marketing

Merchandise Management: Buying and Handling the

Merchandise MixChapter 9

Goals for Chapter 9

Goals for Chapter 9

Describe a Merchandise Logistic System

Goals for Chapter 9


Discuss Merchandise Buying Process

Goals for Chapter 9



Discuss Merchandise Ordering Process

Goals for Chapter 9




Discuss Merchandise Handling Process

Goals for Chapter 9




Discuss Merchandise Handling Process

Examine 21 Common Buying Errors

Retail Logistics

Retail Logistics

“The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer”

Retail Logistics


Consists of three subsystems

Retail Logistics



Merchandise Buying

Retail Logistics



Merchandise Buying

Merchandise Ordering

Retail Logistics



Merchandise Buying


Merchandise Handling

Merchandise Buying

Merchandise Buying

Four step process

Merchandise Buying

Four step processIdentify sources of

supply

Merchandise Buying


supplyContact sources of

supply

Merchandise Buying



supplyEvaluate sources of

supply

Merchandise Buying



supplyEvaluate sources of

supplyNegotiate with sources

of supply

Buying Process

Buying Process

Some considerations:

Buying Process

Some considerations: Manufacturer versus

Wholesaler as vendor

Buying Process


Wholesaler as vendor Determine suitability of

product - quality, colors, durability, etc.

Buying Process




Determine suitability of Distribution - available, order time, consistency, etc.

Buying Process





Price

Buying Process





Price Promotional support

Buying Process





Price Promotional support Service support

Methods of Merchandise Planning


Gross margin Return on Inventory (GMROI)



Basic Stock Method



Basic Stock Method Percentage Variation

Method




Method Weeks’ supply Method




Method Weeks’ supply Method Stock to Sales Method

Determinants of Merchandise Mix


Variety


VarietyBreadth


VarietyBreadthDepth


VarietyBreadthDepthConstraints



Finances



Finances Space



Finances Space Turnover



Finances Space Turnover Market

Exhibit 9.1

Dimensions of and Constraints on Optimal Merchandise Mix

Dollar Merchandise Constraints

Merchandise Turnover Constraints

Space Constraints

Market Constraints

Optimal Merchandise Mix

Variety

Depth

Breath

Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company All rights reserved.

Pricing by Vendors

Pricing by Vendors

List prices (remember Robinson-Patman)

Pricing by Vendors


Trade Discounts

Pricing by Vendors


Trade Discounts Quantity Discounts

Pricing by Vendors


Trade Discounts Quantity Discounts Seasonal Discounts

(Deals)

Pricing by Vendors



(Deals) Cash discounts

Pricing by Vendors



(Deals) Cash discounts Promotional allowances

Pricing by Vendors



(Deals) Cash discounts Promotional allowances Who pays the freight


Traditional Purchase Order System (often adversarial relationship)



Quick Response System - uses computer technology (partnership of vendor and retailer)




Electronic Data Interchange - technology connecting retailer and vendor in a quick response system





Just-in-Time Delivery Systems - Reduces inventory requirements





Just-in-Time Delivery Systems - Reduces inventory requirements

Direct Store Delivery (DSD) - no warehouse; vendor delivers directly to store


Stocking of merchandise can be at store or at warehouse



In either case, receiving function must inspect, verify and log in deliveries and compare to vendor invoice



In either case, receiving function must inspect, verify and log in deliveries and compare to vendor invoice

Price marking of product must be performed, if required

1. Failures to analyze previous year’s merchandise results before going to

market or making purchases.


1. Failures to analyze previous year’s merchandise results before going to

market or making purchases.2. Failure to have kept records from the previous year.


3. Determining only the quantity and leaving the merchandise selection to the vendor, especially size and color

selections.


3. Determining only the quantity and leaving the merchandise selection to the vendor, especially size and color

selections.4. Using too many vendors.


5. Merchandise whose sizes and/or colors were wrongly bought or in too large quantity or were wrongly delivered and prove to be

disproportionate to customer demand at regular prices.


5. Merchandise whose sizes and/or colors were wrongly bought or in too large quantity or were wrongly delivered and prove to be

disproportionate to customer demand at regular prices.

6. Not helping out inexperienced buyers.


7. Failure to know the selling season for your market.


7. Failure to know the selling season for your market.

8. Buying too many items rather than just a few styles.


9. Buying too many hot, new styles.


9. Buying too many hot, new styles.

10. Failure to make small initial purchases, that can be followed up by reorders.


11. Failure to determine if buyer can deliver on time the merchandise ordered or accepting changes by the manufacturer.


11. Failure to determine if buyer can deliver on time the merchandise ordered or accepting changes by the manufacturer.

12. Buying too broad of a product line.


13. Failure to cancel past due orders.


13. Failure to cancel past due orders.

14. Making the last re-order once too often. The last may arrive just in time to be marked down.


15. Failure to negotiate all possible discounts from the vendor.


15. Failure to negotiate all possible discounts from the vendor.

16. Failure to study the market sufficiently so as to know the best quality merchandise and best price.


17. Failure to ask one of the following questions: a. “Does your company substitute ship?” b. “Does your company backorder often?” c. “How long has your

company been in business?”.


17. Failure to ask one of the following questions: a. “Does your company substitute ship?” b. “Does your company backorder often?” c. “How long has your

company been in business?”.

18. Failure to shop the competition so as not to buy identical items.


19. Failure to talk with the central office (where applicable) in order to see what other buyers services are offered.


19. Failure to talk with the central office (where applicable) in order to see what other buyers services are offered.

20. Failure to buy enough merchandise, resulting in lost sales volume.


21. Buying your personal preferences, instead of the market’s preferences.


Maintain Higher Turnover Goals

CONFLICTS IN BUILDING A MODEL STOCK PLAN

Maintain Strong In-Stock Position in Genuinely New Items

Avoid the 90 Percent of Products That Will Fall During Introduction

Stock Basic Popular ItemsHave Inventory Dollars to Capitalize on Opportunities

Maintain High Margin Goals

Have Selection Don’t Confuse Customer

Utilize Space Don’t Congest Store


Summary

Summary

Merchandise Management is extremely important aspect of Retail Operations Many consider it the MOST important)

Summary

Merchandise Management is extremely important aspect of Retail Operations Many consider it the MOST important)

Good merchandise management does not guarantee success but bad merchandise management almost certainly will result in failure

marketing

Documents

subsystems merchandise

step process merchandise

merchandise mixchapter

merchandise management

integrated flow of merchandise

suitability of distribution

retail store

consumer retail logistics