these are very useful slides related to retail marketing and merchandise management. it helped me a lot in understanding the changing scenario of the consumers from unorganized retailing to organized retailing.
2. Merchandise Management
Process by which a retailer offers the correct
quantity of the right merchandise in the right
place at the right time and meets the
company’s financial goals.
Sense market trends
Analyze sales data
Make appropriate adjustments
in prices and inventory levels
3. Scope of Responsibility
Full array of merchandising functions
Buying and selling
Selection, pricing, display, customer transactions
Focus on buying function only
6. Merchandise Planning process
Forecast sales
Develop an
assortment
plan
Determine
inventory
levels
Plan for
managing
inventory
Buy
Merchandise
Allocate
merchandise
to stores
Monitor
performance
7. Types of Merchandise
Staple Merchandise
Predictable Demand
History of Past Sales
Relatively Accurate Forecasts
Fashion Merchandise
Unpredictable Demand
Limited Sales History
Difficult to Forecast Sales
10. Forecasting
Fashion Merchandise Categories
Previous sales data
Many items in a fashion category are often similar
to items sold in previous years.
Market research
Activities range from informal, qualitative research
about trends affecting the category to more formal
experiments and surveys.
11. Forecasting
Fashion Merchandise Categories
Fashion and trend services
There are many services that buyers can
subscribe to that forecast the latest fashions,
colors, and styles.
Vendors
Vendors have proprietary information about their
marketing plans and tend to be very
knowledgeable about market trends.
12. Developing an Assortment Plan
Assortment plan is a list of the SKUs that a
retailer will offer in a merchandise category and
reflects the variety and assortment that the retailer
plans to offer in a merchandise category
Variety (breadth) is the number of different
merchandising categories within a store or
department
Assortment (depth) is the number of SKUs within
a category.
Product availability defines the percentage of
demand for a particular SKU that is satisfied.
13. Determining Variety and
Assortment
Buyers consider
• Retail strategy
• The number of SKUs to offer in a merchandise category is a
strategic decision
• Trade-off between too much versus too little assortment
• Physical characteristics of the store
• Complementary Merchandise
• Assortment and buying behavior
15. Example:
A retailer has allocated Rs. 1 lakh for buying of shirts.
Assuming that the purchase price of each shirt is Rs. 100,
he will be able to stock 1000 shirts in the store.
Step 1: Identify the factors affecting customer’s buying
decision
Suppose the factors identified are
Type of shirt
Size
Sleeve length
Collar type
Color
Fabric
Devising a Model Stock Plan
16. Step 2: Identify the number of levels under
each attribute
Suppose the levels under each attribute are
Devising a Model Stock Plan
S. No Factors Attributes
1 Type of Shirt Dress Casual Formal Sport
2 Size Small Medium Large Extra large
3 Sleeve
Length
Full Short
4 Collar Type Saville Button Down
5 Color White Blue Cream Grey
6 Fabric Cotton Cotton blend
17. Suppose the sales forecasts are as follows
Devising a Model Stock Plan
Factors Attribute levels
Type Dress Casual Formal Sport
% Sales 10 40 20 30
Sizes Small Medium Large Extra Large
% Sales 25 40 25 10
Sleeve
Length
Full Short
% Sales 30 70
Collar Type Saville Button Down
% Sales 60% 40%
Color White Blue Cream Grey
% Sales 40% 30% 20% 10%
Fabric Cotton Cotton blend
18. Step 3: Allocate the total units to the respective
item categories
Devising a Model Stock Plan
Men’s Shirts
100% (1000)
Dress 10%
(100)
Casual 40%
(400)
Small 25%
(100)
Medium
40% (160)
Full Sleeves
30% (48)
Half Sleeves
70% (112)
Button Down
40% (45)
White 40%
(18)
Cotton 25%
(4)
Cotton Blend
75% (14)
Blue 30%
(14)
Cream 20%
(9)
Grey 10%
(4)
Saville 60%
(67)
Large 25%
(100)
Extra large
10% (40)
Formal 20%
(200)
Sport 30%
(300)
19. Product Availability
The percentage of demand for a particular
SKU that is satisfied
Level of support or service level
The backup (buffer) stock in the model stock
plan determine product availability
The higher product availability, the higher the
amount of backup stock necessary to ensure
that the retailer won’t be out of stock on a
particular SKU when consumers demand it
20. Importance of Backup (Buffer)
Stock
Choosing an appropriate amount of backup
stock is critical to successful assortment
planning
If the backup stock is too low loose sales and
customers
If the backup stock is too high scare financial
resources will be wasted on needless inventory that
could be more profitably invested in more variety or
assortment
21. Product Availability
Factors considered to determine the appropriate
level of buffer stock and thus the product availability
for each SKU
• ABC Classification of merchandise (inventory)
• A – higher product availability
• B – medium product availability
• C – lower product availability is acceptable
• Fluctuations in demand
• Lead time for deliver from the vendor
• Frequency of store deliveries
23. Staple Merchandise Planning
Buyer Determines:
Basic Stock or Assortment Plan
Level of Backup Inventory
System:
Monitors Inventory levels
Automatically reorders when inventory gets below
a specified level
24. Inventory Levels for Staple
Merchandise
Cycle (base) stock:
Inventory that goes
up and down due to
the replenishment
process
Backup (buffer,
safety) stock
Inventory needed to
avoid stockout
25. Determining the Level of Backup
Stock
Higher product availability (service
level) retailer wishes to provide to
customers
Greater the fluctuation in demand
Longer lead time from the vendor
More fluctuations in lead time
Lower vendor’s Fill rate (% of
complete orders received from a
vendor)
More
Backup
Stocks
Needed
with
28. Merchandise Budget Plan
Plan for the financial aspects
of a merchandise category
• Specifies how much money
can be spent each month to
achieve the sales, margin,
inventory turnover,
• Not a complete buying plan--
doesn’t indicate what specific
SKUs to buy or in what
quantities
Royalty-Free/CORBIS
29. Key components of the six month
merchandise plan
Planned sales
Planned purchases
Planned reductions : Markdowns, employee
discounts and shrinkage
BOM and EOM planned inventory levels
31. Evaluating the
Merchandise Budget Plan
Inventory turnover GMROI, sales forecast are
used for both planning and control
After the selling season, the actual
performance is compared with the plan
Why did performance exceed or fall short of the
plan?
Was the deviation from the plan due to something
under the buyer’s control?
Did the buyer react quickly to changes in demand
by either purchasing more or having a sale?
32. Open-to-Buy System
The OTB system is used after the merchandise
is purchased
Monitors Merchandise Flow
Determines How Much Was Spent and How Much is
Left to Spend
PhotoLink/Getty Images PhotoLink/Getty Images
33. Allocating Merchandise to
Stores
Allocating merchandise to stores involves three
decisions:
• how much merchandise to allocate to each
store
• what type of merchandise to allocate
• when to allocate the merchandise to different
stores
34. Type of Merchandise Allocated
Retailers classify stores according to the characteristics of
the stores’ trading area
The assortment offered in a ready-to-eat cereal aisle should match
the demands of the demographics of shoppers in a local area
36. Analyzing
Merchandise Management Performance
Three types of analyses related to the
monitoring and adjustment step are:
Sell through analysis
ABC analysis of assortments
Multiattribute analysis of vendors
37. Sell Through Analysis
Evaluating Merchandise Plan
A sell-through analysis compares actual and planned
sales to determine whether more merchandise is
needed to satisfy demand or whether price reductions
are required.
38. ABC Analysis
An ABC analysis identifies the performance of individual
SKUs in the assortment plan.
Rank - orders merchandise by some performance
measure determine which items:
should never be out of stock
should be allowed to be out of stock occasionally
should be deleted from the stock selection.
A items: 5% of SKUs, represent 70% of sales
B items: 10% of SKUs, represent 20% of sales
C items: 65% of SKUs, represent 10% of sales
D items: 20% of SKUs, represent 10% of sales
39. Multiattribute Method
for Evaluating Vendors
The multiattribute method
for evaluating vendors
uses a weighted average
score for each vendor.
The score is based on the
importance of various
issues and the vendor’s
performance on those
issues.
C Squared Studios/Getty Images
40. Identify sources of supply
Contact and Evaluate source of supply
Negotiating with vendors
Establishing vendor Relations
Analyzing vendor performance
Method of Merchandise
Procurement
42. Defining Objective
Defining Gaps in the market
Decision on make/buy and Sourcing
Determine the market sales strategy
Determine the measures of performance
Process of Private Label
Creation
43. Definition: The distributor/supplier process of
managing categories as strategic business units,
producing enhanced business results by focusing
on delivering consumer value
Category Management
45. Sleepers
• Identify key products within
category
• Delist slow movers and marginal
products
• Give quick movers more shelf
space
• Optimize margin mix and
DPP
Winners
• Continue current policies
• Be alert to adoption of new
products
• Minimize operational problems
like “out of stock”
• Optimize margin mix and DPP
Questionable
• Limit product mux to core assortment
• And delist marginal products
• Minimize shelf space at category level
• Transfer logistical and operational work
to third parties
Opportunities
• Harmonize product mix with market
trends
• Improve price image via low prices for
key products
• Maximize shelf space at category level
• Give promotional support to key items
Analyzing
Product
Categories
M
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S
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Market Growth
Step 3: Category Assessment
Quadrant Analysis by Brian Harris
46. Step 4: Category performance measures
Sales
Profits
Market Share
Inventory Turnover
Changes in the assortment
Consumer Transactions
Category Management Business
Process
47. Step 5: Category Strategies
Traffic Building : drawing consumer traffic to the store
Transaction Building : Increasing the size of the
average transaction
Turf Defending : positioning to defend from the
competition
Profit Generating : using products with higher margins
and loyalty
Cash Generating : strategies for fast turnover
products
Excitement Creating : communicate a sense of
urgency or opportunity to consumers
Image Enhancing
Category Management Business
Process
48. Step 6: Category Tactics
Step 7: Category Plan Implementation
Step 8: Category Review
Category Management Business
Process