1. Merchandising at Nine West
Retail Stores
Group 5:
Rajesh Choudhary 12P158
Rohan Khandelwal(12P164)
Vishal Agarwal(12P179),
Aditi Pandey(12P183)
2. Outline
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Introduction
Retail footwear industry
Shoe design and construction
Company Background
NWRS Merchandising org structure
Merchant incentive structure (1 slide) - Rajesh
Store org structure and incentive structure
Merchant decision process
Decisions to be taken
Recommendations
4. The Retail Footwear Industry
CAGR (1990-95): 0.44%
Market Sizing
32.5
32
31.5
31
1990
1995
Women Shoe Market:
Premium Segment Woman:
Market Size: $16 Bn (46%)
Shoes marked 74.50% to 99.49%: Sales
Average Shoe Purchase per annum : 5 per
increased 1.8% (1990-95)
woman
Differentiating factor: Quality and Style
Non - Athletic Women Shoe Market :
Premium on Country of manufacture (Italy
$10.3 Bn
and France)
Expected Growth rate : 3-5%
5. Shoe Design and Construction
• Design process started as a masterful work of art
• A creative created a series of sketches
• Designers selected the raw material supplier and
tanneries
• Sketches were used to form the proposed vision
for wholesale line
• Key was the perfect construction of “last”
• Production process was complex and there were
around 130 stages
• Manufacturing lead time could go up to 10 days
6. Company Background
• Founded by Jerome Fisher and Vincent Comuto in New York in 1977
as a manufacturer and wholesaler of women’s footwear
• More than 7000 retail stores in 40 countries
• Retail division was started in 1983 and contributed around 49% of
the revenue
• In 1996, sales grew by 28% to $1.6 bn and net income increased by
33% to $95 mn
• Company international presence and high growth was achieved
through addition of new stores and acquiring other footwear
companies
• In May 1995, the acquisition of U.S. Shoe Corporation’s footwear
division, made them largest women’s footwear company
• In future company is intended to evolve into a complete life-style
company
7. Merchandising Organization Structure
• Merchandising organization was responsible for
assortment, pricing, purchasing, and store display at each store
• “Retail Directors” performed functions similar to other retail companies’
merchandisers
– Responsible for 50-60 stores
– Managed style selections, purchasing, pricing, and display
– Reported to a merchandise manager who in turn reported to the president of
NWRS
• President’s role
– Responsible for allocating decisions for creating a “point of view” across the
entire organization
– To oversee the compliance of retail directors with company goals
• NWRS was divided by region
– They held the view that product can be customized specific to
demographic, market trends, and eliminated competition between retail
directors
– It did not believe in having extensive “planners,” rather, they expected buyers
to be creative. Buyers and planners frequently worked together as a team
8. Merchant Incentive Structure
• Retail directors were rewarded based on performance and year-end bonuses
• Since the outcomes of a regional director were easier to monitor then the
actions themselves, compensation and performance based rewards were tied
to outcomes rather than behavior
• Retail Director:
– Capable of earning up to 15% of their annual salary for such rewards
– To be eligible, he or she had to exceed both goals and plans
• Bonus had three components:
– Actual performance compared to plan – 50%
– Total NWRS actual performance – 25%
– Earnings per share – 25%
9. Store Organization and Incentive Structure
• Field organization was responsible for day-to-day operations
• Because of the NWRS’s centralization, retail directors relied on regional sales
managers to be their “eyes and ears.”
• Regional and area sales managers qualified for a 15% and 10% bonus
• Five or six area sales managers would report to one regional sales manager
• Each store employed a store manager, and several assistant managers.
– The store manager was responsible for producing weekly business analysis
and highlighting the store’s successes and failures.
– They were reviewed based on annual sales, expenses, turnover, and
shrinkage
• Field employees were rewarded based on the achievement of sales and by
reviews by corporate EPS
• Importance of promotion declined due to
– The reluctance of store managers to relocate consequent to a promotion
– The company’s generally slow growth
10. Merchant decision process
• Planning began roughly ten months prior to the arrival of merchandise in
stores (Time consistent across shoe industry)
• Demand Forecasting
– Retail directors broke this down by store and SKU, and used a combination of
historical data, exogenous variables, and intuition.
– Reliance on historical variables to forecast demand.
– Risk and Reward considered for each product portfolio
– Fashion trend forecasting
• Seasonal Budgeting
– Capital Allocation for inventory decisions to various product categories, and
created sales and gross margin plans for each retail Director
– Exact figures were derived from historical data, analytical monitoring, and
strategic direction to project a six-month
– The ultimate objective was to make certain the most promising opportunities
underwent the planning process when the final budget was approved.
11. Merchant decision process
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Merchant Product Selection and Quantity Commitments
– Shoe week show to preview the upcoming fall collection..
– Forecast initial store quantity commitments ( 40-50% of the entire season’s buy )
– NWRS is vertically integrated, so merchants were able to postpone some decisions
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Rolling Financial Forecasting
– Forecasts updated if a major event occurred
– Showcasing successes and supported funding for specific products or locations
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Merchandise Display Decisions
– Recommendations communicated as “planagrams.”
– Merchandise was put together in “groups” to be aesthetically pleasing
– Correct order of shipment was ensured
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Retail Pricing, Inter- store Transfers, Re-orders and Markdowns
– “Suggested retail price” to ensure consistency in pricing
– 40 – 50% of merchandise was generally secured at regular price
– After a product’s lifestyle the product sold to off-price retailers to ensure brand integrity.
12. Decisions to be taken
• Success in entry into lifestyle products
• Changes in merchant organization structure
• Changes in merchant decision process to make
it condensed and efficient
• Changes in company’s incentive systems, both
in the store and merchandising organizations
• Increasing use of IT in the market
13. Recommendations
• Expanding into the lifestyle market
– Vertical integration would require much more work, but would allow
the company to maintain total control over all aspects of products.
Nine West would have to hire new product designers, production
specialists, market researchers, etc. to ensure the success of the brand
– Instead of vertically integrating this new product, Nine West may
either choose to license select product, or, or acquire small companies
altogether.
– With acquisition, they would be able to alter the new company to fit
into the Nine West vision. It would be greatly beneficial for the
acquired company to already have a strong sourcing department, as
existing Nine West employees would most likely be unfamiliar with
manufacturing this new product
– However, a synergy would still exist between management in NWRS
and new companies
Expanding into the lifestyle marketVertical integration would require much more work, but would allow the company to maintain total control over all aspects of products. Nine West would have to hire new product designers, production specialists, market researchers, etc. to ensure the success of the brandInstead of vertically integrating this new product, Nine West may either choose to license select product, or, or acquire small companies altogether. With acquisition, they would be able to alter the new company to fit into the Nine West vision. It would be greatly beneficial for the acquired company to already have a strong sourcing department, as existing Nine West employees would most likely be unfamiliar with manufacturing this new productHowever, a synergy would still exist between management in NWRS and new companies
