But my favorite collection is Cruise...

Says the girl that spends the large majority of her discretionary income on Chanel’s Cruise Collection every single year. Cruise is my favorite season; all of the products are fashion-based, yet still classic enough to wear year-in and year-out and they all have this fresh feel to them.

Have you ever wondered how retail companies get their products and how they decide what goes where and at which location? Whether they are switching seasons or are buying opportunistically, there is a short period of time between when the planning starts (pre-season) and when it hits the stores (in-season), where allocating the product kicks in. Everyday allocation is having the right product in the right place, so that it fills demand from the customers. It’s the process of assigning item quantities to specific stores based on analytical approaches that take into account the performance of those items from both a historical standpoint, as well as a future potential standpoint.

Allocation is not about buying product; it’s about distributing the right product, at the right quantities, to the right stores.

Retailers have to have an allocation system, or they aren’t able to get merchandise. If you can tell me that you can determine your need accurately at the store level, then you don’t need allocation. If you can’t, you need a system.

With allocating everyday merchandise, planner productivity is extremely critical. There is a large number of sku-store combinations, historical data and trends, amongst many other things to account for. How does a retailer manage the inventory, so that they aren’t left with excess product or shortage at the store level? This ends up causing the retailer to lose money from having to heavily discount to get rid of the excess product and from missing the opportunity to sell to those potential customers, since the supply wasn’t properly stocked to manage the demand. What does a planner have to do in order to account for this planning period? There are all sorts of things from presentation considerations to capacity constraints to holiday shifts.

Seasonal allocation is similar to the above except the process is for seasonal products only such as my desired Cruise and Pre-Fall Collections, or holiday-based buys like Halloween or Christmas. These products are much more closely tied to the assortment decisions around the total buy. Risk is higher than the everyday allocation because these products have no life after the seasonal event; they live in the store for a maximum of three months and then they go out. These products receive large selling spikes and generally are massively discounted following the seasonal event.

During in-season, there can be some level of allocation. Let’s say you are ordering 10k units of handbags. You may only allocate 7k out of the 10k units that you’ve ordered. You have a surplus of 3k units on hold for whichever stores are trending well and you can then distribute accordingly when the product is in-season. This is sometimes called allocation and sometimes called replenishment.

The three major things that are affected with allocation:

Inventory turn- If inventory stays longer, your turns are impacted
Sales- If you allocate too little, there is not enough to sell throughout the season, so you’ve missed the potential sale opportunity
Margin- If you order too much, you have to take markdowns, which affects your margin. Most retailers won’t shift merchandise from store-to-store, because it’s too expensive. They would rather take a markdown and take the hit

In Merchandise Financial Planning that I discussed in one of my prior posts, you are planning anywhere from 9-12 months out; allocation refers to two weeks from now. Allocation is extremely important for a retailer, because it’s the one process that you can impact right now, in-season.

“In 1919, American Vogue evokes the small collection of half-season Coco offers its clients on holiday in the sun...a collection of comprehensive half-season ... rich and tailors Evening dresses. "The cruise mind is indeed born and this is Gabrielle who invented it.” -Chanel

*All images provided by Chanel.com