Understand the preparation of fashion merchandise buying plans. FM 2.02 Understand the preparation of fashion merchandise buying plans.

Merchandise Buying Planning Terms Assortment breadth: the number of different categories or classifications of merchandise offered. Assortment plan: a buying plan that projects the variety and quantity of specific stock-keeping units to be carried by a store or department to meet customer demand. Buying plans: a plan that describes the types and quantities of merchandise to purchase for a department or store for a specific time period and for a set amount of money Classification buying: activity of purchasing only one category classification of merchandise, often done by chain store buyers. Also called central buying. Comparison shoppers: retail employees who check the merchandise assortments, prices, ambiance, and service offered in competing and noncompeting stores, as well as the advertising, displays, and knowledge and demeanor of salespeople. Complementary products: items that supplement or accessorize other basic products Departmental buying: activity of department store buyers who purchase merchandise for only their own departments. Direct selling: the exchange of merchandise to individual consumers in return for money or credit; personal selling Discounts: reductions of the original retail price granted to store employees or special customers Dollar merchandise planning: a financial buying budge for planned stock, sales, and profit of a department or store for a six month period.

Merchandise Buying Planning Terms Floor ready merchandise (FRM): vendor shipped items in a condition to be put directly on the retail shelf or fixture without any additional preparation Indirect selling: nonpersonal promotion aimed at the public or a large general audience Markdown: difference between the previous selling price of an item and the reduced selling price Markup: the amount added to the cost of merchandise to determine the selling price Merchandise cycle: a circle of ongoing planning, buying, and selling activity Open to buy (OTB): the dollar or merchandise unit amount that buyers are permitted to order for their stores, departments, or apparel category or classification for a specified time period Retail buyers: merchandising executives who are responsible for selecting and purchasing goods for their companies and for selling the goods at a profit. Specification buying: when retailer submits definite specificationsto a manufacturer about the quality of materials, workmanship, style, and fit of items, rather than looking for goods already produced. Stock keeping unit (SKU): the smallest unit for which sales and stock are kept Stock shortage/shrinkage: the difference between book inventory, according to records, and actual physical inventory Stock to sales ratio: (inventory to sales ratio) a calculated number that shows dollar sales volume in relation to the dollar value of average inventory Stock Turnover: number of times the average inventory on hand is sold & replaced in a given period

Role of Retail buyers in the fashion industry Responsible for selecting and purchasing goods for their companies. Could be a specific department or classification Could be for an entire retail store ALWAYS consider company image and watch activities of competitors. Must make a profit for the company when the goods are sold. Estimate future demand for merchandise for the target clientele of their stores, catalogs, websites, etc.

Role of Retail buyers in the fashion industry Determine the quantities and timing for various styles, colors, sizes, prices, and fashion emphasis. Follow company policy as to breadth and depth of stock while trying to make the highest possible profit. Notice changes in people’s living patterns, preferences, and tastes. Correctly “reading” customers’ tastes involves skill and practice.

Role of Retail buyers in the fashion industry Recognize what people want, when they will want it, and what they will be willing to pay for it. Predict quantities the market can absorb. Accurately forecast what merchandise will appeal to their customers

Difference between internal and external information used for merchandise planning Internal information can be found within a retail company Internal examples: Past sales records Customer feedback to salespeople Want slips Consumer polls Company merchandising bureaus

Difference between internal and external information used for merchandise planning External information can be found outside the retail company External examples: Vendors Trade information (publications, shows, industry statistics) Comparison shoppers Resident buying officers/consulting services Fashion forecasters

Types of merchandise resource used in selecting vendors Manufacturers Wholesalers Websites Catalogs (paper or video) Importers

Financial and merchandise assortment influence fashion buying plans Buyers plan balanced proportions of styles, colors, sizes, and price points. A fashion assortment lists each item by SKU number, including size, price, and color. An assortment plan for a store with branches indicates what specific items are allotted to each branch store. The goal is a balanced assortment (an ideal stock situation) which has sufficient items to meet demand with breadth and depth to satisfy all customers.

Financial and merchandise assortment influence fashion buying plans Merchandise assortment plans Basic stock plan Proposed purchase list composed of commodity goods, such as blue jeans, underwear, and men’s dress shirts. These are basic items with consistent demand, dependable, and quite predictable. Model stock plan Mostly fashion merchandise. Includes items that have strong customer appeal for a limited time. Always changing as fashion rise and then fall out of favor. Demand is harder to predict. Deals with unpredictability and higher risk. More likely the goods will have to be lowered in price to clear the inventory

Financial and merchandise assortment influence fashion buying plans Financial assortment plans Dollar merchandise plan Estimated dollar amount for planned, stock, sales, and profit for the department for a six month period Two periods are February – July and August – January. Based on analysis of last year’s plan and results.

Financial and merchandise assortment influence fashion buying plans Financial assortment plans Stock –to-Sales ratio Shows dollar sales volume in relation to the dollar value of average inventory Determines stock needed at the beginning of each month based on past sales figures of how fast the particular items of a department or category sell. Related to stock turnover. Indicates an average figure for a certain time span. Is a figure for a specific point in time. Guides to help estimate the amount of stock required in relation to sales.

Financial and merchandise assortment influence fashion buying plans Financial assortment plans Open to buy Dollar or merchandise unit amount buyers are permitted to order for their stores or departments for a specified time period Controlled device, calculated weekly or monthly. Purpose is to maintain the proper mix and level of goods. Available OTB is what can be spent or number of items that can be purchased at the current time. Present inventory and goods on order are deducted from the original allocation of planned purchases to arrive at the amount.