Developing Merchandise Plans Chapter 14 Developing Merchandise Plans RETAIL MANAGEMENT: A STRATEGIC APPROACH 11th Edition BERMAN EVANS

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 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Merchandising Activities involved in acquiring particular goods/ services and making them available at the places, times, prices, and quantities that enable a retailer to reach its goals. Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Merchandising Philosophy Sets the guiding principles for all the merchandise decisions that a retailer makes It should reflect Target market desires Retailer’s institutional type Market-place positioning Defined value chain Supplier capabilities Costs Competitors Product trends Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Scope of Merchandising Responsibility Full array of merchandising functions Buying and selling Selection, pricing, display, customer transactions OR Focus on buying function only Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-1: Dick’s Merchandising Philosophy Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Micromerchandising Retailers adjust shelf-space allocations to respond to customer differences and other differences among local markets. Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Cross-Merchandising Retailers carry complementary goods and services to encourage shoppers to buy more. Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-2: Attributes and Functions of Buying Organizations Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Merchandising and Store Functions Performed Merchandising view All buying and selling functions Assortments Advertising pricing Point-of-sale displays Employee utilization Personal selling approaches Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Merchandising and Store Functions Performed (cont.) Buying view Buyers manage buying functions: Buying Advertising Pricing In-store personnel manage other tasks: Assortments Point-of-sale displays Employee utilization Personal selling approaches Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-4a: Merchandising Career Track at Macy’s Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-4b: Store Management Career Track at Macy’s Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-5: Devising Merchandise Plans Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Forecasts These are projections of expected retail sales for given periods Components: Overall company projections Product category projections Item-by-item projections Store-by-store projections (if a chain) Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Types of Merchandise Staple merchandise Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Staple Merchandise Regular products carried by a retailer Grocery store examples: milk, bread, canned soup Basic stock lists specify inventory level, color, brand, style, category, size, package, etc. Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Assortment Merchandise Apparel, furniture, automotive, and other categories 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 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

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 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Table 14-1a: Factors in Planning Merchandise Innovativeness RELEVANCE for PLANNING Target market(s) Evaluate whether the target market is conservative or innovative Goods/service growth potential Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life Fashion trends Understand vertical and horizontal fashion trends, if appropriate Retailer image Carry goods/services that reinforce the firm’s image Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Table 14-1b: Factors in Planning Merchandise Innovativeness RELEVANCE for PLANNING Competition Lead or follow competition in the selection of new goods/services Customer segments Segment customers by dividing merchandise into established-product displays and new-product displays Responsiveness to consumers Carry new offerings when requested by the target market Amount of investment Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Table 14-1c: Factors in Planning Merchandise Innovativeness RELEVANCE for PLANNING Profitability Assess each new offering for potential profits Risk Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs Constrained decision making Restrict franchisees and chain branches from buying certain items Declining goods/ services Delete older goods/services if sales and/or profits are too low Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-6: Saks: Looking for Hot New Fashions Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-7: Traditional Product Life Cycle Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Structured Guidelines for Pruning Products Select items for possible elimination on the basis of declining sales, prices, profits, and appearance of substitutes Gather and analyze detailed financial/ miscellaneous 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 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-8: Predicting Fashion Adoption Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Table 14-2a: Factors in Planning Merchandise Quality RELEVANCE for PLANNING Target market(s) Match merchandise quality to the wishes of the desired target market(s) Competition Sell similar quality or different quality Retailer’s image Relate merchandise quality directly to the perception that customers have of retailer Store location Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Table 14-2b: Factors in Planning Merchandise Quality RELEVANCE for PLANNING Profitability Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods; turnover may cause total profits to be greater for the latter Manufacturer versus private brands Understand that, in the minds of many consumers, manufacturer brands connote higher quality than private brands Customer services offered Know that high-quality goods require personal selling, alterations, delivery, etc. Personnel Employ skilled, knowledgeable personnel for high-quality merchandise Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Table 14-2c: Factors in Planning Merchandise Quality RELEVANCE for PLANNING Perceived goods/ service benefits Analyze consumers. Lesser quality goods attract customers who desire functional product benefits; High-quality goods attract customers who desire extended product benefits Constrained decision making Face reality. Franchises or chain store managers have limited or no control over products, so independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Retail Assortment Strategies Width of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries. Depth of assortment refers to the variety in any one goods/service category (product line) a retailer carries. An assortment can range from wide and deep (department store) to narrow and shallow (box store). Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-10: Ikea’s Wide and Deep Assortment Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Brands Manufacturer (national) Private Generic (dealer or store) Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Table 14-3: Private Brand Test Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-11: Wal-Mart and Private Brands Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-12: Sears’ Distinctive Branding Strategy Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Category Management Category management is a merchandising technique used to improve productivity. It is a way to manage a retail business that focuses on the performance of product category results rather than individual brands. It arranges product groupings into strategic business units to better meet consumer needs and to achieve sales and profit goals. Retail managers make merchandising decisions that maximize the total return on the assets assigned to them. Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-13: Applying Category Management Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Merchandising Software General Merchandise Planning Software Forecasting Software Innovativeness Software Assortment Software Allocation Software Category Management Software Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-4a: Shelf Logic Software for Category Management Planning Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

Figure 14-4b: Shelf Logic Software for Category Management Planning Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall