1. 2.0 Understand the fashion merchandising process.
Objective 2.02: Understand the preparation of fashion merchandise buying plans.

2. Planning to Buy
Merchandising mainly involves planning, buying, and selling of the right merchandise blend to optimize profits.
It consists of the following 3 steps:
Merchandise planning involves estimating, as correctly as possible, consumer demand and how it can best be satisfied.
Merchandise buying is done through vendors, such as apparel producers, to obtain the merchandise decided upon during the planning phase.
Merchandise selling involves two different aspects. One is indirect selling, or nonpersonal promotion aimed at a large general audience. The other is direct selling, or the exchange of merchandise to individual consumers in return for money or credit.

3. The Merchandising Cycle
These 3 steps make up a merchandising cycle of ongoing activity.
Planning
Direct Selling
Selling
Buying
Indirect Selling

4. The Merchandising Cycle
When the planning and buying for the current season are accomplished by retailers, selling takes place.
The merchandising cycle continues with the planning and buying of new merchandise to replenish goods being sold and for the next season.
It is a continuous cycle.

5. Role of Retail Buyers
Retail buyers are merchandising professionals who are responsible for selecting and purchasing goods for their companies.
They select merchandise assortments that will best serve customers and earn a profit.
They keep track of economic trends and consumer behavior data.
All buyers must be able to recognize what people want, when they will want it, and what they will be willing to pay for it.

6. Role of Retail Buyers
For larger retail venues, a buyer might be in charge of planning the goods for one specific department or just one classification.
Departmental Buying: activity of department store buyers who purchase merchandise for only their own departments. Ex. Men’s Department
Classification Buying: activity of purchasing only one category classification of merchandise, often done by chain store buyers. Ex. Men’s Sweaters

7. Internal Data Sources
Internal data sources are obtained within the retail company.
Includes past sales records, customer feedback to salespeople, want books or want slips, consumer polls and company merchandising bureaus.

8. Internal Data Sources
Past Sales Records: indicate what merchandise has sold in the past and shows what goods are unwanted because they have been returned or marked down.
Salespeople: personal selling provides a valuable source of product and customer information, salespeople should register their observations about customers and relay that information to buyers so that the customer’s feedback can be directly acted upon.

9. Internal Data Sources
Want Books or Want Slips: forms salespeople can use to record customer inquiries or requests about products not carried by the store or that are out of stock. They can keep buyers informed about changing customer wants.
Consumer Opinions and Behavior: can be formally collected by using surveys, panels, customer counts, and sample products to determine preferences.

10. Internal Data Sources
Company Merchandising Bureaus: fashion bureaus specialize in forecasting fashion trends so each buyer does not have to do it independently.

11. External Data Sources
Buyers use several forms of merchandising information from outside their companies.
Some external information sources are vendors, trade information, comparison shoppers, resident buying offices, and fashion forecasters.

12. External Data Sources
Vendors: from who goods are purchased, can be good sources of product information. They have extensive exposure to the marketplace and interaction with other retailers.
Trade Information: trade publications such as newspapers and magazines can be studied for industry statistics, vendor advertisements, market news and trends, and names/addresses of sources by merchandise classifications.

13. External Data Sources
Comparison Shoppers: are hired to check and report back to their employers the depth of merchandise assortments, prices, ambiance, and services of competing and noncompeting retailers.
Resident Buying Offices and Reporting/Consulting Services: provide planning and buying information for a fee.

14. Preparing Buying Plans
Retail buyers must try not to order less than what will be in demand.
They try to establish an expected rate of sale and they base their quantity and timing of orders to realistically support that.

15. Preparing Buying Plans
Stock turnover, or inventory turns, is the number of times the average inventory on hand is sold and replaced in a given period, or how fast merchandise goes in and out of the store.
The following calculation is used in planning the total size of inventory for a time period.
Stock Turnover= $ retail sales for the period
$ average inventory for the period
at selling price

16. Preparing Buying Plans
Buyers prepare buying plans that describe the types and quantities of merchandise to purchase for their selling venues for a specific time period and for a set amount of money.
Written plans include both financial estimates and merchandise item estimates, projecting sales in terms of both dollars and merchandise units.

17. Financial Planning and Control
Financial planning results in a dollar merchandise plan.
This is an estimated dollar amount, or budget, for planned stock, sales, and profit for the department for a six month period.
The two periods of the year are:
February – July
August - January

18. Financial Planning and Control
Dollar merchandise plans also forecast stock values at the beginning of each month to cover sales.
Stock-to-sales ratio, which is calculated to show dollar sales volume in relation to the dollar value of average inventory.
The ratio determines stock needed at the beginning of each month.
$ value of stock at retail at
Stock-to-sales ratio = beginning of the month
$ projected sales for the month
(based on past monthly sales)

19. Financial Planning and Control
Retail companies also limit buyers to a certain open- to-buy (OTB).
Open-to-buy is the dollar amount or merchandise unit amount that buyers are permitted to order for their stores, departments, or apparel classifications for a specific time period.
The OTB is a control device, calculated weekly or monthly.
Its purpose is to maintain the proper mix and level of goods.

20. Assortment Planning
After obtaining an approved dollar plan, buyers plan balanced proportions of styles, colors, sizes, price points, and other variables.
An assortment plan projects the variety and quantity of specific stock-keeping units to be carried by a store or department to meet customer demand.
A stock-keeping unit (SKU) is the smallest unit for which sales and stock records are kept. These units have item numbers for inventory control and identification.

21. Assortment Planning
When planning for your merchandise you have to consider both the assortment breadth and depth that you want to carry.
Assortment Breadth is the number of different categories or classifications of merchandise offered.
Assortment Depth is the quantity of each item offered in the assortment categories or classifications carried.

22. Additional Planning Considerations
Whereas substitute products can be used in place of each other, complimentary products increase store sales without negatively impacting other products.
Complementary products are items purchased to supplement or accessorize other products.
Stocking them provides customers with one-stop shopping convenience.

23. Additional Planning Considerations
Specification buying is when a retailer submits definite specifications to a manufacturer rather than looking for goods already produced.
The quality of materials, workmanship, style and fit of items are specified.

24. Brand Names vs. Private Label Merchandise
Retailers must decide if they should emphasize designer names, national brands, their own private label goods, or some combination of these to enhance their market share.
Brand names have come to represent prestige and quality to customers. Ex. Ralph Lauren Polo
Private label (house brand) merchandise is produced specifically for a retailer and contains the retailer’s own trademark or brand name. Ex. Old Navy