6642148 rm 6 merchandising
TRANSCRIPT
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Retail Marketing Management
RM 6,7
Merchandise Planning &Management
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Merchandising
Merchandise ManagementAnalysis, planning, acquisition, handling & control of themerchandise investments of a retail operation
AnalysisIdentifying needs and wants of customers in order to buy the correct
merchandisePlanning
Timing of purchase to ensure merchandise availability in time of season &availability
Merchandising is the heartbeat of retailing.
Merchandising consists of activities involved inacquiring particular goods / services & making themavailable at the places, time & prices and inquantities that will enable a store reach its goals.
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Merchandise Management Experiences of a Buyer at Walmart
I am one the 7 buyers for the toys department. The categories I handle (large dolls, plush toys etc.) will
produce $450m sales this year.
I am responsible for sourcing new toys, promoting them thruour stores, getting them to the right stores at the right time &manage the assets like a portfolio.
Buying merchandise is like making a series of investments same risk-return trade offs, have to watch the performance ofthe portfolio buy more of whats hot & selling & mark-down /get rid those falling short of expectations.
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Experiences of a Buyer at Walmart
Buying is being a visionary reacting to trends, translate them intomerchandise that will draw customers.
E.g. A toy using new tech was introduced at the New York toy fair.
- decided with senior management to support this toy- put together a plan to ensure Walmart would be the first to havethis toy in significant quantity.- worked with the manufacturing to get sufficient quantity ahead forpromotions.- worked with marketing to develop a marketing / promo concept &
deploy appropriate support material leaflets / packaging / promoitems / advertising to create excitement at stores.- being a new toy it was a high risk item but fortunately it paid off !
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Merchandise Planning
Merchandise buying & Handling Process
Establish formal / informalbuying organization
Outline Merchandiseplans
Determine merchandisesources
Gathering information. Aboutcustomer demand
Evaluatemerchandise
Negotiateprice
Concludepurchase
Re-evaluate on
on-going basis
Re-order
merchandise
Handle the
merchandise
12
4
3
56 7
910 8
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Buying Organization
1. Specify who is responsible merchandise
decisions Tasks they will perform
Authority to make decisions
Relationship of merchandising & retail operations
2.Options are Formal / informal setup?
Centralised vs decentralised buying ?
General or specialised Internal personnel or external e.g buying houses
Merchandising or buying
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Buying Organization
Formal
used by larger organisations
offers specialisation
offers clarity of responsibility &authority
engage specialistsInformal
less expensive
greater flexibility
personnel perform multiple roles
Lacks expert knowledge
Centralized
All purchase decisions from oneoffice
Better control on costs, quality &quantity
Proximity of top management Decentralized
Greater adaptability to local reqm.
Quicker order processing
Autonomy leading to better morale
Lose on controls
Inconsistencies in buying, discounts
Lack of experts
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Merchandise Planning
Merchandise PlanningWhat items to sell quality levels will depend on :
- Desired target markets profile
- Competition- Store image / positioning
- Location of store
- Profitability
- Fashion trends- Seasonal itemsHow much merchandise to carry
- A function of width & depth of assortments.
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Merchandise Planning
Elements of merchandise planning
AcquisitionSince merchandise is bought from other suppliers they have to beidentified, terms negotiated, physical acquisition planned.
Handling
Ensures timely availability at specific locations in time when
required, duly capable of being put on the shelf for sale.Control
To ensure optimum utilisation of resources Financial & shelfspace, so that profitability is ensured.
Requires effective monitoring & co-ordination withregular suppliers
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Merchandise Planning
Factors in Deciding Merchandise Plans Forecasts: Projections of expected sale for given period.
Variables would be:- Overall company projections for the period- Product category projections- Item projection
- Individual store projection
Innovativeness: A firm that carries new goods & servicesand plans for upcoming trends. Variables would be:- Target market & its behaviour
- Product related trends- Stores positioning- Degree of risk- PLC staple item / fashion / fad
- Allocation of resources
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Merchandise Planning (contd)
3. Assortment: Selection of merchandise that a retailercarries which is a function of variety, breadth & depth.
Brands vs. Private Label: A proper mix of brands &private labels.
Timing : When is inventory required in the store, wouldbe dependent on
- Seasonal relevance- Order & delivery lead times
- Stock turnover rate
- Provision for special / urgent orders
- Prices & discounts
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Retail Assortment Strategies
Wide & deep
- Many categories & large assortment in each category Wide & shallow
- Many categories & limited assortment in each category Narrow & deep
- Few categories & large assortment in each
Narrow & shallow- Few categories & limited assortment n each
I. Advantages
- Disadvantages of each & where what / which isappropriate ?
`Shelf space is at a premium
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Optimal Merchandise Mix
3 Dimensions
Variety- Refers to the mix in terms of number of different lines the retailer
stocks in the store. e.g. mens wear, womens wear, toys,appliances, cosmetics, sports goods etc.
Breadth
- Or assortment is the number of merchandise brands that are found in a
merchandise line. e.g. A 7-11 store will carry very narrow breadth, asopposed to Shoppers Stop carries 6-8 brands of jeans or mens shirts.
Battle of brands vs. private labels Depth
- The average number of SKUs within each brand of individualmerchandise line. e.g. Due to shelf space constraints A7-11 store may
carry only 1-2 fast moving sizes whereas a Walmart may carry all sizes& sufficient quantity of each.
Retailers task is to find a balance between the above 3 dimensions in relationto his store, its positioning, customer profile & financial resources.
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Retail Assortment Strategies
Wide and Deep
Advantages
- Broad market
- Full selection of items
- High level of customer traffic
- Customer loyalty- One-stop shopping
- No disappointed customers
Disadvantages
- High inventory investment- General image
- Many items with lowturnover
- Some obsolete merchandise
Wide and Shallow
Advantages
- Broad market
- High level of customer traffic
- Emphasis on convenience
customer- Less costly than wide and deep
- One-step shopping
Disadvantages
- Low variety within product line- Some disappointed customers
- Weak image
- Many items with low turnover
- Reduced customer loyalty
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Retail Assortment Strategies
Narrow & Deep Advantages
- Specialist image- Good customer choice incategory(ies)- Specialized personnel- Customer loyalty- No disappointed customers
- Less costly than wide anddeep
Disadvantages
- Too much emphasis on onecategory
- No one-stop shopping- More susceptible totrends/cycles- Greater effort needed toenlarge the size of thetrading area
Narrow & shallow Advantages
- Aimed at conveniencecustomers- Least costly- High turnover items
Disadvantages
- Little width and depth- No one-stop shopping- Some disappointed customer
- Weak image- Limited customer loyalty- Small trading area
M d l St k Pl M Shi t
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Model Stock Plan : Mens Shirts
Dependent Variables Customer profile psychographic / demographic Buying behavior occasion / frequency of purchase/ budget
Stores positioning vis-a-vis product product category
33 Price pointsPrice
2Cotton, poly-mixFabric
5Blue, white, beige, pink, off-whiteColor
2Button-down, normalCollar
2
4
4
Long, short
S, M, L, XL
Dressy, casual, sports, work
Sleeve
Size
Type
Product Attributes Some Variables
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Model Stock Plan : Mens Shirts (contd)
If the store decides to keep one SKU of each type its initial inventory will be
4 x 4 x 2 x 2 x 5 x 2 x 3 = 1920 SKUs
@ Avg. cost of Rs.300 = Rs. 576, 000
Clearly the final decision will be based on the dominant dependent variable(s) anda retailer may not be able to offer the entire range but offer a more selectivecollection.
Successful retailers know that they will have to allow some customers to walkoutempty handed.
C t M t M t i
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Category Management Matrix
High potential
- Required promo, better position, more exposure, displays- Create interest & excitement around the item to move it into a winnercategory item.
Winners- Capitalise by promo, prominent position, better displays & visibility- Cash cow
Traffic builders
- Review prices, position, move closer to high potential items review space. Under achievers
- Promos, move from prime position, prices, consider dropping item.
Traffic BuildersUnder Achievers
WinnersHigh Potential
ProductPro
fitability
Less
than
M
ore
th
an
`
X/item
`X/item
Less `Y / wk More `Y / wk
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Efficient merchandise management depends onstores ability to generate relative accurate
sales forecast
Sources of information Consumer demographics, L-styles, preferences. Test markets
Manufacturers own forecasts Sales staff Formal system for new/missing items Analysing data Competitors stores Emerging trends
Trade directories Routine advertising by manufacturers Product specific advt. by retailers Internet Visits to exhibitions & trade fairs
Information about Customer Demand
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Sources of Merchandise Direct from manufacturers Through distributors / agents Imports
Some criteria while sourcing merchandise Reliability Price quality balance Processing time reorder time Guarantees / replacement facilities Margins Relationships Advertising & promo support
Price contracts & validity - stability
Information about Customer Demand (contd)
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Sourcing Merchandise
Sources of supply
International or national brands Imports or supply through agents Product specialisation Cost implications of buying sources Suppliers background in terms of
- Selling history- Product quality / warranties- Consumers perception re: manufacturer- Reliability for delivery- Trade terms credit / discounts- Margins- After sales service
- Order processing time- Inventory carrying cost- Packing norms & adaptability / flexibility- Participation in store promotions- Exclusivity of supplies fashion / fad items
ABC analysis of vendors on above parameters
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Sourcing Merchandise (contd)Issues in Buying Merchandise
Strategic partnerships : a win-win situation for buyer & seller
Mutual trust Open communication / sharing information
Ethical issues- Origin of supplies- Genuine vs counterfeit
- Compliance to local regulations Negotiating with suppliers
In-store Merchandise Handling
Receiving merchandise - infrastructure / timings Store / warehousing / handling parking Checking for order compliance quantity / prices / disc. Coding & pricing statutory considerations Allocating to stores / departments
Security of inventory pilferage / shop lifting
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Whether direct from supplier to store or via warehouse?
Advantages of warehousing - Central
Efficiency in transportation Efficiency in storage Improved security Better handling Efficient marketing of goods Ease of returns Control on payments / quality
Disadvantages of Warehousing
Excessive controls Extra handling perishables Order processing delays High operating costs small stores Reduces response time
E l ti M h di
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Evaluation
Check for compliance with order- Delivery date- Quantity ordered billed delivered- Price as per contract / order- Discounts usual / special / schemes- Payment terms special discounts
Physical check of merchandise Quality check random / individual Expiry validity in case of perishables
MRP markings Other statutory req. Transfer of title ?
- Transportation risk?
- Consignment supply
Evaluating Merchandise
E l ti M h di ( td )
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Handling Merchandise
Physical handling Receiving inspections Storing locating / special storage req. Coding inventory management Price marketing checks / control / system Setting up displays Determining how much to stock Customer delivery packing
Billing cash / credit cards Returns & damaged goods system Monitoring pilferage Merchandise control
Evaluating Merchandise (contd)
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Where to Store ?
How much on the shelves?How much in the store?
How much in the warehouseHow much among stores?