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Developing Merchandise

Plans

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Merchandising Activities involved in acquiring

particular goods/ services andmaking them available at theplaces, times, prices, and

quantities that enable a retailerto reach its goals.

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Merchandising Philosophy

Sets the guiding principles for all the

merchandise decisions that a retailer makes

It should reflect

Target market desires Retailer’s institutional type

Market-place positioning

Defined value chain

Supplier capabilities Costs

Competitors

Product trends

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Scope of Merchandising Responsibility

Full array of merchandising functions

Buying and selling

Selection, pricing, display, customertransactions

OR

Focus on buying function only

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Micromerchandising

Retailers adjust shelf-space

allocations to respond to customerdifferences and other differences

among local markets.

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Cross-Merchandising

Retailers carry complementary

goods and services to encourageshoppers to buy more.

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Figure 14-2:

Attributes

andFunctions

of

Buying

Organizations

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Merchandising and Store Functions

Performed

Merchandising view

All buying and selling functions

Assortments

Advertising pricing

Point-of-sale displays

Employee utilization

Personal selling approaches

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Buying view Buyers manage buying functions:

Buying Advertising Pricing

In-store personnel manage other tasks: Assortments Point-of-sale displays Employee utilization Personal selling approaches

Merchandising and Store Functions

Performed (cont.)

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Figure 14-4a:

Merchandising

Career Track atMacy’s

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Figure 14-4b:

Store

ManagementCareer Track at

Macy’s

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Figure 14-5: Devising Merchandise Plans

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Forecasts

These are projections of expected retailsales for given periods

Components:

Overall company projections

Product category projections

Item-by-item projections Store-by-store projections (if a

chain)

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Types of Merchandise

Staple merchandise

Assortment merchandise

Fashion merchandise

Seasonal merchandise

Fad merchandise

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Staple Merchandise

Regular products carried by a retailer

Grocery store examples: milk, bread,canned soup

Basic stock lists specify inventory level,color, brand, style, category, size, package,

etc.

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Assortment Merchandise

Apparel, furniture, automotive, and othercategories for which the retailer must carry a

variety of products in order to give customersa proper selection

Decisions on assortment

Product lines, styles, designs, and colorsare projected

Model stock plan

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Fashion and Seasonal Merchandise

Fashion Merchandise: Products that mayhave cyclical sales due to changing tastes and

life-styles Seasonal Merchandise: Products that sell

well over nonconsecutive time periods

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Table 14-1a: Factors in Planning Merchandise

InnovativenessFACTOR RELEVANCE for PLANNING

Target market(s) Evaluate whether the target market is

conservative or innovative

Goods/service

growth potential

Consider each new offering on the basis of

rapidity of initial sales, maximum sales

potential per time period, and length of

sales life

Fashion trends Understand vertical and horizontal fashiontrends, if appropriate

Retailer image Carry goods/services that reinforce the

firm’s image

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Table 14-1b: Factors in Planning Merchandise

InnovativenessFACTOR RELEVANCE for PLANNING

Competition Lead or follow competition in the selection

of new goods/services

Customer segments Segment customers by dividingmerchandise into established-product

displays and new-product displays

Responsiveness to

consumers

Carry new offerings when requested by the

target market

Amount of

investment

Consider all possible investment for each

new good/service: product costs, new

fixtures, and additional personnel

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Table 14-1c: Factors in Planning Merchandise

Innovativeness

FACTOR RELEVANCE for PLANNING

Profitability Assess each new offering for potential

profits

Risk Be aware of the possible tarnishing of the

retailer’s image, investment costs, and

opportunity costs

Constrained

decision making

Restrict franchisees and chain branches

from buying certain items

Declining goods/

services

Delete older goods/services if sales and/or

profits are too low

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Structured Guidelines for Pruning Products

Select items for possible elimination on the basisof declining sales, prices, profits, and appearanceof substitutes

Gather and analyze detailed financial/miscellaneous data about these items

Consider non-deletion strategies such as cuttingcosts, revising promotion efforts, adjusting

prices, and cooperating with other retailers After making a deletion decision, do not

overlook timing, parts and servicing, inventory,and holdover demand

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Figure 14-8: Predicting Fashion Adoption

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Table 14-2a: Factors in Planning Merchandise

Quality


Target market(s) Match merchandise quality to the wishes of

the desired target market(s)

Competition Sell similar quality or different quality

Retailer’s image Relate merchandise quality directly to the

perception that customers have of retailer

Store location Consider the impact of location on the

retailer’s image and the number of

competitors, which, in turn, relate to quality

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Table 14-2b: Factors in Planning Merchandise

Quality


Profitability Recognize that high quality goods generally

bring greater profit per unit than lesser-

quality goods; turnover may cause totalprofits to be greater for the latter

Manufacturer

versus private

brands

Understand that, in the minds of many

consumers, manufacturer brands connote

higher quality than private brands

Customer services

offered

Know that high-quality goods require

personal selling, alterations, delivery, etc.

Personnel Employ skilled, knowledgeable personnel for

high-quality merchandise

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Table 14-2c: Factors in Planning Merchandise

QualityFACTOR RELEVANCE for PLANNING

Perceived goods/

service benefits

Analyze consumers. Lesser quality goods

attract customers who desire functional

product benefits; High-quality goods attract

customers who desire extended product

benefits

Constrained

decision making

Face reality. Franchises or chain store

managers have limited or no control overproducts, so independent retailers that buy

from a few large wholesalers are limited to

the range of quality offered by those

wholesalers

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Width o f asso r tment refers to the number of distinct

goods/service categories (product lines) a retailer

carries.

Depth of assortm ent refers to the variety in any one

goods/service category (product line) a retailer

carries.

An assortment can range from wide and deep(department store) to narrow and shallow (box store).

Retail Assortment Strategies

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Category Management

Category management is a merchandising

technique used to improve productivity.

It is a way to manage a retail business that

focuses on the performance of product categoryresults rather than individual brands.

It arranges product groupings into strategic

business units to better meet consumer needs

and to achieve sales and profit goals. Retail managers make merchandising decisions

that maximize the total return on the assets

assigned to them.

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Figure 14-13: Applying Category Management

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