Chapter 9 Merchandise Buying and Handling Eric Sanders Ryan Snell

Merchandise Management Analysis: Correctly identify customers needs and wants Planning: Merchandise must be purchased 6-12 months in advance Acquisition: Merchandise must be bought from distributors or manufacturers Handling: Assure the merchandise is where it needs to be, and in proper shape to be sold Control: Over large inventory investments to ensure adequate returns on merchandise

Planning Dollar Inventory Investment Basic Stock Method: Basic stock level plus variable amount based on expected sales for period Percentage Variation Method: Assumes the percentage variation in monthly stock from average stock should be half as great as the percentage variation in monthly sales from average sales

Planning Dollar Inventory Investment cont… Weeks Supply Method: Inventory level should be set equal to a predetermined number of weeks supply, which corresponds to desired rate of stock turnover Stock to Sales Method: Inventory planned for the beginning of the month is a ratio of stock to sales obtained from a trade association or retailers historical records

Choosing the right merchandise mix Inventory Planning Choosing the right merchandise mix Variety: Number of lines (menswear, women’s wear, sporting goods, etc…) Breadth: Number of brands found in a particular merchandise line Depth: Number of stock-keeping units within each brand of the merchandise line

Constraining Factors Dollar merchandise constraints: only so much money to spend on inventory Space constraints: important to fit everything in store while maintaining a nice shopping environment Turnover Constraints: Must keep merchandise in stock, but not have merchandise left over Market Constraint: Must fit into the type of retailer you wish to be: specialty store vs. variety store

JCPenney Makes Shifts in Structure. First step was to bring in outside help…Vanessa Castagna She implemented change by centralizing all buying functions… this allows store management to focus on delivering a excellent shopping experience. Centralized buying process isn’t all that new, but if a retailer wants to stay competitive it must adapt or they will be gone. The new buying process is but one piece of their overall strategy…example women’s magazines.

Implementing Change New home office merchandise action teams…responsible for assortment, planning, & selling. Focus on reducing inventory levels, and will be supported by new software based on sales history data. The new game of retailing involves reaching the customer through nontraditional ways… Internet, catalogs and other marketing methods. FairMarket Inc. is an Auction network that features merchandise overstock from JCPenney’s.

Key Benefits Reduces inventory. Higher turnover…more adaptable to trends. Better customer service for better shopping experience. Fashionable merchandise.

Thank You Any Questions?