The document discusses key aspects of merchandise planning and management for retailers. It covers merchandise planning processes including forecasting sales, determining assortment options and inventory levels, controlling merchandise flow, allocating items to stores, and evaluating merchandising decisions. It also discusses considerations for buying merchandise such as selecting brands, sourcing decisions, preparing for negotiations, building relationships with partners, and addressing ethical responsibilities. Retailers evaluate merchandise decisions based on product group, division, department and other dimensions to continuously improve performance.

1. Retail Management
Module 11: Merchandise Management

2. Merchandise Planning and Management

3. Learning Outcomes: Merchandise Planning and
Management
11.1 Identify the important aspects of merchandise planning and management
• 11.1.1 Define merchandise management
• 11.1.2 Describe the characteristics and functions performed within retail
buying organizations
• 11.1.3 Differentiate between staple and fashion merchandise buying systems

4. Practice Question 1
You are a merchandise manager for a large retailer, in charge of men’s
activewear.
What would be your most important responsibility?

5. Merchandise Management
• Involves understanding and evaluating consumer’s buying habits to
effectively source, plan, display, and stock merchandise
• Merchandise Management is a process from beginning (strategy) to end
(performance evaluation)

6. Retail Buying Organizations
Merchandise Buying:
• Involves sourcing goods from vendors and wholesalers at the best possible cost to
achieve maximum profitability
Merchandise Planning:
• Goal is to maximize profitability by limiting markdowns and achieving/exceeding sales
targets
Merchandise Operations:
• Thought of as those functions that support merchandise planning and buying

7. Merchandise Buying Systems
Staple vs. Fashion Merchandising Systems
• Staple: items that are basic and essential
• For a grocery store, staple items might be bread, butter, eggs, and
milk. Retailers will often carry what is known as safety stock or back-up
stock for staple inventory.
• Fashion: difficult to forecast as it is seasonal and has
unpredictable demand

8. Merchandise Planning Process

9. Learning Outcomes: Merchandise Planning Process
11.2 Examine the merchandise planning process
• 11.2.1 Explain how retailers forecast probable sales numbers for
merchandise categories
• 11.2.2 Compare and contrast various merchandise assortment
options
• 11.2.3 Summarize how retailers determine product inventory levels
• 11.2.4 Outline a system for controlling merchandise flow
• 11.2.5 Describe how retailers decide on merchandise allocations
• 11.2.6 Explore the techniques used to evaluate merchandising
decisions

10. Forecasting Sales Numbers
Important for a few vital functions within the organization:
• human resources,
• marketing, product management,
• Operations
Merchandise planner helps determine sales plan based on data
from previous season and desired sales goals
• Must consider external factors as well
• Some categories of business aren’t affected by downturn in economy
• also look at specific retailers that emerge during tough economic times

11. Merchandise Assortment Options
What?
Why?
How?
Considerations:
• What is merchandise capacity of the stores?
• Is there a need for complementary merchandise to service?
• Is this merchandise profitable?
• What are the corporate objectives and does it align with strategy/goals?
• What are the regional needs for the area?

12. Inventory Levels
Why focus on inventory levels?
• Meet customer demand
• Lead time
• Higher profit
• Better cash flow
• Forward weeks of supply
• Weeks of supply
• Stock-to-sales ratio
• Sell thru percent
• Turnover
• Basic stock

13. Merchandise Flow
• Goal of buyer is to achieve sales plan
• Keep inventory levels on plan
• Begin by working with internal product production organization
• Work with branded suppliers to commit for those purchases in upcoming
season
• Enter planned selling season: controlling inventory flow is crucial
• SCM: where retailer partners with vendors to control product production
• Open-to-buy formula: sales, markdowns, EOP

14. Merchandise Allocations
• Determining how to distribute merchandise to individual store units for
maximum sales/minimal markdowns
• Plan purchases from ground up based on ideal store allocation
• Strategic, tactical considerations, & math
• Allocation influenced by competitive strategy where retailer is attempting to
show wide assortments
• Commercial software applications were developed

15. Merchandising Decisions
Retailers evaluate their performance to continue success
Review of retailer merchandise decisions reflects this, revealing all dimensions of
organization
Broken down from product perspective
• Group, division, department, vendor, classification, subclass, SKU
Analysis is performed at financial AND unit level

16. Practice Question 2
Retailers evaluate their merchandise decisions based on which dimensions?
Why?

17. Buying Merchandise

18. Learning Outcomes: Buying Merchandise
11.3 Outline the considerations taken by retailers when buying
merchandise
• 11.3.1 List some of the brand selection possibilities and their benefits
• 11.3.2 Describe some of the issues involved with sourcing decisions
• 11.3.3 Identify how a retailer can prepare for negotiations
• 11.3.4 Explain the value in building strong partner relationships
• 11.3.5 Summarize the ethical and social responsibilities that come
with buying decisions

19. Activity
What are five of the largest categories of retail market? Then list five of their
popular brands? Discuss similarities and differences between the categories
and their popular brands with a partner.

20. Brand Selection
• Importance of brand to retailer depends on category of retailer and its
market niche
• Largest categories of retail market & popular brands:
• Food (Kroger, Safeway, Publix), (PepsiCo, Coca-Cola)
• Electronics (Amazon, Best Buy, Apple), (Apple, HP, Samsung)
• Home improvement (Home Depot, Lowe’s), (Craftsman)
• Variety/drug (Walgreen, Rite Aid, CVS), (Johnson & Johnson)
• Apparel (Macy’s, JCPenney, Nordstrom), (Nike, Levi’s)
• Some brands grant exclusive distribution rights
• Brands in assortment create credibility for retailer
• Brands offer variety of other benefits to retailers
• Product design, manufacture, transportation

21. Sourcing Decisions
Sourcing is the process of finding goods or services
• Key issues when making sourcing decision:
• Company
• Cost
• Logistics
• Government regulations
• Sourcing
• Sourcing is art and science: larger organizations have staff who focus on
providing sourcing services for company
• Software applications developed to support sourcing process

22. Negotiations
Factors that show good negotiator
• Ability to describe common goals
• Emotional control and equal treatment
• Good listening and communicating
• Thorough knowledge of bargaining
• Ability to close negotiation
Follows a procedure:
• Plan: gather as much information as possible, setting goals
• Discuss: set scene, identify key issues
• Propose: clear solution
• Bargain: discuss proposal
• Agree: reach agreement
• Implement: communicate outcome as necessary

23. Building Partner Relationships
Benefits of individual connections
• Information, advice, introductions, referrals, etc.
Strong relationships are foundation of effective supply chain
Even if retailer and vendor aren’t in formal arrangement, strong partnership will
create benefits
• Retailer: ensure they have correct products
• Vendors: source of market information
Strong relationships benefit vendors and suppliers

24. Ethical and Social Responsibilities
Idea that businesses should balance profit-making activities with activities that
benefit society
Social responsibility takes on different meanings within industries and
companies
Fair Trade concept: movement where goods are produced and sourced in
sustainable way
“Green” companies enjoy enhanced reputations & receive positive support to
customers, leading to increased revenues

25. Quick Review
Roles of buyer, planner, and operations may differ
Utilize methodologies of buying merchandise: planning, assortments, inventory
levels, merchandise flow, allocations, merchandising
Make brand selections and sourcing decisions
Remember that the state of retail industry continues to evolve
Buying is a core competency needed to run successful business
Embrace that these principles apply to all retailers