SIX MONTH MERCHANDISING PLAN FINAL PROJECT Group 3 – Lakesha Cole, Neha Bafna and Melinda Berman

December 4, 2011

STORE

Bloomingdale’s is a high-end American department store owned by Macy's, Inc. What started in 1861 as a Ladies Notions' Shop on Manhattan's Lower East Side known for its hoopskirts, later paved the way for the department store concept at the dawn of the 20th Century.

Bloomingdale's currently operates 41 department stores and home stores in 12 states, bloomingdales.com, and four Bloomingdale’s Outlet stores in three states, generating approximately $25 billion in annual revenues.

Bloomingdale’s is described as more of a lifestyle than as a store. The luxury retailer traditionally caters to upscale and trendy professionals in their upper 20s to late 50s with a household income of $100,000 to $150,000 a year. “The luxury market is growing despite the suffering U.S. economy. In 2006 8 million American households earned more than $150,000 a year, which was a 7% increase since 2002.” 1

According to “The Ipsos Mendelsohn Affluent Survey 2009 Annual Report”, 22% of affluent households shopped at Bloomingdale’s either in person, online, by telephone, or by mail order. Bloomingdale’s is recognized for originality, innovation and fashion leadership. Bloomingdale’s shoppers are “attracted by the latest styles from the hottest brands, such as Armani, Burberry, Chanel, Christian Dior, David Yurman, Jimmy Choo, Louis Vuitton, Miu Miu, Prada, Ralph Lauren Black Label, Theory and Tory Burch.” 2 With a price point of $150 for a pair of Diesel jeans to the average price point of $2,500 for a designer bag,

Bloomingdale’s shoppers expect and relish a variety of the newest looks and high quality goods from accomplished brands, as well as unique products from rising designers of the likes of Rachel Zoe. Their affluent shoppers tend to be educated women who live in upscale living quarters in urban areas and live a global lifestyle that involves traveling with friends, enjoying the city life and entertaining people at home. This shopper is motivated by current trends and the need to have exclusive items.

References 1.  Industry:Fashion - See your portfolio in a whole new light .., http://www.wikinvest.com/industry/Fashion (accessed December 4, 2011). 2. Bloomingdale's - Macy's, Inc. - Macy's, Inc, http://www.fds.com/bloomingdales/default.aspx?Print (accessed December 1, 2011).

TARGET MARKET

PRODUCT CATEGORIES

Designer Clothing Escada $2,550.00

Bloomingdale’s is a leading attraction for visitors in New York City, second only to the Statue of Liberty. Like its notable charm, the heartbeat of its marketing mix “recognizes that the customer is paramount and that all actions and strategies must be directed toward providing a localized merchandise offering and shopping experience to its targeted consumers through dynamic department stores and online sites.” 3

In-store and online, its primary product categories consist of a range of luxury merchandise from around the world: from designer fashions for men and women, to home furnishings and decorative accessories that shape the way its customers live.

Reference 3. Macy's Jobs, http://www.careerbuilder.com/Jobs/Company/C8G2LX73ZZTVZMJTTH9/Macys/ (accessed December 1, 2011).

The designer clothing at Bloomingdale’s consists of an edited selection of top designer names including Oscar De La Renta, BOSS Black, Escada, Max Mara, Zac Posen, Akris etc. The quality is excellent and the prices are high.

Dresses - $600 - $2500+

Blouses - $500 – 1000+

Pants - $250 - $800+

Jackets - $800 - $2500+

PRODUCT CATEGORIES Contemporary Clothing Diane Von Furstenberg $265.00 The contemporary clothing category has a broad range of brand names including Alice + Olivia, Diane Von Fustenberg, J Brand, Theory, Free People, Vince, Marc By Marc Jacobs, Aqua, etc. The quality ranges by designer, some designers concentrate on high quality standards and others put their efforts elsewhere. The prices are in the mid-level price range.

Dresses - $250 - $550+

Blouses - $198 - $500+

Pants - $200 - $450+

Jackets - $350-$600+

PRODUCT CATEGORIES Handbags Marc By Marc Jacobs $528.00 The handbags product category has a range of designer prices, including high-end brand names such as Chloe and Burberry and contemporary names such as, Tory Burch, ZSpoke and Marc By Marc Jacobs. The selection is further divided by, handbags and small leather goods such as wallets and tech accessories, which are more affordable.

Designer Bags – $650 - $2000+

Contemporary Bags – $200 – $550+

Small Leather Goods - $50 - $250+

PRODUCT CATEGORIES

Shoes See By Chloe $350.00

The shoes, similar to handbags, have a range of designer and contemporary names. Therefore, the prices are high to mid-level pricing. The quality is high, however it does range by designer.

Designer Shoes – $450 - $800+

Contemporary Shoes - $89 - $350

PRODUCT CATEGORIES Beauty Balenciaga $130.00

The beauty section also ranges from top designer names to contemporary beauty brand names, such as Chanel, Dior, Benefit and Bobbi Brown. The beauty product category appeals to customers with disposable income, as well as young aspiring customers who can only afford that $30 designer lipstick rather than the $2000 designer dress.

Lipstick – $12 - $35

Skin Care - $36 - $500+

Fragrance - $30 - $250+

Section 2

Section 3

1.  Propose three different solutions that might enable your department to end the season on plan for sales and markdowns

Meeting planned sales and markdowns can be impacted by a multitude of internal and external factors. Several solutions for meeting planned sales and markdowns at the end of the season include:

I. A. Changing the physical look of the store. Changing the physical look of the store, could increase foot traffic, both of existing and new customers, and thus increasing sales. Renovations to stores often create excitement around the store, and upon “reopening” attract further attention from the customer base.

B. The addition of a new store. Increasing the number of stores could also attract more customers. If a store’s current location is not as accessible, sometimes planned sales and markdowns are not met. Often, the markdowns are greater than what is planned, as a result, and sales can be lower. However, the addition of stores creates more accessibility, which can also result in meeting planned sales and markdowns.

II. Change in marketing strategies. Adjusting the marketing strategy for the store can result catching the attention of consumers in ways they might not currently be doing. Marketing strategies builds awareness around the store and create a place in the marketplace for the store. Therefore, effectively adjusting the marketing strategies can also result in the store meeting the planned sales and markdown for the period.

III. Adequately planning stock. Adequately planning for inventory will allow the store to not be in a position where there is too much inventory. Excessive inventory results in an overbought condition, which then results in increased markdowns.

QUESTION #1

2. Based on your primary target market and the product category you have listed and outlined, when would be the best time to plan for markdowns in order to maximize net sales?

Retailers often associate markdowns with profit loss and some retailers even believe that cutting prices for their products could negatively impact their brand image. Retailers have historically viewed markdowns as a necessary evil designed to help sell old or slow-moving inventory. But in this current era of intense competition, businesses are rethinking their pricing strategies, and thus their perception of markdowns.

In this scenario, the best time to plan for markdowns in order to maximize net sales is not at the end of the season but determine early on which items they are willing to reduce in price over time. For example, if a particular contemporary clothing item begins to fall behind its expected rate-of-sale in August, Bloomingdale’s could adjust the product’s price throughout the season to ensure it meets its expected rate-of-sale by the end of the season.

QUESTION #2

3. Based on your product category, what would be an appropriate sales curve? List and describe the factors you would have to consider in reviewing and planning the sales curve for your specific store/department.

Without knowing the sales last year, it is difficult to determine the sales curve for this years 6 month merchandising plan. Below I have listed the most important factors I would consider in determining the sales curve.

The most important factor to look at is accurate sales records from last year for each store in order to predict the sales curve for this year. If there were lost sales in certain months because of late shipments, low inventory levels or buying mistakes we would estimate the loss and add it to the forecasted sales curve for this year. National sales curve data is also available to benchmark our sales curve against the industry standard.

The best way to determine the sales curve is by category since there is a large range of products sold at Bloomingdale’s. Beauty, shoes and handbags, all have highly predictable sales curves, as each category can be defined as basic merchandise, which is in continual demand. Basic merchandise has a highly predictable sales curve, with customer demand being consistent over a long period of time. The designer and contemporary clothing collection must be broken down further by product category, for example outerwear, bathing suits, jeans, sportswear, formal wear, as each of these categories will be on a different sales curve. Outerwear would be high on the east coast in February and March as that is when all of the sales are, and bathing suits would be high in May, June and July during the summer season.

Other factors to consider are, the local climate by each of the 41 stores, types of customers (25-50 professional women), income levels ($100,00-150,000+), speaking to sales associates about customer buying

QUESTION #3

4. Discuss how planned sales and planned turnover impact your plan’s month BOM stock(s).

A plan’s monthly BOM stocks is driven by several factors: • Sales for the month • Basic stock

Basic Stock stock is driven by the average stock and the average monthly sales. The average stock is determined by the sales for the season and the turnover for the season. The higher the turnover rate the lower the average stock, which means the lower the basic stock and BOM stock for the period.

For example, if monthly planned sales totaled $100 and the stock turnover rate was 2.0. Average stock for the season would be $50. Basic stock is equal to average stock less average monthly sales. In this example, we will assume that average monthly sales totaled $10. Therefore, basic stock would equal $40 ($50 average stock - $10 monthly sales). Now BOM Stock equals sales for the month plus basic stock. In this example BOM Stock would amount to $140 ($100 monthly sales + $40 of basic stock).

Now consider, if the turnover rate changed from 2.0 to 1.0. Average stock for the season would $100. Basic stock would equal $90 ($100 average stock - $10 monthly sales). Now BOM Stock equals $190 ($100 monthly sales + $90 of stock).

It is clear from our Six-Month Merchandise Plan, as well as our brief example above, that though planned sales are one of the drivers for BOM Stock, another primary driver is the turnover rate. A slight change in the turnover rate could result in significant changes in the BOM Stock as it affects not just the average stock, but also the basic stock number.

QUESTION #4