanding of their market. But the quantification that goes around it and how to actually manage that stock through its life cycle and those sorts of things, those aren't as, as established and certainly not for that business. So yeah, I think just thinking forward a little further and going, okay, it's not just about now, it's not just about this buy, it's what's the lifecycle of the stock, where's it going next, how will I exit it? Just trying to extend that horizon, I think would be helpful.
Nathan Bush: Do you foresee that there's big competitive advantages coming or available right now for organizations that have really strong data that can be used to automate and predict stock levels without a human intervention?
Susan Martin: I was going to say yes, right up until your last statement, the human intervention part. I'm, you know, I love systems and I love how much more efficient you can be and I love how accurate they can be and, and all of that stuff. So I think, you know, I'm pro systems, powerful, awesome and I think there's massive opportunity still there. I'm less convinced on the, on the lack of human intervention part or at least in the short to medium term. I'm not saying that we won't, you know, we'll be in space rockets in the future, but I think what I am saying is that when I look at how undeveloped a lot of retail environments still are, how immature, not even just the process and the technology or the methodology and tools and so on, but actually the thinking is I feel like there's a really long way to go for a lot of retailers still. And if you don't have that thinking, I don't think that having the systems, the sophisticated systems will get you all the way. I think they'll do the bulk of it. I still think there will be decisions that need to be made with that, that require an in depth understanding that require more than pressing the buttons, at least in the short to medium term. Longer term we could be on the moon.
Nathan Bush: So for people who are going, oh, I would love to train myself up or train my team up in understanding that merchandise thinking better. What resources would you recommend for them? This is plug time. Come on.
Susan Martin: Is this the plug part? No. Look, the thing is that I always count myself really lucky that I had the start that I did in merchandise planning. But that was back in South Africa and when I came to Australia, I found planning a lot less developed here. And I don't, I don't mean to disrespect anybody in that, in, in that statement because, you know, it's the same as when I joined Cotton on and. And planning wasn't super established there at the time, and yet they were super successful. Yeah, so it was super successful before I got there, before we started doing anything with planning. But why they wanted planning at the time was they said, you know, what served us well for the first 20 years is probably going to be different to what serves us well for the next 20. And we think merchandise planning is part of, you know, the picture for the next 20. So I don't disrespect what anybody's achieved so far. It's just that the planning approach has been probably underplayed. And so you tend to find in a lot of businesses here that planning has been owned by finance because it's had to do with how do we spend our money or give it back or that it's been an extension of a buyer or category manager's portfolio. And then people in those roles, in varying degrees, would. Would or wouldn't have a leaning towards some of that stuff. And so it's kind of been learned on the job, learning from someone who went before, but that someone who went before might not necessarily have known that much about it. So it's. I actually think it's been an incredibly difficult environment here for people to develop planning knowledge and skills. And through the different roles that I've had, I've recruited and trained planners over and over again and built training programs and all sorts of things in my employed positions. But now as part of Smart and Planning, we've built a merchandise planning course. So we have an online training program called Merchandise Planning Foundations. And I recommend that because it took me, I think, you know, it was a little bit of. A little bit of a love project. I didn't necessarily think it would necessarily be super popular, but it was something I absolutely needed to do because I had been through so many situations of having to train people, I kind of needed to just get it out of my head and park it somewhere. But of course it's. You know, I've always talked about grow your own because it's. Planning's always been in short supply here. Even the sponsorship rules have changed around that. You can't import Pandas the way you could. Yeah, but, yeah, I think, you know, grow your own. We've put together a program to do that. So I recommend it. And we've had super, super feedback from people who already are established in their planning careers. People even are planning manager level, general manager, finance roles. So I think there's. Because I think some of the. The mindset is covered there as well. It's not just about going and learning your retail maths, because that would like, you know, I'd also fall asleep. I think, because we try to capture so much of the mindset and the thinking that goes with it. I think that also fills in a lot of gaps and makes people go, ah, now I get it. Now I understand why that matters.
Nathan Bush: This is the why, not just the how.
Susan Martin: Yeah, yeah, exactly.
Nathan Bush: And we'll put a link in the show notes and the blog to the course as well. What attributes make a good planner in all your experience? If you kind of put the best planners together, are they analytical, are they creative?
Susan Martin: You know, I was going to say maybe I'm alone in this, but I actually know that I'm not because the content that I put out on LinkedIn and the response that I get from that tells me that I'm speaking to people who agree with me. So I try and push back a little bit against what I sometimes think the stereotype of a merchandise planner is, which is very much this extension of finance, hyper analytical, possibly therefore leaning too much into the being quite absolute with numbers. You know, the numbers say, well, computer says that that's the answer. And to me that's not what planning is at all. And confession.
Nathan Bush: So here we go.
Susan Martin: Yeah, so I've never actually considered myself a numbers person. I hope none of my clients are listening. And if you spoke to my brother who has got a, you know, is a chartered accountant by profession, and you asked him about, you know, me trying to learn maths and science back at school, like he would have PTSD kind of reactions. And why I'm saying that is because planning does require attention to detail and it, and of course it helps to have that analytical and numerical aptitude, but there is so much more to it. And I actually think that if you overemphasize that, you miss a really big chunk of what's important to be successful in merchandise planning, which is much more into the commercial thinking. It's much more into that business acumen. And I think that's actually why I landed up falling into merchandise planning. My passion was very much on a service path, actually. It was. I wanted to go into hospitality, but I fell into merchandise planning because of the degree that I did, which was a Bachelor of Business Science. And the company that employed me and trained me used to seek out business science students because of that commercial acumen. They knew that they were people who would succeed in planning, not because we had done stats or Maths or whatever it was, but because of the broader business thinking that we had developed through the course of that degree, and I totally believe in that. I think a good degree of creativity. Problem solving, I think is high up there. Like, be a lateral thinker, be a problem solver. Yes. Have your eye tuned for risk. Because we don't want to be reckless. You want to be a little bit more on the conservative side. But let logic prevail. Be open to looking at the information that's available to you and sifting through it and prioritizing it. Be a good communicator. Engage with other people and be contextually aware. Like, those are things to me that. That make a great merchandise plan. I always say I'm looking for the bright eyes. Like, you know, and I put out a thing the other day, you know, aptitude plus attitude equals altitude. Like, I think you need to have the aptitude. Of course, you've got to have some of those raw materials. If you. If you're hopeless at, at numbers and you're sloppy with attention to detail and all of those things, you're not going to do well. But so much of it is going to be that attitude, that problem solving, that, that drive and, you know, then I think you'll take off. You'll do really well.
Nathan Bush: So don't rule yourself out. If you're not a macro master or a pivot table person, it's a lot more well rounded than that.
Susan Martin: Yeah. And, you know, and so much of that stuff can be learned, but I think if you've got the right. Yeah, just that right combination of. And that interest and that love for retail.
Nathan Bush: Yeah.
Susan Martin: You've got to be fascinated with it. You've got to, you know, you got to be that, you know.
Nathan Bush: Yes. It takes. Retail is special game.
Susan Martin: Yep, it is.
Nathan Bush: Susan, thank you so much for sharing everything today. I feel like we've only touched, you know, a tiny part of your world, but it's been brilliant to go and have a deep dive into what merch planning looks like. So I really appreciate that. Thank you.
Susan Martin: Oh, no, you're so welcome. I'll talk about it all day, any day. I love it so much. Which I suppose is a good thing after 25 years. So thank you so much for having me on, Nathan. I've loved talking about it. Always do. I mean, I hope it helps. I hope it helps.
Nathan Bush: Beautiful. Now, if people are listening to this and wondering how they can get in touch with you, what's the best way to do that?
Susan Martin: Drop me an email. I've sort of almost got like RSI from how often I pick up my phone. So drop me an email Susan S u S a n@smartinplanning.com or check out our website or my LinkedIn profile. There's tons of places you can find me.
Nathan Bush: Beautiful.
Nathan Bush: And there's so much good content too. You consistently put out some great stuff on LinkedIn.
Susan Martin: So thanks so much.
Nathan Bush: Worth connecting. Go and do it Susan. Thank you.
Susan Martin: Thanks a lot Nathan. Take care.
Nathan Bush: I think Susan has helped lift the lid on the mysterious world of merchandise planning. And I think my own earlier comparison to air filters probably isn't fair. Now now. I hope it didn't scare the bejesus out of you. As you heard from Susan herself, many retailers, even the big ones, don't have the fundamentals in place. Here are my top three practical takeaways from our chat. 1. The dimensions of a Merch Plan I always heard the term merchandise planning but never actually understood what it physically looked like. And as Susan explained, a good merchandising plan should have three dimensions product, time and location. It should have a two year time frame minimum. It should have clear assumptions and it should be a living, breathing document. Rolling stock gathers no moss. To me, that really helped. Actually, that analogy doesn't help at all. But Susan's idea of a merchandising plan really helped crystallize what we should be creating in our businesses. 2. Freshness Susan's key metric was freshness. That's my cod. The fruiter analogy. This is your new stock intake over the last three months as a ratio of your overall stock on hand. New stock intake over the last three months as a ratio of your overall stock on hand and it should be
Nathan Bush: expressed as a percentage.
Nathan Bush: Freshness over 80% in Susan's book is considered healthy. Obviously that is just a round number as a benchmark. It'll be different for every business and the last one. Number three act last minute. It goes against everything your teachers have taught you, but when it comes to inventory, you want to leave decisions as late as possible to optimize freshness and profitability. You don't want to get stuck with bad inventory. Having a clear plan, multiple scenarios and contingency plans will help you do these last minute decisions safely. To finish up, I have three resources for you. Firstly, if you're a first time listener of Add to CART and you want to stay up to date with new episodes, head over to add to cart.com and you can sign up for our weekly newsletter. We'll let you know every time a new episode drops as well as giving you my three takeaways from each episode and a link to the transcripts so you can know that this is an episode that you want to dive straight into. Secondly, if you want a weekly roundup of the best e commerce case studies tools and research, sign up to the High 5 Friday newsletter letter which is delivered to inboxes at 8am every Friday morning. I read all the e commerce news and send you the bits that I think you can take action from. Sign up at 12high12h I g h.com au forward slash and the last thing if you are looking to explore your next e commerce opportunity head over to esweettalent.com we are a dedicated e commerce talent agency connecting the best e commerce talent with the fastest growing brands. Check it out. Sign up to the email and get in touch with me if you want to discuss your next move. Until next time, thanks for listening and keep those customers adding to cart.
