retail merchandising by prof.sr shauk

7/29/2019 retail merchandising by Prof.Sr Shauk

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RETAIL MERCHANDISING

MERCHANDISINGTermed as the planning, buying and selling of merchandiseIt is an integral part of retailing and is also one of he mostchallenging functionsRetailers often say, GOODS WELL BOUGHT ARE HALFSOLD.

MERCHANDISE MANAGEMENTTermed as the analysis, planning, acquisition, handling andcontrol of merchandise investment of retail operation


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RETAIL MERCHANDISING ANALYSIS

Analysis is required because a retailer needs to understandthe needs and wants of his target audience

PLANNINGIt is necessary to plan since the merchandise to be sold infuture must be bought in advance

ACQUISITIONMerchandise to be sold in retail store, needs to be procuredfrom others either from distributors or manufacturers


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HANDLINGIt is necessary to determine where merchandise is neededand ensure that the merchandise reaches the required stores

at he right time and the right condition

CONTROL As the function of retailing involves spending money foracquiring of products, it necessary to control the amount of money spent of buying


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RETAIL MERCHANDISINGProcess of merchandise management includes

the developing of strategies to ensure that the right productIs bought at the right priceIs available at he right place

At the right timeIn the right amountIn order o satisfy he needs of the target customer

No one in retail can avoid any contact with merchandising activities

Merchandising is the day-to-day business of all retailers

As inventory is sold, new stocks need to be purchased, displayed and sold

Hence merchandising is often said to be at the core of retail management


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RETAIL MERCHANDISINGFACTORS AFFECTING THE MERCHANDISING FUNCTIONS

MERCHANDISINGFUNCTION

SIZE OF THE

ORGANIZATION

MERCHANDISETO BE

CARRIED

ORGANIZATIONSTRUCTURE

TYPE OFSTORE


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FACTORS AFFECTING THE MERCHANDISING FUNCTION

Merchandising does not function in isolation

It is affected by various factors, like1. The size of the retail organization

2. The type of store3. The merchandise to be carried and4. The organization structure


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RETAIL MERCHANDISINGThe size of the retail organization

Function of retailing varies depending on the size of retail business

Needs of an independent retailer varies considerably from those of large chainoperation

In case of a single store the owner or manager assisted by the sales person may perform he buying function

As the single store grows in terms of business functional departmentalization may occur and number of persons involved in buying process may increase

In case of a chain store, the buying process may be centralized or decentralizedgeographically depending on the organization

The buyer for a chain store may have a fair amount of say in buying price, as quantitiesare much larger than the single store

As chain store exists across regions and at times, across nations, buyer has to keepregional preferences in mind


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RETAIL MERCHANDISINGThe type of store

The buying for a mail order catalogue or for direct marketing or for an e-tail venture would be completely different

Mail order buyer needs to plan well in advance, as the production of catalogues takes a long time

In addition the large variety of merchandise needs a fair amount of market works

Buyers for an e-tail venture need to have a clear understanding of the type of

product that consumers would buy on the net Very often in direct marketing or in e-tail ventures, it is the uniqueness of theproduct or the competitive price, which makes the difference

Thus the nature of the organization is an important factor affecting thefunction of merchandising


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RETAIL MERCHANDISINGThe merchandize to be carried out

It largely determines the responsibilities of the retailer

The buying for basic merchandise is different from that of fashion merchandise

This is primarily because these products are always in demand

Examples of basics : white shirts in clothing or items like pulses, oil etc.

Fashion products are those that may sell very well in one season or year and may notbe in demand in the next season

Fads are products which have a smaller life cycle, and when sales are very high initially,the demand also dies down soon

Merchandiser handling fashion products will need to spend more time in the market

He will also need to be aware of the fashion forecasts and trends in international

markets


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The organization structure

The organization structure that the retail organization adopts, also affects themerchandising function

Some organizations may demarcate the role of the buyer and the role of themerchandiser as separate functions

While in smaller organization, one person may carry out all the duties


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RETAIL MERCHANDISINGFUNCTIONS OF A MERCHANDISE MANAGER

The merchandise manager is responsible for particular lines of merchandiseIn a department store there may be separate merchandise managersMens wear, womens wear, childrens wear etc. They would be in charge of a group of buyers and their basic duties could be

divided into four areas : planning, directing, coordinating and controlling

PLANNINGMerchandise managers formulate the policies for the areas for which they areresponsible

Forecasting the sales for the forthcoming budget period is requiredThis involves the estimating of the consumer demand and the impact of thechanges occurring in retail environmentThe sales forecasts are then translated into budgets , to help the buyers within the financial guidelines


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RETAIL MERCHANDISINGDIRECTING

Guiding and training buyers as and when the need arises, is also a function of hemerchandise managerMany a times, the buyers have to be guided to take additional markdowns for products which may not be doing too well in storesInspiring commitment and performance on the part of the buyer is necessary

COORDINATINGUsually, merchandise managers supervise the work of more than one buyerHence they need to coordinate the buying efforts in terms of how well it fits in

1. with the stores image and2. with the other products being bought by other buyers

CONTROLLING Assessing not only the merchandise performance, but also the buyers performance, is apart of the merchandise managers job Buying performance may be evaluated on the basis of the net sales, mark up percentagesmaintained, markdown percentages, the gross margin percentages and the stock turnThis is necessary to provide control and maintain high performance results


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RETAIL MERCHANDISINGMERCHANDISE PLANNING

Analysis is the starting point of merchandise planningThe person who is to take buying decisions for retail organization, must beaware of the consumers needs and wants An understanding of the consumer buying process is necessary

A clear understanding is also necessary as to what products are actually selling and whereInformation is obtained from the sales recordInteraction with he sales staff also provides valuable insights as to whatproduct is selling

Surveys , magazines and trade publications also provide external source of informationThe information thus gathered needs to be analyzedThe analysis forms the basis of sales forecastThe first stage in merchandise planning is sales forecast


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MERCHANDISE PLANNINGSTAGE I : DEVELOPING SALES FORECAST

Forecast may be made by the merchandiser , based on targets given by the topmanagementSales forecast is the first step in determining the inventory needs of the productor category Forecasts are typically developed to answer the following questions:

1. How much of each product needs to be purchased?2. Should new products be added to the merchandise assortment?3. What price should be charged for the product?

A sales forecast is usually made for a specific period of time, this may be weeks ora season or a yearThe person who is to make forecasts for the product group or category needs tobe aware of

1. The changes in tastes and attitudes of consumers2. The size of the target market3. And the changes in their spending pattern


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MERCHANDISE PLANNINGPROCESS OF DEVELOPING SALES FORECASTS

1. Reviewing past salesReview of past sales is necessary It helps establish a pattern or trend in sales figuresSales of the past year for a period will give an indication of the sales in the current year for the same

2. Analyzing the changes in economic conditionsNecessary to consider the changes happening in he economic front

It has a direct link consumer spending patternsEconomic slowdowns, increase in unemployment levels, etc. all effect business

3. Analyzing the changes in the sales potentialIt is now necessary to relate the demographic changes in the market to that of

the store and the products to be sold


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MERCHANDISE PLANNINGPROCESS OF DEVELOPING SALES FORECASTS

4. Analyzing the changes in the marketing strategies of the retail organizationand the competitionFor forecasting sales the marketing strategy to be adopted by theorganization and that of the competition is to be considered

Is there any line of merchandise to be introduced ? Any new store to be opened? An existing store to be renovated? All the above factors need to be taken into consideration

5. Creating the sales forecast After considering he above mentioned points an estimate of the projectedincrease in the sales is arrived atThis is then applied to the various products/categories to arrive at heprojected sales figures


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MERCHANDISE PLANNINGSTAGE II : DETERMINING THE MERCHANDISE REQUIREMENT

Planning in merchandising is at two levels1. The creation of the merchandise budget, and2. The assortment plan

There are two methods of developing the merchandise plan1. Top down planning, and2. Bottom up planning

In top down planning , op management works on the sales plan and passes itdown to the merchandising teamIn bottom up planning , the individual department managers work on theestimated sales projectionsThe are then added to arrive at the total sales figures


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MERCHANDISE PLANNINGSTAGE II : DETERMINING THE MERCHANDISE REQUIREMENT

After the sales forecasting has been completed, the inventory levels need to beplanned

The merchandise budget is the first stage in the planning of merchandiseIt is a financial planIt indicates how much to invest in product inventories, stated in monetary terms

The merchandise budget usually comprises five parts:The sales plan: how much of each product needs to be sold department wisedivision wise or store wiseThe stock support plan, which tells us how much inventory or stock, is needed toachieve those salesThe planned reductions, which may need to be made in case the product does notsellThe planned purchase levels, ie., the quantity of each product that needs to beprocured from he marketThe gross margins that the department, division or store contributes to theoverall profitability of he company


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MERCHANDISE PLANNINGMETHODS OF INVENTORY PLANNING

Any one of the four methods given below can be used for planningthe inventory levels needed

1. The Basis Stock Method2. The percentage variation Method3. The Weekss Supply Method

4. The Stock/Sales Ratio Method


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MERCHANDISE PLANNINGMETHODS OF INVENTORY PLANNING

1. The Basic Stock Method

This method is used when the retailer believes that it isnecessary to have a given level of inventory on hand at all times

Basic stock is the minimum amount of inventory that needs to

be maintained for a product, category or store, even duringtimes of low sales


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MERCHANDISE PLANNING

Basic Stock = Average stock for the season average monthly salesfor the season where

Average monthly sales for the season = Total planned sales for the season

Number of months in the season

Average stock for the season = Total planed sales for the seasonEstimated Inventory Turnover Rate for the season

Beginning of Month (BOM) stock = Planned Monthly Sales + Basic Stock


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Illustration : Using the basic stock method, calculate BOM inventory for themonth of January, given the following information

Planned sales for January : 30,000

Average monthly sales : 25,000 Average monthly inventory : 40,000

Basic stock = 40,000 25,000 = 15,000BOM stock = 30,000 + 15,000 = 45,000


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2. The Percentage Variation Method

This method is used when the stock turnover rate is more than six times a year

The basic premise is that this method of inventory planning is that inventory levels should reflect the actual sales

It is calculated as under :

BOM Stock = Avg stock for the season x [ 1 + (Planned Sales for the month / Avgmonthly sales)]


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MERCHANDISE PLANNINGIllustration: Using the Percentage Variation Method, calculate the

BOM inventory for the month of January, given the followinginformation

Planned sales for the month of January : 30,000 Average monthly sales : 25,000 Average monthly inventory : 40,000

BOM Stock = Avg stock for the season x [ 1 + (Planned Sales for the month / Avg monthly sales)]

BOM stock = 40,000 x [1 + 30,000/ 25,000)]= 40,000 x (1 + 1.2)= 40,000 x x 2.2= 40,000 x 1.1

= 44,000


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3. Stock to Sales Ratio Method

This method is very easy to use, but it requires the Retailer les ratio.It involves the maintaining of the inventory levels at a specific ratio to the

salesThis ratio tells he retailer how much inventory is needed at the beginning of the month, to support the months estimated sales

Stock-Sales ratio = Value of Inventory / Actual sales

Planned BOM inventory = Stock-Sales Ratio x Planned Sales


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Illustration: Using the ales Ratio Method, calculate the BOMinventory for the month of January, given the followinginformation

Stock to sales Ratio = 1.4Planned sales for the month of January : 20,000Planned BOM inventory = 1.4 x 20,000

= 28,000


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MERCHANDISE PLANNINGStock Turnover Rate

An effective measure of the speed with which products or merchandisemoves in and out of a retail store for a given periodIt is a measure of efficiency and is usually calculated for a period, of sixmonths or a yearIt is calculated using the following formula

Planned Sales (for a period)---------------------------------------------------- = Stock turnoverPlanned average Inventory (for the period)

The stock turnover rate is a measure of efficiency Every department usually has its own stock turnover rate as differentmerchandise need different speeds of sellingFrom the managements perspective, the stock turnover indicates the level of capital usage ie.Turning money into inventory, inventory into money and then repeating the

process again

retail merchandising by prof.sr shauk

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