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Merchandising Theory Grace Kunz.

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Presentation on theme: "Merchandising Theory Grace Kunz."— Presentation transcript:

1 Merchandising Theory Grace Kunz

2 Merchandising Planning
Section Two Merchandising Planning

3 Fundamentals of Merchandise Planning
Chapter Five Fundamentals of Merchandise Planning

4 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Learning Objectives Apply concepts of merchandise classification systems to facilitate merchandise planning Examine differences in fashion, basic, seasonal, and staple merchandise Develop merchandise calendars suitable for fashion/seasonal and basic/staple merchandise Explore the fundamentals of Accurate Response and Category Management Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

5 Traditional Line Planning
Types of traditional line planning Top-down planning Executive constituency Focus on sales goals Bottom-up planning What was sold? How much? What kind? When? At what price? Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

6 Phases of Traditional Line Planning
Two six-month plans per year Establish levels of investment for each month of the year for merchandise lines categories Two parts: Dollar planning/ sales-turnover-profit margin-markdowns Unit planning/ SKU level Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

7 Contemporary Line Planning
Comprised of organizational pyramid Conglomerate tier Group tier Corporate tier Division tier Individual store or production unit tier Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

8 Application of the Organizational Pyramid
Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

9 Application of the Organizational Pyramid
Conglomerate Tier: Target Corporation Group Tier: Target Stores, Target India, Target Commercial Interiors, AMC, Target Financial Services Corporate Tier for Target Stores: Target, Super Target, Target.com Division Tier for Target Stores: Target regional offices: Los Angeles, Dallas, Minneapolis, Richmond, VA, and Troy, MI Store Tier: 1,591 stores in 47 states (Source: Target Corporation, retrieved April 2008 from Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

10 Contemporary Integrated Planning
combination of the top-down and bottom-up systems teamwork approach company-wide plan applied throughout the merchandising cycle Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

11 Phases of Contemporary Line Plans
Merchandise budgets (dollar plans) planned sales reductions merchandise to receive Merchandise defined by category class subclass or group merchandising cycle or selling period Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

12 Phases of Contemporary Line Plans
Assortment Plans (unit plans) model stocks basic stocks and/or automated replenishment Merchandise defined by style size color Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

13 Planning for Private Brand Sourcing
Product development may take place at Conglomerate tiers Group tiers Corporate tiers Merchandise cost as sourcing factor Combining orders to achieve economy of scale Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

14 Dimensions of Planning Product Lines
Pricing dimensions Assortment dimensions Styling dimensions Timing dimensions Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

15 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Pricing Dimensions Price is used as an indicator of product quality amount that has to be paid to buy a product List price manufacturer’s suggested retail price provides the foundation for pricing in the manufacturing sector First price planning price assigned by retailer basis of pricing in the retail sector Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

16 Assortment Dimensions
Merchandise assortment range of choices offered for sale at a particular time Merchandise classification system set of names and code numbers breaks down the total merchandise mix into consistent identifiable groups Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

17 Assortment Dimensions
A total merchandise mix is the offering of a particular retailer or manufacturer Merchandise mix Merchandise categories Merchandise classes and subclasses Merchandise groups Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

18 Assortment Dimensions
Merchandise mix offered by a men’s specialty retailer may include Categories of suits, outerwear, casual wear, and accessories Classes of suit category may be single-breasted, double-breasted, and formal Subclasses of single-breasted class may be solids, stripes, and tweeds Merchandise groups of solid subclasses may be four-season fabrics and woolen fabrics Assortments defined by style, size and color Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

19 Assortment Dimensions
A balanced assortment has a well-planned variety of styles, sizes, and colors for special appeal to a specific market Stocked in ratios consistent with customer demand Results in satisfied customers and meets merchandising goals Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

20 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Merchandising Goals Adequate variety to attract customers Adequate inventory to prevent stock-outs Minimum investment in slow-moving goods Minimum investment in total inventory Maximum gross margin Maximum gross margin return on inventory Maximum stock turn Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

21 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Styling Dimensions Styling determines the appearance of a product Styling must be consistent with the firm’s market position If fashion forward  styles must convey fashion leadership If classic offering  styles must reflect time-tested favorites Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

22 Fashion Interpretation
Psychologists  seeking individuality Sociologists  class competition/ social conformity to norms Economists  pursuit of the scarce Aestheticians  Artistic components/ ideal of beauty Historians  Evolutionary explanations for changes in designs Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

23 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Stages of Fashion Maturity Decline Growth TOTAL RETAIL SALES Introduction Trend Setters Early Adopters Majority Late Comers TIME Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

24 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Styling Dimensions Merchandising perspectives on product change Fashion goods Basic goods Seasonal goods Staple goods Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

25 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Product Change Fashion goods require frequent changes in styling in order to maintain acceptance form consumers Basic goods are products that have little demand for style change Seasonal goods experience change in demand related to combination of factors associated with the calendar year Staple goods are products that have little change in demand relative to the time of the year Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

26 Perceptual Map of Product Change
Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

27 Assessment of Product Change and Length of Selling Periods
Does a class or subclass have demand for change in styling, and if so, how often? Does the same class or subclass have change in demand related to the time of year? Where should this same class or subclass be placed on the Perceptual Map to understand the balance between fashion and seasonal influences and the length of the selling period? Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

28 Timing: Merchandising Calendars
Selling periods Transition periods Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

29 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Key Questions During which weeks in the merchandising cycle does each selling period begin? During which weeks does each selling period end? How many peeks are in each selling period? During which weeks do the peaks occur in each selling period? What merchandising activities influence the sales per week? Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

30 Merchandising Calendar
Merchandising calendar brings together multiple dimensions of Merchandise decision making in relation to the Merchandising cycle for particular Merchandise classes, subclasses and groups Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

31 Necessary Information
Months of year Weeks in merchandising cycle Seasonal events Selling and transition periods Pricing plan Delivery plan Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

32 Table 5.3: Merchandising Calendar (First 26 Weeks)
Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

33 Some Aspects to be Considered
What factors influenced the beginning and end of the selling periods? Did the timing of merchandise delivery influence sales? Were inventory levels appropriate? Were sales lost because of unbalanced assortments? Were sales lost because of missed reorder opportunities? Were weather conditions a factor in any of the selling periods? What caused selling peaks? Would similar selling peaks be expected this year? For multi-store operations, were distribution plans effective by classification? How much and what kind of merchandise remains from the past season by store? How much and what kind of merchandise was transferred among stores? How might distribution plans be modified to balance assortments? Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

34 Forecast-Based Merchandise Plans
Purpose provide a foundation for planning product lines satisfy customers while achieving firm’s goals during each selling period in the merchandising cycle Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

35 Regional and Local Economic and Cultural Influences
Factors that will complicate apparel forecasting the casually dressed workforce the decreasing popularity of department stores the emergence and ongoing influence of urban wear the stronger voice of youth the integration of technology into the fashion arena ( 2004) Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

36 During-the-Period Trend Analysis
Evaluate fast sellers: Determine product appeal Reorder for continued sales potential Rework merchandise presentation Update trend analysis Evaluate slow sellers: Determine problems with product Rework merchandise presentation Mark down promptly if price is too high Consider stage of fashion cycle Update trend analysis Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

37 End-of-Period Trend Analysis
Evaluation criteria include Sales volume Turnover Percent markdown Maintained markup Percent change in sales Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

38 ©2010 Fairchild Books, A Division of Condé Nast Publications.
Category Management Sophisticated form of merchandise planning Traffic Builders Transaction Builders Cash Generators Image Creators Excitement Creators Kunz Chapter 5 ©2010 Fairchild Books, A Division of Condé Nast Publications.

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