Chapter 14 Developing Merchandise Plans

RETAIL MANAGEMENT: A STRATEGIC APPROACH,

10th Edition BERMAN EVANS

Chapter Objectives
To demonstrate the importance of a sound merchandising philosophy To study various buying organization formats and the processes they use To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation To discuss category management and merchandising software
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Merchandising
Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals

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Merchandising Philosophy
Sets the guiding principles for all the merchandise decisions that a retailer makes Should reflect * Target market desires * Retailers 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, customer transactions OR Focus on buying function only

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Figure 14-1: Nikes Own Store Merchandising Philosophy

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Micromerchandising

Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets

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Cross-Merchandising
Retailers carry complementary goods and services to encourage shoppers to buy more

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Figure 14-2: Attributes and Functions of Buying Organizations

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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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Functions Performed (cont.)

Buying view * Buyers manage buying functions
Buying Advertising Pricing

* In-store personnel manage other tasks

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Assortments Point-of-sale displays Employee utilization Personal selling approaches

Figure 14-4: Merchandising Versus Store Management Career Tracks

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Figure 14-5: Devising Merchandise Plans

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Forecasts
These are projections of expected retail sales 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, auto, and other categories for which the retailer must carry a variety of products in order to give customers a proper selection Decisions on Assortment * Product lines, styles, designs, and colors are projected * Model stock plan
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Fashion and Seasonal Merchandise

Fashion Merchandise: Products that may have 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 Innovativeness

FACTOR
Target market(s) Goods/service growth potential

RELEVANCE for PLANNING

Evaluate whether the target market is conservative or innovative Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life Understand vertical and horizontal fashion trends, if appropriate Carry goods/services that reinforce the firms image

Fashion trends Retailer image

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Table 14-1b: Factors in Planning Merchandise Innovativeness

FACTOR
Competition

RELEVANCE for PLANNING

Lead or follow competition in the selection of new goods/services

Customer segments Segment customers by dividing merchandise into established-product displays and new-product displays

Responsiveness to consumers
Amount of investment
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Carry new offerings when requested by the target market

Consider all possible investments for each new good/service: product costs, new fixtures, and additional personnel

Table 14-1c: Factors in Planning Merchandise Innovativeness

FACTOR
Profitability Risk

RELEVANCE for PLANNING

Assess each new offering for potential profits Be aware of the possible tarnishing of the retailers image, investment costs, and opportunity costs Restrict franchisees and chain branches from buying certain items Delete older goods/services if sales and/or profits are too low

Constrained decision making Declining goods/ services

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Figure 14-6: R&D at Wendys

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Figure 14-7: Traditional Product Life Cycle

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Structured Guidelines for Pruning Products

Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes Gather and analyze detailed financial and other data about these items Consider nondeletion strategies such as cutting costs, 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

FACTOR
Target market(s)

RELEVANCE for PLANNING

Match merchandise quality to the wishes of the desired target market(s) Sell similar quality or different quality

Competition

Retailers image

Relate merchandise quality directly to the perception that customers have of retailer
Consider the impact of location on the retailers image and the number of competitors, which, in turn, relate to quality

Store location

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Table 14-2b: Factors in Planning Merchandise Quality

FACTOR Profitability RELEVANCE for PLANNING Recognize that high quality goods generally bring greater profit per unit than lesserquality goods; turnover may cause total profits to be greater for the latter
Understand that, for many, manufacturer brands connote higher quality than private brands

Manufacturer versus private brands

Customer services Know that high-quality goods require offered personal selling, alterations, delivery, and so on Personnel
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Employ skilled, knowledgeable personnel for high-quality merchandise

Table 14-2c: Factors in Planning Merchandise Quality

FACTOR Perceived goods/ service benefits RELEVANCE for PLANNING 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 over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers

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Retail Assortment Strategies

Width of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries
Depth of assortment 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)
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Figure 14-10: Sephoras Very Deep Assortment of Cosmetics

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Brands

Manufacturer (national) Private (dealer or store)

Generic

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Table 14-3: Private Brand Test

Match the Retailer with the Brand Name

Retailer Bloomingdales Costco Kmart J.C. Penney Sears Wal-Mart Target Macys
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Brand Arizona Jeans Ol Roy Michael Graves Martha Stewart Joseph & Lyman Kenmore Kirkland Alfani

Figure 14-11: Wal-Marts New Approach to Private Brands

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Figure 14-12: Daffys Distinctive Branding Strategy

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Figure 14-13: Applying Category Management

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Merchandising Software
General Merchandise Planning Software Forecasting Software Innovativeness Software Assortment Software Allocation Software Category Management Software

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Figure 14-4a: Shelf Logic Software for Category Management Planning

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Figure 14-4b: Shelf Logic Software for Category Management Planning

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