Chapter 14 Developing Merchandise Plans RETAIL MANAGEMENT A

Chapter 14 Developing Merchandise Plans RETAIL MANAGEMENT: A STRATEGIC APPROACH, 9 th Edition BERMAN EVANS

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

Figure 14. 1 Harry and David’s 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 14 -8

Figure 14. 2 The Attributes and Functions of Buying Organizations 14 -9

Figure 14. 3 At Wal-Mart: Developing an Inside Buying Organization 14 -10

Functions Performed ¯ Merchandising view * All buying and selling functions • Assortments • Advertising pricing • Point-of-sale displays • Employee utilization • Personal selling approaches 14 -11

Functions Performed ¯ Buying view * Buyers manage buying functions • Buying • Advertising • Pricing * In-store personnel manage other functions • Assortments • Point-of-sale displays • Employee utilization • Personal selling approaches 14 -12

Figure 14. 4 Merchandising Versus Store Management Career Tracks 14 -13

Figure 14. 5 Considerations in Devising Merchandise Plans 14 -14

Forecasts ¯ Forecasts 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) 14 -15

Types of Merchandise ¯ Staple merchandise ¯ Assortment merchandise ¯ Fashion merchandise ¯ Seasonal merchandise ¯ Fad merchandise 14 -16

Staple Merchandise ¯ Regular products carried by a retailer * Grocery store staple examples • Milk • Bread • Canned soup ¯ Basic stock lists specify inventory level, color, brand, style, category, size, package, etc. 14 -17

Assortment Merchandise ¯ Apparel, furniture, auto, and other products 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 * Model stock plan 14 -18

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 -19

Table 14. 1 a Factors to Bear in Mind When 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 -20

Table 14. 1 b Factors to Bear in Mind When 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 investment for each new good/service: product costs, new fixtures, and additional personnel 14 -21

Table 14. 1 c Factors to Bear in Mind When 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 -22

Figure 14. 6 R&D at Wendy’s 14 -23

Figure 14. 7 The Traditional Product Life Cycle 14 -24

Structured Guidelines for Pruning Products ¯ Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes ¯ Gather and analyze detailed financial and other data about these items ¯ Consider nondeletion 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 14 -25

Figure 14. 8 A Selected Checklist for Predicting Fashion Adoption 14 -26

Table 14. 2 a Factors to Consider When Planning Merchandise Quality FACTOR 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 14 -27

Table 14. 2 b Factors to Consider When Planning Merchandise Quality FACTOR RELEVANCE for PLANNING Profitability Recognize that high quality goods generally bring greater profit per unit than lesserquality goods; turnover may cause total profits to be greater for the latter Manufacturer versus private brands Understand that, for many, manufacturer brands connote higher quality than private brands Customer services offered Know that high-quality goods require personal selling, alterations, delivery, and so on Personnel Employ skilled, knowledgeable personnel for high-quality merchandise 14 -28

Table 14. 2 c Factors to Consider When Planning Merchandise Quality FACTOR 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; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers 14 -29

Figure 14. 9 Retail Assortment Strategies 14 -30

Figure 14. 10 Sephora: A Very Deep Assortment of Cosmetics 14 -31

Brands Manufacturer (national) Private (dealer or store) 14 -32 Generic

Table 14. 3 The Berman/ Evans Private Brand Test Match the Retailer with the Brand Name Retailer Bloomingdale’s Costco Kmart Brand Arizona Jeans Sam’s Choice Michael Graves J. C. Penney Sears Wal-Mart Target Macy’s Martha Stewart Joseph & Lyman Kenmore Kirkland Charter Club 14 -33

Figure 14. 11 Costco’s Approach to Private Brands 14 -34

Figure 14. 12 Daffy’s Distinctive Branding Strategy 14 -35

Figure 14. 13 Applying Category Management 14 -36

Merchandising Software ¯ General Merchandise Planning Software ¯ Forecasting Software ¯ Innovativeness Software ¯ Assortment Software ¯ Allocation Software ¯ Category Management Software 14 -37

Figure 14. 4 a Shelf Logic: Software for Category Management Planning 14 -38

Figure 14. 4 b Shelf Logic: Software for Category Management Planning 14 -39