Merchandise planning is the process of deciding what products to sell, how much to buy and when to have them in stock, based on a sales plan and a budget. It connects your sales goals to your buying, so you buy enough to hit the goal without tying up cash in stock that doesn't sell.
I'm Carina Hatton, boutique owner since 2013 and ecommerce coach since 2019. Big retailers have whole teams and software for this. A boutique can do the same thinking with a spreadsheet and an hour or two a month. This guide is the overview. Each step links to a deeper guide or calculator. All figures are hypothetical examples.
The merchandise planning process
A merchandise plan moves in this order. Each step feeds the next.
Planning a first collection or new drop? Use the Boutique Inventory Planner to estimate revenue, profit, and overbuying risk before you order.
Open the Boutique Inventory Planner →- Sales plan: how much you expect to sell, by month and by category.
- Assortment plan: which categories, styles, sizes, colors and price points make up that sales.
- Inventory plan: how much stock you need on hand to support the sales.
- Buying budget (open-to-buy): how much you can spend, after what you already own and have on order.
- Buying and receiving: placing orders that fit the budget and the calendar.
- Tracking and adjusting: sell-through, turnover, markdowns and reorders.
1. Build the sales plan
Start with what you sold in the same months last year, if you have it. Adjust for what's changed: more traffic, a new category, an event, a price change. If you're new, work back from your costs and a realistic goal. The sales forecast example walks through this, and the sales goal calculator turns a target into orders.
Then split the month by category using your own sales history. Seasonality matters here. Outerwear, swim and gifts all shift the mix from month to month, so a single yearly split usually leads to buying the wrong things at the wrong time.
2. Plan the assortment
The assortment plan decides the product mix inside each category: how many styles (width), how many units of each (depth), which sizes and colors, and which price points. Core products that sell every season get steady depth. New or trend items get small tests. My retail assortment planning guide covers width, depth and testing in detail.
3. Plan inventory levels
You need enough stock on hand to sell from, but not so much that it sits. Planned ending inventory for each month is the level you want to carry into the next one. Your inventory turnover tells you how many times you sell through your average stock, which helps you judge whether planned levels are too heavy or too light for how fast you actually sell.
4. Set the buying budget with open-to-buy
Open-to-buy (retail) = planned sales + planned markdowns + planned ending inventory − beginning inventory − inventory on order
Open-to-buy is the step that stops overbuying. It tells you how much is left to spend once you count what you already own and what's already coming. My open-to-buy guide explains every part, and the open-to-buy calculator does the math.
Merchandise planning example
Hypothetical example for one boutique's March plan:
- Planned sales: $12,000
- Planned markdowns: $1,200
- Planned ending inventory: $20,000
- Beginning inventory: $22,000
- Inventory on order: $4,000
Open-to-buy at retail = $12,000 + $1,200 + $20,000 − $22,000 − $4,000 = $7,200. At a 60% margin, stock costs about 40% of its retail value, so that's roughly $7,200 × 0.40 = $2,880 to spend at cost. Split by this store's sales mix:
| Category | Share of sales | March sales plan | Buying budget at cost |
|---|---|---|---|
| Tops | 40% | $4,800 | $1,152 |
| Dresses | 30% | $3,600 | $864 |
| Accessories | 20% | $2,400 | $576 |
| Shoes | 10% | $1,200 | $288 |
| Total | 100% | $12,000 | $2,880 |
A straight split by sales share is a starting point. In a real plan you'd shift money toward categories that sell through faster and away from ones already heavy on stock. Use landed cost when you convert, and the landed cost calculator if freight is a big part of your cost.
5. Buy and receive to the plan
Take the budget to market or your wholesale sites and buy against it by category. Set delivery dates so stock arrives before the selling window, not in the middle of it. If this is your first order, the first order planner helps you split a starting budget across categories, and the inventory buy planner estimates what an order could return.
6. Track and adjust
A plan is only useful if you check it against what actually happens. These are the numbers I'd review each month:
| Metric | What it tells you | Where to learn it |
|---|---|---|
| Sell-through | How much of what you received has sold | Sell-through rate |
| Inventory turnover | How fast stock moves overall | Turnover calculator |
| GMROI | Gross margin earned per $1 of inventory | GMROI calculator |
| Markdowns | How much margin you gave up to sell stock | Markdown strategy |
| Aging stock | What has sat too long | Dead stock |
| Reorder levels | When to restock proven sellers | Reorder point calculator |
When sales run ahead of plan, reorder proven styles early and raise the next month's budget. When sales run behind, cut or delay orders you haven't placed, move slow stock before it ages, and lower planned ending inventory so the next open-to-buy comes down with it.
Planning cadence
- Seasonally: set the sales plan and category mix for the next season and decide what to test.
- Monthly: recalculate open-to-buy, review sell-through, turnover and markdowns, and adjust orders.
- Weekly: check bestsellers and reorder points so you don't run out of what's working.
For how these numbers fit alongside sales and marketing numbers, see boutique KPIs. For day-to-day stock control, see boutique inventory management.
Common merchandise planning mistakes
- Buying by feel at market with no budget in hand.
- Using one yearly category split when sales change by season.
- Forgetting stock already on order when setting the budget.
- Leaving markdowns out of the plan, which overstates what you can buy.
- Never comparing the plan to actual sales, so the same mistakes repeat.