these are very useful slides related to retail marketing and merchandise management. it helped me a lot in understanding the changing scenario of the consumers from unorganized retailing to organized retailing.

1. MANAGING THE
MERCHANDISE
PLANNING PROCESS

2. Merchandise Management
 Process by which a retailer offers the correct
quantity of the right merchandise in the right
place at the right time and meets the
company’s financial goals.
 Sense market trends
 Analyze sales data
 Make appropriate adjustments
in prices and inventory levels

3. Scope of Responsibility
 Full array of merchandising functions
 Buying and selling
 Selection, pricing, display, customer transactions
 Focus on buying function only

4. The Attributes and
Functions
of
Buying
Organizations

5. Types of Merchandise
 Staple Merchandise
 Fashion Merchandise
 Seasonal Merchandise

6. Merchandise Planning process
Forecast sales
Develop an
assortment
plan
Determine
inventory
levels
Plan for
managing
inventory
Buy
Merchandise
Allocate
merchandise
to stores
Monitor
performance

7. Types of Merchandise
Staple Merchandise
Predictable Demand
History of Past Sales
Relatively Accurate Forecasts
Fashion Merchandise
Unpredictable Demand
Limited Sales History
Difficult to Forecast Sales

8. Factors Affecting Sales
Projections
 Promotions
 Store Locations
 Merchandise
Placement
 Cannibalization
 Seasonality
 Weather
 Competitive Activity
 Product Availability
 Economic Conditions
Controllable Uncontrollable

9. Forecasting
Fashion Merchandise Categories
Retailers develop
fashion forecasts by
relying on:
 Previous sales data
 Market research
 Fashion and trend
services
 Vendors

10. Forecasting
Fashion Merchandise Categories
 Previous sales data
 Many items in a fashion category are often similar
to items sold in previous years.
 Market research
 Activities range from informal, qualitative research
about trends affecting the category to more formal
experiments and surveys.

11. Forecasting
Fashion Merchandise Categories
 Fashion and trend services
 There are many services that buyers can
subscribe to that forecast the latest fashions,
colors, and styles.
 Vendors
 Vendors have proprietary information about their
marketing plans and tend to be very
knowledgeable about market trends.

12. Developing an Assortment Plan
 Assortment plan is a list of the SKUs that a
retailer will offer in a merchandise category and
reflects the variety and assortment that the retailer
plans to offer in a merchandise category
 Variety (breadth) is the number of different
merchandising categories within a store or
department
 Assortment (depth) is the number of SKUs within
a category.
 Product availability defines the percentage of
demand for a particular SKU that is satisfied.

13. Determining Variety and
Assortment
Buyers consider
• Retail strategy
• The number of SKUs to offer in a merchandise category is a
strategic decision
• Trade-off between too much versus too little assortment
• Physical characteristics of the store
• Complementary Merchandise
• Assortment and buying behavior

14. Setting inventory and product
availability levels

15. Example:
A retailer has allocated Rs. 1 lakh for buying of shirts.
Assuming that the purchase price of each shirt is Rs. 100,
he will be able to stock 1000 shirts in the store.
 Step 1: Identify the factors affecting customer’s buying
decision
Suppose the factors identified are
 Type of shirt
 Size
 Sleeve length
 Collar type
 Color
 Fabric
Devising a Model Stock Plan

16.  Step 2: Identify the number of levels under
each attribute
Suppose the levels under each attribute are
Devising a Model Stock Plan
S. No Factors Attributes
1 Type of Shirt Dress Casual Formal Sport
2 Size Small Medium Large Extra large
3 Sleeve
Length
Full Short
4 Collar Type Saville Button Down
5 Color White Blue Cream Grey
6 Fabric Cotton Cotton blend

17. Suppose the sales forecasts are as follows
Devising a Model Stock Plan
Factors Attribute levels
Type Dress Casual Formal Sport
% Sales 10 40 20 30
Sizes Small Medium Large Extra Large
% Sales 25 40 25 10
Sleeve
Length
Full Short
% Sales 30 70
Collar Type Saville Button Down
% Sales 60% 40%
Color White Blue Cream Grey
% Sales 40% 30% 20% 10%
Fabric Cotton Cotton blend

18.  Step 3: Allocate the total units to the respective
item categories
Devising a Model Stock Plan
Men’s Shirts
100% (1000)
Dress 10%
(100)
Casual 40%
(400)
Small 25%
(100)
Medium
40% (160)
Full Sleeves
30% (48)
Half Sleeves
70% (112)
Button Down
40% (45)
White 40%
(18)
Cotton 25%
(4)
Cotton Blend
75% (14)
Blue 30%
(14)
Cream 20%
(9)
Grey 10%
(4)
Saville 60%
(67)
Large 25%
(100)
Extra large
10% (40)
Formal 20%
(200)
Sport 30%
(300)

19. Product Availability
 The percentage of demand for a particular
SKU that is satisfied
 Level of support or service level
 The backup (buffer) stock in the model stock
plan determine product availability
 The higher product availability, the higher the
amount of backup stock necessary to ensure
that the retailer won’t be out of stock on a
particular SKU when consumers demand it

20. Importance of Backup (Buffer)
Stock
Choosing an appropriate amount of backup
stock is critical to successful assortment
planning
 If the backup stock is too low  loose sales and
customers
 If the backup stock is too high  scare financial
resources will be wasted on needless inventory that
could be more profitably invested in more variety or
assortment

21. Product Availability
Factors considered to determine the appropriate
level of buffer stock and thus the product availability
for each SKU
• ABC Classification of merchandise (inventory)
• A – higher product availability
• B – medium product availability
• C – lower product availability is acceptable
• Fluctuations in demand
• Lead time for deliver from the vendor
• Frequency of store deliveries

22. Control system for managing
inventory

23. Staple Merchandise Planning
 Buyer Determines:
 Basic Stock or Assortment Plan
 Level of Backup Inventory
 System:
 Monitors Inventory levels
 Automatically reorders when inventory gets below
a specified level

24. Inventory Levels for Staple
Merchandise
 Cycle (base) stock:
 Inventory that goes
up and down due to
the replenishment
process
 Backup (buffer,
safety) stock
 Inventory needed to
avoid stockout

25. Determining the Level of Backup
Stock
 Higher product availability (service
level) retailer wishes to provide to
customers
 Greater the fluctuation in demand
 Longer lead time from the vendor
 More fluctuations in lead time
 Lower vendor’s Fill rate (% of
complete orders received from a
vendor)
More
Backup
Stocks
Needed
with

26. Inventory Management Report
for Rubbermaid Merchandise

27. Fashion Merchandise
Management Systems
 The system for managing fashion
merchandise categories is typically called a
Merchandise Budget Plan

28. Merchandise Budget Plan
Plan for the financial aspects
of a merchandise category
• Specifies how much money
can be spent each month to
achieve the sales, margin,
inventory turnover,
• Not a complete buying plan--
doesn’t indicate what specific
SKUs to buy or in what
quantities
Royalty-Free/CORBIS

29. Key components of the six month
merchandise plan
 Planned sales
 Planned purchases
 Planned reductions : Markdowns, employee
discounts and shrinkage
 BOM and EOM planned inventory levels

30. Six Month Merchandise Plan
for Men’s Casual Slacks

31. Evaluating the
Merchandise Budget Plan
 Inventory turnover GMROI, sales forecast are
used for both planning and control
 After the selling season, the actual
performance is compared with the plan
 Why did performance exceed or fall short of the
plan?
 Was the deviation from the plan due to something
under the buyer’s control?
 Did the buyer react quickly to changes in demand
by either purchasing more or having a sale?

32. Open-to-Buy System
The OTB system is used after the merchandise
is purchased
Monitors Merchandise Flow
Determines How Much Was Spent and How Much is
Left to Spend
PhotoLink/Getty Images PhotoLink/Getty Images

33. Allocating Merchandise to
Stores
Allocating merchandise to stores involves three
decisions:
• how much merchandise to allocate to each
store
• what type of merchandise to allocate
• when to allocate the merchandise to different
stores

34. Type of Merchandise Allocated
Retailers classify stores according to the characteristics of
the stores’ trading area
The assortment offered in a ready-to-eat cereal aisle should match
the demands of the demographics of shoppers in a local area

35. Timing of
Merchandise Allocation to Stores
Seasonality differences and consumer demand differences

36. Analyzing
Merchandise Management Performance
Three types of analyses related to the
monitoring and adjustment step are:
 Sell through analysis
 ABC analysis of assortments
 Multiattribute analysis of vendors

37. Sell Through Analysis
Evaluating Merchandise Plan
 A sell-through analysis compares actual and planned
sales to determine whether more merchandise is
needed to satisfy demand or whether price reductions
are required.

38. ABC Analysis
 An ABC analysis identifies the performance of individual
SKUs in the assortment plan.
 Rank - orders merchandise by some performance
measure determine which items:
 should never be out of stock
 should be allowed to be out of stock occasionally
 should be deleted from the stock selection.
 A items: 5% of SKUs, represent 70% of sales
 B items: 10% of SKUs, represent 20% of sales
 C items: 65% of SKUs, represent 10% of sales
 D items: 20% of SKUs, represent 10% of sales

39. Multiattribute Method
for Evaluating Vendors
The multiattribute method
for evaluating vendors
uses a weighted average
score for each vendor.
The score is based on the
importance of various
issues and the vendor’s
performance on those
issues.
C Squared Studios/Getty Images

40.  Identify sources of supply
 Contact and Evaluate source of supply
 Negotiating with vendors
 Establishing vendor Relations
 Analyzing vendor performance
Method of Merchandise
Procurement

41.  Store Brand
 Umbrella Brand
 Individual brand
Private Labels

42.  Defining Objective
 Defining Gaps in the market
 Decision on make/buy and Sourcing
 Determine the market sales strategy
 Determine the measures of performance
Process of Private Label
Creation

43.  Definition: The distributor/supplier process of
managing categories as strategic business units,
producing enhanced business results by focusing
on delivering consumer value
Category Management

44.  Step 1: Category definition
 Step 2: Defining Category Roles
 Destination Category
 Preferred Category
 Seasonal Category
 Convenience Category
Category Management Business
Process

45. Sleepers
• Identify key products within
category
• Delist slow movers and marginal
products
• Give quick movers more shelf
space
• Optimize margin mix and
DPP
Winners
• Continue current policies
• Be alert to adoption of new
products
• Minimize operational problems
like “out of stock”
• Optimize margin mix and DPP
Questionable
• Limit product mux to core assortment
• And delist marginal products
• Minimize shelf space at category level
• Transfer logistical and operational work
to third parties
Opportunities
• Harmonize product mix with market
trends
• Improve price image via low prices for
key products
• Maximize shelf space at category level
• Give promotional support to key items
Analyzing
Product
Categories
M
a
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k
e
t
S
h
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e
Market Growth
Step 3: Category Assessment
Quadrant Analysis by Brian Harris

46.  Step 4: Category performance measures
 Sales
 Profits
 Market Share
 Inventory Turnover
 Changes in the assortment
 Consumer Transactions
Category Management Business
Process

47.  Step 5: Category Strategies
 Traffic Building : drawing consumer traffic to the store
 Transaction Building : Increasing the size of the
average transaction
 Turf Defending : positioning to defend from the
competition
 Profit Generating : using products with higher margins
and loyalty
 Cash Generating : strategies for fast turnover
products
 Excitement Creating : communicate a sense of
urgency or opportunity to consumers
 Image Enhancing
Category Management Business
Process

48.  Step 6: Category Tactics
 Step 7: Category Plan Implementation
 Step 8: Category Review
Category Management Business
Process