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Developing Merchandise Plans

International Retail Management

Merchandising

Activities involved in acquiring particular goods/ services and making them available at the

places, times, prices, and in thequantity that enable a retailer to

reach its goals.

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Merchandising Philosophy❖ selecting the right products, ordering the right quantity, having them

in stock at the right time, displaying them in the right place in the

store, and selling them at the right price❖ Breadth, depth, quality of the assortment, store brands vs. national brands,

pricing policies

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❖ It should reflect

Target market desires

Retailer’s institutional type

Market-place positioning

Defined value chain

Supplier capabilities

Costs

Competitors

Product trends14-4

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Merchandise Management

❖ Merchandising view Inventory control

Assortments

Pricing

Financial objectives

Analyze merchandising performance

Employee utilization

Planning promotions

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Standard Merchandise Classification

• Merchandise Group– The highest classification level

– Eg// Zara Apparel/Home

• Department– The second level in the merchandise classification

– Zara Women/Men/TRF/Kids

• Classification

• Category– Sportswear/Dresses/Swimwear/Outwear etc.

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Merchandise Classification

• Some retailers such as department stores may define categories interms of brands.

– Vans, Hummel, Converse are categories in Boyner

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Category Management

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❖ 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.

❖ Retail managers make merchandising decisions that maximize the total

return on the assets assigned to them.

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Applying Category Management The Category Product Life Cycle

• A merchandise category’s sales pattern over time.

• Shape of the life cyle can be affected from various factors– Retailer’s strategies

– Rate of adoption

– Prices

– Environmental factors etc.

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Variations on the Category Life Cycle

❖ Staple merchandise

❖ Assortment merchandise

❖ Fashion merchandise

❖ Seasonal merchandise

❖ Fad merchandise

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Staple Merchandise

❖ Regular products carried by a retailer– Grocery store examples: milk, bread, canned soup

❖ Not chanage much over time

❖ Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.

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Staple Merchandise Example:Milk Section in a Supermarket

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Fad Merchandise

• Fad is a merchandise category that generates a lot of sales for a relatively short time- often less than a season.

• Fads are often illogical and unpredictable

– Furbys, Pokemon, Tamagotchi (digital pet), some computer games

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Fashion 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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What are the possible seasonal merhandise items in different kind of retailers?

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What are the possible fashion merhandise items in different kind of retailers?

Fashion and Seasonal Merchandise

• Neon Colors

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Fashion and Seasonal Merchandise

• Ramadan and Holy Feast

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Fashion and Seasonal Merchandise: Tchibo Case

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Are jeans a fad, a fashion, or a staple?

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Structured 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.

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Figure 14-5: Devising Merchandise Plans

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Forecasts

❖ These are projections of expected retail sales for given periods– Components:

• Overall company projections

• Product category projections

• Item-by-item projections

• Store-by-store projections (if a chain)

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Forecasting Staple Merchandise

• Relatively constant from year to year

• Relatively predictable

• Based on historical sales

• Controllable factors affecting sales?

• Uncontrollable factors affecting sales?

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Forecasting in «Fashion Merchandise Categories» is

challenging.WHY?

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The Assortment Planning Process

• List of items that a retailer will ofer in a merchandise category

– VARIETY (BREADTH)

– ASSORTMENT (DEPTH)

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An assortment can range from

broad and deep (department store)

to narrow and shallow (box store).

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Walmart’s Wide and DeepAssortment

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Decathlon’s Narrow and Deep Assortment

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An assortment plan indicates that a buyer can purchase 1000 units of fashion wristwatches. The buyer must choose between buying 20 styles of 50 units each or 5 styles of 200 units each. In terms of the store’s philosophy toward risk and space utilization,

how does the buyer make this decision?

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Profitability of Merchandising Mix

Corporate Philosophy toward the Assortment

Physical Characteristics of Store and Layout

Customer Demands

Micromerchandising

Retailers adjust shelf-space allocations to respond to customer differences and other differences among

local markets.

Micro-Merchandising works by defining local assortments for meeting specifically needs of the local

customers

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❖ Walmart: “Store of Community” Program

❖ Placing merchandise in stores based on community demographics and preferences

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«One size fits all» vs.

Micromerchandising

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Cross-Merchandising

❖ the practice of displaying products from different categories (or store departments) together, in order to get customers interested in additional items at the point of sale

❖ Retailers carry complementary goods and services to encourage shoppers to buy more.

❖ Cross Merchandising helps the customers to know about the various options which would complement their product

❖ Example: Shoe laces, shoe shiners, shoe racks with shoes

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Cro

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gTop Tips about Cross-Merchandising

• Group together products that are related in some way (Correlation -logical connection )

• Create your product display around a central theme.

• The merchandise should be neatly arranged without giving a cluttered look to the store.

• If it’s not performing well, don’t be hesitant to make some changes.(Controling)

• Think like a customer. Ask yourself — does this display make me want to buy the product? If you answered no, it’s probably time to re-think your product display.

• !!! The holidays are a great time to cross-merchandise

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Brands

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Private Brands

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Private label brands (PLBs), also referred to as “store brands”,

are brands owned by a retailer or wholesaler

Private label growth has been driven by the expansion of large

grocery retailers and propensity of customer preferences to buy

less expensive products

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Private Brands

❖ Generally, private brands are 10-30 % cheaper than leading national brands (NBs)

❖ Premium PLBs are positioned in the same way as successful NBs

❖ “Branded House” (only retailer name used),

❖ “House of Brands” (only separate brand name used)

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Private Brands

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

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PLANOGRAM

Schematic drawing of

shelves and fixtures that

helps in making the

optimal use of available

shelf-space in a retail

store

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

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https://www.youtube.com/watch?v=-jNXPGC8wik

http://www.visualretailing.com/asda-george/

Eye-tracking

• https://www.youtube.com/watch?v=8sfO2AKv8Io

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