6642148 RM 6 Merchandising

8/9/2019 6642148 RM 6 Merchandising

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Retail Marketing Management

RM 6,7

Merchandise Planning &Management


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Merchandising

Merchandise ManagementAnalysis, planning, acquisition, handling & control of themerchandise investments of a retail operation

AnalysisIdentifying needs and wants of customers in order to buy the correct

merchandisePlanning

Timing of purchase to ensure merchandise availability in time of season &availability

Merchandising is the heartbeat of retailing.

Merchandising consists of activities involved inacquiring particular goods / services & making themavailable at the places, time & prices and inquantities that will enable a store reach its goals.


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Merchandise Management Experiences of a Buyer at Walmart

I am one the 7 buyers for the toys department. The categories I handle (large dolls, plush toys etc.) will

produce $450m sales this year.

I am responsible for sourcing new toys, promoting them thruour stores, getting them to the right stores at the right time &manage the assets like a portfolio.

Buying merchandise is like making a series of investments same risk-return trade offs, have to watch the performance ofthe portfolio buy more of whats hot & selling & mark-down /get rid those falling short of expectations.


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Experiences of a Buyer at Walmart

Buying is being a visionary reacting to trends, translate them intomerchandise that will draw customers.

E.g. A toy using new tech was introduced at the New York toy fair.

- decided with senior management to support this toy- put together a plan to ensure Walmart would be the first to havethis toy in significant quantity.- worked with the manufacturing to get sufficient quantity ahead forpromotions.- worked with marketing to develop a marketing / promo concept &

deploy appropriate support material leaflets / packaging / promoitems / advertising to create excitement at stores.- being a new toy it was a high risk item but fortunately it paid off !


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Merchandise Planning

Merchandise buying & Handling Process

Establish formal / informalbuying organization

Outline Merchandiseplans

Determine merchandisesources

Gathering information. Aboutcustomer demand

Evaluatemerchandise

Negotiateprice

Concludepurchase

Re-evaluate on

on-going basis

Re-order

merchandise

Handle the

merchandise

12

4

3

56 7

910 8


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Buying Organization

1. Specify who is responsible merchandise

decisions Tasks they will perform

Authority to make decisions

Relationship of merchandising & retail operations

2.Options are Formal / informal setup?

Centralised vs decentralised buying ?

General or specialised Internal personnel or external e.g buying houses

Merchandising or buying


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Buying Organization

Formal

used by larger organisations

offers specialisation

offers clarity of responsibility &authority

engage specialistsInformal

less expensive

greater flexibility

personnel perform multiple roles

Lacks expert knowledge

Centralized

All purchase decisions from oneoffice

Better control on costs, quality &quantity

Proximity of top management Decentralized

Greater adaptability to local reqm.

Quicker order processing

Autonomy leading to better morale

Lose on controls

Inconsistencies in buying, discounts

Lack of experts


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Merchandise PlanningWhat items to sell quality levels will depend on :

- Desired target markets profile

- Competition- Store image / positioning

- Location of store

- Profitability

- Fashion trends- Seasonal itemsHow much merchandise to carry

- A function of width & depth of assortments.


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Elements of merchandise planning

AcquisitionSince merchandise is bought from other suppliers they have to beidentified, terms negotiated, physical acquisition planned.

Handling

Ensures timely availability at specific locations in time when

required, duly capable of being put on the shelf for sale.Control

To ensure optimum utilisation of resources Financial & shelfspace, so that profitability is ensured.

Requires effective monitoring & co-ordination withregular suppliers


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Factors in Deciding Merchandise Plans Forecasts: Projections of expected sale for given period.

Variables would be:- Overall company projections for the period- Product category projections- Item projection

- Individual store projection

Innovativeness: A firm that carries new goods & servicesand plans for upcoming trends. Variables would be:- Target market & its behaviour

- Product related trends- Stores positioning- Degree of risk- PLC staple item / fashion / fad

- Allocation of resources


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Merchandise Planning (contd)

3. Assortment: Selection of merchandise that a retailercarries which is a function of variety, breadth & depth.

Brands vs. Private Label: A proper mix of brands &private labels.

Timing : When is inventory required in the store, wouldbe dependent on

- Seasonal relevance- Order & delivery lead times

- Stock turnover rate

- Provision for special / urgent orders

- Prices & discounts


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Retail Assortment Strategies

Wide & deep

- Many categories & large assortment in each category Wide & shallow

- Many categories & limited assortment in each category Narrow & deep

- Few categories & large assortment in each

Narrow & shallow- Few categories & limited assortment n each

I. Advantages

- Disadvantages of each & where what / which isappropriate ?

`Shelf space is at a premium


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Optimal Merchandise Mix

3 Dimensions

Variety- Refers to the mix in terms of number of different lines the retailer

stocks in the store. e.g. mens wear, womens wear, toys,appliances, cosmetics, sports goods etc.

Breadth

- Or assortment is the number of merchandise brands that are found in a

merchandise line. e.g. A 7-11 store will carry very narrow breadth, asopposed to Shoppers Stop carries 6-8 brands of jeans or mens shirts.

Battle of brands vs. private labels Depth

- The average number of SKUs within each brand of individualmerchandise line. e.g. Due to shelf space constraints A7-11 store may

carry only 1-2 fast moving sizes whereas a Walmart may carry all sizes& sufficient quantity of each.

Retailers task is to find a balance between the above 3 dimensions in relationto his store, its positioning, customer profile & financial resources.


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Wide and Deep

Advantages

- Broad market

- Full selection of items

- High level of customer traffic

- Customer loyalty- One-stop shopping

- No disappointed customers

Disadvantages

- High inventory investment- General image

- Many items with lowturnover

- Some obsolete merchandise

Wide and Shallow

Advantages

- Broad market

- High level of customer traffic

- Emphasis on convenience

customer- Less costly than wide and deep

- One-step shopping

Disadvantages

- Low variety within product line- Some disappointed customers

- Weak image

- Many items with low turnover

- Reduced customer loyalty


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Narrow & Deep Advantages

- Specialist image- Good customer choice incategory(ies)- Specialized personnel- Customer loyalty- No disappointed customers

- Less costly than wide anddeep

Disadvantages

- Too much emphasis on onecategory

- No one-stop shopping- More susceptible totrends/cycles- Greater effort needed toenlarge the size of thetrading area

Narrow & shallow Advantages

- Aimed at conveniencecustomers- Least costly- High turnover items

Disadvantages

- Little width and depth- No one-stop shopping- Some disappointed customer

- Weak image- Limited customer loyalty- Small trading area

M d l St k Pl M Shi t


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Model Stock Plan : Mens Shirts

Dependent Variables Customer profile psychographic / demographic Buying behavior occasion / frequency of purchase/ budget

Stores positioning vis-a-vis product product category

33 Price pointsPrice

2Cotton, poly-mixFabric

5Blue, white, beige, pink, off-whiteColor

2Button-down, normalCollar

2

4

4

Long, short

S, M, L, XL

Dressy, casual, sports, work

Sleeve

Size

Type

Product Attributes Some Variables


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Model Stock Plan : Mens Shirts (contd)

If the store decides to keep one SKU of each type its initial inventory will be

4 x 4 x 2 x 2 x 5 x 2 x 3 = 1920 SKUs

@ Avg. cost of Rs.300 = Rs. 576, 000

Clearly the final decision will be based on the dominant dependent variable(s) anda retailer may not be able to offer the entire range but offer a more selectivecollection.

Successful retailers know that they will have to allow some customers to walkoutempty handed.

C t M t M t i


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Category Management Matrix

High potential

- Required promo, better position, more exposure, displays- Create interest & excitement around the item to move it into a winnercategory item.

Winners- Capitalise by promo, prominent position, better displays & visibility- Cash cow

Traffic builders

- Review prices, position, move closer to high potential items review space. Under achievers

- Promos, move from prime position, prices, consider dropping item.

Traffic BuildersUnder Achievers

WinnersHigh Potential

ProductPro

fitability

Less

than

M

ore

th

an

`

X/item

`X/item

Less `Y / wk More `Y / wk


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Efficient merchandise management depends onstores ability to generate relative accurate

sales forecast

Sources of information Consumer demographics, L-styles, preferences. Test markets

Manufacturers own forecasts Sales staff Formal system for new/missing items Analysing data Competitors stores Emerging trends

Trade directories Routine advertising by manufacturers Product specific advt. by retailers Internet Visits to exhibitions & trade fairs

Information about Customer Demand


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Sources of Merchandise Direct from manufacturers Through distributors / agents Imports

Some criteria while sourcing merchandise Reliability Price quality balance Processing time reorder time Guarantees / replacement facilities Margins Relationships Advertising & promo support

Price contracts & validity - stability

Information about Customer Demand (contd)


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Sourcing Merchandise

Sources of supply

International or national brands Imports or supply through agents Product specialisation Cost implications of buying sources Suppliers background in terms of

- Selling history- Product quality / warranties- Consumers perception re: manufacturer- Reliability for delivery- Trade terms credit / discounts- Margins- After sales service

- Order processing time- Inventory carrying cost- Packing norms & adaptability / flexibility- Participation in store promotions- Exclusivity of supplies fashion / fad items

ABC analysis of vendors on above parameters


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Sourcing Merchandise (contd)Issues in Buying Merchandise

Strategic partnerships : a win-win situation for buyer & seller

Mutual trust Open communication / sharing information

Ethical issues- Origin of supplies- Genuine vs counterfeit

- Compliance to local regulations Negotiating with suppliers

In-store Merchandise Handling

Receiving merchandise - infrastructure / timings Store / warehousing / handling parking Checking for order compliance quantity / prices / disc. Coding & pricing statutory considerations Allocating to stores / departments

Security of inventory pilferage / shop lifting


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Whether direct from supplier to store or via warehouse?

Advantages of warehousing - Central

Efficiency in transportation Efficiency in storage Improved security Better handling Efficient marketing of goods Ease of returns Control on payments / quality

Disadvantages of Warehousing

Excessive controls Extra handling perishables Order processing delays High operating costs small stores Reduces response time

E l ti M h di


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Evaluation

Check for compliance with order- Delivery date- Quantity ordered billed delivered- Price as per contract / order- Discounts usual / special / schemes- Payment terms special discounts

Physical check of merchandise Quality check random / individual Expiry validity in case of perishables

MRP markings Other statutory req. Transfer of title ?

- Transportation risk?

- Consignment supply

Evaluating Merchandise

E l ti M h di ( td )


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Handling Merchandise

Physical handling Receiving inspections Storing locating / special storage req. Coding inventory management Price marketing checks / control / system Setting up displays Determining how much to stock Customer delivery packing

Billing cash / credit cards Returns & damaged goods system Monitoring pilferage Merchandise control

Evaluating Merchandise (contd)


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Where to Store ?

How much on the shelves?How much in the store?

How much in the warehouseHow much among stores?

6642148 RM 6 Merchandising

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Transcript of 6642148 RM 6 Merchandising