6 MERCHANDISE MANAGEMENT

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MERCHANDISE MANAGEMENT Definition The planning and implementation of the acquisition, handling and monitoring of merchandise categories for an identified retail organization

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Category
• A category is an assortment of items that the customer would broadly perceive as being substitutes for each other while reflecting the extent of possible variants for eg. A pair of trousers for jeans

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Inventory Turnover • Can also be described as merchandise stock-turn • To workout how long inventory is on hand prior to it being sold 4 .

Inventory Turnover • Net sales Average inventory at retail store • Cost of merchandise sold Average inventory at cost • Units sold Average inventory at retail store 5 .

METHODS OF PLANNING AND CALCULATING INVENTORY LEVELS • Basic stock method of planning inventory • When it is agreed that there should be a particular level of inventory avle at all times 6 .

of months And Basic Stock = (a) + (b) 7 .The level of Beginning of month stock (BOM) = Planned monthly sales + Basic Stock Where (a) Av. Stock for season = Total planned sales for season Estimated inventory turnover (b) Av. Monthly sales = Total planned sales for season No.

Percentage variation method (PVM) Beginning of month planned inventory level = Planned av. Mthly stock for season X ½ [1+(Estimated mthly sales/ Estimated av. Mthly. Sales)] 8 .

of weeks to be stocked = No. of weeks in the period Stock turnover rate for the period 9 . of weeks to be stocked Where Av.Week’s supply method BOM=Av. Weekly sales * no. Weekly sales=Estimated total sales for the period Stock turnover rate for the period And No.

• Stock-to-sales method If a retailer wants to maintain a specified ratio of goods on hand to sales Shrinkage – is the difference between the amt of merchandise that is reported on inventory stock system and what is avle for sale or on the shelves 10 .

Markdowns are a lowering of the prices of the merchandise so that the reduction (markdown) acts as promotion Employee discounts are part of planned reductions and offer value to the employee in working at the store 11 .

MERCHANDISER SKILLS AND PROFILE Developing the first stage of the merchandise plan It requires: understanding the target market groups Agreeing regional and branch sales forecasts collecting information on competitors and any new branch plans Taking into consideration branding and corporate policy Agreeing merchandise budget Liaison and initial discussion with buyer(s) 12 • • • • • • .

Gilbert 13 .CATEGORY MANAGEMENT Definition Category management is related to decisions over group of products that are selected and placed to satisfy useoccasions or patterns. This is based upon strategic retailing principles that attempt to maximize sales and profits and may also include trade partnerships .

• Business Process: Trading Partner Relationships & IT 14 .Components of Category Management • Strategy: Performance Measurement & Organizational Capabilities.

Convenience) Cat. image. defend.suppliers) Category Performance Measures (sales.competition.Who is a category captain ? See S. excitement) • Category Strategies & Tactics • Category Plan Implementation • Category review Q . profit.Pradhan.Routine. t/o. 15 . mkt share. inv.Seasonal. assortment) (traffic.market. profits. assessment (customer.Category Management Business Process • • • • • Category definition Category role (Destination.

Challenges in retail traditional supply chain • • • • • • Product development and sourcing Supplier mgmt Buying Merchandising Distribution Retail operations 16 .

17 . with the extent of each determined by company policy.RANGE PLANNING • A retailer’s stock range can be described in terms of its width and depth. This is sometimes termed the assortment.

(It is also called pdt. A wide and narrow stock assortment is normally where there is little choice of brands.Ranging policy: assortment versus variety Product line breadth/ width: Wide choice of generic product classes with few brand choices (variety). of categories that are found in the merchandise line and different generic classes of product or merchandise carried. kids wear The width will relate to the no. women wear. . range) In other words. within an individual range. the no. Stock-turn could be higher for a broad 18 merchandise assortment. styles etc. eg. of different lines a retailer stocks in a store is often referred to as the variety of the merchandise mix. but margins will be slim. Men’s wear.

colours and prices within a particular generic class of a product. colours and prices in men’s wear 19 . which offer a lot of depth but with a narrow product range.). styles. There are specialist shops. checks etc.• Product line depth: Wide choice with (assortment) generic product class The depth relates to sizes. such as the niche boutiques. eg. Various sizes. styles (striped.

Assortment profiles and merchandise strategies Cook and Walters 1991 20 .

Assortment profiles and merchandise strategies 21 .

Assortment profiles and merchandise strategies 22 .

g. size and colour mix – depth and width • Taking into consideration the sales-to-stock level targets and calculating the optimum level of stock by utilizing one of the stock inventory planning methods • Relating the range plans to individual stores and possible promotional plans • Briefing the buyer(s) on agreed source 23 . style.Developing the range planning and merchandise allocation plan It requires: • Understanding the selection process of consumers • Deciding upon core and seasonal merchandise • Agreeing the range – e.

or items purchased by. based upon sales performance 24 .Developing the control mechanisms of the merchandise plan It requires: • An understanding of comparative frequency of store visits. employee reductions • Liaisoning with the buyer(s) to discuss the performance figures • Expanding or reducing merchandise categories. the target market groups • Forecasting sales of range items and profitability • Monitoring stock levels and availability of new stocks and replenishment levels • Assessing value of merchandise through shrinkage. based upon the browsing of. markdowns.

it is a common practice to grade the stores • The grading is normally done on the basis of floor sales area 25 .Store grading • Can be related to the gross sales forecast • Rather than produce a unique plan for each store.

SPACE ALLOCATION There is a need to know: • Are products easy to locate individually and as part of a basket of goods? • How long does it take to obtain and purchase a category? • Is the range broad enough to provide a satisfactory selection? • Are other retailers offering a superior layout of categories? 26 .

• Space allocation will be driven by: – Financial emphasis of yield mgmt techniques – Competitive strategy • Space allocation will be constrained by: – Practical operational and – Merchandise related factors • New product launch 27 .

• Fixture layout – – – – Space allocation and layout decision making Pangrams – proprietary software Shelf layouts Impact of category role on range and space strategies – Temporary shifts in space allocation – Use of off-shelf displays • In-store layout – Grid layout – Free flow layout – Can be instrumental in creating the ambience 28 .

MERCHANDISE ASSORTMENT AND SUPPORT • Analysis of merchandise category performance • If Demand>projected figures->prospect of missed out Opportunities and disappointed customers • > anticipated sales volume of the underperforming category->prospect of markdowns • The gross margin is only realized when the stock is turned over or sold 29 .

and not undermining the perception of added value that the retailer has to preserve in order to command its ‘full’ price on the reminder of the stock range 30 .• All retailers have to execute markdowns • Customer perceptions of reduced merchandise are a key consideration and the public profile of the ‘bargain-bin’ cannot be allowed to compromise image • So the merchandiser has to strike the balance between stimulating stock-turn with pricereductions.

NEGOTIATING THE PURCHASE • • • • • • Centralized buying Decentralized buying Specialist buyers Generalist buyers Negotiated Contract Uniform Contract 31 .

CONCLUSION 32 .

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