Session 11 Merchandise Assortment Planning

8/13/2019 Session 11 Merchandise Assortment Planning

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MERCHANDISEMANAGEMENT

Session 11

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Retail Merchandising is the process ofdeveloping , securing , pricing , supporting and communicating the retailersmerchandise offering.

It means offering theright product at the righttime at the right price

with the right appeal!! 2Yasmin


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Developing Merchandise PlansCategory Management

Category management orients retail managers toward the

merchandising decisions necessary to maximize the total returnon the assets assigned to them

Successful category management is predicted on these ten points.

Categories should be arranged as they would be if

consumers could stock the shelf themselves.

Category configuration should be a function oftime, space, and product utilization.

Category management should seek to drive multipleitem 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 createunique consumer value not just to bolster manufacturer-retailer practice.

A retailer s category management plan ought to be basedon overall trading-area scenarios.

Category management is an exclusionary process asmuch a way of deciding what not to sell as what to sell toeveryone.

The fundamental data base for category management

should be drawn from a pre customer interface analysisof trading-area needs.

The supplier s goal is to make the most of purchase andmargins within a given geographic area. The retailer s goalis to raise total store or store cluster profitability andproductivity. Yasmin4


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Role of CategoryRoutine categories : products used by the customerson a regular basisConvenience categories: more convenientlypurchased by customers from their neighborhoodretail outlets Seasonal Categories: products that are boughtoccasionallyDestinations Categories: are used by the retailersto position themselves as the preferred stores ofcustomers through their superior service and bettervalue offering

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The Buying Organization

There are five levels in a buyingorganization-The Merchandise groupDepartmentClassificationCategoryStock Keeping unit(SKU)

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The Merchandise Group

This is the highest level of buyingOrganization.

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 level-

The divisional Merchandise Managerof each dept works under their

guidance.

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Classification

Purchasers who report to the divmerchandise manager manages all thebuying activities.

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Developing Merchandise Plans

Devising Merchandise Plans

Considerations inDevising Merchandise

Plans

MerchandisePlan

Innovativeness

Assortment

Brands

Timing

Allocation

Forecasts

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Developing Merchandise Plans

The Traditional Product Life Cycle

Total

Retail

Sales

Time

Introduction

Growth

Maturity

Decline

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Developing Merchandise PlansThe Traditional Product Life Cycle

Strategy

Variable Introduction Growth Maturity Decline

Life Cycle Stage

Target High - income Middle-income Mass marketLow-income

Market Innovators adaptorsand laggardsood or One basic Some variety GreaterLess

Service offering varietyvariety

Distribution Limited or More More Fewer

Intensity extensive retailers reta ilers retailers

Price Penetration Wide range Lower prices Lowerprices

or skimming

Promotion Informative Persuasive Competitive Limited

Supplier Monopoly Oligopoly CompetitionOligopoly

Structure oligopoly competition


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Variations on the Category Life

CycleFad: is a merchandise category thatgenerates a lot of sales for a relatively

short time often less than a seasonFashion : fashion is a category thattypically lasts several seasons and

sales can vary dramatically from oneseason to the next

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Variations on the Category Life

CycleStaple Merchandise : items in thiscategory are in demand over an

extended period

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Steps In The Retail

Merchandising Process1. Develop the merchandise mix and establish

the merchandise budget.

2. Build the logistic system for procuring themerchandise mix.3. Price the merchandise offering.4. Organize the customer support service and

manage the personal selling effort.5. Create the retailers advertising, sales

incentive and publicity programs.

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Assortment Planning Process

The decision of merchandiseassortment depends on the availability

of store space & the financial budget ofthe retailer.Establishing a trade-off between variety,

assortment & product availability is themost challenging task of a retailer.

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THE COMPONENTS OF THE

MERCHANDISE MIXMerchandise Variety

(no. of product lines)Merchandise Assortment

(no. of product items)

Merchandise Support(no. of product units)

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Planning Merchandise VarietyInvolves Planning And

Controlling Product Lines

Retailers use MANY factors to evaluate product lines!!

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CONTROLLING

MERCHANDISE VARIETYIs an art and a scienceNo rules for what should be included in the

merchandise mix and what should beexcludedTwo useful management methods

I. Category Management : each product

managed as a business unit at the storelevelII. ABC Analysis : each product line is rank

ordered based on performance levels20Yasmin


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PLANNING MERCHANDISEASSORTMENT AND SUPPORT

Must organize the merchandise mix asto the number of different product linescarried

Must decide on:BrandsSizes

ColorsMaterialStyles

Price points 21Yasmin


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PLANNING MERCHANDISEASSORTMENT AND SUPPORT

Goal is to ensure that product choice meetstargeted consumer needs

Must carefully plan the number of units tohave on hand to meet the expected salesfor the brand, size, color combinationsMust develop merchandise lists

1. Basic Stock List (staple items)2. Model Stock List (fashion items)3. Never Out List (key items and best

sellers)22Yasmin


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CONTROLLING MERCHANDISEASSORTMENT AND SUPPORT

Involves monitoring and adjusting the typesof product lines that are added and droppedfrom the merchandise mixTwo widely used methods to controlassortment and support:

1. Inventory turnover: rate at which the

retailer depletes and replenishes stock2. Open-to-buy:amount of new merchandisea retailer can buy during a specific timeperiod without exceeding planned

purchases for the period 23Yasmin


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Merchandise Mix StrategiesDifferent optimal variety and assortment

strategies possible!!Narrow Variety/Shallow AssortmentVending machinesNewsstands

Door-to-doorWide Variety/Shallow Assortment

Variety StoresGeneral Stores

Discount StoresNarrow Variety/Deep Assortment

Specialty StoresWide Variety/Deep Assortment

Full-line Department Stores 24Yasmin


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MERCHANDISE BUDGET

MANAGEMENTFinancial management tool used to planand control the total amount (in dollars)

of inventory carried in stock at any timeDetermines how much a retailer shouldinvest in inventory during a specifiedperiodRemember: Merchandise Budgetcontrols expenses; Merchandise Mixcontrols product units

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Product Mix trends

Retailers need to develop aninnovative product mix strategy, that

suits the needs of the unsatisfiedcustomers.Two emerging trends are-

1. Shotgun Merchandising2. Rifle Merchandising

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Shotgun Merchandising

It involves expansion of themerchandise being offered in the store

in order to satisfy the increasing needsof the consumersRetailer attempts to increase his market

share by catering to different submarkets and trying to fulfill the specificneeds of various individual target

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Rifle Merchandising

Aimed at targeting merchandise at aselect group of customers

The store carries a very limited numberof product lines, but a large assortmentis made available in each product line

Uses penetration strategy

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Documents

Session 11 Merchandise Assortment Planning