Implementing Merchandise Plans

Gathering Information :
After overall merchandising plans are set, more information about target market needs and prospective suppliers is required before buying and rebuying merchandise. In gathering data about the market place a retailer has several possible sources like :

Consumer Suppliers (Manufacturer & Wholesalers) Retail Sales & Display Personnel. Competitors Government

Competition shopping report

Store---Dept----------Date-----------Qualified competition shopped 1.------------2.-------------Descripti Our 1st on price comp. price 2nd comp. price Stores recom. price Buyers recom. price

Our Model Style no no

Items seen at competitor s store which we should carry

Manufact urer Model no. Descriptio n List price Sale price Buyers comments

Selecting and Interacting with Merchandise Sources :

The next step is to select sources of merchandise and to interact with them. Three major options exist : Company owned. Outside, regularly used supplier. Outside, new supplier. Type of outside suppliers Manufacturer-physically produce goods, may provide shipping and credit. Full service merchant wholesaler-shipping, storing, credit, information etc a. General merchant b. Specialty merchant c. Rack jobber

Cont..

Limited service merchant wholesaler-few services are provided at lower costs a. Drop shipper(no contact with the goods only intermediates with the buyer and seller) b. Mail order c. Cash and carry Agents and Brokers

Check list before choosing vendors

Reliability Price quality Order processing time Exclusive rights Ethics Information provided Mark up Investment Risk Local advertising Guarantee Credit Long term relationship

Evaluating Merchandise : Whatever sources is chosen, there must be a procedure to evaluate the merchandise under consideration. Three procedures are possible : Inspection. Sampling. Description.

Negotiating the Purchase :

A retailer negotiates the purchase and its terms. A new or special order usually results in a negotiated contract, and a retailer and a supplier carefully discuss all aspects of the purchase. A regular order or reorder often involves a uniform contract, since terms are standard or have already been set and the order is handled routinely.

Concluding Purchases :
Many medium-sized and large retailers use computers to complete and process orders(based on EDI),and each purchase is fed into a computer data bank. Smaller retailers often write up and process orders manually, and purchase amounts are added to their inventory in the same way. Yet, with the advances in computerized ordering software, even small retailers may have the capability of placing orders electronically. Receiving and stocking merchandise Reordering Merchandise

Re-Evaluating on a Regular Basis :

A merchandising plan should be re-evaluated regularly, The overall procedure, as well as the handling should be monitored. Conclusions during this stage become part of the information gathering stage for future efforts.

Financial Merchandise Management

Through Financial merchandise management , a retailer specifies which products are purchased, when they are purchased and how many are purchased. Dollar control Unit control
FMM

Methods of accounting

Merchandise forecasting and budgeting

Unit control system

Financial inventory control

Method of Accounting: Inventory valuation

ABC store P&L statement, Jan 1 , 2011-June 30,2011 Sales Beginning Inventory(cost) Purchases (cost) Transportation charges Merchandise available for sale Ending inventory Cost of goods sold Gross Profits Less operating expenses; Salaries Advertising Rental Others Total operating expenses Net Profits before taxes 70,000 25000 16000 26000 1,37,000 49,950 Rs. 40,500 Rs.2,50,000 Rs 3000 Rs.2,93,500 Rs. 60000 2,33,500 186,950 Rs.4,20,450

Methods of accounting
1. Cost method -give codes and fix cost value 2. Physical inventory system using cost method-ending inventory value. It is measured by counting the merchandise on stock at the close of selling period. 3. Book inventory systemDate Beginning of month inventory + Net monthly purchases Monthly sales End of month = inventory

Cont

FIFO and LIFO are two ways to value inventory. Sales - 220 T a average of 320each= 70400 Merchandise availableBeginning inventory = 30 units at 150 each= 4500 January purchases = 100 units at 175 each= 17500 Oct Dec purchase= 150 units at 225 each= 33750 total = 55,750 FIFO Ending inventory 60 units at 225 each= 13500 Total cost 55750- 13500= 42250 Gross profits= 70400-42250= 28150 LIFO Ending inventory 30 units at 150=4500+30 units at 175 =5250 Total= 9750 Total cost of goods sold 55750-9750=24400 Gross profits 70400-46000=24400

Retail method of accounting

With this method , closing inventory value is determined by calculating the average relationship between the cost and retail value of merchandise available for sale during the period. Steps 1. Calculating the cost complementCost complement = Total cost valuation/ Total retail valuation
At cost Beginning inventory
Net purchase Additional markups Transportation charges Total merchandise available for sale

At retail 139,200
340,526 16,400 -

90,500
205,900 3,492

Cont

2. Calculating deductions from retail value Merchandise available for sale total deduction= Ending book value of inventory 3. Converting retail inventory value to cost Ending retail book value of inventory Stock shortages= Adjusted ending book value of inventory Ending inventory= Adjusted ending book value of inventory X cost complement Calculate gross profits and net profits before taxes. gross profits= sales- Cost of goods sold Cost of goods sold =Total merchandise available for sales(at cost) - Adjusted ending book value of inventory Net profits= gross profits- Total operating expenses