342ch09

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342ch09

  1. 1. Merchandise Management: Buying and Handling the Merchandise Mix Chapter 9
  2. 2. Goals for Chapter 9
  3. 3. Goals for Chapter 9 <ul><li>Describe a Merchandise Logistic System </li></ul>
  4. 4. Goals for Chapter 9 <ul><li>Describe a Merchandise Logistic System </li></ul><ul><li>Discuss Merchandise Buying Process </li></ul>
  5. 5. Goals for Chapter 9 <ul><li>Describe a Merchandise Logistic System </li></ul><ul><li>Discuss Merchandise Buying Process </li></ul><ul><li>Discuss Merchandise Ordering Process </li></ul>
  6. 6. Goals for Chapter 9 <ul><li>Describe a Merchandise Logistic System </li></ul><ul><li>Discuss Merchandise Buying Process </li></ul><ul><li>Discuss Merchandise Ordering Process </li></ul><ul><li>Discuss Merchandise Handling Process </li></ul>
  7. 7. Goals for Chapter 9 <ul><li>Describe a Merchandise Logistic System </li></ul><ul><li>Discuss Merchandise Buying Process </li></ul><ul><li>Discuss Merchandise Ordering Process </li></ul><ul><li>Discuss Merchandise Handling Process </li></ul><ul><li>Examine 21 Common Buying Errors </li></ul>
  8. 8. Retail Logistics
  9. 9. Retail Logistics <ul><li>“ The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer” </li></ul>
  10. 10. Retail Logistics <ul><li>“ The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer” </li></ul><ul><li>Consists of three subsystems </li></ul>
  11. 11. Retail Logistics <ul><li>“ The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer” </li></ul><ul><li>Consists of three subsystems </li></ul><ul><li>Merchandise Buying </li></ul>
  12. 12. Retail Logistics <ul><li>“ The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer” </li></ul><ul><li>Consists of three subsystems </li></ul><ul><li>Merchandise Buying </li></ul><ul><li>Merchandise Ordering </li></ul>
  13. 13. Retail Logistics <ul><li>“ The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer” </li></ul><ul><li>Consists of three subsystems </li></ul><ul><li>Merchandise Buying </li></ul><ul><li>Merchandise Ordering </li></ul><ul><li>Merchandise Handling </li></ul>
  14. 14. Merchandise Buying
  15. 15. Merchandise Buying <ul><li>Four step process </li></ul>
  16. 16. Merchandise Buying <ul><li>Four step process </li></ul><ul><li>Identify sources of supply </li></ul>
  17. 17. Merchandise Buying <ul><li>Four step process </li></ul><ul><li>Identify sources of supply </li></ul><ul><li>Contact sources of supply </li></ul>
  18. 18. Merchandise Buying <ul><li>Four step process </li></ul><ul><li>Identify sources of supply </li></ul><ul><li>Contact sources of supply </li></ul><ul><li>Evaluate sources of supply </li></ul>
  19. 19. Merchandise Buying <ul><li>Four step process </li></ul><ul><li>Identify sources of supply </li></ul><ul><li>Contact sources of supply </li></ul><ul><li>Evaluate sources of supply </li></ul><ul><li>Negotiate with sources of supply </li></ul>
  20. 20. Buying Process
  21. 21. Buying Process <ul><li>Some considerations: </li></ul>
  22. 22. Buying Process <ul><li>Some considerations: </li></ul><ul><ul><li>Manufacturer versus Wholesaler as vendor </li></ul></ul>
  23. 23. Buying Process <ul><li>Some considerations: </li></ul><ul><ul><li>Manufacturer versus Wholesaler as vendor </li></ul></ul><ul><ul><li>Determine suitability of product - quality, colors, durability, etc. </li></ul></ul>
  24. 24. Buying Process <ul><li>Some considerations: </li></ul><ul><ul><li>Manufacturer versus Wholesaler as vendor </li></ul></ul><ul><ul><li>Determine suitability of product - quality, colors, durability, etc. </li></ul></ul><ul><ul><li>Determine suitability of Distribution - available, order time, consistency, etc. </li></ul></ul>
  25. 25. Buying Process <ul><li>Some considerations: </li></ul><ul><ul><li>Manufacturer versus Wholesaler as vendor </li></ul></ul><ul><ul><li>Determine suitability of product - quality, colors, durability, etc. </li></ul></ul><ul><ul><li>Determine suitability of Distribution - available, order time, consistency, etc. </li></ul></ul><ul><ul><li>Price </li></ul></ul>
  26. 26. Buying Process <ul><li>Some considerations: </li></ul><ul><ul><li>Manufacturer versus Wholesaler as vendor </li></ul></ul><ul><ul><li>Determine suitability of product - quality, colors, durability, etc. </li></ul></ul><ul><ul><li>Determine suitability of Distribution - available, order time, consistency, etc. </li></ul></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Promotional support </li></ul></ul>
  27. 27. Buying Process <ul><li>Some considerations: </li></ul><ul><ul><li>Manufacturer versus Wholesaler as vendor </li></ul></ul><ul><ul><li>Determine suitability of product - quality, colors, durability, etc. </li></ul></ul><ul><ul><li>Determine suitability of Distribution - available, order time, consistency, etc. </li></ul></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Promotional support </li></ul></ul><ul><ul><li>Service support </li></ul></ul>
  28. 28. Methods of Merchandise Planning
  29. 29. Methods of Merchandise Planning <ul><li>Gross margin Return on Inventory (GMROI) </li></ul>
  30. 30. Methods of Merchandise Planning <ul><li>Gross margin Return on Inventory (GMROI) </li></ul><ul><li>Basic Stock Method </li></ul>
  31. 31. Methods of Merchandise Planning <ul><li>Gross margin Return on Inventory (GMROI) </li></ul><ul><li>Basic Stock Method </li></ul><ul><li>Percentage Variation Method </li></ul>
  32. 32. Methods of Merchandise Planning <ul><li>Gross margin Return on Inventory (GMROI) </li></ul><ul><li>Basic Stock Method </li></ul><ul><li>Percentage Variation Method </li></ul><ul><li>Weeks’ supply Method </li></ul>
  33. 33. Methods of Merchandise Planning <ul><li>Gross margin Return on Inventory (GMROI) </li></ul><ul><li>Basic Stock Method </li></ul><ul><li>Percentage Variation Method </li></ul><ul><li>Weeks’ supply Method </li></ul><ul><li>Stock to Sales Method </li></ul>
  34. 34. Determinants of Merchandise Mix
  35. 35. Determinants of Merchandise Mix <ul><li>Variety </li></ul>
  36. 36. Determinants of Merchandise Mix <ul><li>Variety </li></ul><ul><li>Breadth </li></ul>
  37. 37. Determinants of Merchandise Mix <ul><li>Variety </li></ul><ul><li>Breadth </li></ul><ul><li>Depth </li></ul>
  38. 38. Determinants of Merchandise Mix <ul><li>Variety </li></ul><ul><li>Breadth </li></ul><ul><li>Depth </li></ul><ul><li>Constraints </li></ul>
  39. 39. Determinants of Merchandise Mix <ul><li>Variety </li></ul><ul><li>Breadth </li></ul><ul><li>Depth </li></ul><ul><li>Constraints </li></ul><ul><ul><li>Finances </li></ul></ul>
  40. 40. Determinants of Merchandise Mix <ul><li>Variety </li></ul><ul><li>Breadth </li></ul><ul><li>Depth </li></ul><ul><li>Constraints </li></ul><ul><ul><li>Finances </li></ul></ul><ul><ul><li>Space </li></ul></ul>
  41. 41. Determinants of Merchandise Mix <ul><li>Variety </li></ul><ul><li>Breadth </li></ul><ul><li>Depth </li></ul><ul><li>Constraints </li></ul><ul><ul><li>Finances </li></ul></ul><ul><ul><li>Space </li></ul></ul><ul><ul><li>Turnover </li></ul></ul>
  42. 42. Determinants of Merchandise Mix <ul><li>Variety </li></ul><ul><li>Breadth </li></ul><ul><li>Depth </li></ul><ul><li>Constraints </li></ul><ul><ul><li>Finances </li></ul></ul><ul><ul><li>Space </li></ul></ul><ul><ul><li>Turnover </li></ul></ul><ul><ul><li>Market </li></ul></ul>
  43. 43. Exhibit 9.1 Dimensions of and Constraints on Optimal Merchandise Mix Dollar Merchandise Constraints Merchandise Turnover Constraints Space Constraints Market Constraints Optimal Merchandise Mix Variety Depth Breath Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  44. 44. Pricing by Vendors
  45. 45. Pricing by Vendors <ul><li>List prices (remember Robinson-Patman) </li></ul>
  46. 46. Pricing by Vendors <ul><li>List prices (remember Robinson-Patman) </li></ul><ul><li>Trade Discounts </li></ul>
  47. 47. Pricing by Vendors <ul><li>List prices (remember Robinson-Patman) </li></ul><ul><li>Trade Discounts </li></ul><ul><li>Quantity Discounts </li></ul>
  48. 48. Pricing by Vendors <ul><li>List prices (remember Robinson-Patman) </li></ul><ul><li>Trade Discounts </li></ul><ul><li>Quantity Discounts </li></ul><ul><li>Seasonal Discounts (Deals) </li></ul>
  49. 49. Pricing by Vendors <ul><li>List prices (remember Robinson-Patman) </li></ul><ul><li>Trade Discounts </li></ul><ul><li>Quantity Discounts </li></ul><ul><li>Seasonal Discounts (Deals) </li></ul><ul><li>Cash discounts </li></ul>
  50. 50. Pricing by Vendors <ul><li>List prices (remember Robinson-Patman) </li></ul><ul><li>Trade Discounts </li></ul><ul><li>Quantity Discounts </li></ul><ul><li>Seasonal Discounts (Deals) </li></ul><ul><li>Cash discounts </li></ul><ul><li>Promotional allowances </li></ul>
  51. 51. Pricing by Vendors <ul><li>List prices (remember Robinson-Patman) </li></ul><ul><li>Trade Discounts </li></ul><ul><li>Quantity Discounts </li></ul><ul><li>Seasonal Discounts (Deals) </li></ul><ul><li>Cash discounts </li></ul><ul><li>Promotional allowances </li></ul><ul><li>Who pays the freight </li></ul>
  52. 52. Merchandise Ordering
  53. 53. Merchandise Ordering <ul><li>Traditional Purchase Order System (often adversarial relationship) </li></ul>
  54. 54. Merchandise Ordering <ul><li>Traditional Purchase Order System (often adversarial relationship) </li></ul><ul><li>Quick Response System - uses computer technology (partnership of vendor and retailer) </li></ul>
  55. 55. Merchandise Ordering <ul><li>Traditional Purchase Order System (often adversarial relationship) </li></ul><ul><li>Quick Response System - uses computer technology (partnership of vendor and retailer) </li></ul><ul><li>Electronic Data Interchange - technology connecting retailer and vendor in a quick response system </li></ul>
  56. 56. Merchandise Ordering <ul><li>Traditional Purchase Order System (often adversarial relationship) </li></ul><ul><li>Quick Response System - uses computer technology (partnership of vendor and retailer) </li></ul><ul><li>Electronic Data Interchange - technology connecting retailer and vendor in a quick response system </li></ul><ul><li>Just-in-Time Delivery Systems - Reduces inventory requirements </li></ul>
  57. 57. Merchandise Ordering <ul><li>Traditional Purchase Order System (often adversarial relationship) </li></ul><ul><li>Quick Response System - uses computer technology (partnership of vendor and retailer) </li></ul><ul><li>Electronic Data Interchange - technology connecting retailer and vendor in a quick response system </li></ul><ul><li>Just-in-Time Delivery Systems - Reduces inventory requirements </li></ul><ul><li>Direct Store Delivery (DSD) - no warehouse; vendor delivers directly to store </li></ul>
  58. 58. Merchandise Handling
  59. 59. Merchandise Handling <ul><li>Stocking of merchandise can be at store or at warehouse </li></ul>
  60. 60. Merchandise Handling <ul><li>Stocking of merchandise can be at store or at warehouse </li></ul><ul><li>In either case, receiving function must inspect, verify and log in deliveries and compare to vendor invoice </li></ul>
  61. 61. Merchandise Handling <ul><li>Stocking of merchandise can be at store or at warehouse </li></ul><ul><li>In either case, receiving function must inspect, verify and log in deliveries and compare to vendor invoice </li></ul><ul><li>Price marking of product must be performed, if required </li></ul>
  62. 62. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  63. 63. 1. Failures to analyze previous year’s merchandise results before going to market or making purchases . SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  64. 64. 1. Failures to analyze previous year’s merchandise results before going to market or making purchases . 2. Failure to have kept records from the previous year. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  65. 65. 3. Determining only the quantity and leaving the merchandise selection to the vendor, especially size and color selections . SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  66. 66. 3. Determining only the quantity and leaving the merchandise selection to the vendor, especially size and color selections . 4. Using too many vendors. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  67. 67. 5. Merchandise whose sizes and/or colors were wrongly bought or in too large quantity or were wrongly delivered and prove to be disproportionate to customer demand at regular prices. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  68. 68. 5. Merchandise whose sizes and/or colors were wrongly bought or in too large quantity or were wrongly delivered and prove to be disproportionate to customer demand at regular prices. 6. Not helping out inexperienced buyers . SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  69. 69. 7. Failure to know the selling season for your market. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  70. 70. 7. Failure to know the selling season for your market. 8. Buying too many items rather than just a few styles. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  71. 71. 9. Buying too many hot, new styles. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  72. 72. 9. Buying too many hot, new styles. 10. Failure to make small initial purchases, that can be followed up by reorders. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  73. 73. 11. Failure to determine if buyer can deliver on time the merchandise ordered or accepting changes by the manufacturer. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  74. 74. 11. Failure to determine if buyer can deliver on time the merchandise ordered or accepting changes by the manufacturer. 12. Buying too broad of a product line. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  75. 75. 13. Failure to cancel past due orders. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  76. 76. 13. Failure to cancel past due orders. 14. Making the last re-order once too often. The last may arrive just in time to be marked down. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  77. 77. 15. Failure to negotiate all possible discounts from the vendor. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  78. 78. 15. Failure to negotiate all possible discounts from the vendor. 16. Failure to study the market sufficiently so as to know the best quality merchandise and best price. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  79. 79. 17. Failure to ask one of the following questions: a. “Does your company substitute ship?” b. “Does your company backorder often?” c. “How long has your company been in business?”. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  80. 80. 17. Failure to ask one of the following questions: a. “Does your company substitute ship?” b. “Does your company backorder often?” c. “How long has your company been in business?”. 18. Failure to shop the competition so as not to buy identical items. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  81. 81. 19. Failure to talk with the central office (where applicable) in order to see what other buyers services are offered. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  82. 82. 19. Failure to talk with the central office (where applicable) in order to see what other buyers services are offered. 20. Failure to buy enough merchandise, resulting in lost sales volume. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  83. 83. 21. Buying your personal preferences, instead of the market’s preferences. SOME COMMON BUYING ERRORS Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  84. 84. Maintain Higher Turnover Goals CONFLICTS IN BUILDING A MODEL STOCK PLAN Maintain Strong In-Stock Position in Genuinely New Items Avoid the 90 Percent of Products That Will Fall During Introduction Stock Basic Popular Items Have Inventory Dollars to Capitalize on Opportunities Maintain High Margin Goals Have Selection Don’t Confuse Customer Utilize Space Don’t Congest Store Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.
  85. 85. Summary
  86. 86. Summary <ul><li>Merchandise Management is extremely important aspect of Retail Operations Many consider it the MOST important) </li></ul>
  87. 87. Summary <ul><li>Merchandise Management is extremely important aspect of Retail Operations Many consider it the MOST important) </li></ul><ul><li>Good merchandise management does not guarantee success but bad merchandise management almost certainly will result in failure </li></ul>

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