Merchandise Management

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Merchandise Management

  1. 1. MERCHANDISE MANAGEMENT
  2. 2. MERCHANDISE MANAGEMENT <ul><li>Overview </li></ul><ul><li>Planning and Controlling Merchandise Variety </li></ul><ul><li>Planning and Controlling Merchandise Assortment/Support </li></ul><ul><li>Merchandise Mix Strategies </li></ul><ul><li>Merchandise Budget Management </li></ul>
  3. 3. Retail Merchandising is the process of developing , securing , pricing , supporting and communicating the retailer’s merchandise offering. It means offering the right product at the right time at the right price with the right appeal!!
  4. 4. Steps In The Retail Merchandising Process <ul><li>Develop the merchandise mix and establish the merchandise budget. </li></ul><ul><li>Build the logistic system for procuring the merchandise mix. </li></ul><ul><li>Price the merchandise offering. </li></ul><ul><li>Organize the customer support service and manage the personal selling effort. </li></ul><ul><li>Create the retailer’s advertising, sales incentive and publicity programs. </li></ul>
  5. 5. Retail merchandising requires management of the merchandise mix including: <ul><li>Planning Merchandise Variety </li></ul><ul><li>Controlling Merchandise Variety </li></ul><ul><li>Planning Merchandise Assortment/Support </li></ul><ul><li>Controlling Merchandise Assortment/Support </li></ul><ul><li>Merchandise Mix Strategies </li></ul><ul><li>Developing the merchandise mix allows </li></ul><ul><li>the retailer to segment the market and </li></ul><ul><li>appeal to a select group of consumers!! </li></ul>
  6. 6. Retail merchandising requires management of the merchandise budget including: <ul><li>Planning And Controlling Retail Sales </li></ul><ul><li>Planning And Controlling Inventory Levels </li></ul><ul><li>Planning And Controlling Retail Reductions </li></ul><ul><li>Planning And Controlling Purchases </li></ul><ul><li>Planning And Controlling Profit Margins </li></ul>
  7. 7. THE COMPONENTS OF THE MERCHANDISE MIX <ul><li>Merchandise Variety </li></ul><ul><li>(# of product lines) </li></ul><ul><li>Merchandise Assortment </li></ul><ul><li>(# of product items) </li></ul><ul><li>Merchandise Support </li></ul><ul><li>(#of product units) </li></ul>
  8. 8. Planning Merchandise Variety Involves Planning And Controlling Product Lines Retailers use MANY factors to evaluate product lines!!
  9. 9. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The compatibility among product lines. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>Product substitutes </li></ul></ul><ul><ul><li>Product complements </li></ul></ul><ul><ul><li>Unrelated products </li></ul></ul>
  10. 10. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The physical attributes of each product line. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>Product bulk </li></ul></ul><ul><ul><li>Product standardization </li></ul></ul><ul><ul><li>Product service levels </li></ul></ul><ul><ul><li>Product selling methods </li></ul></ul>
  11. 11. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The product lines’ potential profitability. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>Direct and indirect contribution to profitability </li></ul></ul><ul><ul><li>Calculations of gross margin % and $$ </li></ul></ul>
  12. 12. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The role branding plays in the success of the product line. </li></ul><ul><ul><li>Must Consider: </li></ul></ul><ul><ul><li>How brands can distinguish a retailer from competitors </li></ul></ul><ul><ul><li>How brands can build store loyalty </li></ul></ul><ul><ul><li>The advantages and disadvantages of offering different types of brands – no names, vendor brands, store brands (private labels) and licensed merchandise </li></ul></ul>
  13. 13. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The age of each product within the product lifecycle </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>What stage a product is in to judge future sales potential </li></ul></ul><ul><ul><li>The number of products offered at different stages </li></ul></ul>
  14. 14. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The fashionable nature of each product line. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>Use of unique designer fashions as part of the store’s strategy </li></ul></ul><ul><ul><li>The above average risk of fashion merchandise ( But also note: high margin items with above average profitability) </li></ul></ul>
  15. 15. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The market appropriateness of each product line. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>How well the product matches consumption patterns and buying needs of targeted consumers </li></ul></ul><ul><ul><li>The relative advantage, affinity, trialability, observability and complexity of new product introductions </li></ul></ul><ul><ul><li>Market trends– provide products the market wants!! </li></ul></ul>
  16. 16. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The impact of lifestyle on product line acceptance. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>Targeted customers’ activities, interests, and opinions </li></ul></ul><ul><ul><li>The match between consumers’ lifestyle and retailer’s image </li></ul></ul><ul><ul><li>Usefulness of trade shows to identify product lines for targeted consumers’ lifestyles </li></ul></ul>
  17. 17. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The competitive threat facing each product. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>Competitive conditions under which the product line is available – intensive, selective or exclusive distribution </li></ul></ul><ul><ul><li>Is the product line available to direct (intra type) competitors or indirect (inter type) competitors, or both </li></ul></ul>
  18. 18. FACTORS USED TO EVALUATE PRODUCT LINES <ul><li>The conditions under which each product line will be procurable. </li></ul><ul><li>Must Consider: </li></ul><ul><ul><li>Availability and reliability of various suppliers </li></ul></ul><ul><ul><li>Terms and conditions under which the product will be made available </li></ul></ul>
  19. 19. CONTROLLING MERCHANDISE VARIETY <ul><li>Is an art and a science </li></ul><ul><li>No rules for what should be included in the merchandise mix and what should be excluded </li></ul><ul><li>Two useful management methods </li></ul><ul><ul><li>Category Management : each product managed as a business unit at the store level </li></ul></ul><ul><ul><li>ABC Analysis : each product line is rank ordered based on performance levels </li></ul></ul>
  20. 20. PLANNING MERCHANDISE ASSORTMENT AND SUPPORT <ul><li>Must organize the merchandise mix as to the number of different product lines carried </li></ul><ul><li>Must decide on: </li></ul><ul><ul><li>Brands </li></ul></ul><ul><ul><li>Sizes </li></ul></ul><ul><ul><li>Colors </li></ul></ul><ul><ul><li>Material </li></ul></ul><ul><ul><li>Styles </li></ul></ul><ul><ul><li>Price points </li></ul></ul>
  21. 21. PLANNING MERCHANDISE ASSORTMENT AND SUPPORT <ul><li>Goal is to ensure that product choice meets targeted consumer needs </li></ul><ul><li>Must carefully plan the number of units to have on hand to meet the expected sales for the brand, size, color combinations </li></ul><ul><li>Must develop merchandise lists </li></ul><ul><ul><li>Basic Stock List (staple items) </li></ul></ul><ul><ul><li>Model Stock List (fashion items) </li></ul></ul><ul><ul><li>Never Out List (key items and best sellers) </li></ul></ul>
  22. 22. CONTROLLING MERCHANDISE ASSORTMENT AND SUPPORT <ul><li>Involves monitoring and adjusting the types of product lines that are added and dropped from the merchandise mix </li></ul><ul><li>Two widely used methods to control assortment and support: </li></ul><ul><ul><li>Inventory turnover: rate at which the retailer depletes and replenishes stock </li></ul></ul><ul><ul><li>Open-to-buy:amount of new merchandise a retailer can buy during a specific time period without exceeding planned purchases for the period </li></ul></ul>
  23. 23. Merchandise Mix Strategies Different optimal variety and assortment strategies possible!! <ul><li>Narrow Variety/Shallow Assortment </li></ul><ul><ul><li>Vending machines </li></ul></ul><ul><ul><li>Newsstands </li></ul></ul><ul><ul><li>Door-to-door </li></ul></ul><ul><li>Wide Variety/Shallow Assortment </li></ul><ul><ul><li>Variety Stores </li></ul></ul><ul><ul><li>General Stores </li></ul></ul><ul><ul><li>Discount Stores </li></ul></ul><ul><li>Narrow Variety/Deep Assortment </li></ul><ul><ul><li>Specialty Stores </li></ul></ul><ul><li>Wide Variety/Deep Assortment </li></ul><ul><ul><li>Full-line Department Stores </li></ul></ul>
  24. 24. MERCHANDISE BUDGET MANAGEMENT <ul><li>Financial management tool used to plan and control the total amount (in dollars) of inventory carried in stock at any time </li></ul><ul><li>Determines how much a retailer should invest in inventory during a specified period </li></ul><ul><li>Remember: Merchandise Budget controls dollars; Merchandise Mix controls product units </li></ul>
  25. 25. MERCHANDISE BUDGET MANAGEMENT <ul><li>We will consider: </li></ul><ul><ul><li>Calculating monthly sales index to project next year’s sales. </li></ul></ul><ul><ul><li>Using Basic Stock Model to calculate BOM stock </li></ul></ul><ul><ul><li>Using Stock/Sales Ratio Method to calculate BOM stock </li></ul></ul><ul><ul><li>Calculating planned monthly purchases and open-to-buy </li></ul></ul>

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