Merchandising Planning Process ByDr.U.Srinivasaraghavan

Steps in Merchandising Planning Process Develop inventory Level &Product availability Plan for managing inventory Allocate Merchandise For stores Buy Merchandise Monitor & evaluate & make adjustments Forcast sales Develop Assortment Plan

Types of Merchandise planning process Staple/Basic Merchandise consist of items that are in continuous demand over an extended time period. Examples: paints, notebooks, Staple/Basic Merchandise consist of items that are in continuous demand over an extended time period. Examples: paints, notebooks, Fashion Merchandise consists of items that are in demand for a relatively short period of time. New products are continually introduced into these categories, making the existing products obsolete. Examples: high-end womens apparel, laptops. Fashion Merchandise consists of items that are in demand for a relatively short period of time. New products are continually introduced into these categories, making the existing products obsolete. Examples: high-end womens apparel, laptops. A FAD is a merchandise category that generates a lot of sales for a relatively short time, often less than a season.Example: some electronic games A FAD is a merchandise category that generates a lot of sales for a relatively short time, often less than a season.Example: some electronic games

General Features of Staple Merchandise Categories Relatively easy to forcast demand and the consequences of making mistakes in forcasting are not great Relatively easy to forcast demand and the consequences of making mistakes in forcasting are not great Predictability of demand makes it easy to plan for continuous replenishments Predictability of demand makes it easy to plan for continuous replenishments Generating orders for inventory replacement can be automatic when the inventory falls below a pre- determined level Generating orders for inventory replacement can be automatic when the inventory falls below a pre- determined level

General Features of Fashion Merchandise Categories Forecasting of sales is much more complex Forecasting of sales is much more complex Buyers for fashion category have much less flexibility in correcting forecasting errors. Buyers for fashion category have much less flexibility in correcting forecasting errors. The attempt is to be as close to out of stock as possible at the same time that the SKUs become out of fashion The attempt is to be as close to out of stock as possible at the same time that the SKUs become out of fashion Seasonal Merchandise categories are treated more or less similar to the fashion merchandise and they consist of items whose sales fluctuate dramatically depending on the time of the year Seasonal Merchandise categories are treated more or less similar to the fashion merchandise and they consist of items whose sales fluctuate dramatically depending on the time of the year

Category Life Cycle Total retail sales Time introduction growth maturity decline

Comparison of Category life cycles -fad, fashion, staple - Fad Fad Fashion Fashion Staple Staple Sales over many seasons No No yes yes Sales of a specific style over many seasons No No no no yes yes Dramatic variation of sales from season to next season No No yes yes no no

Questions that help buyers in distinguishing between a fad and a fashion 1. Is it compatible with the life style of the consumer? Innovations that are consistent with the life style of the consumers are more enduring fashions. (Example) Denim Jeans Vs Leather Pants 2 Does the innovation provide real benefits? (Example) Poultry and Fish based products VsMutton based specia;l dishes 3. Is the innovation more compatible with other changes in the market place? (Example) Cell phones with more mobile, time conscious society 4. Who is adopting?

Forecasting Staple Merchandise Categories Extrapolating Historical data with necessary corrections using statistical methods like time series analysis etc Extrapolating Historical data with necessary corrections using statistical methods like time series analysis etc

Forecasting Fashion Merchandise Categories 1. Previous sales data 2. Personal awareness – shop, converse, act, notice notice 3. Fashion and trend services 4.Vendors 5. Market research

Assortment Plan It is th list of SKUs that a merchandiser will offer in a retail category It is th list of SKUs that a merchandiser will offer in a retail category Variety is the number of different merchandising categories offered and is often refered as the breadth Variety is the number of different merchandising categories offered and is often refered as the breadth Assortment or depth is the number of SKUs offered within a category Assortment or depth is the number of SKUs offered within a category

Determining the Variety & Assortments 1. Firms Retail Strategy 2. GMROI 3. Physical characteristics of Store 4. Complementary Merchandise

Product Availability It is the percentage of demand for a particular SKU that is satisfied. Also known as level of support. Higher the availability higher is the need for buffer /basic stock It is the percentage of demand for a particular SKU that is satisfied. Also known as level of support. Higher the availability higher is the need for buffer /basic stock