SECTION

THREE
MERCHANDISE
MANAGEMENT

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Levy/Weitz: Retailing Management, 3/e
 Chapter 12
Planning
Merchandise
Assortments
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Levy/Weitz: Retailing Management, 3/e
TM 12-1
Merchandise Management Issues

Planning Merchandise Assortments (Chapter 12)

Organize the Buying Process by Categories

Set Merchandise Financial Objectives

Develop an Assortment Plan

Buying Systems (Chapter 13)

Fashion Merchandise Staple Merchandise

Buying Systems Buying Systems

Allocate Merchandise to Stores

Analyze Merchandise Performance

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TM 12-2 Standard Merchandise Classification Scheme
and Organizational Chart

Click to edit Master title style

Merchandise Group
Chairman
Merchandise-
Oriented partner
Planning Group

Sr. vice pres Sr. vice pres Sr. vice pres Sr. vice pres
merch mgr merch mgr merch mgr merch mgr V.P.
• Click to edit Master text styles
Women’s
ready-to-wear
Men’s, chld’s,
intimate apparel
Cosmet, shoes,
jewelry, access.
Soft home
furn., kitchen Planning
Department – Second level
Div. merch Div. merch Div. merch Div. merch Div. merch
manager• Third level
manager manager manager manager Div Dir..
Men’s suits,
slacks, dress– Fourth
Men’slevel
sports- Young men’s, Children’s Intimate Planning
shirts wear, Polo boys’ apparel apparel apparel

Classification
• Fifth level
Buyer Buyer Buyer Buyer Buyer Buyer Mgr.
Preteen Girls’ Girls’ Toddlers’ Infants’ Little boys’
Planning
accessories Size 7-14 Size 4-6
Category
Sportswear Dresses Swimwear Outerwear
SKU
Girls Levi jeans, sz
5, stone washed
blue, straight leg
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TM 12-3
Illustration of GMROI

MILK WINE
Gross Margin $ 2,000 $150,000
Sales 150,000 300,000
Average Inventory 1,000 75,000

GMROI = Gross Margin Net Sales Gross Margin

x =
Net Sales Average inventory Average Inventory

Milk GMROI = $2,000 $150,000 $ 2,000

x =
$150,000 1,000 1,000

Caviar GMROI = $150,000 $300,000 $300,000

x =
$300,000 75,000 150,000
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=
Management, 3/e
50% X 4
©The McGraw-Hill =
Companies, Inc.,200%
1998
TM 12-4
GMROI and Inventory Turnover for Selected
Departments in Department and Specialty Stores

GMROI Inventory
Turnover
Dept. Specialty Dept. Specialty
Stores Stores Stores Stores

Female apparel 230 350 2.6 3.2

Adult female accessories 180 280 1.9 2.5

Men/boys apparel & access. 160 220 2.0 2.4

Infant/children clothing & access. 210 160 2.6 2.4

Footwear 110 140 1.4 1.7

Home furnishings 120 220 1.7 1.8

Source: Alexandra Moran, ed. MOR 1996 Edition: Merchandising and

08/21/97 * Operating Results of Retail Stores in 1995, 71st ed. (New York: John
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Levy/Weitz: Retailing Management, 3/e ©The McGraw-Hill Companies, Inc., 1998
TM 12-5
The Category Product Life Cycle

Decline

Total Retail Sales

Growth
Maturity

Introduction

Time
Strategy variable Introduction Growth Maturity Decline
Target market High-income Middle-income Mass market Low-income
Innovators adapters and laggards
Variety One basic Some variety Greater variety Less variety
offering
Distribution Limited or More retailers More retailers Fewer
Intensity extensive retailers
Price Penetrating Wide range Lower prices Lower prices
or skimming
08/21/97Promotion Informative * Persuasive Competitive Limited7
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TM 12-6
Variations of the Category Life Cycle

Fad Fashion Staple Seasonal

Sales over many seasons No Yes Yes Yes

Sales of a specific style over No No Yes Yes

many seasons

Sales vary dramatically from No Yes No Yes

one season to the next

SALES

SALES

SALES
SALES

Illustration
TIME TIME TIME TIME
(Sales against Time)
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TM 12-7
Sales for Levi Jeans at
Trendsetters Department Store

400
SALES ($000) DOLLARS

350
300 Spring &
Winter summer
250 sales sales
Fall
200
sales
150
100
50
0
1 4 7 10
YEAR
Note: The peaks show the fall sales, typically 40 percent of annual sales; the horizontal lines typify 15 percent of annual sales
each in spring and summer; and the black dots (the winter sales) are typically 30 percent of annual sales. These data are for
illustrative purposes only. They do, however, represent typical growth patterns for a category like jeans.
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TM 12-8
Relationship between Inventory Investment
and Product Availability

Inventory investment Dollars

600

500

400

300

200

100

0
80 85 90 95 100
Product Availability (Percent)

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TM 12-9
Cycle and Backup Stock

150 -
Order 96
Cycle
Units Available

Stock
100 -

Buffer
Stock
50 -

0-
1 2 3 4
Weeks

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TM 12-10
Assortment Plan for Girls’ Jeans

Styles T R A D I T I O N A L
Price levels $20 $20 $35 $35 $45 $45

Fabric Reg denim Stone- Reg denim Stone- Reg denim Stone-
composition washed washed washed
Colors Light blue Light blue Light blue Light blue Light blue Light blue

B O O T C U T
Price levels $25 $25 $40 $40
Fabric Reg denim Stone- Reg denim Stone-
composition washed washed

Colors Light blue Light blue Light blue Light blue

Indigo Indigo Indigo Indigo
Black Black Black Black
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TM 12-11
Size Distribution for Traditional $20 Denim Jeans
in Light Blue for a Large Store

SIZE
Length 1 2 4 5 6 8 10 12 14

Short 2 4 7 6 8 5 7 4 2 %
9 17 30 26 34 21 30 17 9 units

Medium 2 4 7 5 8 4 6 3 2 %
9 17 30 21 34 17 26 12 9 units

Long 0 2 2 2 3 2 2 1 0 %
0 9 9 9 12 9 9 4 0 units
Total 100%
429 units
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Levy/Weitz: Retailing Management, 3/e ©The McGraw-Hill Companies, Inc., 1998
TM12-12
Predicting Fads

Does it fit with basic lifestyle and value changes?

How important is the product’s benefits to the
consumer?
Is the product based on a basic trend or a side
effect of that trend?
Is the new development supported by
deveopments in other area?
Which groups of consumers have changed?
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