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  1. 1. Retail Merchandising 1 Shri rangan
  2. 2. Objectives <ul><li>To demonstrate the importance of a sound merchandising philosophy </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 </li></ul><ul><li>To study various buying organization formats and the processes they use </li></ul>
  3. 3. Retail Merchandising <ul><li>Definition & the Concept of Retail Merchandising </li></ul><ul><li>Role & Responsibilities of a Merchandiser </li></ul><ul><li>Fashion Merchandising </li></ul><ul><li>Merchandise Characteristics </li></ul><ul><li>Merchandise Management- Merchandise Mix & Merchandise Budget </li></ul><ul><li>Basics of Merchandise Accounting </li></ul>
  4. 4. RM - DEFINITION <ul><li>Retail selling effort that is the principal task of in-store sales personnel through the use of promotions designed by a manufacturer, such as unique displays, giveaways, or discount and premium offers. In this case, merchandising is the act of managing and arranging the merchandise on display in a store so as to promote its sale . </li></ul>
  5. 5. Role & Responsibility of Merchandiser <ul><li>Planning </li></ul><ul><li>Directing </li></ul><ul><li>Co-ordinating </li></ul><ul><li>Controlling </li></ul>
  6. 6. Merchandising Versus Store Management Career Tracks
  7. 7. Functions of Merchandisers at Shopper’s stop <ul><li>Inventory-turn Management </li></ul><ul><li>Achieving Sales & Margins </li></ul><ul><li>Plans Merchandise </li></ul><ul><li>Availability Management, as per range plan </li></ul><ul><li>Merchandising strategy & planning </li></ul><ul><li>Processing of purchase orders </li></ul><ul><li>Analysis of Data & Sales Budgeting </li></ul><ul><li>Profitability Targets & Expense Control </li></ul><ul><li>Vendor/Supplier relations for both, in-house products as well as for brands. </li></ul>
  9. 10. Merchandising arrangement <ul><li>MERCHANDISING ARRANGMENT……… </li></ul><ul><li>Why making effective use of your space is so important. </li></ul><ul><li>How to position your departments and products. </li></ul><ul><li>How to improve store lighting. </li></ul><ul><li>The importance of atmosphere and cleanliness in your store. </li></ul><ul><li>How to create great displays and signage. </li></ul><ul><li>WHAT WE WILL ACHIEVE AS A BUSINESS………. </li></ul><ul><li>The consistently best Display standards against Competition in India </li></ul><ul><li>A great environment that will attract & satisfy Customers </li></ul><ul><li>Showcase to best advantage our product offer </li></ul><ul><li>Dramatically enhance Customer Service </li></ul>
  10. 11. Managing the Merchandise <ul><li>Developing a sales forecast </li></ul><ul><li>Determining the merchandise requirements </li></ul><ul><li>Merchandise control </li></ul><ul><li>Assortment planning </li></ul>
  11. 12. Developing Sales forecast <ul><li>Reviewing Past sales </li></ul><ul><li>Analyzing the changes in Economic Conditions </li></ul><ul><li>Analyzing the changes in the sales potential </li></ul><ul><li>Analyzing the changes in the marketing strategies of the retail organization and the competition </li></ul><ul><li>Creating the sales forecast </li></ul>
  12. 13. 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>
  13. 14. Determining the merchandise requirements <ul><li>Merchandise Mix </li></ul><ul><li>Retail communication Mix </li></ul>
  14. 15. Basics of Merchandise Accounting
  15. 16. Merchandising Accounting <ul><li>Cash Flow </li></ul><ul><li>The Balance sheet </li></ul><ul><li>Financial Ratios </li></ul><ul><li>Income statements </li></ul><ul><li>Gross- Margin-Return on Investment </li></ul>
  16. 17. Cash Flow <ul><li>Cash In </li></ul><ul><li>Cash Out </li></ul><ul><li>Negative Cash flow = Cash In < Cash Out </li></ul><ul><li>Positive Cash flow = Cash out > Cash In </li></ul>
  17. 18. Cash Flow Curve Oct Nov Dec Jan Feb Mar Cash In Cash out
  18. 19. The Balance Sheet <ul><li>The Balance Sheet is a statement of an organization's Assets, Liabilities and Owners’ Equity at a Particular Point in time. </li></ul><ul><ul><ul><ul><li>Assets </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Liabilities </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Owner's Equity </li></ul></ul></ul></ul>
  19. 20. Assets <ul><li>Assets – Owned by an organization </li></ul><ul><li>a. Short term (or) Current Assets </li></ul><ul><li>b. Long term </li></ul>
  20. 21. Liability <ul><li>Liability: Debts owed by an organization </li></ul><ul><ul><ul><ul><li>Payment on Short term </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Ex: Payment to supplier </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Payment on Long term </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Ex: Mortgage on Land & Building </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li> Investment on Extension, Expansion & renovation </li></ul></ul></ul></ul></ul>
  21. 22. Owner’s Equity <ul><li>Owner’s Equity : Difference between asset and Liability. </li></ul><ul><ul><ul><li>Relationship: </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Assets = Liabilities + Owner’s Equity </li></ul></ul></ul></ul></ul>
  22. 23. Income statement
  23. 24. Income statement <ul><li>Profit performance for a specific period of time </li></ul><ul><li>Income statement is otherwise called Statement of earnings or Profit & loss statement </li></ul><ul><li>Income statement: </li></ul><ul><ul><ul><ul><ul><li>Revenue – Expenses = Net Income </li></ul></ul></ul></ul></ul><ul><li>Profit = Expenses < Revenue = positive Net Income </li></ul><ul><li>Loss = Expenses > Revenue = Negative Net Income </li></ul>
  24. 25. Income statement contd… <ul><li>Income statement can be computed for an entire organization </li></ul><ul><ul><ul><ul><li>Individual Store </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A Group of Store </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Department </li></ul></ul></ul></ul><ul><li>Profit and loss is based on the revenue & expenses directly associated with each unit of business. </li></ul>
  25. 26. Income statement contd… <ul><li>Components : 5 major components </li></ul><ul><ul><ul><ul><ul><li>Revenue </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Cost of goods sold </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Gross margin </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Expenses </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Net Profit </li></ul></ul></ul></ul></ul><ul><li>Relationship among the components </li></ul><ul><li>Net revenue – Cost of goods sold - Expenses </li></ul><ul><ul><ul><ul><ul><li>Gross margin Net Profit </li></ul></ul></ul></ul></ul>
  26. 27. Income statement contd… <ul><li>Relationship among the components </li></ul><ul><li>Net revenue – Cost of goods sold - Expenses </li></ul><ul><ul><ul><ul><ul><li>Gross margin Net Profit </li></ul></ul></ul></ul></ul><ul><li>Net revenue : composed of sales, Leasing or renting property or interest on accounts </li></ul><ul><li>Net sales = Gross sales – Customer return </li></ul><ul><li>Gross sales are used to determine the customer return rates </li></ul><ul><ul><li>Customer return rate = Customer returns x100 </li></ul></ul><ul><ul><ul><ul><ul><li>Gross sales </li></ul></ul></ul></ul></ul>
  27. 28. Income statement contd… <ul><li>High customer return rate is often indicates of issue related </li></ul><ul><li>a. Customer service </li></ul><ul><li>b. Quality </li></ul><ul><li>c. Fit of merchandise </li></ul><ul><li>High sales attest to the ability of an organization buyer to select assortments of goods that are appealing to the store’s target customers. </li></ul>
  28. 29. Income statement contd… <ul><li>Cost of goods sold (or) Cost of Merchandise sold (or) cost of sales </li></ul><ul><li>Cost of goods sold = Billed cost of Merchandise + work room costs +shipping cost – cash Discount - Returns to vendors </li></ul>
  29. 30. Income statement contd… <ul><li>Shipping cost : Delivery cost for transporting goods from supplier </li></ul><ul><li>Workroom costs: activities that prepare merchandise for sale ( steaming & pressing apparel) </li></ul><ul><li>Return to vendors : defective or slow selling goods returned to suppliers for credit </li></ul><ul><li>Cash discounts : Invoice concessions from suppliers for prompt payment </li></ul>
  30. 31. Income statement contd… <ul><li>Expenses: Payroll, rent, Utilities, advertising and interest on debt. </li></ul><ul><li>Direct Expense: attributable to a specific unit ( store rent ) </li></ul><ul><li>Indirect Expense: is not attributable to a specific unit. ( news paper advertisement ) </li></ul>
  31. 32. Income statement contd… <ul><li>Gross margin : Difference between sales and cost of goods sold. </li></ul><ul><li>Net Income : Gross Margin – Expenses </li></ul><ul><li>Income can be increased by Increasing sales </li></ul><ul><ul><ul><ul><li>Increasing Gross Margin </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Decreasing cost of goods sold </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Any combination of above </li></ul></ul></ul></ul><ul><li>Component Percentage : </li></ul><ul><li>Cost of goods sold = cost of goods X 100 </li></ul><ul><ul><ul><ul><li>Net sales </li></ul></ul></ul></ul><ul><ul><ul><ul><li> Gross Margin = Gross Margin X 100 </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Net Sales </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Expenses = Expenses X 100 </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li> Net Sales </li></ul></ul></ul></ul></ul>
  32. 33. GMROI Particulars Category A Category B Sales 300000 250000 Cost of Goods Sold 180000 100000 Gross Margin 120000 150000 Gross Margin % 40% 60%
  33. 34. GMROI <ul><li>Gross Margin Return on Investment </li></ul><ul><ul><li>Integrates two performance </li></ul></ul><ul><ul><ul><ul><ul><li>Gross Margin </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Turn Over </li></ul></ul></ul></ul></ul><ul><li>To create a single measure of performance </li></ul><ul><ul><ul><ul><ul><li>GMROI = Gross Margin X Net sales </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li> Net Sales Average Inventory </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>GMROI = Gross Margin / average Inventory </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li> </li></ul></ul></ul></ul></ul>
  34. 35. GMROI for 3 Merchandise Categories Particulars Gross Margin Avg Inventory GMROI Specialty Food 120000 28000 4.3 Countertop Appliance 80000 40000 2.0 Glassware 200000 130000 1.5
  35. 36. Key terms <ul><ul><li>Assets </li></ul></ul><ul><ul><li>Balance sheet </li></ul></ul><ul><ul><li>Cash discount </li></ul></ul><ul><ul><li>Cash Flow </li></ul></ul><ul><ul><li>Component Percentage </li></ul></ul><ul><ul><li>Cost of goods sold </li></ul></ul><ul><ul><li>Current ratio </li></ul></ul><ul><ul><li>Expenses </li></ul></ul><ul><ul><li>Factor </li></ul></ul><ul><ul><li>GMROI </li></ul></ul><ul><ul><li>Gross sales </li></ul></ul>Income statement Liability Net Income Net Loss Net Sales Return to Vendor Owner’s Equity Time Series Comparison Workroom cost