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Developing Merchandise Plans

RETAIL MANAGEMENT:A STRATEGICAPPROACH11th Edition11th Edition

BERMAN EVANS

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Chapter Objectives To demonstrate the importance of a

sound merchandising philosophy To study various buying organization

formats and the processes they use To outline the considerations in

devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation

To discuss category management and merchandising software

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Merchandising

Activities involved in acquiring particular goods/ services and making them

available at the places, times, prices, and

quantities that enable a retailer to reach its goals.

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Merchandising PhilosophyMerchandising Philosophy Sets the guiding principles for all the

merchandise decisions that a retailer makes It should reflect

Target market desires Retailer’s institutional type Market-place positioning Defined value chain Supplier capabilities Costs Competitors Product trends

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Scope of Merchandising ResponsibilityScope of Merchandising Responsibility

Full array of merchandising functions Buying and selling Selection, pricing, display, customer

transactions

OR

Focus on buying function only

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Figure 14-1: Dick’s Merchandising Philosophy

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MicromerchandisingMicromerchandising

Retailers adjust shelf-space allocations to respond to

customer differences and other differences among local markets.

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Cross-MerchandisingCross-Merchandising

Retailers carry complementary goods and services to encourage

shoppers to buy more.

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Figure 14-2: Attributes

and Functions

of Buying

Organizations

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Merchandising and Store Functions Merchandising and Store Functions PerformedPerformed

Merchandising viewMerchandising viewAll buying and selling functions

AssortmentsAdvertising pricingPoint-of-sale displaysEmployee utilizationPersonal selling approaches

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Buying viewBuying viewBuyers manage buying functions:

BuyingAdvertisingPricing

In-store personnel manage other tasks:AssortmentsPoint-of-sale displaysEmployee utilizationPersonal selling approaches

Merchandising and Store Functions Merchandising and Store Functions Performed (cont.)Performed (cont.)

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Figure 14-4a: Merchandising Career Track

at Macy’s

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Figure 14-4b: Store

Management Career Track

at Macy’s

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Figure 14-5: Devising Merchandise Plans

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ForecastsForecasts

These are projections of expected retail sales for given periodsComponents:

Overall company projectionsProduct category projectionsItem-by-item projectionsStore-by-store projections (if

a chain)

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Types of MerchandiseTypes of Merchandise

Staple merchandise Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise

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Staple MerchandiseStaple Merchandise

Regular products carried by a retailerGrocery store examples: milk,

bread, canned soup Basic stock lists specify inventory

level, color, brand, style, category, size, package, etc.

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Assortment MerchandiseAssortment Merchandise

Apparel, furniture, automotive, and other categories for which the retailer must carry a variety of products in order to give customers a proper selection

Decisions on assortmentProduct lines, styles, designs, and

colors are projectedModel stock plan

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Fashion and Seasonal MerchandiseFashion and Seasonal Merchandise

Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles

Seasonal Merchandise: Products that sell well over nonconsecutive time periods

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Table 14-1a: Factors in Planning Merchandise InnovativenessFACTOR RELEVANCE for PLANNING

Target market(s) Evaluate whether the target market is conservative or innovative

Goods/service growth potential

Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life

Fashion trends Understand vertical and horizontal fashion trends, if appropriate

Retailer image Carry goods/services that reinforce the firm’s image

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Table 14-1b: Factors in Planning Merchandise InnovativenessFACTOR RELEVANCE for PLANNING

Competition Lead or follow competition in the selection of new goods/services

Customer segments Segment customers by dividing merchandise into established-product displays and new-product displays

Responsiveness to consumers

Carry new offerings when requested by the target market

Amount of investment

Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel

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Table 14-1c: Factors in Planning Merchandise InnovativenessFACTOR RELEVANCE for PLANNING

Profitability Assess each new offering for potential profits

Risk Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs

Constrained decision making

Restrict franchisees and chain branches from buying certain items

Declining goods/ services

Delete older goods/services if sales and/or profits are too low

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Figure 14-6: Saks: Looking for Hot New Fashions

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Figure 14-7: Traditional Product Life Cycle

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Structured Guidelines for Pruning ProductsStructured Guidelines for Pruning Products

Select items for possible elimination on the basis of declining sales, prices, profits, and appearance of substitutes

Gather and analyze detailed financial/ miscellaneous data about these items

Consider non-deletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers

After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand

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Figure 14-8: Predicting Fashion Adoption

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Table 14-2a: Factors in Planning Merchandise QualityFACTOR RELEVANCE for PLANNING

Target market(s) Match merchandise quality to the wishes of the desired target market(s)

Competition Sell similar quality or different quality

Retailer’s image Relate merchandise quality directly to the perception that customers have of retailer

Store location Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality

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Table 14-2b: Factors in Planning Merchandise QualityFACTOR RELEVANCE for PLANNING

Profitability 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

Manufacturer versus private brands

Understand that, in the minds of many consumers, manufacturer brands connote higher quality than private brands

Customer services offered

Know that high-quality goods require personal selling, alterations, delivery, etc.

Personnel Employ skilled, knowledgeable personnel for high-quality merchandise

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Table 14-2c: Factors in Planning Merchandise QualityFACTOR RELEVANCE for PLANNING

Perceived goods/ service benefits

Analyze consumers. Lesser quality goods attract customers who desire functional product benefits; High-quality goods attract customers who desire extended product benefits

Constrained decision making

Face reality. Franchises or chain store managers have limited or no control over products, so independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers

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Width of assortmentWidth of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries.

Depth of assortmentDepth 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).

Retail Assortment StrategiesRetail Assortment Strategies

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Figure 14-10: Ikea’s Wide and Deep Assortment

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Private(dealer or store)

Manufacturer(national)

Generic

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Table 14-3: Private Brand Test

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Figure 14-11: Wal-Mart and Private Brands

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Figure 14-12: Sears’ Distinctive Branding Strategy

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Category ManagementCategory Management

Category management Category management is a merchandising technique used to improve productivity.

It is a way to manage a retail business that focuses on the performance of product category results rather than individual brands.

It arranges product groupings into strategic business units to better meet consumer needs and to achieve sales and profit goals.

Retail managers make merchandising decisions that maximize the total return on the assets assigned to them.

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Figure 14-13: Applying Category Management

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Merchandising Software

General Merchandise Planning Software

Forecasting Software Innovativeness Software Assortment Software Allocation Software Category Management Software

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Figure 14-4a: Shelf Logic Software for Category Management Planning

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Figure 14-4b: Shelf Logic Software for Category Management Planning

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