Direct Store Delivery Back door traffic at store

Direct Store Delivery Back door traffic at store n 25% of grocery products never see a warehouse n HED 460

DSD Product Characteristics n Shelf life Bread/pastry/salty snacks/beer n 30 -70 days DSD vs 390 days for warehoused category n n Higher SKU velocity n 12 units/store/week vs 9 units HED 460

DSD Product Characteristics n Demand variability Frequent promotions n Frequent service n n Lower value density Fragility - chips n Weight – beer, soft drinks n HED 460

DSD Product Characteristics n Lower value density (cont. ) $27/cu. Ft. (dsd) vs $100/cu. Ft. n Price divided by space n High cost as a % sales n n Merchandising difficulty n Special equipment HED 460

Problem n How can you have a low GM but high profit and sales? COGS must be high n Expenses must be minimized n Emphasis on contribution margin n HED 460

Direct Store Delivery Results n More cash flow n 8 days of inventory held with 30 day payment Turns n Contribution Dollars n GMROI n High % of in-stock n HED 460

Product Development

Market Share Growth Strategies Acquire other businesses n Enter into joint ventures n Private label/product development n HED 460

Private Label n Merchandise bearing a retailer’s own name brand retailer’s own name n another copyrighted name n designer with whom the retailer has an exclusive license n HED 460

Why Private Label? Many Retailers today, see the value in having their own private label brand. o o o Product Differentiation Control over design/color assortment Increase in profits HED 460

Risks involved in Private Label o o o No one to ask for markdown $, if the item is not selling Image of store can suffer Quality and appearance of the product is a direct reflection upon the store HED 460

Importance of Private Label From 0 -100% of merchandise assortments n Grew 5 x from 1995 -2002 n Sears (Craftsman, Kenmore, Canyon River, Covington) n J. C. Penney (Arizona, Hunt Club, St. John’s Bay) n HED 460

Importance of Private Label n Higher profits than national brands n n differentiation Private brands, now premium brands Master Choice (A&P) n SFA Collection (Saks Fifth Avenue) n Faconnable (Nordstrom) n HED 460

History of product development n Foreign competition in early 1980 s Firm restructuring n Focus on improving existing products n Workforces cut drastically n Sites closed n Innovate or die n HED 460

Product development - Defined Design and engineering required to create products that are serviceable, producible, salable and profitable n Development of private label merchandise for the exclusive sale by one company n HED 460

Product Development Defined o Taking a 2 -D idea and transforming it into a 3 -D product to be sold to a consumer And the consumer wants… • • • The The The “right” “right” color fit price quality time (in season) HED 460

Types of Product Development n Original design more processes and lead time n more costly and time consuming n n Modification n reduced development time and costs HED 460

Types of Product Development n Knock off eliminates many development processes n saves time and money n n Joint product development Manufacturer and retailer n speeds design and decreases wholesaling time n n Combination HED 460

The Product Development Team o • • MERCHANDISING Front End Design Trend Analysis Merchandising (Retail Buyer) o • • PRODUCTION Back End Product Mgt. (in/out) Technical Patternmaking Sourcing Vendor Relations QA/QC HED 460

Process of Product Development Merchandising (Buyer) works with Design/Trend Dept. on WHAT to offer 1. • • • What filled What color the assortment will include price the item will sold for styling details are necessary holes in the branded retail mix need to be will give the store a competitive edge HED 460

Process of Product Development The Production Team brings the product to “life” 2. • • • Patternmaking/Design/Technical: the “right” fit Design/Merchandising/Product Mgr. Ensure the “right” quality Product Mgr negotiates w/factory to get the “right” price and lead-time HED 460

How it is done o o o Tools: BOM/spec sheets/artwork/fit sessions/anaylsis Communication inside retail team and outside with vendor/suppliers/factories Details: “all the small things” • • Washcare Instructions Woven label, Hangtags, UPC codes Strength and color of sewing thread Type of plastic bag, how many pcs per carton box Strength of the carton box How important is TIME, and quick replenishment Trade laws/new agreements, NAFTA HED 460

Why are details so important? Did you ever play that game: draw a circle and a box and at the top of the page, write the words… HED 460

Phase I: Pre-Adoption n Creativity Materials development and selection n Style development n Pattern making n Sample making n Product testing n Sample review n HED 460

Phase II: Post-Adoption n Preparing for production perfecting fit n making production patterns n writing production specifications n sourcing production n estimating final costs n HED 460

Software - PDM n Creates and maintains product specifications n n n Front and back detailed sketch Garment construction Graded specifications Fabric trim and details Packaging and labeling HED 460

Software - PDM n Used extensively in industry n n n n The Gap JCrew Kmart Osh Kosh B’ Gosh J. C. Penney Talbot’s Abercrombie & Fitch HED 460