Presentation ON Merchandising Management: Purchasing System

Goals For Presentation

Merchandise Management Meaning Purchasing System Meaning Merchandise Budget Plan : Meaning Steps Of Budget Plan Methods Monthly Sales Percent Distribution To Season Monthly Sales Monthly Reductions Percent Distribution To Season Monthly Reductions Summary

MERCHANDISE MANAGEMENT
It is the process of developing, securing, pricing, supporting and communicating the retailers merchandise offering It means offering the right product at the right time at the right price with the right appeal!!

PURCHASING SYSTEM

A method used by businesses to buy products and/or services. A purchasing system manages the entire acquisition process, from requisition, to purchase order, to product receipt, to payment. Purchasing systems are a key component of effective inventory management in that they monitor existing stock and help companies determine what to buy, how much to buy and when to buy it. A popular purchasing system is based on economic order quantity models

MERCHANDISE BUDGET PLAN

Plan for the financial aspects of a merchandise category Specifies how much money can be spent each month to achieve the sales, margin, inventory turnover, and GMROI objectives. Not a complete buying plan--doesnt indicate what specific SKUs to buy or in what quantities

STEPS IN DEVELOPING A BUDGET PLAN

Set margin and inventory turn goals

Seasonal sales forecast for category

Breakdown sales forecast by month

Plan reductions markdowns, inventory loss

Determine stock needed to support forecasted sales

Determine open to buy for each month

SIX MONTH MERCHANDISE PLAN FOR MENS CASUAL SLACKS

METHODS OF BUDGET PLAN

Monthly Sales Percent Distribution to Season (Line1)
Sales % Distribution to Season
6 mo. data April 100.00% 21.00% May 12.00% June 12.00% July 19.00% Aug 21.00% Sept 15.00%

The percentage distribution of sales by month is based on Historical data Special promotion plans

MONTHLY SALES PERCENT DISTRIBUTION TO SEASON

Retail sales are very seasonal. The Christmas season often accounts for more than 40% of a retailers annual sales.

MONTHLY SALES (LINE 2)

Sales % Distribution
1. Month Sept 6 mo. data 100% April 21% May 12% June 12% July 19% Aug 15% $19,500

2. Mo. Sales $130,000

$27,300 $15,600 $15,600 $24,700

Monthly sales = The forecasted total season for the six-month period x monthly sales %

MONTHLY REDUCTIONS PERCENT DISTRIBUTION (LINE 3)

3. Reduction % Distribution to Season 6 mo. data April 100.00% 40.00% May 14.00% June 16.00% July 12.00% Aug 10.00% Sept 8.00%

To have enough merchandise every month to support the monthly sales forecast, buyers need to consider factors that reduce the inventory level in addition to sales made to customers.

Markdowns Shrinkage Discounts to Employees

SHRINKAGE
Inventory loss caused by shoplifting, employee theft, merchandise being misplaced or damaged and poor bookkeeping. Retailers measure shrinkage by taking the difference between 1. The inventory recorded value based on merchandise bought and received 2. The physical inventory actually in stores and distribution centers

MONTHLY REDUCTIONS (LINE 4)

Reduction % Distribution 3. Month % 6 mo. data April May June July Aug Sept 100.00% 40.00% 14.00% 16.00% 12.00% 10.00% 8.00% 4. Monthly Reductions $16,500 $6,600 $2,310 $2,640 $1,980 $1,650 $1,320

Monthly Reductions = Total reductions x Monthly reduction %

SUMMARY

Merchandise Management is extremely important aspect of Retail Operations Many consider it the MOST important)

Good merchandise management does not guarantee success but bad merchandise management almost certainly will result in failure.

Presented by Chitra Mani Khyati Nikita