How is AI Transforming Merchandise Planning?

Merchandise planning has always been a complex dance between understanding what consumers want and making smart decisions about what to sell, at what price, and in what quantity. Traditionally, planners relied on historical data and intuition. But in today’s retail environment, that’s no longer enough. AI is stepping in to change how retailers plan their assortments, manage inventory, and set prices. AI has become an indispensable tool for navigating these challenges, helping retailers reduce risk and meet consumer demand with precision. 

The Challenges of Traditional Merchandise Planning

Over-Reliance on Excel and Historical Data

For decades, merchandise planning has been driven by spreadsheets and past sales data. These tools served their purpose for a time, but they now act more like anchors than engines. Excel requires manual input, and relying on historical data in a rapidly changing market can lead to missteps. What sold last year may not resonate this year, especially as consumer preferences shift in real-time. The process is slow and reactive, forcing planners to work with incomplete and outdated information. 

Mitigating Risk in Merchandise Planning 

Merchandise planning is about striking a balance. It’s not about crafting a perfect plan but about minimizing errors. Retailers are constantly walking a tightrope, trying to avoid overbuying products that won’t sell or underestimating demand for items that could fly off the shelves. Traditional methods can only take planners so far. They don’t provide the accuracy needed to reduce risk in today’s fast-moving market, leaving retailers vulnerable to expensive miscalculations. 

The Dynamic Consumer and the Need for Real-Time Data

Perhaps the biggest challenge retailers face is the unpredictability of consumers. They’re not static; their needs and preferences evolve constantly, influenced by everything from fashion trends to world events. Traditional systems often fail to capture this dynamism, leaving planners in the dark. Without real-time data to track these changes, retailers risk missing out on the very trends that could drive their success. 

Elevating Intuition with Data-Driven Insights

Enhancing Retail Intuition with AI 

There’s no denying that intuition plays a role in merchandise planning. Experienced merchants know their products and customers well, but even the sharpest intuition can benefit from data-driven insights. Voice of Customer data in conjunction with AI strengthens intuition by filling in the gaps. It provides planners with precise, actionable information in real-time, allowing them to make decisions with confidence. Rather than relying on gut feeling alone, planners can now see the full picture – even predicting success, informed by VoC and AI’s ability to deliver vast amounts of data instantly.

Speed and Scalability: Meeting Consumer Demand 

These additional data points empower planners to act quickly. In an industry where timing is everything, having the ability to respond to market shifts in real-time is a game changer. With the help of AI, planners are able to analyze and process data at lightning speed, providing the agility to make informed decisions quickly. Whether it’s adjusting an assortment, recalculating inventory needs, or tweaking pricing, retailers can meet consumer demand when and where they are at. 

Key Areas Where AI Transforms Merchandise Planning 

Assortment Optimization: Picking the Right Products

Choosing the right products is the foundation of successful merchandising, but it’s never been easy. Some products drive sales, while others are essential for brand identity or fashion appeal. With VoC data coupled with AI, retailers no longer have to guess which items will succeed. By analyzing data from multiple sources, the platform pinpoints the products that will resonate most with consumers by assigning a “value score”. It helps planners strike the right balance between financial winners and brand-building items, ensuring every decision supports both profitability and brand strategy. 

Inventory Optimization: Betting on the Right Products 

Stocking the right amount of product is one of the most critical—and downright challenging—tasks for any retailer. VoC data that’s paired with AI and predictive analytics simplifies this process by predicting consumer demand with greater accuracy. It tells planners which products to prioritize, and where to pull back. This eliminates the risk of overstocking products that won’t sell and ensures a strong sell-through rate - taking the guesswork out of inventory management. 

Dynamic Pricing: Ensuring Profitability 

Pricing is a delicate balance. Set prices too high, and customers will walk away; too low, and profitability suffers.  Dynamic pricing is most effective when it spans the full product lifecycle: starting with an initial price that resonates with customers and captures demand, followed by in-season adjustments using AI and VoC insights to monitor market trends and fine-tune prices. Promotions can drive additional sales, while strategically planned markdowns help clear inventory without sacrificing margins. This approach ensures that each product is priced optimally from launch to clearance, maximizing profitability and aligning with customer expectations. 

How First Insight’s InsightSUITE Empowers Merchandise Planners

Leveraging Voice of the Customer (VoC) for Smarter Decision-Making

At the heart of First Insight’s platform is a powerful tool: the Voice of the Customer (VoC). This data offers retailers a direct line to consumers, providing insights into what they want and why they want it. Planners can use this information to make more informed decisions about which products to stock, how to price them, and when to introduce them to the market. With VoC data, every decision is grounded in the reality of consumer preferences. 

Closing the Feedback Loop 

One of the most valuable features of First Insight’s platform is its ability to close the feedback loop. After products are launched, the platform can track performance via integration, ultimately providing insights into what worked and what didn’t. This feedback informs future decisions, creating a continuous cycle of improvement. Planners can refine their assortments, pricing, and inventory strategies based on actual performance, making each planning cycle smarter than the last. 

The Future of Merchandise Planning with AI

AI as a System of Intelligence: Enhancing Your Existing Tools 

Tools like VoC paired with AI don’t replace existing planning systems—they enhance them. By integrating real-time data and predictive analytics into traditional tools, data like this can improve a planner’s effectiveness without requiring a complete overhaul. Retailers can continue using their existing systems while benefiting from the added data point the platform provides to expedite decision-making.  

A Sustainable Approach to Product Development

The cherry on top? AI-driven merchandise planning isn’t just good for business—it’s good for the planet. By reducing overproduction and minimizing waste, tools like InsightSUITE help retailers develop products more sustainably. It ensures that resources are used efficiently and that products are produced in the right quantities, or with less samples, leading to less waste and a more responsible approach to retail. 

Why AI is Essential for Retail Success

Merchandise planning is evolving, and AI is at the forefront of that change. First Insight’s InsightSUITE gives retailers the tools they need to make smarter, faster, and more accurate decisions. From optimizing assortments to pricing products effectively, AI is no longer a luxury—it’s a necessity. Retailers who embrace AI will not only survive in this competitive market but thrive. Interested in how you could make smarter, faster decisions? Chat with a retail expert to see how First Insight can improve your business.