INDEX

COMPANY PROFILE SCOPE OF THE PROJECT OBJECTIVE INTRODUCTION LITERATURE REVIEW METHODOLOGY OBSERVATION

2 3 4 5 6 - 42 43 - 49

ACKNOWLEDGEMENT
Throughout the course of research leading to the completion of this project, I have gratitude to many people, who have provided us with tremendous help and support in one way or another which we think we cannot possibly acknowledge in full measures. First and foremost, I would like to express our sincere thanks to Mr. S.S Ray course coordinator, Department of Fashion Technology, NIFT (Kolkata) & our project mentor Mr Tapash Bhattacharya for his time and valuable advice .His experience, insightful guidance, and encouragement provided us with necessary ways and confidence to carry out and complete this study. I would also take this opportunity to thank Ms. Nilima Topno for giving me valuable suggestions regarding the project. I also wish to express our sincere thanks to Mr. Raju Zore, Mr. Kedar Naik, Mr. Vishal Dabre & MR. Ashish Gupta from Westside for his generous and valuable support information to my research .Likewise, I would like to send our heartfelt thanks to our friends in NIFT, who gave us not only considerable assistance but also significant support to help us conduct the study. This project would not have got the shape it has got without the thoughtful insights of the people mentioned above. Prabodh Mishra

COMPANY PROFILE The Westside story began in 1998 when the Tatas acquired Littlewoods, a London based retail chain. This acquisition was followed by the establishment of Trent Limited. Littlewoods was subsequently named as Westside. TRENT a Tata Enterprise started its Retail venture in 1998 with its 1st store in Bangalore. Headed by MD, Mr. Noel Tata, the company crossed 460cr turnover in 2007. Trent runs its business under three formats, Westside which is lifestyle format and Star India Bazaar which is a Hyper Market Format & Landmark, the book store By the year end 06-07, Westside had 44 stores across the country. The company has 7 main departments, Buying, Merchandising, Sourcing, Operations, Marketing, IT, Finance & Human Resource.

In a rapidly evolving retail scenario, Westside has carved a niche for its brand of merchandise creating a loyal following. Currently, the company has 41 Westside stores measuring 15,00030,000 square feet each across 22 cities. With a variety of designs and styles, everything at Westside is exclusively designed and the merchandise ranges from stylized clothes, footwear and accessories for men, women and children to well-co-coordinated table linens, artifacts, home accessories and furnishings. Well-designed interiors, sprawling space, prime locations and coffee shops enhance the customers shopping experience.

Awards & Accolades Balanced Scorecard Hall of Fame India Brand Summit Brand Leadership Retail IFA Visionary of the Year Award, 2002 Mrs. Simone N. Tata Most Admired Large Format Retail Chain of the Year - Lycra Images Fashion Awards 2005 NDTV Profit Business Leadership Awards 2006 - Retail Category

SCOPE OF THE PROJECT

Good inventory control is critical to ensuring an adequate level of stock is on hand for the amount of sales being generated. Having too much inventory (or the wrong type) during certain periods can slow your cash flow and reduce profits with too many markdowns. On the other hand, if you under buy and miss sales opportunities then you are not making your potential profit. A retailer can be sure to stock the right amount of the right products at the right time by using an Open-To-Buy (OTB) plan.

The problem faced by the menswear department in Westside was inadequate stocks due to overstocking and under stocking in the various stores across the country.

The problem can arise due to many flaws at different stages like:

Base stock calculation

Allocation pattern

Identification of target segment

5 stores in Mumbai and Pune region were allotted me. I studied the sales pattern across the past 4 quarters to formulate my observations & analysis based on these 5 stores. The project will be implemented in other stores based on the results and the impact on these 5 stores.

Merchandise planning is the key to any successful retailing and the buying plan of a retailer is perhaps the determining factor between the stock & the sale. The stock sales ratio should be as low as possible for a successful retailer.

The preparation of buying plan includes calculating the project sales of the next season taking the trends and seasonal factors into the account and forecasting the next season sales i.e. calculating the projected sales and the base stock to be maintained.

OBJECTIVE
To develop an open to buy plan for the in-house brands of the menswear department for the store situated at SGS Magnum mall, Pune. Sub objective To forecast the sales for the next quarter To prevent under stocking & overstocking in the category of menswear by calculating the base stock to be maintained

INTRODUCTION The term Merchandising is unique and exclusive to the retail industry. It refers to the entire process of inventory planning and management in a retail organization. Merchandising, when done properly, leads to an increase in the return on investment (ROI). The greater the ROI, more the profitability.

In order to satisfy every customers needs, the retail store must have the right product in the right place, in the right quantity, with the right quality at the right price, with right mix of sizes or variants and at the at the right time.

Good inventory control is critical to ensuring an adequate level of stock is on hand for the amount of sales being generated. Having too much inventory (or the wrong type) during certain periods can slow your cash flow and reduce profits with too many markdowns. On the other hand, if you under buy and miss sales opportunities then you are not making your potential profit. The next most crucial step to high returns in retail is defined buying. Buying for a retail organization is a critical function of merchandising. The process begins with the preparation of the buying plan, called OPEN-TO-BUY or OTB. It helps retailer project and control future buying so that the flow of merchandise in the store matches anticipated sales at desired stock turn rates to give positive cash flow.

In an uncomplicated way an OTB is essentially the difference between how much inventory is needed and how much is actually available. This includes inventory on hand, in transit and any outstanding orders. Development of a well formulated categorized OTB plan is utterly crucial for best margin returns, and numerous other benefits as saving the markdowns.

LITERATURE REVIEW

Retailing Retailing by its very nature is very dynamic. The past decade has been one of turmoil and transition to the world. Some economies roared ahead, and then rebounded. Competition heated up and consumer spending cooled down. New giants emerged and erstwhile leaders faded. Entire industry segments emerged only to make way for new ones yet again. Mergers, acquisitions and bankruptcies hastened consolidation. Technological advances transformed business practices. New leaders reengineered business models and invested in new infrastructure. Each passing year has new and far reaching effects on the retail industry, and this is not surprising to consider that retail is an industry which is all about to change. The next ten years will undoubtedly bring about even more changes than the last decade.

Retail is the final stage of any economic activity. By the virtue if this, retail occupies an important position in the world economy. According to Philip Kotler, Retailing includes all the activities involved in selling goods or services to the final consumer for personal, nonbusiness use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.

The route for Indias retail sector is not clear, and even questions whether big retailers will be the inevitable face of modern retail. At the most basic level, modern retailing seems inevitable as shoppers demand keenly priced goods in an attractive retail setting. This means the future for retailing is to bring together the theatre and factory elements a combination that needs robust structures and meticulous attention to detail in business planning and daily execution. Shoppers will always value service, and no one does this better than a store owner-

manager. Tomorrows battleground in retail is, therefore, over the ability of big retailers to tout the factory side and ensure they motivate their store teams to provide customer service, while local stores will need to retain the theatre of shopping through their intimacy with customers while developing behind-the-scenes operations that efficiently enable quality goods to be sold at a fair price. While there is undoubted potential in the Indian market, driven by the legendary scale of the middle class, todays modern retail sector remains small by international comparison. Efforts to tap this potential are hindered by several factors and, as a result, expansion and investment is being held back and commitment deferred.

Challenges facing global retailers:

The biggest challenge facing the Indian organized retail sector is the lack of retail space. With real estate prices escalating due to increase in demand from the Indian organized retail sector, it is posing a challenge to its growth. With Indian retailers having to shell out more for retail space it is affecting their overall profitability in retail.

The Indian government has allowed 51% foreign direct investment (FDI) in the India retail sector to one brand shops only. This has made the entry of global retail giants to organized retail sector in India difficult. This is a challenge being faced by the Indian organized retail sector. But the global retail giants like Tesco, Wal-Mart, and Metro AG are entering the organized retail sector in India indirectly through franchisee agreement and cash and carry wholesale trading. Many Indian companies are also entering the Indian organized retail sector like Reliance Industries Limited, Tata Trent Ltd., Pantaloons, and Bharti Telecoms. But they are facing stiff competition from

these global retail giants. As a result discounting is becoming an accepted practice. This too brings down the profit of the Indian retailers. All these are posing as challenges facing the Indian organized retail sector.

The emergence of new markets: Asia, especially China and India are the emerging market places. There is tremendous technological, transportation and industrial revolutions that have changed the worlds perspective about these countries. Increasing urbanization in both the markets has fast emerged as an important factor in the rise of these nations as important emerging markets. Together, India and China are estimated to see their GDP rise to $6 trillion by the year 2020. Few markets and retailers can hence ignore these markets.

The empowered consumer: Retaining a consumer is far more difficult today than it was a decade ago. Consumer demographics and lifestyles are changing rapidly. Spending power is increasing and technology is aiding consumers in making sound shopping decisions. Given the increased amount of choice in terms of products and formats, consumers now demand more for less from the shopping experience: more quality, choice, consistency, convenience and service for less money, time, effort and risk.

Technology enabled efficiencies: Technology has enabled businesses and consumers to build efficiencies on the basis of the ability to receive and transmit data, at a fast speed. This information today has become critical for achieving efficiencies in all aspects of retailing. In the near future, retailer-supplier partnerships will depend on technology, substituting information for inventory in the pipeline to reduce costs while improving productivity.

The rise of the e-age: The emergence of internet retailing or e-tailing has been a key driver of change in retail. This increase in the number of internet users not only in the developed markets, but also globally, has placed new demands on retailers. Online shopping facilitated by auction sites are the new realities of retail.

Understanding the retail consumer: According to Peter Drucker, business exists to satisfy customers. The existence of the customer is integral to the existence of the retailer. The ability to understand consumers is the key to developing a successful retail strategy. To be able to satisfy consumers, its necessary to understand him, his needs and how he responds to various marketing efforts undertaken by the retail organization. The retailer needs this information to stay ahead of the competition and to build a competitive advantage.

Developing the Marketing Mix: Once the company has decided on its overall competitive marketing strategy, the next step is to begin planning details of the marketing mix. The marketing mix is one of the major con concepts in modern retailing and marketing. Marketing mix can be defined as the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix involves everything a firm can do to increase the demand for its products. It involves the functions of the 4 Ps which are: Product, Price, place and Promotion. Product means the goods and services combination the company offers to the target market. Thus, the Levis Jeans product consists of the fabric, threads, buttons and other accessories, along with the attractive packaging.

Price is the amount of money the customers have to pay to obtain the product. Retailers calculate their margins based on the price charged by their suppliers and fix a selling price to the commodities. Value based retailers also calculated a mark down to their margins to give a value price offering to their customers.

Place includes company activities that make the product available to the target customers. Retailers usually expand their market presence by increasing the number of stores in areas close to their customer base.

Promotion means activities that communicate the merits of the product and persuade target customer to buy it.

The marketing mix constitutes the companys tactical tool kit for establishing strong positioning in target markets. The 4Ps represent the sellers view of the marketing tools available for influencing the buyers. From a customer view point, each marketing tool is designed to deliver a customer benefit.

Four Ps Product Price Place Promotion

Four Cs Customer needs and wants Cost to the customer Convenience Communication

Winning companies are those that can meet customer needs economically and conveniently and with effective communication.

MERCHANDISE PLANNING

In the large retail store, we find a dizzying array of goods to clothe our bodies, decorate our homes and entertain our families. All of this merchandise comes in a variety of sizes, colours, makes and models. Bringing it all together requires the successful coordination of numerous individuals and divisions, including buyers, warehouse employees, financial staff, store operations, etc.

Yet, merchandising takes top priority. It doesnt matter how efficiently the other departments are operating. If merchandising is not firing on all cylinders, the company cannot succeed.

Retail Merchandising is the process of developing, securing, pricing, supporting and communicating the retailers merchandise offering.

The merchandise planning process allows the retail buyer to forecast with some degree of accuracy what to purchase and when to have it delivered. This will greatly assist the company in attaining its sales and gross margin goals. Buyers must rely heavily on historical sales data, coupled with personal experience and their own intuition about market trends.

A well premeditated merchandise plan comprises of following steps:

 Define Your Merchandise Policy

Every retail organization must have a vision in order to provide its buyers with some insight into the following business components: Demographics of current and potential customers. Stores image. Merchandise quality levels. Price point policy. Marketing approach. Customer service levels. Desired profit margins.

This will allow you to develop a clear merchandise policy that outlines buying goals and objectives. Communicating this policy effectively will not only provide direction, but should also drive all decision making throughout the merchandise planning process.

Gather Historical Information In building merchandise plan, the objective is to prepare a month-by-month total purchasing schedule for the company. Then, repeat this process for the next level of detail (i.e. the departmental level). Depending on the sophistication of company information systems, each department can then be broken down into smaller segment "classes", for which a similar sales plan is prepared. The first step in preparing these plans is to pull the sales information for the same period last year. Not only should we gather actual sales numbers, but also statistics on returns, markdowns and any inventory carry-over. Unless your store is computerized, detail of this

nature will not always be available. However, even a manual analysis of total merchandise purchases will provide you with an acceptable level of data, which is far better than having no information at all.

Perform Qualitative Analysis

Most professionals will agree that the buying process is 90% analytical and 10% intuitive. In other words, you must do your homework to achieve any level of success. But your efforts will be rewarded. As the most critical aspect of a successful operation, buying/ merchandise management is what retail is all about.

Qualitative Analysis refers to identifying the proper components in a mixture. In this case, the mixture is the merchandise plan and the components that affect this plan are as follows:

Customer Profile Analysis Department Analysis Key Department Trends Major Vendor Analysis Advertising Review Visual Representation Analysis Top Selling Variant

Completing the Merchandise Plan

Step 1: Assemble Last Years Figures Assemble and fill in last years results. Unless your operation is computerized, however, getting most of the monthly data for your plan will be impossible. In such cases, simply begin with six month or even annual figures, and then divide by the relevant number of months. Or just take an educated guess. The more times you do this, the sooner you will develop systems to extract these numbers on a monthly basis.

Step 2: Planned Sales Sales planning is the most difficult step in the whole process. It would be great if you could purchase a retailer's crystal ball and sales forecasts would miraculously appear after rubbing it with a cash register tape. In the real world, however, we start by reviewing last years figures and trying to determine what might affect our performance this year. Some things to consider are:

a) Sales Performance Coming Into The Season b) Monthly Promotions c) Customer Behaviour d) Economic Factors

Step 3: Planned Reductions Markdowns, employee discounts and inventory shrinkage come under the heading of planned reductions. These three figures affect our ending gross margin, so they must be considered

when calculating department and class profitability. Since they also affect inventory levels, they must be projected to ensure enough merchandise is on hand to attain forecasted sales levels.

a) Planned Mark-downs

Taking any markdowns is a difficult task for most retailers to face. Shoddy merchandise and bad weather are factors that may be out of the retailer's control.

b) Employee Discounts As a percentage of sales, this figure remains relatively constant from one year to the next unless company policy changes. Therefore, it is then safe to use last year's sales figure as a percentage of sales and apply it to the sales projections for the current period.

c) Shrinkage

The acceptable method of calculating the shrinkage amount per month is to use the year-end shrink percent multiplied by the monthly sales projection.

d) B.O.M. & E.O.M. Planned Inventory Levels

Planning End-of-Month (E.O.M.) or Beginning-of-Month (B.O.M.) inventory levels (one months ending is the next months beginning) is another important element of the merchandise plan. Inventory is by far the number one dollar asset within the

company, and careful planning is required to ensure an adequate return on investment is attained.

Stock-to-Sales Method

The Stock-to-Sales Method is a popular way to forecast how much inventory is required to attain monthly sales projections. Stock-to-sales (S/S) is a ratio of the amount of inventory on hand at a particular date to the sales for the same period, and is calculated as follows: S/S ratio = Stock on hand E.O.M (at retail value)/Sales for the same month

When using the S/S method for planning stock levels, the buyer selects the S/S ratios he desires each month. Desired S/S ratios are usually obtained by referencing previous seasons. The selected ratio is then multiplied by the projected period sales to get the desired E.O.M inventory level.

If S/S Ratio is: 1 2 3 4 Step 5: Inventory Stock Turns

Estimated Annual Inventory Turnover is: 12 6 4 3

Inventory stock turns measure the rate at which merchandise is sold from your store compared to the inventory level on hand. The higher the rate, the more profit the buyer brings to the company and the better your cash flow will be. Stock turns are calculated by dividing the total sales for the season by the seasons average ending inventory (at retail value).

Season Average Inventory = Sum of E.O.M. Inventory/Months in Season

Stock turn rate = Total sales for season/Season average inventory

Step 6: Gross Margin Return On Inventory Investment (GMROII)

While the standard Inventory Turnover ratio tells you how efficiently you are moving your inventory, it ignores the profitability of this inventory movement. For example, an item with a low gross margin and high sales will show a higher turnover rate. However, this is obviously not as desirable as moving inventory with higher (or even average) gross margins. Basically, it produces a lot of activity, but with fewer financial results. Gross Margin Return On Inventory Investment has become the standard inventory statistic for many retailers because it reflects the movement of inventory relative to profitability, rather than to sales. This is a better measure of inventory performance because retailers are more interested in profitability than sales. Think of GMROII as the rate of return you are earning on your inventory investment. As you know, a savings bond that pays 8% is better than one that pays only 3%. Similarly, inventory that provides you with a higher rate of return is more desirable. GMROII = Gross Margin/Avg. Inventory Investment @ Cost X 100

Step 7: Planned Purchases Once sales projections, stock reductions and stock levels have been established, you can calculate your planned purchases. The planned purchase figure is also the buyers first "opento-buy" estimate.

Planned Purchases = EOM Inventory + Sales + Reductions - BOM Inventory

Step 8: Gross Margin Gross margin is the difference between the selling price and the cost of the product, less reductions for markdowns, shrinkage and employee discounts. Hopefully, what is left after these reductions is enough to pay all operating expenses and leave the retailer with a profit.

C.O.G.S. (cost of goods sold) = B.O.M. Inventory + Purchases - E.O.M. Inventory

Planned Gross Margin = (Period sales - C.O.G.S)/Period sales

OPEN TO BUY OTB refers to merchandise budgeted for purchase during a certain period of time for which the stocks have not yet been ordered. It is also the process of forecasting sales and purchases.

OTB is a planning tool that assists in setting budget for sales and merchandise inventory levels and in monitoring the current status of the OTB amount, which is the amount remaining to be ordered to meet the budget.

Every company needs to use a OTB plan, as most tend to over stock when sales increase and under stock when they are low. Often a small increase in sales leads to excessive buying that ultimately affects the retail organisations bottom-line. OTB helps a retailer fix the ideal amount of stock that should be on hand at the beginning of any given month and the quantum of new merchandise to be received during the month.

The Open-To-Buy is very simply the buyer's buying plan and should be used to ensure you have the "right" amount of inventory to support your sales plans. The goal of the Open-ToBuy is not to keep you from buying! The goal is to ensure the correct inventory level so you do not have too much or too little inventory. While preparing and following an Open-To-Buy is no guarantee of success and lack of a plan is no guarantee of failure, we feel Open-To-Buy planning is essential to ensure the optimum level of inventory to support monthly sales plans and to maximize the return on capital invested in merchandise inventory.

CATEGORY MANAGEMENT

Category management can be defined as the distributor/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on

delivering consumer value. Thus, a category is a basic unit of analysis for making merchandising decisions. In general, a category is an assortment of items that the customer sees as reasonable substitutes for each other. The fundamentals of category management revolve around managing categories as Strategic Business Units.

At the core of Category Management concept is a focus on a better understanding of consumer needs as the basis for retailers and suppliers strategies, goals and work processes. Technology plays a key role, as information is a key enabler. The idea is to use this information to tailor the product offering according to consumer needs. The offering is then measured in terms of sales, cost and returns per square foot. The whole process is aimed at providing customer satisfaction and at the same time, maximizing returns for the organization. This focus causes a re-understanding of many prevalent business practices, which may have obstructed a greater understanding of consumer needs and opportunities.

Category management is now considered as the new science of retailing for three basic reasons. 1. It involves a systematic process that has been shown to be robust in various retail situations across the world. 2. It emphasizes decision making based on complex analysis of consumer data and market-level syndicated data. 3. It replaces the brand bias that stems from a suppliers interest in maximizing market share, with a more objective view based on the consumers desires.

For the past couple of years, the term category management has entered the retail lexicon in virtually every merchandise category. Category management began in the supermarket business, where big retailers of packaged goods learned that they could improve sales and profits if they could more efficiently administer all their different product classifications. The idea was to oversee the store not as an aggregation of products, but rather as an amalgam of categories, with each category unique in how it is priced and how it is expected to perform over time.

The process of Category Management implies a change in the way in which suppliers are viewed. It goes beyond the traditional lines where the function that a supplier performs is broken down onto competencies and all information is shared. Category management requires a focus team organization that spans both suppliers and retailers organizational boundaries. It helps in identifying the lack of connection between how customers come to buy and how retailers and suppliers go to the market in attempts to meet customer demands, by emphasizing that consumer-defined needs and their solutions should be at the heart of decisions in hoe products and categories are marketed.

Category Management has emerged due to the following reasons: Consumer changes At the heart of category management concept is a focus on a better understanding of consumer needs as the basis for retailers and suppliers strategies, goals and work processes. The focus on consumers ensures that the retailer is careful while describing categories and in the way these are managed at the store end. It takes into account the fact that consumers come to the store to satisfy needs which are more likely to be defined in terms such as glamorous look, fresh breathe, breakfast food,

cool dude look, etc. Category management draws attention to unproductive departmental separations by emphasizing that categories should be defined first and foremost by consumer needs and not by departmental separations. Competitive pressures The emergence of new formats of retail like hypermarkets and category killers and the breaking down of global boundaries requires retailers to become more competitive. This type of competitor focuses on a category, not at the total store level. To compete effectively against these new forms of competition, carefully devised and implemented strategies at the category level are essential. This is the essence of category management process. It provides the necessary competitive perspectives, management methods and tools to meet the challenges of these new category-focused competitive formats. Economic and efficiency considerations Economic factors may also induce the need to adopt a new approach towards management of products. Factors like slow growth of domestic economy, a decline in the birth rate and inflation critically affects the cost incurred by companies. Category management can provide work processes and organizational designs to achieve greater efficiencies in an integrated manner, across both demand and supplyside management. Advances in Information Technology Information technology now makes it possible for retailers and suppliers to share information and change collective business practices in ways that were unimaginable in the past. These advances have affected the capabilities of retailers and suppliers to obtain, organize, access, analyze and act upon the data required for effective category management.

Category management provides business processes that lead to effective deployment of these new skills and information sources without neglecting to provide for the security considerations of protecting proprietary data. By focusing on superior understanding of consumer needs, category management provides renewed opportunities for meeting consumer needs and, at the same time, for achieving competitive advantage as well as lower costs through greater work process efficiencies.

RATIONALE FOR CATEGORY MANAGEMENT

One key reason for the introduction of Category Management was the retailers' desire for suppliers to add value to their (i.e. the retailer's) business rather than just the supplier's own. For example, in a category containing brands A and B, the situation could arise such that every time brand A promoted its products, the sales of brand B would go down by the amount that brand A would increase, resulting in no net gain for the retailer. The introduction of Category Management imposed the condition that all actions undertaken, such new promotions, new products, re-vamped planogram, introduction of Point of Sale advertising etc. were beneficial to the retailer and the shopper in the store.

A second reason was the realization that only a finite amount of profit could be milked from price negotiations and that there was more profit to be made in increasing the total level of sales.

 A third reason was that the collaboration with the supplier meant that supplier's expertise about the market could be drawn upon, and also that a considerable amount of workload in developing the category could be delegated to the supplier.

There are three vital considerations with regard to assortment decision making: 1. Stocking goods in a product subcategory should reflect the behaviour of that subcategory shoppers 2. Retailers should leverage manufacturer research to improve category 3. Retailers should study product placement alternatives

CATEGORY LIFE CYCLE

Merchandise categories generally follow a predictable sales pattern; Sales start off low, increase plateau, and then ultimately decline. This sales pattern is divided into 4 stages introduction, growth, maturity and decline. Knowing where the category is in its life cycle is important in developing a sales forecast and merchandising strategy.

COMPONENTS OF CATEGORY MANAGEMENT

Performance Measurement Trading Partner Relationships

Strategy Business Process

Organizational capabilities Information Technology

There are 6 components which are key to the functioning of category management. The core components are Strategy and Business Process. The enabling factors are Performance Measurement, Information Technology, Organizational Capabilities and Co-operative Trading Partner Relationships. Category management is generally viewed as a step-by-step planning and implementation process that helps retailers and suppliers achieve both the performance based objectives and longer term strategic aims.

THE CATEGORY MANAGEMENT BUSINESS PROCESS

1. Category definition A category can be defined as a distinct, manageable group of products/services that consumers perceive to be interrelated and /or suitable in meeting a consumer need. The category definition should be based on how the consumer buys, and not on how the retailer buys. The category definition should include all products that are either highly substitutable or closely replaced.

2. Defining the category role

The category role determines the priority and the importance of various categories in the overall business. This essentially serves as the basis for resource allocation. For example, some categories may be dominated by premium brands, in which case, most of the brands are or should be quite profitable. The category management Best Practices Report suggests a set of 4 consumer based category roles; Destination category: In such a case, the retailer is the customers first choice for specific products. A category of products which is defined as a destination category needs to consistently deliver superior value to the target customers and lead in areas of turnover, market share, consumer satisfaction, service level and operating expenses. Preferred/Routine category: Here, the retailer decided that he wishes to be the preferred provider of these products to the target customer. Typically, this would consist of products that the consumer purchases as a matter of routine. Occasional/Seasonal category: They are those that are purchased infrequently or follow cyclical patterns. Convenience category: This category helps the retailer reinforce the target consumers image of the retailer as the place for one-stop shopping. Convenient categories are those that the consumer finds convenient to pick up at a neighborhood retailer.

3. Category Assessment The current performance of the category is evaluated with respect to turnover, profits and return on assets in the category. It involves an assessment of the consumers, the market, retailer and suppliers. This process can help a retailer in identifying opportunities in the category. The basic purpose of category assessment is to identify

where the biggest turnover, profit, and return on asset improvement opportunities exist in a category, that is, whether a gap exists between the chosen category role and the current performance level of the category.

4. Category performance measures The development of the category performance measures involves setting measurable targets in terms of sales, margins and GMROI. They determine the target objectives that are set by the retailer and supplier for the achievement of the implication of the Category Business Plan. Typical category performance measures include sales, profits, market share, inventory turnover, etc.

5. Category strategies This step appears when strategies are developed to deliver the category role and category performance targets. The purpose of this step is that retailer and supplier should develop strategies that capitalize on category opportunities through creative and efficient use of the resources that are available to the category.

6. Category tactics Category tactics work towards the determination of optimal category pricing, promotion, assortment, and shelf management that are necessary to achieve the agreed-on-role, scorecard and strategies. This step identifies and validates the specific actions that will be taken to implement the category strategies developed previously. Tactics should be generated after taking into account the spread of consumer needs and the minimum coverage levels that are needed to meet the customer needs.

7. Category plan implementation A specific implementation schedule is developed and responsibilities assigned, accurate implementation is the key to the success of category management. The implementation plan includes what specific tasks need to be done, when each task should be completed and who is to accomplish each task.

8. Category reviews The final process in the business process is the review of the progress and the actual achievement of the targets set for the category. Review aids the taking of decisions at the right point of time.

COMPREHENSION OF RETAIL INDUSTRY

All SKUs are divided in a distinct, manageable group of products that consumers perceive to be interrelated and/or suitable in meeting a consumer need is known as a CATEGORY.

Categories are further divided on the basis of mode of replenishment. Consignment mode In consignment mode goods are retained by retail store with a vendor owned liability of accepting them back if not sold with various commitments like minimum sales guaranteed expressed in rupees. Virtually in consignment mode store only provides space and doesnt own the goods. With a few technicalities of business deal involved such as: OA(on approval) Consignment is functionality wherein you purchase materials from the vendor on a consignment-basis. When the delivery comes, the materials, though will be stored in your warehouse, are still legally owned by the vendor until they are consumed, i.e. GI posting (this is the only time you will be liable to the vendor). This agreement is furnished when store and vendor lie in the same vicinity within state. VC(vendor consignment) VC agreement is much alike OA, the only difference being involvement of Value Added Tax on the goods payable by the vendor as vendor is located in some other state against to stores location. SOR(sales-or-return)

Virtually its like bought out because invoice is generated at the time of receiving goods in spite of that goods not sold can be returned to the vendor. This saves the company scores of financial losses as compared to bought out mode and the agreement furnished is more preferred by the vendor as their is only partial liability for the goods on both the halves as compared to earlier agreements.

Buy and sell/ outright/ bought out mode Its a conventional mode of buying goods wherein invoices are produced and payments are made in the first instance. Henceforth, goods belong to the company sold or not sold. OTB planning is applicable only on articles which come under this mode. Before further discussing OTB and merchandise planning we would like to throw some light on the process of goods replenishment. Consignment receipt process is applicable for all the consignment stocks received by Central and Brand Factory Vendor should send the template for the items to be sent through in the Standard Template format to the cataloging team and the respective Relationship Managers Cataloging team receives the template from the vendors, complete the cataloging in the system and send the barcode text file or labels to the vendor After receiving the barcode text file or labels, the vendor prints and sticks the barcode on the items as per the MRP and style code Once the goods are ready for dispatch after sticking the barcode labels on the items, vendor fills the Advance Shipment Notice and e-mails it to the SCM and Service

Delivery Team. (ASN is advance information to the warehouse and Relationship team about the exact quantity, style odes, MRP and number of boxes of the consignment that is being sent by the vendor. It gives the visibility of the incoming material and enable to plan for receipt and replenishment at stores) Once the SCM and SDT receive the ASN, it should check whether the bar-coding is complete. If its an AIC (Alternative Item Code) consignment, the SDT should check with the cataloging team whether the same has been catalogued. This will help sort out all the issues before the consignment is dispatched by the vendor. After checking, the SCM Service Delivery would give the approval for ASN and email the copy of the ASN approval to the receiving warehouse or store (in case of direct delivery). Vendor should dispatch the consignment only after obtaining the ASN approval.

INWARD DISCREPANCY MANAGEMENT

STOCK VISIBILITY

MERCHANDISE RECEIPT PROCESS: TEMPLATE CREATION TO GRN

MERCHANDISE RECEIPT PROCESS: TEMPLATE CREATION TO GRN

INDENT FULFILLMLENT PROCESS

RTV AND STORE RETURNS

A simple to understand inference of this would be:-

Supplier

P.O

P.P.O

Goods Returned

Receipt

Checking

Documents to A/C for Payments

G.R.N

I.T.N (OUT)

Reverse I.T.N

Warehousing

Sales Barcoding Goods Returning Receipt At store

Goods Inward

Checking

I.T.N

Inter transfer note(ITN)

His is made when the prepared and readied merchandise is upllied to the retail store. The reverse ITN (ITN OUT) is prepared when the goods are sent back to the warehouse by the retail store. Goods that are returned to the warehouse are then sent back to the supplier and vendors. The system recognizes the same and raises a debit note to the vendors.

MERCHANDISE MANAGEMENT CYCLE

OTB planning/ replenishment triggers

EDI with Vendors

Purchase Orders

Point of sale, Customer manageme nt and merchandis e manageme nt including analysis at the store

Report & Analysis

Order fulfillment

CRM & Loyalty

Goods receipt & warehousing

Warehouse management, inventory management and replenishmen t processing in the warehouse

Sales

Inventory management

Pricing & Bar-coding

STRATEGIC RESOURCE MODEL

A strategic resource model gauges the performance of a retail store according to its productivity. The SRM measures the performance of the three resources in retailinginventory, labor and space (footage), also referred to as Trinity Resources. The evaluative measures in the SRM are GROSS MARGIN RETURN ON INVENTORY (GMROI), GROSS MARGIN RETURN ON SELLING AREA (GMROF) and GROSS MARGIN RETURN ON LABOR (GMROL). These measures indicate to what extent the utilization of each of the input factors have been converted into gross profit for covering costs.

The SRM model suggests that retailers can develop strategies that vary on the following factors: Level of Gross Margin Level of Inventory Productivity Degree of Merchandise Intensity Degree of service (by people) intensity.

Merchandise intensity is defined as inventory per square foot; its multiplication with the margin on inventory produces the space productivity result. If sales increase and eventually stocks turn more number of times, the other factors of space and staff remaining constant, the GMROI increase. If the gross margin is increased while the other components are held constant, GMROF will increase.

STARTEGIC RESOURCE MANAGEMENT MODEL

Net Sales/Inventory

Stock Turns

= X x
Inventory/Selling Feet Merchandise intensity

Gross Margin/ Inventory

GMROI

=
Gross margin/Net X Sales Net Sales/Selling Feet Sales per sq. =feet

Gross Margin/ Selling feet

GMROF

x
Gross margin% Selling Feet/FTE employees Service Intensity

X =
Net Sales/FTE employees Sales per = employee Gross Margin/ FTE employes

GMROL

METHDOLOGY

The development of a successful OTB and merchandise plan for any category should begin with the study and analysis of the city profile and the clients customer profile. This can be achieved by conducting a Marketing Research to study the location, positioning and viability of the clients store with respect to its competitors. The study should also include the analysis of customer demographics, their tastes and preferences with respect to the clients store and the product mix offered in the Accessories category.

Market research along with historical sales figure helps in attaining precise OTB and merchandise plan. Few market research datas referred are obtained by the marketing team as well.

Various factors considered for OTB and merchandise plans are: Historical sales figure. City profiles. Available OTB formats( books and internet) Market researches. Assuming few ideal retail situations( as stock turns) POS reports Store operating parameters. Inventory reports. Racking capacity. Sought advice from sales staff. Annual business plan

Trend Analysis: Analyzing the Sales to map the contribution of the brand in the category. Map the monthly performances of the brands (July to March). Arriving at the Average Selling Price for the brands studied. Analyzing the Stock balance, to define the Opening Stock On the basis of targets defined for the period Planned Purchases would be arrived at Planned Purchase = Sales Target / ASP Arriving at the Planned Closing Stock

NATURE OF STUDY:

Exploratory Research

DATA COLLECTION METHOD: SECONDARY DATA: Secondary data was collected from the companys previous sales data and merchandising documents like the Distribution Module (DM), sales stock pending (SSP) PRIMARY DATA: Primary data was collected through interviewing and having discussions with the different people of merchandising department, chiefly the menswear allocators

Secondary market research refers to any data gathered for one purpose by one party and then put to a

second use by or made to serve the purpose of a second party. Secondary market research is thus the broadest and most diffuse tool within the toolbox, because it includes virtually any information that can be reused within a market research context. Secondary research is also the closest thing to an all-purpose market research tool, because virtually every project makes some use of secondary data and almost any decision stage may incorporate some kind of secondary research. As a general rule, relatively speaking secondary research also is the cheapest and quickest form of market research. You ignore or skimp on it at your peril. Its range of application is limited only by your ingenuity. It is helpful to distinguish between internal and external secondary research. Internal secondary data consist of information gathered elsewhere within your firm.

The major categories include (1) Sales reports, (2) Customer databases, (3) Reports from past primary market research.

Sales reports generally give data broken down by product category, region, and time period. More sophisticated systems also give breakdowns by distribution channel, level of price discount, customer type (large, medium, small), and similar categories. Customer databases might include a recording of brief descriptive data on all accounts (industry, contact person, phone number, and purchase history); a log of tech support or response center calls; a record of specific products purchased; and the like. Records of past primary market research include results of surveys and focus groups conducted in prior years, accumulated customer visit trip reports.

Strength and weakness

An important strength of secondary research is that it is generally quickly available for a modest cost. This is no small advantage in many business situations. Moreover, as discussed earlier, it is difficult to do any kind of primary market research for less than $10,000. If a few days in the library can remove most of the key uncertainties about market facts, albeit without giving exact answers to all ones questions, this may save you tens of thousands of dollars. The key fact about secondary research, then, is that it already exists and is readily available. At a minimum, it can improve the focus of any primary research you do choose to conduct.

A particular advantage of internal secondary data is that it uses categories and breakdowns that reflect a corporations preferred way of structuring the world. Outside analysts may use very different and not always comparable breakdowns. Internal databases often contain very specific and detailed information, and very fine-grained breakdowns. Finally, one can generally get a fairly good idea of the validity of the data because one can discuss how it was gathered with the people responsible.

Reviewing Agency Records

Purpose

To understand the types of information that can be obtained for your evaluation by reviewing agency records.

Definitions

Agency records: Organizational documents relevant to your program, such as: work plans, meeting minutes, grant proposals, annual reports, mission statements, attendance sheets, budget information, correspondence, newsletters. Existing records: Information routinely collected by your program, not specifically for the evaluation. Created records: Information collected about the program specifically for the evaluation.

When are reviewing agency records useful? Agency records may provide information about programming decisions, program activities, changes in program policies, changes within the organization relevant to the program, and reactions of stakeholders to program events. Agency records may provide information about the number of program participants and

characteristics and behaviors of the participants. Agency records may provide information about the history and context of the program and about internal and external factors that have affected the program and program activities. Agency records may be used to examine changes in the program over time.

Advantages and disadvantages of reviewing agency records

Advantages:

A review of agency records is typically inexpensive because the documents already exist and a minimum number of staff members/evaluators are required to collect data Not obtrusive to the program - program activities are not interrupted.

Disadvantages:

Agency records may not be accessible to outside evaluators. The information contained in existing records may be inaccurate or incomplete. Information collected over time may be inconsistent. Reviewing agency records may be time-consuming.

 When reviewing existing records, data is limited to what already exists

Steps for planning to review agency records for evaluation

Review your objectives to determine whether reviewing agency records is an appropriate method of data collection. Determine which objectives you will address through a review of agency records. Decide which documents are appropriate for answering your research questions. (What documents do you need to review and over what period of time?) Gather and organize the documents you plan to review. Determine specifically what type of information you are seeking from the documents, and how you will track the information you find. Create a system to code or organize the data you collect. Conduct the data collection.

MARKET RESEARCH

A marketing research is carried out to analyze the same and the results of the research are given below:

CITY PROFILE OF SGS MAGNUM MALL

Sgs Magnum Mall

is located in MG road, the central part of the pune city, which is

constantly flooded with people travelling across the city. The population in the area Sconsists of people with a wide range of demographic backgrounds like students, working professionals, job seekers and youngsters. The mall is one of the most sought after malls in Pune. The mall has a great trade area around itself, as there are sevaeral other retail stores in the vicinity such as Lifestyle, Samyakk and Reebok. SGS Magnum mall is located in M.G Road, which is the most attractive, preferred and easily accessible shopping destinations in Bangalore. The location of the mall is such that it gives the store a premium lifestyle image which is in accordance with the customer image; it also gives an advantage to the mall in terms of communication, as the hoardings and banners can be seen with ease.

OBSERVATION

An efficient OTB plan has the following elements: Forward sales planning (Sales forecast): the sales plan ought to be prepared for the entire year with month wise detail of planned sales. A good OTB plan helps one to react to variations in sales plan, re-schedule deliveries and cancel or alter purchase orders for future deliveries, as the case may be. Forward cover: This based on the planned stock turns for the retail outfit. For instance, if the planned stock turn is four times a year, then the ideal stock holding at any point in time should be equivalent to three months stock cover. Stock required: this is based on the forward cover planned for the store. If the forward cover is for three months and the current month is month one, then the stock required will be the sum of forecast sales of months two, three or four. Opening stock: the value of the opening stock is a flow calculation. In OTB planning the first is a estimate. From the second month onwards, the opening stock is the closing stock figures of the previous month. Intake requirement: This is the difference between the required stock and the opening stock. On Order: these are stocks that has been already ordered and due for delivery during the relevant period. Open to receive: This figure is arrived at by deducting the stock on order, if any, from the intake requirement. This figure indicates the OTB quantity. Closing stock: To arrive at this figure, one needs to take the Opening stock-sales + On order quantities + Open to receive quantities.

The Open-To-Buy Formula

Planned Inventory

Sales + -

Planned Planned

Markdowns Beginning

+ of

Planned

End

of

Quarter Inventory

Quarter

---------------------------------------= Open-To-Buy (retail)

For example, a retailer has an inventory level of $150,000 on July 1st and planned $152,000 End of Month inventory for July 31st. The planned sales for the store are $48,000 with $750 in planned markdowns. Therefore, the retailer has $50,750 Open-To-Buy at retail.

Note: Multiply that number by the initial markup to reach the OTB at cost. If our markup is 40%, then our Open-To-Buy at cost is $20,300.

Before placing your Open-to-Buy plan into operation, ask yourself if each number is realistic. Does it make sense for the way you do business? Keep in mind that many of the figures on your inventory plan are only guidelines. A good rule of thumb is if your actual ending inventory is within five percent of your plan, you are doing very well.

Benefits of Using Open-To-Buy

1. Ability to estimate in advance the amount of cash that will be required to be invested in inventory from month to month for the coming season. 2. Helps to ensure an adequate amount of inventory on hand to support the level of planned sales. 3. Places restraints on merchandise commitments so the store does not receive too much new merchandise too early in the season or not enough. 4. Keeps a fresh flow of new merchandise coming into the store throughout the season. This keeps the customer interested in coming back again and again, keeps the sales staff excited and also helps your cash flow. 5. Establishes goals so actual performance can be compared to the plan, thereby pointing out those areas where corrective action needs to be taken.

Benefits of Store Specific Open To Buy 1. Sales trends of a particular store can be taken into account for forecast. 2. Budget will be prepared keeping in mind the customer segment of the store. 3. Stock sales variation can be reduced to a greater extent. 4. Planning & Analysis can be done at micro level rather than macro level. 5. The budget will be more accurate.