Chapter 14 Developing Merchandise Plans RETAIL MANAGEMENT A

Chapter 14 Developing Merchandise Plans RETAIL MANAGEMENT: A STRATEGIC APPROACH, 10 th Edition BERMAN EVANS

Chapter Objectives þ To demonstrate the importance of a sound merchandising philosophy þ To study various buying organization formats and the processes they use þ To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation þ To discuss category management and merchandising software 14 -2

Merchandising Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals 14 -3

Merchandising Philosophy ¯ Sets the guiding principles for all the merchandise decisions that a retailer makes ¯ Should reflect * Target market desires * Retailer’s institutional type * Market-place positioning * Defined value chain * Supplier capabilities * Costs * Competitors * Product trends 14 -4

Scope of Merchandising Responsibility ¯ Full array of merchandising functions * Buying and selling * Selection, pricing, display, customer transactions OR ¯ Focus on buying function only 14 -5

Figure 14 -1: Nike’s Own Store Merchandising Philosophy 14 -6

Micromerchandising Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets 14 -7

Cross-Merchandising Retailers carry complementary goods and services to encourage shoppers to buy more offer warranties 14 -8

Functions Performed ¯ Merchandising view * All buying and selling functions • Assortments • Advertising pricing • Point-of-sale displays • Employee utilization • Personal selling approaches 14 -9

Functions Performed (cont. ) ¯ Buying view * Buyers manage buying functions • Buying • Advertising • Pricing * In-store personnel manage other tasks • • 14 -10 Assortments Point-of-sale displays Employee utilization Personal selling approaches

Figure 14 -5: Devising Merchandise Plans 14 -11

Forecasts ¯ These are projections of expected retail sales for given periods * Components: • Overall company projections (Estimation) • Product category projections • Item-by-item projections • Store-by-store projections (if a chain) 14 -12

Types of Merchandise ¯ ¯ ¯ 14 -13 Staple merchandise Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise

Staple Merchandise ¯ Regular products carried by a retailer * Grocery store examples: milk, bread, canned soup ¯ Basic stock lists specify inventory level, color, brand, style, category, size, package, etc. 14 -14

Assortment Merchandise ¯ Apparel, furniture, auto, and other categories for which the retailer must carry a variety of products in order to give customers a proper selection ¯ Decisions on Assortment * Product lines, styles, designs, and colors are projected 14 -15

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 14 -16

Assessing each Factors in Planning Merchandise Innovativeness FACTOR 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 14 -17

Table 14 -1 b: Factors in Planning Merchandise Innovativeness FACTOR 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 investments for each new good/service: product costs, new fixtures, and additional personnel 14 -18

Table 14 -1 c: Factors in Planning Merchandise Innovativeness FACTOR 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 14 -19

Figure 14 -7: Traditional Product Life Cycle 14 -20

Retail Assortment Strategies Width of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries Depth 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) 14 -21

Brands Manufacturer (national) Private (dealer or store) 14 -22 Generic

Timing & Location ¯ Timing : For new produces the retailer should decide when they are first purchased, displayed and sold the must plan the merchandising flow per during a year ¯ Location: location of products in store and stockroom or warehouse to be used 14 -23