MERCHANDISE MANAGEMENT

Session 11
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Retail Merchandising is the process of developing, securing, pricing, supporting and communicating the retailers merchandise offering.

It means offering the right product at the right time at the right price with the right appeal!!
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Developing Merchandise Plans Category Management

Category management orients retail managers toward the merchandising decisions necessary to maximize the total return on the assets assigned to them.

Categories should be arranged as they would be if consumers could stock the shelf themselves. Successful category management is predicted on these ten points.
Category configuration should be a function of time, space, and product utilization. Category management should seek to drive multiple item purchases, not the selection of a single SKU from a like-item category set.

Category management is a fluid, dynamic, proprietary set of decisions, not a standard, universal, institutionalized practice.
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Category Management
The Ultimate aim of category management is to create unique consumer value not just to bolster manufacturerretailer practice. A retailers category management plan ought to be based on overall trading-area scenarios. Category management is an exclusionary process as much a way of deciding what not to sell as what to sell to everyone. The fundamental data base for category management should be drawn from a pre customer interface analysis of trading-area needs. The suppliers goal is to make the most of purchase and margins within a given geographic area. The retailers goal is to raise total store or store cluster profitability and 4 productivity. Yasmin

Role of Category

Routine categories: products used by the customers on a regular basis Convenience categories: more conveniently purchased by customers from their neighborhood retail outlets Seasonal Categories: products that are bought occasionally Destinations Categories: are used by the retailers to position themselves as the preferred stores of customers through their superior service and better value offering
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The Buying Organization

There are five levels in a buying organization The Merchandise group Department Classification Category Stock Keeping unit(SKU)

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The Merchandise Group

This is the highest level of buying Organization.

It consists of all the Vice presidents like the Womens wear, Mens wear Cosmetics & accessories etc. They are responsible of each dept.
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Department

This is at the second levelThe divisional Merchandise Manager of each dept works under their guidance.

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Classification

Purchasers who report to the div merchandise manager manages all the buying activities.

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Buying Organization Formats and Process

Developing Merchandise Plans

The Attributes and Functions of Buying Organizations

Level of Formality

Formal Informal

Degree of Centralization

Centralized Decentralized

Organizational Breadth

General Specialized
Internal External Resident Buying Office Cooperative buying

Personnel Resources

Functions Performed

Merchandising Buying Buyer(buying only) Sales manager Buyer(merchandising)

Staffing

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Developing Merchandise Plans

Devising Merchandise Plans
Considerations in Devising Merchandise

Plans

Innovativeness

Forecasts

Assortment

Merchandise Plan
Allocation Brands

Timing

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Developing Merchandise Plans

The Traditional Product Life Cycle

Maturity
Total Retail Sales

Introduction

Decline

Growth

Time

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DevelopingProduct Merchandise Plans The Traditional Life Cycle

Life Cycle Stage

Strategy

Variable

Introduction
High - income Innovators One basic offering Limited or extensive Penetration or skimming

Growth
Middle-income adaptors Some variety

Maturity
Mass market

Decline

Target Low-income Market Good or and laggards Less Service variety Distribution Intensity Price prices

Greater variety

More retailers Wide range

More retailers Lower prices

Fewer retailers Lower

Promotion

Informative

Persuasive

Competitive

Limited

Supplier Oligopoly Structure

Monopoly oligopoly

Oligopoly competition

Co mpetition

Variations on the Category Life Cycle

Fad: is a merchandise category that generates a lot of sales for a relatively short time often less than a season Fashion: fashion is a category that typically lasts several seasons and sales can vary dramatically from one season to the next

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Variations on the Category Life Cycle

Staple Merchandise: items in this category are in demand over an extended period

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Steps In The Retail Merchandising Process

1.
2. 3. 4.

5.

Develop the merchandise mix and establish the merchandise budget. Build the logistic system for procuring the merchandise mix. Price the merchandise offering. Organize the customer support service and manage the personal selling effort. Create the retailers advertising, sales incentive and publicity programs.
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Assortment Planning Process

The decision of merchandise assortment depends on the availability of store space & the financial budget of the retailer. Establishing a trade-off between variety, assortment & product availability is the most challenging task of a retailer.

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THE COMPONENTS OF THE MERCHANDISE MIX

Merchandise

Variety

(no. of product lines)

Merchandise
Merchandise

Assortment Support
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(no. of product items) (no. of product units)

Planning Merchandise Variety Involves Planning And Controlling Product Lines

Retailers use MANY factors to evaluate product lines!!
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CONTROLLING MERCHANDISE VARIETY

Is an art and a science No rules for what should be included in the merchandise mix and what should be excluded Two useful management methods I. Category Management: each product managed as a business unit at the store level II. ABC Analysis: each product line is rank ordered based on performance levels
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PLANNING MERCHANDISE ASSORTMENT AND SUPPORT

Must

organize the merchandise mix as to the number of different product lines carried Must decide on: Brands Sizes Colors Material Styles 21 Price points Yasmin

PLANNING MERCHANDISE ASSORTMENT AND SUPPORT

Goal is to ensure that product choice meets targeted consumer needs Must carefully plan the number of units to have on hand to meet the expected sales for the brand, size, color combinations Must develop merchandise lists 1. Basic Stock List (staple items) 2. Model Stock List (fashion items) 3. Never Out List (key items and best sellers)
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CONTROLLING MERCHANDISE ASSORTMENT AND SUPPORT

Involves monitoring and adjusting the types of product lines that are added and dropped from the merchandise mix Two widely used methods to control assortment and support: 1. Inventory turnover: rate at which the retailer depletes and replenishes stock 2. Open-to-buy:amount of new merchandise a retailer can buy during a specific time period without exceeding planned purchases for the period Yasmin 23

Merchandise Mix Strategies

Narrow Variety/Shallow Assortment

Vending machines Newsstands Door-to-door

Different optimal variety and assortment strategies possible!!

Wide Variety/Shallow Assortment

Variety Stores General Stores Discount Stores

Narrow Variety/Deep Assortment

Specialty Stores

Wide Variety/Deep Assortment

Full-line Department Stores
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MERCHANDISE BUDGET MANAGEMENT

Financial management tool used to plan and control the total amount (in dollars) of inventory carried in stock at any time Determines how much a retailer should invest in inventory during a specified period Remember: Merchandise Budget controls expenses; Merchandise Mix controls product units

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Product Mix trends

1. 2.

Retailers need to develop an innovative product mix strategy, that suits the needs of the unsatisfied customers. Two emerging trends areShotgun Merchandising Rifle Merchandising
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Shotgun Merchandising
It involves expansion of the merchandise being offered in the store in order to satisfy the increasing needs of the consumers Retailer attempts to increase his market share by catering to different sub markets and trying to fulfill the specific needs of various individual target customers Yasmin 27

Rifle Merchandising
Aimed at targeting merchandise at a select group of customers The store carries a very limited number of product lines, but a large assortment is made available in each product line Uses penetration strategy

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