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Chapter 14. Developing Merchandise Plans. Dr. Pointer’s Notes. Chapter Objectives. To demonstrate the importance of a sound merchandising philosophy To study various buying organization formats and the processes they use

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chapter 14

Chapter 14

Developing Merchandise Plans

Dr. Pointer’s Notes

chapter objectives
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
merchandising
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.

merchandising philosophy
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
scope of responsibility
Scope of Responsibility

Two different philosophies

  • Full array of merchandising functions
    • Buying and selling
    • Selection, pricing, display, customer transactions or is the
  • Focus on buying function only and leave selling to other specialists
micromerchandising
Micromerchandising

To capitalize on opportunities, retailers adjusts shelf-space allocations to respond to customer and other differences among local markets. What is on the shelves in Houston, Tx maybe different from what is on the shelves in other markets

cross merchandising
Cross-merchandising

Another way to capitalize on opportunities is for Retailers to carry complementary goods and services to encourage shoppers to buy more. This is the reason apparel stores stock accessories. Similar to scramble merchandising.

attributes and functions of buying organizations
Attributes and Functions of Buying Organizations

Level of Formality

Formal

Informal

Centralized

Decentralized

Degree of Centralization

Organization Breadth

Personnel Resources

Functions Performed

Staffing

General

Specialized

External/Internal

Resident buying office

Merchandising

Buying

Buyer

Sales Manager

level of formality
Level of Formality
  • Formal buying organizations, merchandising buying is distinct retail task and a separate department is set up to do this. Advantage is clarify of responsibilities. Disadvantage could be the cost for the dept.
  • Informal buying organization, merchandise buying is not a separate function but can be done by different folks. Advantage is low cost and flexibility but disadvantage is less defined tasks and lesser emphasis
degree of centralization
Degree of Centralization
  • Multiunit retailers have to options for controlling buying function
  • Centralized buying where all purchasing is done from one office. Advantage include integrated effort, strict controls, consistent image, closeness to top mgmt, staff support and bigger volume discounts, Disadvantage is inflexibility, time delays, morale and excessive uniformity
  • Decentralized buying where buying decisions are made locally or regionally
degree of centralization1
Degree of Centralization
  • Multiunit retailers have to options for controlling buying function
  • Decentralized buying where buying decisions are made locally or regionally. Advantages are more adaptability to locale needs, quicker reordering and improved morale
  • Disadvantages are disjointed planning,, inconsistent image and limited control, lower volume discounts and less staff support
organizational breadth
Organizational Breadth
  • Generalized approach is where one buyer buys for complete store which is possible with small organizations
  • Specialist approach is needed for large retailers where it is best to use buyers for each department
personnel resources
Personnel Resources
  • Inside buying organization – is staffed by retailer’s owned people
  • Outside buying organization – personnel external to the retailer are used to staff the organization usually for a fee
  • Resident buying office responsible for buying and keeping abreast of trends in the market
  • Cooperative buying offices – group of unrelated retailers purchase together to get economies that larger chains get.
functions performed
Functions Performed
  • Merchandising view Merchandise personnel oversees all
    • All buying and selling functions
      • Assortments
      • Advertising pricing
      • Point-of-sale displays
      • Employee utilization
      • Personal selling approaches
functions performed1
Functions Performed
  • Buying view
    • Buyers manage buying functions
      • Buying
      • Advertising
      • Pricing
    • In-store personnel manage other functions
      • Assortments
      • Point-of-sale displays
      • Employee utilization
      • Personal selling approaches
staffing
Staffing
  • List of all the positions that need to be filled
  • Buyers - selects the merchandise that is to be sold and for setting a strategy to market the products
  • Sales Managers- supervises the on the floor selling and operations activities for specific retail depts
slide17

Different Career Tracks in Retailing

Merchandising Track

Store Management Track

Divisional

Merchandise

Manager

Store Manager

Assistant Store

Manager

Buyer

Associate Buyer

Sales Manager

Assistant Buyer

Assistant Sales

Manager

figure 14 5 considerations in devising merchandise plans
Figure 14.5 Considerations in Devising Merchandise Plans

Assortment

Innovativeness

Forecasts

Merchandise

Plan

Brands

Allocation

Timing

forecasts
Forecasts
  • Forecasts are projections of expected retail sales for given periods. Serves as the foundation of merchandise planning
    • Components:
      • Overall company projections
      • Product category projections
      • Item-by-item projections
      • Store-by-store projections (if a chain)
types of merchandise
Types of Merchandise
  • Staple merchandise- all regular products to carried all the time
  • Assortment merchandise-consist of merchandise from many different depts.
  • 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.
  • Fad merchandise- high sales generated for short period of time
staple merchandise
Staple Merchandise
  • Regular products carried by a retailer
    • Grocery store staple examples
      • Milk
      • Bread
      • Canned soup
  • Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.
assortment merchandise
Assortment Merchandise
  • Apparel, furniture, auto, and other products 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-used to project the number of different colors/variations of a certain design product
fashion and seasonal merchandise
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
slide27

Product life Cycle for product

  • Product life Cycle shows the expected behavior of a good or service over its life.
  • Introduction- limited target market. One basic version supplied
  • Growth – as innovators purchase sales increases as others begin to emulate them
  • Maturity – largest portion of target market is using product with a wide assortment of products.
  • Declines stage comes about due to shrinking market.
figure 14 7 the traditional product life cycle
Figure 14.7 The Traditional Product Life Cycle

Total Retail Sales

Maturity

Growth

Decline

Introduction

Time

structured guidelines for pruning products
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 non-deletion 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
assortment
Assortment
  • Assortment is the selection of merchandise a retailer carries. It includes both breadth of product categories and variety within each category
  • Width of assortment – number of distinct goods/service categories (lines)
  • Depth- number (variety) within each line
brands need to select the proper mix of brands
Brands- need to select the proper mix of Brands

Manufacturer

(national)

Private

(dealer or store)

Generic

brands
Brands
  • Manufacturer (national) products are produced and controlled by manufacturer
  • Private or dealer brands (store brands) – owned by wholesalers or retailers and cost less and are controlled by them
  • Generic brands – no frills goods stocked by retailers (receive no support, poor shelf locations and are very inexpensive)
private label brands
Are 20 % of USA and Canadian sales

Priced 20-30% lower than manufacturers products

80% of consumers buy them

Many retailers sales are heavily done in private label products

Research shows that consumers feel that private label quality is just as good as branded

Premium private brands are now emerging

Battle of the brands are in progress

Private Label Brands
timing and allocation
Timing and Allocation
  • Timing is deciding on when certain merchandise is purchased, displayed, and sold
  • Allocation deals with how the stock is allocated either between stores or once in the store how much is displayed on shelves or in storage area
category management
Category Management
  • Category management refers to how to manage products in categories in order to improve productivity
  • Products are arranged into strategic business units to generate the highest profits
merchandising software
Merchandising Software
  • General Merchandise Planning Software
  • Forecasting Software
  • Innovativeness Software
  • Assortment Software
  • Allocation Software
  • Category Management Software
questions
Questions
  • Make sure that you read this chapter carefully and make additional notes.