The Assortment Planning Process

1. The Assortment Planning Process Assortment Plan :- describes in general terms what should be carried in a particular Merchandise category . A Good Assortment plan requires -a good forecast for sales , -GMROI -Inventory Turnover -Mix of subjective & experienced judgment

2. Dimensions of Assortment Planning :- • Variety • Assortment • Product Availability VARIETY :- is the number of different merchandising categories within a store or department . Stores with a large variety are said to have good breadth . Variety = Breadth ASSORTMENT :- is the number of SKUs within a category . Stores with largeassortment are said to have good depth. Assortment = Depth PRODUCT AVAILABILITY :- defines the percentage of demand for a particular SKU that is satisfied . Product availability is also referred to as the level of support or service level.

3. Determining Variety & Assortment • Following Factors :- • 1. Profitability of Merchandise Mix • 2. The Corporate Strategy & Positioning toward the Assortment • Physical Characteristics of the Store & Layout of the Internet • Balance between too much versus too little assortment • Complementary Merchandise Determining Product Availability The higher the product availability , the higher the amount of backup Stock necessary .

4. Cycle Stock :- also known as base stock :- inventory that result from the Replenishment proces & is required to meet demand when the retailer can predict demand & replenishment times (lead times) perfectly . Backup Stock :- also known as safety stock or buffer stock , as a cushion for the Cycle stock so they wont run out before the next order arrives Cycle Stock Units Available Backup Stock Weeks

5. Level of Backup Stock Depends on :- • Safety Stock Requirements • Product availability the retailer wishes to provide • Higher the fluctuations in demand • Lead time from the vendor • Lead time :- is the amount of time between recognition that an • order needs to be placed & the point at which the merchandise • arrives in the store & • is ready for sale . • Fluctuations in lead time :- uncertainty in lead time • Vendor’s product availability

6. Branding Strategies • Manufacturer Brands • Licensed Brands • Private-Label Brands Manufacturer Brands :- also known as national brands are products designed , produced and marketed by a vendor . • Licensed Brands :- Special manufacturer brand is a Licensed brand , • in which the owner of a well-known brand name (licensor) enters a • contract with a licensee to develop , produce and sell the branded • merchandise . • Licensee may be • Retailer that contracts to have the manufacturer to produce • the licensed product • 2. Third party that contracts to have the merchandise produced & • then sell it to the retailer

7. Private-label Brands Also called store brands , are products developed by a retailer & available for sale only from that retailer . • Reasons for relatively small growth in past :- • National brands are heavily advertised , creating a strong consumer • franchise . • 2. Hard for retailers o gain economies of scale • No sophisticated enough to aggressively compete against • manufacturer brands • Had a reputation of being inferior to manufacturer brands • Requires significant investments to design merchandise • Need to create customer awareness , develop favorable image for • their private-label brands .

8. Benefits of Private labels to retailers :- • Strong private labels boosts store loyalty • Enhance store image if the brands are of high quality & fashionable • Successful private-label brands can draw customers to the store . • More control over manufacturing , quality control & distribution • of the merchandise . • 5. Gross margin opportunities may be greater . Categories of Private-labels • Bargain Branding :- price sensitive segment • Premium Branding • Copycat Branding :- imitates the manufacturer brand- appearance, • packaging • 4. Parallel Branding :- “ invitation to compare”

9. INTERNATIONAL SOURCING DECISIONS Reason for sourcing globally rather than domestically is to save money . COST ISSUES WHEN MAKING INTERNATIONAL SOURCING DECISIONS • Country-of –origin Effects • Foreign Currency Fluctuations • Tariffs • Free Trade Zones • Inventory carrying cost • Cost of carrying inventory = • Average inventory value (at cost) * Opportunity cost of capital • 6. Transportation Cost

10. CONNECTING WITH VENDORS • Internet exchanges • Wholesale Market Centers • Trade Shows • Buying on their own Turf • Resident Buying Offices Internet Exchanges :- Retail exchanges :- are electronic marketplace operated by organizations that felicitate the buying & selling of merchandise using the Internet . • Functions of Exchanges :- • Directory • Selection • Pricing (reverse auction) • Collaboration • Content

11. NEGOTIATING WITH VENDORS Guidelines for Planning Negotiations with Vendors :- PRICING STRATEGIES • EDLP :- Every Day Low Pricing :- • Benefits :- • Reduced price wars • Reduced advertising • Reduced stock outs & improved inventory management • 2. High/Low Pricing :- • Benefits :- • The same merchandise appeals to multiple markets • Sales create excitement • Sales move merchandise • Emphasis is on quality