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Process of tradeoff Variety, Assortment and backup stock is called assortment planning Assortment Plan – list of merchandise that indicates in general terms what a retailer wants to carry in a particular category.
Merchandise Planning Is Done at the Category Level • Why? • Category: group of products likely to have similar demand patterns Vendors. Promotions • Category Management: (a) maximising sales (b) maximising profits .
Merchandise Planning Is Done at the Category Level • Category Captain: favoured vendor to manage the category – Acess to all market & store information – Vendors may take advantage .
President Department – State Level Category Manager SKU .Buying Organisation • • • • Merchandise Group .
• Merchandise in stock must meet the profit goal.Two Basic Considerations • Must stock what the customer wants to buy. .
Turnover} \ . Inventory [sales/stock ratio -.not inv.Measures of Financial Performance • Overall corporate: ROA = Net Profit X Net Sales Net Sales Total Assets • Merchandising Financial Performance GMROI = Gross Margin X Net Sales Net Sales Av.
GMROI • Turnover effects • Profit effects • Return on Investment (ROI) viability .
Inventory GMROI measures what you are making on each dollar invested in inventory. in this ratio “Average Inventory” is measured in cost dollars.Sales/Stock Ratio GMROI = Gross Margin X Net Sales Net Sales Av. . Therefore.
GM and Sales/Stock Different for Different Products .
profit goals • Ex: Shopper's Stop decision to sell toys .Buyer’s Dilemma • Need to balance customer preferences/ shopping behaviors vs.
Inventory Turnover Net Sales Average Inventory @ Retail Cost of Goods Sold Average Inventory @ Cost .
Inventory Turnover Sales to Stock Ratio X (100 – Gross Margin %) .
Advantages of high InventoryT/O • • • • • • Increased sales volume Less risk of obsolence Improved salesperson morale More money for market opportunities Decreased Operating Expenses Increased Asset T/O .
Disadvantages of high Inventory T/O • Lowered sales volume • Increased cost of goods sold • Increased operating expenses .
Inventory Turnover • Sales/Stock = Net Sales Average Inventory at Cost • Inventory Turnover = Net Sales Av Inv at Retail OR = COGS Av Inv at Cost • All ratios use Average Inventory.Sales/Stock vs. WHY? .
GM%) = COGS Av Inv at Av Inv at Cost Cost .Converting S/S to Inv Turnover • Sales/Stock ratio X (100%-Gross margin %) • Really changing retail $ in “net sales” to COGS (GM% + COGS% = 100%) SO • Net Sales X (100% .
GMROI Uses • • • • • Evaluate departments Evaluate merchandise classifications Evaluate vendors Evaluate particular items EVALUATE BUYER’S PERFORMANCE .
Sales Forecasting • Category Life Cycles – – – – Fad Fashion Staple Seasonal .
Fad Sales over saasons Sales on a specific style over many seasons Sales vary from one season to next No No Fashion Yes No Staple Yes Yes Seasonal Yes Yes No Yes No Yes .
Customer Interviews (Focus Group) Shop Competition • .Developing a Sales Forcast • • • Previous Sales Volume Published Sources – economic trends Customer Information – Want Book.