1. Developing Merchandise Plans
Chapter 14
Developing Merchandise Plans
RETAIL
MANAGEMENT:
A STRATEGIC
APPROACH
11th Edition
BERMAN EVANS

2. Chapter Objectives
To demonstrate the importance of a sound merchandising philosophy
To study various buying organization formats and the processes they use
To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation
To discuss category management and merchandising software
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3. Merchandising
Activities involved in acquiring particular goods/ services and making them available at the places, times, prices, and quantities that enable a retailer to reach its goals.
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4. Merchandising Philosophy
Sets the guiding principles for all the merchandise decisions that a retailer makes
It should reflect
Target market desires
Retailer’s institutional type
Market-place positioning
Defined value chain
Supplier capabilities
Costs
Competitors
Product trends
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5. Scope of Merchandising Responsibility
Full array of merchandising functions
Buying and selling
Selection, pricing, display, customer transactions OR
Focus on buying function only
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6. Figure 14-1: Dick’s Merchandising Philosophy
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7. Micromerchandising
Retailers adjust shelf-space allocations to respond to customer differences and other differences among local markets.
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8. Cross-Merchandising
Retailers carry complementary goods and services to encourage shoppers to buy more.
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9. Figure 14-2: Attributes and Functions of Buying Organizations
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10. Merchandising and Store Functions Performed
Merchandising view
All buying and selling functions
Assortments
Advertising pricing
Point-of-sale displays
Employee utilization
Personal selling approaches
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11. Merchandising and Store Functions Performed (cont.)
Buying view
Buyers manage buying functions:
Buying
Advertising
Pricing
In-store personnel manage other tasks:
Assortments
Point-of-sale displays
Employee utilization
Personal selling approaches
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12. Figure 14-4a: Merchandising Career Track at Macy’s
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13. Figure 14-4b: Store Management Career Track at Macy’s
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14. Figure 14-5: Devising Merchandise Plans
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15. Forecasts
These 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)
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16. Types of Merchandise Staple merchandise Assortment merchandise
Fashion merchandise
Seasonal merchandise
Fad merchandise
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17. Staple Merchandise Regular products carried by a retailer
Grocery store examples: milk, bread, canned soup
Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.
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18. Assortment Merchandise
Apparel, furniture, automotive, and other categories 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
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19. 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
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20. Table 14-1a: Factors in Planning Merchandise Innovativeness
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
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21. Table 14-1b: Factors in Planning Merchandise Innovativeness
RELEVANCE for PLANNING
Competition
Lead or follow competition in the selection of new goods/services
Customer segments
Segment customers by dividing merchandise into established-product displays and new-product displays
Responsiveness to consumers
Carry new offerings when requested by the target market
Amount of investment
Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel
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22. Table 14-1c: Factors in Planning Merchandise Innovativeness
RELEVANCE for PLANNING
Profitability
Assess each new offering for potential profits
Risk
Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs
Constrained decision making
Restrict franchisees and chain branches from buying certain items
Declining goods/ services
Delete older goods/services if sales and/or profits are too low
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23. Figure 14-6: Saks: Looking for Hot New Fashions
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24. Figure 14-7: Traditional Product Life Cycle
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25. Structured Guidelines for Pruning Products
Select items for possible elimination on the basis of declining sales, prices, profits, and appearance of substitutes
Gather and analyze detailed financial/ miscellaneous data about these items
Consider non-deletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers
After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand
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26. Figure 14-8: Predicting Fashion Adoption
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27. Table 14-2a: Factors in Planning Merchandise Quality
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
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28. Table 14-2b: Factors in Planning Merchandise Quality
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, in the minds of many consumers, manufacturer brands connote higher quality than private brands
Customer services offered
Know that high-quality goods require personal selling, alterations, delivery, etc.
Personnel
Employ skilled, knowledgeable personnel for high-quality merchandise
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29. Table 14-2c: Factors in Planning Merchandise Quality
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, so independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers
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30. Retail Assortment Strategies
Width of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries.
Depth of assortment refers to the variety in any one goods/service category (product line) a retailer carries.
An assortment can range from wide and deep (department store) to narrow and shallow (box store).
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31. Figure 14-10: Ikea’s Wide and Deep Assortment
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32. Brands Manufacturer (national) Private Generic (dealer or store)
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33. Table 14-3: Private Brand Test
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34. Figure 14-11: Wal-Mart and Private Brands
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35. Figure 14-12: Sears’ Distinctive Branding Strategy
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36. Category Management
Category management is a merchandising technique used to improve productivity.
It is a way to manage a retail business that focuses on the performance of product category results rather than individual brands.
It arranges product groupings into strategic business units to better meet consumer needs and to achieve sales and profit goals.
Retail managers make merchandising decisions that maximize the total return on the assets assigned to them.
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37. Figure 14-13: Applying Category Management
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38. Merchandising Software
General Merchandise Planning Software
Forecasting Software
Innovativeness Software
Assortment Software
Allocation Software
Category Management Software
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39. Figure 14-4a: Shelf Logic Software for Category Management Planning
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40. Figure 14-4b: Shelf Logic Software for Category Management Planning
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