1. MERCHANDISE PLANNING
CHAPTER 6

2. MERCHANDISING DECISIONS
ENABLES RETAILERS TO MAKE BETTER DECISIONS ABOUT MERCHANDISE NEEDED TO MEET SALES GOALS FOR THEIR BUSINESSES.
CHALLENGE: PROVIDING THE RIGHT MERCHANDISE AT THE RIGHT PRICES, AT THE RIGHT TIME

3. THE MERCHANDISE PLAN
A BASIC BUDGETING TOOL THAT ASSISTS THE RETAILER OR BUYER IN MEETING DEPARTMENT OR CLASSIFICATION GOALS.
PREVIOUS YEAR TO CREATE PLAN FOR CURRENT YEAR

4. COMPONENTS
PLANNED SALES – DOLLAR FIGURES REFLECT SALES NEEDED TO MEET GOAL FOR MONTH
PLANNED STOCK- $ OF MERCHANDISE A STORE NEEDS TO MEET PLANNED SALES GOAL
PLANNED REDUCTIONS- $ OF ANY DECREASE IN THE SELLING PRICE OF MERCHANDISE ( MARKDOWNS, ADJUSTMENTS, LOSS FROM SHOPLIFTING)
PLANNED PURCHASES- $ OF NEEDED MERCHANDISE TO MEET PLANNED SALES GOALS.
$= DOLLAR AMOUNTS

5. MERCHANDISE LIFE CYCLES
REFERS TO CUSTOMER ACCEPTANCE LEVELS AND BUYING LEVELS OF AN ITEM OF MERCHANDISE OR PRODUCT.
4 STAGE CYCLE

6. INTRODUCTION

7. GROWTH

8. ACCEPTANCE

9. DECLINE

10. CYCLE

11. MERCHANDISE ASSORTMENT PLANNING TOOLS
RETAILERS LOOK TO IMPROVE AND REFINE THEIR PURCHASING.
STUDY SALES AND INVENTORIES TO FIND WAYS TO IMPROVE

12. TYPES OF MERCHANDISE STAPLE MERCHANDISE FASHION MERCHANDISE
SELLS WELL OVER A LONG PERIOD OF TIME
EX: T-SHIRTS SELL SEASON AFTER SEASON; WHITE, BLACK, RED, NAVY POPULAR COLOR
FASHION MERCHANDISE
SELLS WELL FOR SEVERAL SEASONS, BUT NOT YEAR AFTER YEAR
EX: WOMENS PLEATED SKIRT IN STYLE FOR A FEW SEASONS BUT AFTERWARDS INTEREST IS LOST

13. CONVENIENCE MERCHANDISE
SEASONAL MERCHANDISE
SELLS WELL AT CERTAIN TIMES, OR SEASONS, OF THE YEAR
EX: HOLIDAY; CHRISTMAS, HALLOWEEN
CONVENIENCE MERCHANDISE
MERCHANDISE BOUGHT WIHTOUT MUCH PLANNING OR THINKING
EX: DRUGSTORE CUSTOMERS WILL BUY HEADACHIE REMEDIES; GUM

14. BUYING MERCHANDISE
UNDERSTANDING THE ROLE THAT BUYING PLAYS IS IMPORTANT FOR UNDERSTANDING THE RETAIL BUSINESS.
BUYING THE RIGHT MERCHANDISE TO SATISFY CUSTOER NEEDS IS ONE OF THE MOST IMPORTANT DECISIONS IN THE RETAIL MIX.

15. THE BUYER’S JOB RIGHT AMOUNT OF MERCHANDISE IS CRITICAL
TOO MUCH, SLOW TURN AROUND, IF NOT ON DEMAND
TOO LITTLE, MAY RESULT IN LOSS OF SALE
WHEN IS THE RIGHT TIME TO BUY?
LARGE RETAIELRS EMPLOY BUYERS, SMALLER RETAILERS DO IT THEMSELVES
BUYER REQUIRES ACCURATE KNOWLEDGE OF TARGET-MARKET CUSTOMERS AND IN DEMAND PRODUCT

16. 1. DETERMINING AVAILABLE MONEY
DETERMINED BY THE MERCHANDISE PLAN
OPEN-TO-BUY - AMOUNT OF MONEY AVAILABLE TO PURCHASE MERCHANDISE AFTER OTHER PURCHASES HAVE BEEN SUBTRACTED.
AMOUNT IS FIGURED FOR A MONTH OR SEASON
PLANNED PURCHASES – (MERCHANDISED RECEIVED + MERCHANDISE ORDERED)= OPEN-TO-BUY

17. OPEN-TO-BUY
TOM IS RUNNING A BEACH SHOP. IN JUNE, PLANNED PURCHASES TOTAL $3,300. SHE’S ORDERED MERCHANDISE THAT COSTS $1,400 AND RECEIVED A SHIPMENT OF GOGGLES WORTH $300. WHAT IS THE OPEN TO BUY FIGURE?

18. ANSWER
3,300 – (300+1,400) = 1,600

19. 2. WHAT CUSTOMERS WANT
TARGET-MARKET INFO: DETERMINE MERCHANDISE CUSTOMERS WILL BUY
SALES RECORDS: BASED ON PAST PURCHASES
CUSTOMER PREFERENCES: ITEMS LIKED MORE THAN OHTERS; SALES ASSOCIATES CAN LEARN BY TALKING TO CUSTOMERS

20. CUSTOMER REQUESTS: ITEMS NOT AVAILABLE CAN BE REQUESTED; SPECIFIC; SPECIAL ORDER
SHOPPING THE COMPETITION: BUYER WILL SHOP OR VISIT COMPETITOR LOOKING FOR IDEAS, STYLES, SALES, AMBIANCE, ETC.

21. 3. VENDOR SELECTION
A COMPANY FROM WHICH A BUYER PURCHASES MERCHANDISE.
SHOP VENDOR LOOKING FOR QUALITY, PRICE, AND RELIABILITY
DETERMINING QUALITY OF MERCHANDISE IS CRITICAL. YOU WANT MIDDLE GROUND; NOT LOWER OR HIGHER

22. 4. NEGOTIATING TERMS AND DISCOUNTS
BUYER’S OBJECTIVE: TO MAKE PROFIT
DATING TERMS DEAL WITH THE DATE WHEN THE BILL FOR MERCHANDISE HAS TO BE PAID TO VENDOR.
2/10, NET 30
2% DISCOUNT OF TOTAL BILL IF PAID WITHIN 10 DAYS OF SHIPMENT, OR PAY FULL BILL WITHIN 30 DAYS

23. SHIPPING TERMS REFER TO HOW MERCHANDISE WILL GET FROM THE MANUFACTURER TO THE STORE;
WHO PAYS FOR THE SHIPPING ( MANUFACTURER OR BUYER);
AND WHEN OWNERSHIP OF THE MERCHANDISE CHANGES HANDS.

24. IMPORTANT:
1. SHIPPING CAN BE VERY COSTLY, ADD TO COST OF MERCHANDISE IF STORE HAS TO PAY
2. OWNER OF MERCHANDISE WHILE IN TRANSIT MUST PAY INSURANCE TO COVER LOSS OR DAMAGE
3. OWNER WHILE TRANSIT, MUST FILE ANY CLAIMS FOR LOSS OR DAMAGE

25. 5. TIMING MERCHANDISE DELIVERIES
BUYER DETERMINES BEST TIME FOR MERCHANDISE TO ARRIVE.
ARRIVING AFTER THE FACT, WILL RESULT IN LOST OF SALE AND CUSTOMER

26. TYPES OF BUYING
CENTRALIZED BUYING OCCURS WHEN ALL BUYING FOR THE CHAIN IS COMPLETED FROM ONE LOCATION.
EX. BUYER FOR MACYS SHOE DEPARTMENT WILL PURCHASE ALL THE SHOES FOR ALL STORES FROM ONE LOCATION.
QUANTITY DISCOUNTS ARE OFFEREDFOR LARGE OR BULK PURCHASES.
DECENTRALIZED BUYING MEANS THAT BUYING DECISIONS ARE MADE AT THE LOCAL STORE LEVEL.

27. PRICING MERCHANDISE

28. FACTORS AFFECTING SELLING PRICE
PRICE TOO HIGH, CUSTOMERS WILL NOT BUY
PRICE TOO LOW, CUSTOMERS MAY NOT SEE ANY VALUE IN THE MERCHANDISE
TO MAKE PROFIT, SELLING PRICE MUST INCLUDE:
COST OF MERCHANDISE
EXPENSES OF GETTING MERCHANDISE TO STORE
SHARE OF RETAILER’S OVERHEAD EXPENSE
RETURN ON INVESTMENT

29. MARKUP IS THE TERM USED TO EXPRESS THE DIFFERENCE BETWEEN THE COST PRICE OF MERCHANDISE/SERVICES AND THE SELLING PRICE OF THE MERCHANDISE.
TELEVISION
STORE PAYS $500
CUSTOMER PRICE $1,200
MARKUP $ 700

30. 3 MAJORS FACTORS AFFECT SELLING PRICE
1. COMPETITION
RETAILERS CONSIDER PRICES THEIR COMPETITORS ARE CHARGING FOR THE SAME OR SIMILAR MERCHANDISE/SERVICE.
CHARGING SAME = MEETING THE COMPETITION
RETAILERS RELY ON CUSTOMER LOYALTY AND CONVENENCE

31. 2. SUPPLY AND DEMAND LAW STATES:
IF THE SUPPLY IS LIMITED, PRICES ARE HIGHER.
IF SUPPLY IS PLENTIFUL, PRICES ARE LOWER.
DEMAND IS THE QUANTITY THAT CUSTOMERS WILL BUY.
SUPPLY IS THE QUANTITY OF MERCHANDISE THAT IS AVAILABLE FOR PURCHASE.
EX. HOLIDAY DECORATIONS
PRICES ARE HIGHER BEFORE HOLIDAY THAN AFTER
SUPPLIES ARE LIMITED, CUSTOMERS WILLING TO PAY HIGHER.
EX. CUSTOMERS WILLING TO PAY MORE FOR PEACHES DURING OFF-SEASON THAN IN.

32. 3. CUSTOMER ACCEPTANCE
WILL CUSTOMER ACCEPT YOUR MERCHANDISE/SERVICE BASED ON PRICE?
KNOW YOUR TARGET-MARKET WELL ENOUGH TO PREDICT AND JUDGE LEVEL OF ACCEPTANCE

33. OTHER FACTORS 1ST CONCERN IS PROFIT
RETURN ON INVESTMENT IS A PERCENTAGE FIGURE USED TO EXPRESS THE RETURN ( OR PROFIT) ON THE COST OF MERCHANDISE OR SERVICE PLUS THE EXPENSES NECESSARY TO SELL THE MERCHANDISE/SERVICE.

34. MARKET SHARE IS ONE RETAILER’S PART OF THE TOTAL SALES OF MERCHANDISE AND SERVICES BY ALL RETAILERS IN THE SELLING AREA.
TO INCREASE SALES, RETAILER MIGHT LOWER PRICE.

35. MARKDOWNS A REDUCTION IN THE ORIGINAL SELLING PRICE. SALE ITEMS
REASONS:
ATTRACT NEW CUSTOMERS
REDUCE INVENTORY - SELL MERCHANDISE NOT SELLING AS WELL AS EXPECTED
GENERATE NEW SALES
PART OF DOING BUSINESS
PART OF THE MERCHANDISE PLAN ALLOWING FOR PRICE REDUCTIONS UNDER PLANNED REDUTIONS.

36. SELLING MARKDOWN MERCHANDISE
METHODS TO LIQUIDATE LEFTOVER MERCHANDISE
1. SELL, OR JOB-OUT TO ANOTHER RETAILER SUCH AS T.J. MAXX
2. CONSOLIDATE AND SELL TO ANOTHER STORE UNDER SAME OWNERSHIP
3. USE INTERNET
4. DONATE AND USE AS TAX DEDUCTION
5. CARRY OVER INTO NEXT SEASON