MERCHANDISE MANAGEMENT

STRATEGY, PROCESSES, PLANNING, CULTURE AND EXECUTION

BY RIC ANDERSON

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MERCHANDISE MANAGEMENT:STRATEGY, PROCESSES, PLANNING, CULTURE AND EXECUTION

By Ric Anderson

These Processes are a living document of the methodology for the management and execution of running a strong Merchandise Category.

CUSTOMER VALUE PROPOSITION What is the CVP for that Product Category? Does it build the Product Category as a Brand? Does it align with the Stores CVP? What are the goals of each Division? Purple Cows? Service Level by type of Revenue Channel or Store Profile.

MERCHANDISING Brand Profile for each Private Brand with comparisons to National Brands Goals by brand as to purpose, penetration, financial and future Goals by Division as to purpose, sales, profit, ROI Goals of Category by Channel? What adjustments need to be made? Pricing Strategy: High/Low, Mid/High, Everyday pricing Clearance Strategy: When to markdown goods, how to make it a traffic driver,

numerical ending of pricing, synergistic to other categories.

SALES, GM$By Time: Broken down to Days, Weeks, Quarters, Seasons. Year

Regular Sales to Clearance Sales by Division by Week. By Sub Categories: Dresses, Denim, Shoes etc. GMROI by Division by Month GMROI by Customer Profile GM$ broken down by Division by Week sub totals to month, quarter, season year.

With % to total: Forecast, plan, actual, LY.

By Category by Geography By Top Doors penetration and learning’s By Revenue Channel by Week by Division: Sales, GM%, GMROI, Marketing Expense By Division by class for 3 years: Sales, GM$, GM%, GMROI – where have been the

dramatic changes and what action is taking place

STORES Sales, GM$, Sq. Ft. Sale per Sq. Ft. , GM$ per Sq. Ft. ROI Year, Season, Quarter Adjustments by Season to Sq. Ft. By Geographic Region By Large Metro with Marketing by Region By Demographics: Urban, Suburban, Rural Sales and GM$ by Sq. Ft. compared by each Apparel Category.

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Grouped by traffic flow in Store. Back vs. Front Consultative vs. Open Sell vs. 50/50

PLANS

Store Plans that rolled to total Sales, GM%, GM$, Inventory Vendor Plans – Forecast, Plan, Act, LY By Division by month: Sales, inventory(cost & retail), Turn, Reg MD’s, Promo MD’s, TOP DOOR: Plans by Division for top percent of Doors.

CULTURE Individual Reviews and Goals Brand building Classes Classes on Marketing to achieve goals.

ANALYSIS Customer profiles percent by Division.

▫ By Type of Customer: Fashion, Comfort, Career, Casual, Colors, fabrics, body types Aged Inventory by Division by Month Top 100 Items

▫ Top 50 items by Division▫ Top 20 by Customer Profile

Number of Items needed by Product Category and Customer Profile. Top 10 Vendors by Division: Sales, GM$, GM%, GMROI, Penetration % Market-basket

▫ Other Apparel Categories down to Sub-Division level, in Basket by dollars and percent

▫ Break Down by Month▫ Market Basket for Shoes by Division▫ Frequency by Apparel Category down to Sub Levels.▫ Most Profitable Customer vs. Most Sales vs. Frequency.▫ Market Basket results with different Product Marketing.

MERCHANDISE PROCESSES Good, OK, Ugly: Review of past season by Category Semi-Annual Competition Review Big Ideas: by Category

▫ Why, When, How Big? Which Vendors, Marketing, Financials, Bonus Item. Line Reviews

▫ Sales by week▫ GM$▫ Marketing▫ Breakdown by Customer Type▫ Competition

Template for Vendor Meetings.▫ Checklist of information, expectations, plans,

Critical Thought Process▫ What do we want to know? When, How,▫ From whom?▫ In what form?

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INVENTORY REVIEWS OTB:

▫ Review current Inventory▫ On Order▫ Old Age▫ Performing and Non-Performing items with Action accountability.

Monthly reviews of performance of category – sales to inventory. Do in-season adjustments need to be made.

MARKETING Sales by Week % to total with Marketing by week by channel % to total. Footwear Events geared toward fashion or Category.

▫ Template on elements needed for each event.▫ Goals: Financial and Branding.

Competition Marketing by Week with Ad Book. Marketing Plans by Week 6 months in advance.

▫ Events and Themes of Ads▫ Types of Footwear in Ad▫ Actual Samples and Colors.▫ Partner with any apparel categories

COMMUNICATION: MEETINGS AND PROCESSES Master Calendar of meetings, due dates and responsibilities Weekly Merchandising meeting with Best/Worst Sellers War Room with Advertising by Week Monthly Results and Goals Monthly Phone call to RVP Monthly Phone Call to Managers – invitees change monthly. Discuss Best Practices Monthly News Letter to Stores: Best Sellers, Advertising, Best Practices Website on Training, Best Practices, Questions. Semi-Annual Survey to Stores on what they want, need, don’t need, issues,

competition practices Semi-Annual Support Group Form: Presentations by Division to Stores, Marketing,

Internet, Senior Management, Sourcing etc. on the results, goals and needed support Quarterly Merchandise Trips to Stores in different Regions

EMPLOYEE RECOGNITION and AWARDS Fire Breathing Dragon Best Practice Thank You Awards Quarterly Division Outings

VENDOR SEMINARS Bring in best vendors by Category

o Round Robin with each support group: Marketing, Logistics, Internet, Merchandising, Inventory Planning.

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RETAIL STORE AND MERCHANDISE ANALYSIS

QUESTIONS TO BE ASKED SALES Total By Store, Growth by year By Category Per Square Foot Per GM$ Sq. Ft. Average sale transaction- Clearance and Regular Amount of Regular Vs. Clearance Units per transaction By Time Period Month By quarter By season By Channel: Regional Stores, Outlet Stores, Catalog, E-commerce

STORES By volume, Average per store Profit by store, City, State Number of Mall Stores, Number of Strip Malls Year Opened Square Foot Manager’s name, Time in position Customers in surrounding Zip Codes Store Leases: Rates by store, Dates of ending leases. Planned new stores?

CUSTOMERS Demographics for products Affinity sales Number of customers in surrounding Zip Codes Lifestyle of Customer – purchase patterns.

FINANCIALS Sales Total, Category, SKU Gross Margins Total, Category, SKU GM$ Total, Category, SKU Average Stock Total, Category, SKU Turn Total, Category, SKU Fixed Expenses Expenses related to revenue Sales per Sq. Ft. Financials by store Sales, margins, overhead, Age of inventory by store, by product

PRODUCTS

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Categories SKU’s by Category Sales by Product, by SKU Growth rate by Product, by Sku Percent to total by Product, by SKU Per of SKU to Category Which products are made? Which products do we buy? Relationship of overhead, product costs and volume on each Product? Pricing Policy: Markup? $.95 endings? 1st markdown? When and how much? Multiple pricing? Lead time for each product we make. Decisions about buying outside vendors? Who, Where, When, Why? New products in work? Average price per SKU % by categories Basic Stock items How to reorder, When, Who Top Ten by Channel: Stores, Catalog, E-commerce, B2B

OPERATIONS Manager Bonus system for Manager, Salespeople Commission Store Hours Fixed Expenses Expenses tied to sales Employees per store % Full time, % Part time Store Hours, Change at Christmas Deliveries to stores. How often? Direct ship other product? What do we empower our employees to do? Guarantees Types of Bags per product Turnover of employees Moral

MARKETING OF THE BRAND What is the Brand today? What is the Customer Value Proposition and should it be changed? Different in Stores from Catalog Strengths & Weakness Advertising Budget Media currently being used by the company and competition In House Credit Card Loyalty Rewards system

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CHANNELS OF REVENUE Stores: Number of Stores, Locations, Size of Stores Internet Direct to Customer B2B Catalog

Lead-time for the Catalog How many catalogs Any catalogs specifically for stores? Number of mailings per catalog.

E-COMMERCE Sales per transaction Units per transaction Sales per category, Sku’s Number of hits Customer Experience on Site E-mails Strategy

PERSONNEL Evaluation of current management Training of staff Current culture of business

COMPETITION

Who is best in class – Nationally and Regionally? Strengths Weakness

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