Developing Merchandise Plans
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Transcript of Developing Merchandise Plans
Chapter 1414Developing Merchandise Plans
RETAIL MANAGEMENT:A STRATEGICAPPROACH,
10th Edition
BERMANBERMAN EVANS EVANS
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Chapter Objectives
To demonstrate the importance of a sound merchandising philosophy
To study various buying organization formats and the processes they use
To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation
To discuss category management and merchandising software
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Merchandising
Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in
the quantity that enable a retailer to reach its goals
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Merchandising Philosophy
Sets the guiding principles for all the merchandise decisions that a retailer makes
Should reflect * Target market desires* Retailer’s institutional type* Market-place positioning* Defined value chain* Supplier capabilities* Costs* Competitors* Product trends
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Scope of Merchandising Responsibility
Full array of merchandising functions* Buying and selling * Selection, pricing, display, customer
transactions
OR
Focus on buying function only
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Figure 14-1: Nike’s Own Store Merchandising Philosophy
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Micromerchandising
Retailer adjusts shelf-space allocations to respond to customer
and other differences among local markets
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Cross-Merchandising
Retailers carry complementary goods and services to encourage
shoppers to buy more
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Figure 14-2: Attributes and
Functions of
Buying Organizations
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Functions Performed
Merchandising viewMerchandising view* All buying and selling functions
• Assortments• Advertising pricing• Point-of-sale displays• Employee utilization• Personal selling approaches
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Functions Performed (cont.)
Buying viewBuying view* Buyers manage buying functions
• Buying• Advertising• Pricing
* In-store personnel manage other tasks• Assortments• Point-of-sale displays• Employee utilization• Personal selling approaches
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Figure 14-4: Merchandising Versus Store Management
Career Tracks
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Figure 14-5: Devising Merchandise Plans
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Forecasts
These are projections of expected retail sales for given periods* Components:
• Overall company projections
• Product category projections
• Item-by-item projections
• Store-by-store projections (if a chain)
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Types of Merchandise
Staple merchandise Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise
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Staple Merchandise
Regular products carried by a retailer* Grocery store examples: milk,
bread, canned soup Basic stock lists specify inventory
level, color, brand, style, category, size, package, etc.
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Assortment Merchandise
Apparel, furniture, auto, and other categories for which the retailer must carry a variety of products in order to give customers a proper selection
Decisions on Assortment* Product lines, styles, designs, and
colors are projected* Model stock plan
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Fashion and Seasonal Merchandise
Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles
Seasonal Merchandise: Products that sell well over nonconsecutive time periods
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Table 14-1a: Factors in Planning Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Target market(s) Evaluate whether the target market is conservative or innovative
Goods/service growth potential
Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life
Fashion trends Understand vertical and horizontal fashion trends, if appropriate
Retailer image Carry goods/services that reinforce the firm’s image
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Table 14-1b: Factors in Planning Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Competition Lead or follow competition in the selection of new goods/services
Customer segments Segment customers by dividing merchandise into established-product displays and new-product displays
Responsiveness to consumers
Carry new offerings when requested by the target market
Amount of investment
Consider all possible investments for each new good/service: product costs, new fixtures, and additional personnel
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Table 14-1c: Factors in Planning Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Profitability Assess each new offering for potential profits
Risk Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs
Constrained decision making
Restrict franchisees and chain branches from buying certain items
Declining goods/ services
Delete older goods/services if sales and/or profits are too low
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Figure 14-6: R&D at Wendy’s
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Figure 14-7: Traditional Product Life Cycle
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Structured Guidelines for Pruning Products
Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes
Gather and analyze detailed financial and other data about these items
Consider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers
After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand
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Figure 14-8: Predicting Fashion Adoption
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Table 14-2a: Factors in Planning Merchandise Quality
FACTOR RELEVANCE for PLANNING
Target market(s) Match merchandise quality to the wishes of the desired target market(s)
Competition Sell similar quality or different quality
Retailer’s image Relate merchandise quality directly to the perception that customers have of retailer
Store location Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality
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Table 14-2b: Factors in Planning Merchandise Quality
FACTOR RELEVANCE for PLANNING
Profitability Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods; turnover may cause total profits to be greater for the latter
Manufacturer versus private brands
Understand that, for many, manufacturer brands connote higher quality than private brands
Customer services offered
Know that high-quality goods require personal selling, alterations, delivery, and so on
Personnel Employ skilled, knowledgeable personnel for high-quality merchandise
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Table 14-2c: Factors in Planning Merchandise Quality
FACTOR RELEVANCE for PLANNING
Perceived goods/ service benefits
Analyze consumers. Lesser quality goods attract customers who desire functional product benefits; High-quality goods attract customers who desire extended product benefits
Constrained decision making
Face reality. Franchises or chain store managers have limited or no control over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers
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Retail Assortment Strategies
Width of assortmentWidth of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries
Depth of assortmentDepth of assortment refers to the variety in any one goods/service category (product line) a retailer carries
An assortment can range from wide and deep (department store) to narrow and
shallow (box store)
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Figure 14-10: Sephora’s Very Deep Assortment of Cosmetics
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Brands
Private(dealer or store)
Manufacturer(national)
Generic
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Table 14-3: Private Brand Test Match the Retailer with the Brand Name
Retailer Brand
Bloomingdale’s Arizona Jeans
Costco Ol’ Roy
Kmart Michael Graves
J.C. Penney Martha Stewart
Sears Joseph & Lyman
Wal-Mart Kenmore
Target Kirkland
Macy’s Alfani
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Figure 14-11: Wal-Mart’s New Approach to Private Brands
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Figure 14-12: Daffy’s Distinctive Branding Strategy
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Figure 14-13: Applying Category
Management
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Merchandising Software
General Merchandise Planning Software Forecasting Software Innovativeness Software Assortment Software Allocation Software Category Management Software
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Figure 14-4a: Shelf Logic Software for Category Management Planning
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Figure 14-4b: Shelf Logic Software for Category Management Planning