Developing Merchandise Plans

Chapter 14 Developing Merchandise Plans RETAIL MANAGEMENT: A STRATEGIC APPROACH , 10th Edition BERMAN EVANS

Chapter Objectives

To demonstrate the importance of a sound merchandising philosophy

To study various buying organization formats and the processes they use

To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation

To discuss category management and merchandising software

Merchandising

Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals

Merchandising Philosophy

Sets the guiding principles for all the merchandise decisions that a retailer makes

Should reflect

Target market desires

Retailer’s institutional type

Market-place positioning

Defined value chain

Supplier capabilities

Costs

Competitors

Product trends

Scope of Merchandising Responsibility

Full array of merchandising functions

Buying and selling

Selection, pricing, display, customer transactions

OR

Focus on buying function only

Figure 14-1: Nike’s Own Store Merchandising Philosophy

Micromerchandising

Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets

Cross-Merchandising

Retailers carry complementary goods and services to encourage shoppers to buy more

Figure 14-2: Attributes and Functions of Buying Organizations

Functions Performed

Merchandising view

All buying and selling functions

Assortments

Advertising pricing

Point-of-sale displays

Employee utilization

Personal selling approaches

Functions Performed (cont.)

Buying view

Buyers manage buying functions

Buying

Advertising

Pricing

In-store personnel manage other tasks

Assortments

Point-of-sale displays

Employee utilization

Personal selling approaches

Figure 14-4: Merchandising Versus Store Management Career Tracks

Figure 14-5: Devising Merchandise Plans

Forecasts

These are projections of expected retail sales for given periods

Components:

Overall company projections

Product category projections

Item-by-item projections

Store-by-store projections (if a chain)

Types of Merchandise

Staple merchandise

Assortment merchandise

Fashion merchandise

Seasonal merchandise

Fad merchandise

Staple Merchandise

Regular products carried by a retailer

Grocery store examples: milk, bread, canned soup

Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.

Assortment Merchandise

Apparel, furniture, auto, and other categories for which the retailer must carry a variety of products in order to give customers a proper selection

Decisions on Assortment

Product lines, styles, designs, and colors are projected

Model stock plan

Fashion and Seasonal Merchandise

Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles

Seasonal Merchandise: Products that sell well over nonconsecutive time periods

Table 14-1a: Factors in Planning Merchandise Innovativeness Carry goods/services that reinforce the firm’s image Retailer image Understand vertical and horizontal fashion trends, if appropriate Fashion trends Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life Goods/service growth potential Evaluate whether the target market is conservative or innovative Target market(s) RELEVANCE for PLANNING FACTOR

Table 14-1b: Factors in Planning Merchandise Innovativeness Consider all possible investments for each new good/service: product costs, new fixtures, and additional personnel Amount of investment Carry new offerings when requested by the target market Responsiveness to consumers Segment customers by dividing merchandise into established-product displays and new-product displays Customer segments Lead or follow competition in the selection of new goods/services Competition RELEVANCE for PLANNING FACTOR

Table 14-1c: Factors in Planning Merchandise Innovativeness Delete older goods/services if sales and/or profits are too low Declining goods/ services Restrict franchisees and chain branches from buying certain items Constrained decision making Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs Risk Assess each new offering for potential profits Profitability RELEVANCE for PLANNING FACTOR

Figure 14-6: R&D at Wendy’s

Figure 14-7: Traditional Product Life Cycle

Structured Guidelines for Pruning Products

Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes

Gather and analyze detailed financial and other data about these items

Consider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers

After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand

Figure 14-8: Predicting Fashion Adoption

Table 14-2a: Factors in Planning Merchandise Quality Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality Store location Relate merchandise quality directly to the perception that customers have of retailer Retailer’s image Sell similar quality or different quality Competition Match merchandise quality to the wishes of the desired target market(s) Target market(s) RELEVANCE for PLANNING FACTOR

Table 14-2b: Factors in Planning Merchandise Quality Employ skilled, knowledgeable personnel for high-quality merchandise Personnel Know that high-quality goods require personal selling, alterations, delivery, and so on Customer services offered Understand that, for many, manufacturer brands connote higher quality than private brands Manufacturer versus private brands Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods; turnover may cause total profits to be greater for the latter Profitability RELEVANCE for PLANNING FACTOR

Table 14-2c: Factors in Planning Merchandise Quality Face reality. Franchises or chain store managers have limited or no control over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers Constrained decision making Analyze consumers. Lesser quality goods attract customers who desire functional product benefits; High-quality goods attract customers who desire extended product benefits Perceived goods/ service benefits RELEVANCE for PLANNING FACTOR

Retail Assortment Strategies Width of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries Depth of assortment refers to the variety in any one goods/service category (product line) a retailer carries An assortment can range from wide and deep (department store) to narrow and shallow (box store)

Figure 14-10: Sephora’s Very Deep Assortment of Cosmetics

Brands Private (dealer or store) Manufacturer (national) Generic

Table 14-3: Private Brand Test Match the Retailer with the Brand Name Alfani Macy’s Kirkland Target Kenmore Wal-Mart Joseph & Lyman Sears Martha Stewart J.C. Penney Michael Graves Kmart Ol’ Roy Costco Arizona Jeans Bloomingdale’s Brand Retailer

Figure 14-11: Wal-Mart’s New Approach to Private Brands

Figure 14-12: Daffy’s Distinctive Branding Strategy

Figure 14-13: Applying Category Management

Merchandising Software