1. Merchandising Theory
Grace Kunz

2. Copyright ©2010 Fairchild Books
All rights reserved. No part of this presentation covered by the copyright hereon may be reproduced or used in any form or by any means–graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems–without written permission of the publisher.
ISBN:
GST R

3. Section One
Merchandising Theory

4. Merchandising Systems
Chapter Three
Merchandising Systems

5. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Learning Objectives
Introduce multi-channel merchandising systems and cross-channel customers
Explore the Taxonomy of Apparel Merchandising System (TAMS)
Examine measures of merchandising success
Relate fundamentals of income statements to merchandise planning and controlling processes
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

6. Business-to-Ultimate-Consumer Transactions—Retailing
A complete description of a retail organization requires terms related to
Assortment definitions
Price positioning
Business organization
Presentation methods
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

7. Box 3.1: Types of retailers in today’s consumer-goods markets
Category killers
Catalog retailers
Convenience retailers
Department store retailers
Internet/online retailers
Manufacturer outlets
Manufacturer owned retailers
Mass merchandisers
Multi-channel retailers
Retailer outlets
Specialty boutiques
Specialty retailers
Warehouse/wholesale clubs
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

8. Merchandising in Multi-Channel Environments
Benefits:
expanded market presence
opportunity to overcome traditional limitations
insights into customers’ shopping behavior
greater sales and profitability
Challenges:
developing and/or maintaining brand image
providing consistent assortments
maintaining fair pricing from the customer’s perspective
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

9. Taxonomy of Apparel Merchandising Systems
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

10. Taxonomy of Apparel Merchandising Systems

11. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Product Line
A combination of styles that:
satisfy similar or related customer needs
are sold within the targeted price range
are marketed with similar strategies
Product line and merchandise line are used interchangeably
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

12. Context of Merchandising System
Marketing plan
Position the firm
Create marketing system
Plan advertising/promotions
Business plan
Mission
Goals
Merchandise mix
Fashion emphasis
Policies & practices
Price ranges
Quality standards
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

13. ©2010 Fairchild Books, A Division of Condé Nast Publications.
TAMS: Line Planning
Line planning requires
Assessment of the present
Analysis of the past
Projection for the future
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

14. ©2010 Fairchild Books, A Division of Condé Nast Publications.
TAMS: Line Planning
Evaluate Merchandise Mix
Categories
Classifications
Sub-classifications
Groups
Forecast Merchandise Offerings
Sales history
Selling periods
Product types
Size ranges
Price points
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

15. ©2010 Fairchild Books, A Division of Condé Nast Publications.
TAMS: Line Planning
Plan merchandise budgets
Sales
Reductions
Required merchandise
Prices
Initial markup
Allowable costs
Plan merchandise assortments
Model stocks
Basic stocks
Automated replenishment
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

16. ©2010 Fairchild Books, A Division of Condé Nast Publications.
TAMS: Line Planning
Determine delivery and allocation
Sequence of delivery
Allocate to stores
Arrange resupply
Analyze and update merchandise plans
Update budgets
Update assortments
Update delivery plans
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

17. TAMS: Line Development
Line Concept
Synthesize current issues/trends
Describe fashion trends
Establish line direction
Describe materials
Identify group concepts
Analyze current line
Creative Design
Develop designs
Create design prototypes
Review prototypes
Revise patterns
Create prototypes until designs are perfected
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

18. TAMS: Line Development
Line Adoption
Determine styles in line
Establish list or first prices
Assign styles/sizes/ colors to line plan
Balance assortments
Produce sales/photo/ catalog samples
Technical Design
Perfect styling and fit
Finalize patterns
Test materials
Test assembly methods
Develop style samples
Develop style/quality specifications
Detailed costing
Grade patterns
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

19. TAMS: Line Presentation
Sourcing Strategy
Make or Buy
Process
Materials
Internal
Review for adoption
Wholesale
Line preview
Line/style release
Retail
Types
Power of appeal
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

20. TAMS: Garment Production
Production Planning
Make to order/make to stock
Cut order planning
Marker making
Engineering specifications
Plant layout/startup
Methods development
Training/ergonomics
Assembly and Finishing
Production scheduling
Work study
Quality control
Spreading/cutting
Sewing
Pressing
Finishing
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

21. TAMS: Garment Production
Packaging and Distribution
Labeling/ticketing
Packaging
Hanger or shelf ready
Loading
Shipping
Quality audits
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

22. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Income Statements
Income measurements
Gross sales
Net sales
Gross margin
Adjusted gross margin
Operating profit
Net profit before taxes
Income modifications
Customer returns and allowances
Cost of goods sold
Procurement costs
Overhead/operating expense
Other income and/or expenses
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

23. Table 3.1 Sample Income Statement
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

24. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Relationships of Income Measurements, Income Modifications, and Associated Ratios
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

25. Income Statement for Mike’s Bikes
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

26. Income Statement for Mike’s Bikes
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.

27. Benchmarks of a Firm’s Success
Executive measures
did each constituency achieve its goals?
Merchandising measures
markups, markdowns, turnover, gross margin
Marketing measures
market position, growth in sales and market share
Operations measures
operating expense, selling costs, utility costs as % of sales
Finance measures
fixed & variable expense as a % of sales, cash flow, growth
Kunz
Chapter 3
©2010 Fairchild Books, A Division of Condé Nast Publications.