MERCHANDISING Merchandising means the activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals.

Merchandising should reflect – Target market desires – Retailer’s institutional type – Market-place positioning – Supplier capabilities – Costs – Competitors – Product trends

MICRO MERCHANDISING Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets Retailers carry complementary goods and services to encourage shoppers to buy more

CROSS MERCHANDISING Retailers carry complementary goods and services to encourage shoppers to buy more

Merchandising functions – All buying and selling functions Assortments Advertising pricing Point-of-sale displays Employee utilization Personal selling approaches

CONSIDERATIONS IN DEVISING MERCHANDISE PLANS : A. Forecasts B. Innovativeness C. Allocation D. Timing E. Brands

MERCHANDISING FORECASTS Forecasts 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)

Types of merchandise : Staple merchandise Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise

STAPLE MERCHANDISE Regular products carried by a retailer – Grocery store staple examples Milk Bread Canned soup Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.

ASSORTMENT MERCHANDISE Apparel, furniture, auto, and other products 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 is provided to project specific items

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

FACTOR 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

FACTOR 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

FACTOR 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, for many, manufacturer brands connote higher quality than private brands Customer services offered Know that high-quality goods require personal selling, alterations, delivery, and so on Personnel Employ skilled, knowledgeable personnel for high-quality merchandise

FACTOR 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; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers

Regular products carried by a retailer – Grocery store staple examples Milk Bread Canned soup Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.

Apparel, furniture, auto, and other products 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

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

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

INVENTORY LEVELS Cycle (base) stock: inventory that goes up and down due to the replenishment process Backup (buffer, safety) stock : Inventory needed to avoid stockout Order Point the point at which inventory available should not go below or else we will run out of stock before the next order arrives

Order Quantity When inventory reaches the order point, the buyer needs to order enough units so the cycle stock isn’t depleted and sales dip into backup stock before the next order arrives. Order Quantity = Order Point – Quantity Available

TECHNIQUES TO PLAN INVENTORY LEVELS ARE : 1. Basic stock method 2.Percentage variation method 3. Week’s supply method 4. Stock to sales method

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, and GMROI objectives Not a complete buying plan--doesn’t indicate what specific SKUs to buy or in what quantities

Steps In Developing A Merchandise Budget Plan Set margin and inventory turn goals Seasonal sales forecast for category Breakdown sales forecast by month Plan reductions – markdowns, inventory loss Determine stock needed to support forecasted sales Determine “open to buy” for each month

When inventory reaches the order point, the buyer needs to order enough units so the cycle stock isn’t depleted and sales dip into backup stock before the next order arrives. Order Quantity = Order Point – Quantity Available

TECHNIQUES TO PLAN INVENTORY METHODS Basic stock method : In this method a retailer carries more items than he expects to sell over a specified period. There is a cushion if sales are more than anticipated, shipments are delayed, or customers want to select from a variety of items. Basic stock = average monthly stock –average monthly sales

Beginning of the month planned inventory level : Planned monthly sales + basic stock Percentage variation method : This method is recommended if stock turnover is more than six times a year or relatively stable Beginning of month planned inventory level= Planned average monthly stock x estimated average monthly sales

Weeks’ supply method forecasts average sales weekly. In this method too much merchandise may be stocked in peak periods and too little during slow periods. Beginning of month planned inventory level= Average estimated weekly sales x number of weeks to be stored x number of weeks to be stored

In the stock to sales method a stock to sales ratio is maintained Stock-to-Sales Ratio specifies the amount of inventory (in retail dollars) that should be on hand at the beginning of the month to support the sales forecast and maintain the inventory turnover objective for the category

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?