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Stores as products Merchandise planning decisions Developing a successful merchandise plan What makes shoppers tick Assortment, depth issues Mechanics of merchandise management Inventory-level planning
Merchandise Selection
Decisions Merchandise Planning Decisions
Merchandising Organization
Assistant Buyer Associate Buyer Buyer Divisional Merchandising Manager (DMM) General Merchandising Manager (GMM)
Merchandising Organization
Chairman
Merchandise Group
Sr. vice pres merch mgr Womens readyto-wear Sr. vice pres merch mgr Mens, childs, intimate apparel Sr. vice pres merch mgr Cosmet, shoes, jewelry, access.
Planning Group
Sr. vice pres merch mgr Soft home furn., kitchen
V.P. Planning
Department
Div. merch manager Mens suits, slacks, dress shirts Div. merch manager Mens sportswear, Polo Div. merch manager Young mens, boys apparel Div. merch manager Childrens apparel Div. merch manager Intimate apparel
Classification
Buyer Preteen accessories Buyer Girls Size 7-14 Buyer Girls Size 4-6 Buyer Toddlers Buyer Infants Buyer Little boys
Mgr. Planning
Category
Sportswear Dresses Swimwear Outerwear
SKU
Girls Levi jeans, sz 5, stone washed blue, straight leg
Innovativeness
Forecasts
Assortments
Merchandise Plan
Allocation
Brands
Timing
Innovativeness
Fashion Trends Retailers Image Competition Customer Segments Investment Costs Profitability Risk
Fashion Trends
Vertical A designer trend which will change as it filters down to other mkts Horizontal A trend accepted by a wide no. of people on its introduction
Assortment
Product Quality Width Depth Considerations: Sales & Profit Space Requirements Inventory Turnover Cannibalization
Merchandise Management 11.8
Assortment Types
Width Wide Narrow Depth Shallow Deep
Brands
Manufacturer (National) Private Label (Dealer)
Width
Narrow
Depth
Deep
Special Image Good Selection in Category(ies) Specialized Personnel Customer Loyalty No Disappointed Customers Lower Cost than Wide and Deep BUT
Shallow
Broad Market High Customer Traffic Emphasis on Conven. Shoppers Less Costly Than Wide and Deep One-Stop Shopping BUT
7. Reordering
5. Concluding Purchases
Retailing/Vendor relationships
Variety
Stock Balance
3
Width. Which products, & the number of merchandise categories in a store or department. This is the Buyers decision. Depth or support. The number of SKUs within a category, & the inventory depth. Most often the invty control analysts decision
Assortment Planning
4 5
Turnover
8 9
$ Planning
7 10 11
Sales Plan
12
Stock Plan
Purchase Plan
13
$ Control
Cost
15
Dollars Units
Merchandise Management 11.13
OTB
Variety
Stock Balance
3
Width. Which products, & the number of merchandise categories in a store or department. This is the Buyers decision. Depth or support. The number of SKUs within a category, & the inventory depth. Most often the invty control analysts decision
Assortment Planning
4 5
Turnover
8 9
$ Planning
7 10 11
Sales Plan
12
Stock Plan
Purchase Plan
13
$ Control
Cost
15
Dollars Units
Merchandise Management 11.14
OTB
Fall sales --- typically 40 percent of annual sales Spring/Summer --- typically 15 percent of annual sales Winter sales --- typically 30 percent of annual sales.
Merchandise Management 11.15
Planned Sales
$5,200 5,200 13,000 7,800 15,600 5,200
$52,000
$52,000
Reduction Planning
Planned Planned Month Sales
February March April May June July TOTAL $5,200 5,200 13,000 7,800 15,600 5,200 $52,000
Amount of Reduction*
30% ---30% 40% 100%
Reduction
$1,248 ---1,248 1,664 $4,160
Return on Investment
Net Profit Net Worth
Asset Turnover
Leverage Ratio
ROA vs GMROI
therefore net profit It can control total investment & therefore total assets
Inventory Turnover
So GMROI:
GMROI = Gross Margin $ (@ Retail or Cost) Average Invty $ (@ Retail or Cost)
Gross Margin Return on Inventory Investment
Gross Profit Margin
Inventory Turnover
GMROI Examples
Milk
Gross Margin Sales Average Inventory
Gross Profit Margin
Caviar
$150,000 300,000 75,000
Gross Margin Avg Inventory
2,000
150,000 1,000
Inventory Turnover
= Gross Marg $ X Net Sales Net Sales Average inventory = $2,000 $150,000 X $150,000 1,000
=
=
$ 2,000 1,000
=
Caviar GMROI
1.33%
X
X X
150
$300,000 75,000 4
200%
$300,000 150,000 200%
=
=
Trade discounts:
for performing services.
Quantity discounts:
Discounts from the invoice offered to retailers who purchase a specific quantity. Cumulative quantity discount: The values of all orders in a period are added together for the calculation of quantity discounts. Invoice: A bill sent by suppliers calling for payment.
Seasonal discounts:
Discounts retailers earn by ordering or taking delivery of merchandise before the normal selling period is done.
Terms of Payment:
payment to vendors.
Cash discounts:
payment of invoice.
Payment Requirements
Shipping terms
F.O.B. (Free on board): Merchandise is placed on board a truck, railroad car or airplane with title to goods passing from seller to buyer at the F.O.B. point. F.A.S. (Free alongside ship): At a named port the seller quotes a price for the goods including charges for delivery and loading alongside a vessel. C.I.F. (Cost, insurance, and freight): The seller quotes the price including transportation, insurance, and miscellaneous expenses. C.O.D. (Cash on delivery): The seller requires that the buyer pay for the goods at time of delivery.
Advanced dating
Vendors offer retailers more time in which to pay their bill in order to entice them to purchase their goods.
Extra dating: One type of advanced dating which lengthens the time that retailers have to take advantage of cash discounts. EOM (End of month) dating: Under EOM dating, the ordinary period does not begin until the end of the month of the date shown on the invoice. ROG (Receipt of goods)dating: Under ROG dating, the terms of the discount do not begin until the date that goods are received in the store. Anticipation discount: Discounts given by some vendors as an inventive for early payment in the form of a percentage rate per year.
Merchandise Management 11.23
The retailer buys an amount equal to planned sales plus a basic stock E.g., BOM invty = planned sales + basic stock Recommended when stock turnover is > 6 times per yr. Actual stock on hand in any month is allowed to vary by only half of the months variation from avg. estimated monthly sales E.g., if we expect a month to have a sales increase of 14% over the avg. month, invty for that month is increased by only 7% E.g., if avg invty = $100k, sales = $70K/mo. & planned sales = $80K, then BOM invty = $100K x (1 + $80K/$70K) = $107K Assumes stock is carried in proportion to sales -- stock on hand equals several weeks sales E.g., BOM invty = avg weekly sales x # weeks Assumes the retailer wants to keep a specified ratio of mdse to sales. E.g., a ratio of 3 means that an expected $10K month must be supported by $30K invty