Session 6 - Retail Merchandise & Category Management

8/7/2019 Session 6 - Retail Merchandise & Category Management

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Retail Merchandise &Category Management

Prof. Sandeep Hegde


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What is merchandisemanagement?

The analysis, planning, acquisition,handling and control of merchandiseinvestments of a retail operation.

Merchandising is the core of retailing


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Factors Affecting theMerchandising Function

Size of organisationMerchandise to be carriedO

rganisation Structu re

Types of stores

Merchandising function


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Role of the Buyer

Developing the merchandising strategiesfor the product line

Planning and selecting merchandiseassortments

Vendor Selection

Pricing of the merchandise Inventory Management


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Stage I: Analysis

Starts with the sales forecast.

Steps involved :

1. Reviewing past sales.

2. Analysing the economic conditions.

3. Analysing the sales potential4. The marketing strategy of the competitors.

5. Creating the forecast.


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Methods of Inventory Planning

The Basic Stock Method The Percentage Variation Method

The Weeks Supply Method The Stock / Sales Ratio Method


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Basic Stock Method

Basic Stock = Avg.stk for the season Avg mthlysales for the season where,Average Monthly Sales for the season = Total

Planned Sales for the season / No. of months in theseasonAvg. stock for the season = Total Planned Sales for the season/Estimated inventory turnover rate for theseason.

BOM (Beginning of the Month) Stock = PlannedMonthly Sales + Basic Stock.


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Percentage Variation Method

Usually used when the stock turnover ismore than six times a year

BOM stock = Avg stock for the season x [1+planned sales for the month / AverageMonthly Sales ]


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Weeks Supply Method

This method is largely used by retailers who planinventories on a weekly and not on a monthly basis. TheWeeks Supply Method is calculated as under:

No of weeks to be stocked = the number of weeks in theperiod / Stock turnover rate for the periodAvg weekly sales = Estimated total sales for the period / Theno. of weeks in the periodBOM Stock = Avg weekly sales x no of weeks to be stocked


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Stock to Sales Method

This method is very easy,however requires theretailer to have a beginning of the monthstock/sales ratio.This ratio tells the retailer how

much inventory is needed for the month.Stock to Sales Ratio = Value of Inventory /Actual salesPlanned BOM Inventory = Stock Sales Ratio xPlanned Sales


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Stage III: Merchandise Control

Controlling the money to buy The Open to Buy(OTB)

Limits overbuying & under buying

Prevents loss of sales due to unavailability of required stock

Maintains purchases within the budgeted limits Reduces markdowns which may arise due to excess

buying


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Calculating OTB

OTB is always calculated for the currentand future periodsOpen to Buy = Planned EOM Stock Projected EOM StockProjected EOM Stock = Average BOMStock + Actual Additions to Stock + Actual

on Order Planned Monthly Sale Planned Reductions for the month


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Stage IV: Assortment Planning

Fashion Merchandise

Staple / Basic Merchandise The Assortment Plan


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Depth & Breadth of merchandise

DEPARTMENT

PRODUCT LINE

BREADTH

DEPTH

STYLES COLOURS SIZES

ZODIAC VAN HEUSEN LOUIS PHILLIPPE ARROW

SHIRTS TROUSERS ACCESSORIES

MENSWEAR


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Mens Shirts100% (1,000)

Dress

10% (100)

Casual

40% (400)

Formal

(20%) 200

Sport

30% (300)

Small25% (100)

Medium40% (160)

Large25% (100)

Extra Large10% (40)

Full Sleeves30% (48)

Half Sleeves70% (112)

Button Down40% (45)

Saville60% (67)

White40% (18)

Blue30% (14)

Cream20% (9)

Grey10% (4)

Cotton25% (4)

Cotton Blend75% (14)


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The Process of MerchandiseBuying

1. Identifying the sources of supply2. Contacting the sources of supply

3. Evaluating the sources of supply4. Negotiating with the sources of supply


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Step 1: Identifying the sourcesof supply

Domestic sources central markets, tradeshows, expositions

Foreign sources trade fairs, residentbuying offices

Legal issues in sourcing in India


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Step 2: Contacting thesources of supply


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Step 3: Evaluating the sourcesof supply

The target market for whom themerchandise is being purchased

The merchandise and price offered Terms and services offered by the vendor The vendors reputation and reliability


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Step 4: Establishing vendor relations


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Step 5: Analysing Vendor Performance

Total orders placed on the vendor Total returns to the vendor and the quality of

merchandise

The initial markup on the products The markdown, if any Vendor participation in schemes and discounts Transportation costs Cash discounts offered by vendor Sales performance of the merchandise


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Category Management


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What is Category Management?

* Category Management can be defined as the distributor /supplier process of managing categories as strategicbusiness units , producing enhanced business resultsby focusing on delivering consumer value

Thus, a category is an assortment of items that thecustomer sees as reasonable substitutes of eachother.


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Documents

Session 6 - Retail Merchandise & Category Management