Developing Merchandise Plans


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Developing Merchandise Plans

  1. 1. Chapter 14 Developing Merchandise Plans RETAIL MANAGEMENT: A STRATEGIC APPROACH , 10th Edition BERMAN EVANS
  2. 2. Chapter Objectives <ul><li>To demonstrate the importance of a sound merchandising philosophy </li></ul><ul><li>To study various buying organization formats and the processes they use </li></ul><ul><li>To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation </li></ul><ul><li>To discuss category management and merchandising software </li></ul>
  3. 3. Merchandising <ul><li>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 </li></ul>
  4. 4. Merchandising Philosophy <ul><li>Sets the guiding principles for all the merchandise decisions that a retailer makes </li></ul><ul><li>Should reflect </li></ul><ul><ul><li>Target market desires </li></ul></ul><ul><ul><li>Retailer’s institutional type </li></ul></ul><ul><ul><li>Market-place positioning </li></ul></ul><ul><ul><li>Defined value chain </li></ul></ul><ul><ul><li>Supplier capabilities </li></ul></ul><ul><ul><li>Costs </li></ul></ul><ul><ul><li>Competitors </li></ul></ul><ul><ul><li>Product trends </li></ul></ul>
  5. 5. Scope of Merchandising Responsibility <ul><li>Full array of merchandising functions </li></ul><ul><ul><li>Buying and selling </li></ul></ul><ul><ul><li>Selection, pricing, display, customer transactions </li></ul></ul><ul><li>OR </li></ul><ul><li>Focus on buying function only </li></ul>
  6. 6. Figure 14-1: Nike’s Own Store Merchandising Philosophy
  7. 7. Micromerchandising <ul><li>Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets </li></ul>
  8. 8. Cross-Merchandising <ul><li>Retailers carry complementary goods and services to encourage shoppers to buy more </li></ul>
  9. 9. Figure 14-2: Attributes and Functions of Buying Organizations
  10. 10. Functions Performed <ul><li>Merchandising view </li></ul><ul><ul><li>All buying and selling functions </li></ul></ul><ul><ul><ul><li>Assortments </li></ul></ul></ul><ul><ul><ul><li>Advertising pricing </li></ul></ul></ul><ul><ul><ul><li>Point-of-sale displays </li></ul></ul></ul><ul><ul><ul><li>Employee utilization </li></ul></ul></ul><ul><ul><ul><li>Personal selling approaches </li></ul></ul></ul>
  11. 11. Functions Performed (cont.) <ul><li>Buying view </li></ul><ul><ul><li>Buyers manage buying functions </li></ul></ul><ul><ul><ul><li>Buying </li></ul></ul></ul><ul><ul><ul><li>Advertising </li></ul></ul></ul><ul><ul><ul><li>Pricing </li></ul></ul></ul><ul><ul><li>In-store personnel manage other tasks </li></ul></ul><ul><ul><ul><li>Assortments </li></ul></ul></ul><ul><ul><ul><li>Point-of-sale displays </li></ul></ul></ul><ul><ul><ul><li>Employee utilization </li></ul></ul></ul><ul><ul><ul><li>Personal selling approaches </li></ul></ul></ul>
  12. 12. Figure 14-4: Merchandising Versus Store Management Career Tracks
  13. 13. Figure 14-5: Devising Merchandise Plans
  14. 14. Forecasts <ul><li>These are projections of expected retail sales for given periods </li></ul><ul><ul><li>Components: </li></ul></ul><ul><ul><ul><li>Overall company projections </li></ul></ul></ul><ul><ul><ul><li>Product category projections </li></ul></ul></ul><ul><ul><ul><li>Item-by-item projections </li></ul></ul></ul><ul><ul><ul><li>Store-by-store projections (if a chain) </li></ul></ul></ul>
  15. 15. Types of Merchandise <ul><li>Staple merchandise </li></ul><ul><li>Assortment merchandise </li></ul><ul><li>Fashion merchandise </li></ul><ul><li>Seasonal merchandise </li></ul><ul><li>Fad merchandise </li></ul>
  16. 16. Staple Merchandise <ul><li>Regular products carried by a retailer </li></ul><ul><ul><li>Grocery store examples: milk, bread, canned soup </li></ul></ul><ul><li>Basic stock lists specify inventory level, color, brand, style, category, size, package, etc. </li></ul>
  17. 17. Assortment Merchandise <ul><li>Apparel, furniture, auto, and other categories for which the retailer must carry a variety of products in order to give customers a proper selection </li></ul><ul><li>Decisions on Assortment </li></ul><ul><ul><li>Product lines, styles, designs, and colors are projected </li></ul></ul><ul><ul><li>Model stock plan </li></ul></ul>
  18. 18. Fashion and Seasonal Merchandise <ul><li>Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles </li></ul><ul><li>Seasonal Merchandise: Products that sell well over nonconsecutive time periods </li></ul>
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. Figure 14-6: R&D at Wendy’s
  23. 23. Figure 14-7: Traditional Product Life Cycle
  24. 24. Structured Guidelines for Pruning Products <ul><li>Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes </li></ul><ul><li>Gather and analyze detailed financial and other data about these items </li></ul><ul><li>Consider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers </li></ul><ul><li>After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand </li></ul>
  25. 25. Figure 14-8: Predicting Fashion Adoption
  26. 26. 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
  27. 27. 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
  28. 28. 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
  29. 29. 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)
  30. 30. Figure 14-10: Sephora’s Very Deep Assortment of Cosmetics
  31. 31. Brands Private (dealer or store) Manufacturer (national) Generic
  32. 32. 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
  33. 33. Figure 14-11: Wal-Mart’s New Approach to Private Brands
  34. 34. Figure 14-12: Daffy’s Distinctive Branding Strategy
  35. 35. Figure 14-13: Applying Category Management
  36. 36. Merchandising Software <ul><li>General Merchandise Planning Software </li></ul><ul><li>Forecasting Software </li></ul><ul><li>Innovativeness Software </li></ul><ul><li>Assortment Software </li></ul><ul><li>Allocation Software </li></ul><ul><li>Category Management Software </li></ul>
  37. 37. Figure 14-4a: Shelf Logic Software for Category Management Planning
  38. 38. Figure 14-4b: Shelf Logic Software for Category Management Planning