Developing Merchandise Plans

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Chapter 14

• Developing Merchandise Plans

RETAIL MANAGEMENT A STRATEGIC APPROACH, 9th
Edition
BERMAN EVANS
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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 Responsibility

• Full array of merchandising functions
• Buying and selling
• Selection, pricing, display, customer
  transactions
• Focus on buying function only

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Figure 14.1 Harry and Davids 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 The Attributes and Functions of
Buying Organizations
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Figure 14.3 At Wal-Mart Developing an Inside
Buying Organization
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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

• Buying view
• Buyers manage buying functions
• Buying
• Advertising
• Pricing
• In-store personnel manage other functions
• Assortments
• Point-of-sale displays
• Employee utilization
• Personal selling approaches

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Figure 14.4 Merchandising Versus Store Management
Career Tracks
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Figure 14.5 Considerations in Devising
Merchandise Plans
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Forecasts

• Forecasts 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 staple 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 products 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 to Bear in Mind When Planning
Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Target market(s) Evaluate whether the target market is conservative or innovative
Goods/ service growth potential Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life
Fashion trends Understand vertical and horizontal fashion trends, if appropriate
Retailer image Carry goods/ services that reinforce the firms image
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Table 14.1b Factors to Bear in Mind When Planning
Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Competition 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 Carry new offerings when requested by the target market
Amount of investment Consider all possible investment for each new good/service product costs, new fixtures, and additional personnel
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Table 14.1c Factors to Bear in Mind When Planning
Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Profitability Assess each new offering for potential profits
Risk Be aware of the possible tarnishing of the retailers image, investment costs, and opportunity costs
Constrained decision making Restrict franchisees and chain branches from buying certain items
Declining goods/ services Delete older goods/services if sales and/or profits are too low
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Figure 14.6 RD at Wendys
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Figure 14.7 The 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 A Selected Checklist for Predicting
Fashion Adoption
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Table 14.2a Factors to Consider When Planning
Merchandise Quality
FACTOR RELEVANCE for PLANNING
Target market(s) Match merchandise quality to the wishes of the desired target market(s)
Competition Sell similar quality or different quality
Retailers image Relate merchandise quality directly to the perception that customers have of retailer
Store location Consider the impact of location on the retailers image and the number of competitors, which, in turn, relate to quality
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Table 14.2b Factors to Consider When Planning
Merchandise Quality
FACTOR RELEVANCE for PLANNING
Profitability Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods turnover may cause total profits to be greater for the latter
Manufacturer versus private brands Understand that, for many, manufacturer brands connote higher quality than private brands
Customer services offered Know that high-quality goods require personal selling, alterations, delivery, and so on
Personnel Employ skilled, knowledgeable personnel for high-quality merchandise
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Table 14.2c Factors to Consider When Planning
Merchandise Quality
FACTOR RELEVANCE for PLANNING
Perceived goods/ service benefits 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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Figure 14.9 Retail Assortment Strategies
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Figure 14.10 Sephora A Very Deep Assortment of
Cosmetics
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Brands
Manufacturer (national)
Private (dealer or store)
Generic
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Table 14.3 The Berman/ Evans Private Brand Test
Match the Retailer with the Brand Name
Retailer Brand
Bloomingdales Arizona Jeans
Costco Sams Choice
Kmart Michael Graves
J.C. Penney Martha Stewart
Sears Joseph Lyman
Wal-Mart Kenmore
Target Kirkland
Macys Charter Club
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Figure 14.11 Costcos 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