chapter 14

Chapter 1414Developing Merchandise Plans

RETAIL MANAGEMENT:A STRATEGICAPPROACH,

10th Edition

BERMANBERMAN EVANS 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 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

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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

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Scope of Merchandising Responsibility

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

transactionsOR

Focus on buying function only

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

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Micromerchandising

Retailer adjusts shelf-space allocations to respond to customer and other differences among local

markets

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Cross-Merchandising

Retailers carry complementary goods and services to encourage

shoppers to buy more offer warranties

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Functions Performed

Merchandising viewMerchandising view* All buying and selling functions

• Assortments• Advertising pricing• Point-of-sale displays• Employee utilization• Personal selling approaches

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Functions Performed (cont.) Buying viewBuying view

* Buyers manage buying functions• Buying• Advertising• Pricing

* In-store personnel manage other tasks• Assortments• Point-of-sale displays• Employee utilization• Personal selling approaches

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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 (Estimation)

• Product category projections• Item-by-item projections• Store-by-store projections (if a chain)

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Types of Merchandise

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 Basic stock lists specify inventory

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

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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

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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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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

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Table 14-1b: 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

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Table 14-1c: 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

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Figure 14-7: Traditional Product Life Cycle

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Retail Assortment Strategies

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)

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Brands

Private(dealer or store)

Manufacturer(national)

Generic

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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