ALLOCATING

MERCHANDISE TO STORES

By: Boss Dave

Overview

Amount of Merchandise Allocated

Types of Merchandise Allocated
Merchandise Management
Managing the Merchandise Planning
Process
Three types of analysis
 Afterdeveloping a plan for managing
merchandise inventory in a category,
the next step in the merchandise
management process is to allocate the
merchandise purchased and received to
the retailers store. Research indicates
that these allocation decisions have a
much bigger impact on profitability that
does the decision about quantity of
merchandise to purchase.
 Allocatingmerchandise to stores
involves three decisions:
1. How much merchandise to allocate to
each stores.
2. What type of merchandise to allocate
3. When to allocate the merchandise to
different stores.
Amount of Merchandise
Allocated
Retailchains typically classify each of their
stores on the basis of annual sales. Thus A
stores would have the largest sales volume
and typically receive the most inventory
while C stores would have the lowest sales
volume and receive the least inventory for a
category, allocators consider the physical
characteristics of the merchandise and the
depth of assortment and level of product
availability that firm wants to portray for the
specific store.
 Types of Merchandise
Allocated
The geodemographics of a stores trading
area are considered in making allocation
decisions. Consider the allocation decision
of a national supermarkets for its ready to
eat cereal assortment. Some stores are
located in areas dominated by segments
called Rustbelt Retirees and other areas
are dominated by the Laptops and
Lattes segment. The ready to eat
breakfast cereal planner would offer
different assortments for stores in these
Example of Different
Geodemographic Segments
Timing of Merchandise
Allocation
In addition to the need to allocate different
inventory levels and types of merchandise across
stores need to be considered. This exhibit
illustrates these different regions of the United
States. Comparing regions shows that capri sales
peak in late July in the Midwest and at the
beginning of September in the West, due to
seasonality differences and differences in
consumer demand. To increase inventory
turnover in the category, buyers need to
recognize these regional differences arrange for
merchandise to be shipped to the appropriate
regions when customers are ready to buy.
Sales of Capri Pants by
Region
Analyzing Merchandise
Management Performance

The next step in the merchandise

planning process is to analyze the
performance of the process and
make adjustments, such as ordering
more or less merchandise, lowering
prices to increase sales, allocating
different assortments to specific
stores, or changing the assortment
and model stock plans.
Three types of analysis related to the
monitoring and adjustment steps are:
Sell through Analysis
Evaluating Merchandise Plan

A sell through analysis compares

actual and planned sales to
determine whether more
merchandise is needed to satisfy
demand or whether price reductions.
Evaluating the Assortment
Plan and Vendors

AnABC analysis identifies the

performance of individual SKUs in
the assortments plan. It is used to
determine which SKUs should be in
the plan and how much backup stock
and resulting product availability are
provided for each SKU in the plan.
Multiattribute Method for
Evaluating Vendors.
Itis for evaluating vendors uses a
weighted average score for each
vendor. The score is based on the
importance of various issues and the
vendors performance on those
issues. This method is similar to the
multiattribute approach that can be
use to understand how customers
evaluate stores and merchandise.
CONCLUSION

Thistopic provides an overview of

the merchandise management
planning process. All Advanced
Planning functions used to create
plans and assortments are
dependent on the accuracy and
timelines of the information utilized.
This fact is especially helpful in
Allocation and Replenishment for the
merchandise.