Professional Documents
Culture Documents
Chapter 12
Managing Merchandise
Assortments
12-2
12/13/2014
Merchandise Management
Merchandise
Planning
System
Chapter 13
Buying
Merchandise
Chapter 14
Managing
Merchandise
Assortments
Chapter 12
Retail
Pricing
Chapter 15
Retail
Communication
Mix
Chapter 16
12-3
Questions
How is the merchandise management process
organized?
Why do the merchandise management processes differ
for staple and fashion merchandise?
How do retailers evaluate the quality of their
merchandise management decisions?
How do retailers forecast sales for merchandise
classifications?
How do retailers plan their assortments and determine
the appropriate inventory levels?
What trade-offs must buyers make in developing
merchandise assortments?
12-4
12/13/2014
Merchandise Management
Process by which a retailer offers the correct
quantity of the right merchandise in the right
place at the right time and meets the companys
financial goals.
Sense market trends
Analyze sales data
Make appropriate adjustments in
prices and inventory levels
c) image100/PunchStock
12-5
12-6
12/13/2014
Buying Organization
Merchandise Group
Department
Classification
Category
SKU
12-8
12/13/2014
Merchandise Category
The Planning Unit
A merchandise category is an assortment of items that
customers see as substitutes for each other.
Vendors might assign products to different categories
based on differences in product attributes
Retailers might assign two products to the same
category based upon common consumers and buying
behavior
12-9
Category Management
The process of managing a retail business with the
objective of maximizing the sales and profits of a category
Objective is to maximize the sales and profits of the entire
category, not just a particular brand
12-10
12/13/2014
Category Captain
Selected vendor responsible for managing a category
Vendors frequently have more information and analytical skills
about the category in which they compete than retailers
Helps retailer understand consumer behavior
Creates assortments that satisfy the customer
Improves profitability of category
Problems
Vendor category captain may have different goals than
retailer
12-11
12/13/2014
GMROI
Productivity Measures
Gross
Margin
Inventory
Input
Output
GMROI
Gross Margin Return on Inventory Investment
net sales
avg inventory at cost
gross margin
avg inventory at cost
Inventory Turnover
= (1 Gross Margin Percent) x sales-to-stock ratio
12-14
12/13/2014
Price:
Prices that buyers set
Prices that buyers negotiate with vendors
12-15
12-16
12/13/2014
Illustration of GMROI
Merchandise categories with different margin/turnover profiles
can be compared and evaluated
Canned food
Fresh Bakery
Canned food
Fresh Bakery
12-17
12-18
12/13/2014
Inventory turnover =
Inventory turnover =
Average inventory =
Net Sales
Average inventory at retail
Cost of goods sold
Average inventory at cost
Month1 + Month2 + Month 3 +
Number of months
10
12/13/2014
Inventory Turnover
Month
EOM January
EOM February
EOM March
Total Inventory
12-21
Net Sales
Average inventory at retail
Inventory turnover =
(at cost)
Sock-to-Sales Ratio =
inventory
12-22
11
12/13/2014
12-23
12-24
12
12/13/2014
another approach
To improve inventory turnover
Buy merchandise more often
Buy in smaller quantities which should reduce average
inventory without reducing sales
BUT by buying smaller quantities
Buyers cant take advantage of quantity discounts so
Gross margin decreases
Operating expenses increase
Buyers need to spend more time placing orders and
monitoring deliveries
12-25
12-26
13
12/13/2014
1. forecasting sales
2. Developing an assortment plan
3. Determining the appropriate inventory level
12-28
14
12/13/2014
12-29
15
12/13/2014
12-31
Types of Merchandise
Fashion Merchandise
Unpredictable Demand
Limited Sales History
Difficult to Forecast Sales
The McGraw-Hill Companies, Inc./Lars A. Niki,
photographer
Staple Merchandise
Predictable Demand
History of Past Sales
Relatively Accurate Forecasts
12-32
16
12/13/2014
12-33
Personal Awareness
How do fashion buyers know the trends?
SCAN
Shop the retail stores, Web sites and catalogs of competitors as a
customer would
Converse with consumers, sales clerks, and neighbors
Act like your customer
Notice
12-34
17
12/13/2014
12-35
12-36
18
12/13/2014
12-37
12-38
19
12/13/2014
12-39
20
12/13/2014
12-41
Right
Place
good assortment
strategy
Happy
Right
Right
+
= Customer
Time
Quantities
good assortment
execution
Financial success
12-42
21
12/13/2014
Reality
Customers respond to a promotion, only to find
the store is out of stock
Customers find a piece of clothing in every
sizebut not hers
Customers go to a store, only to find the
inventory picked over
12-43
43
For A Retailer,
These Situations Are Very Costly
--Forrester Research
12-44
44
22