Purchasing Products and Services

1. Purchasing Products and Services Explain the role of a merchandising plan Explain the elements of a merchandising plan Compare merchandising strategies of two stores with similar products Analyze forms used in purchasing

2. Role of the Buyer • Industrial Markets- manufacturing and service businesses • Resellers’ Market- wholesale and retail operations

3. Re-Sellers’ Markets • Purchase Goods for Resale • Forecast Customers’ Needs • Buy Necessary Products • Plan far in advance of selling season • Know how much of each item to purchase

4. Six Month Merchandise Plan • Budge that estimates planned purchases for six month period of time • Allocates funds • Determines WHAT is purchased • Determines HOW MUCH is purchased • Must analyze target market in planning PRIOR to completing six month plan

5. Parts of Merchandise Plan • Planned Sales – based on previous year sales data; sales goal • Retail Stock BOM (Beginning of Month Inventory) – Used to ensure enough stock to accommodate sales volume; Buyer checks previous year data for stock needed in relation to sales • Retail Reductions- reductions in price of merchandise; shortages of merchandise including clerical errors, pilfering, shoplifting • Planned Purchases- retail dollar purchase needed to achieve sales and inventory projection for each month

6. Determining Planned Sales Use previous year data for a specific month to help determine this figure then project or use sales goal (% of increase or decrease) to calculate EXAMPLE FROM FALCONS’ NEST August 2013 Gross Sales: $3400 Sales Goal: 5% Increase August 2014 Planned Sales = ($3400x.05 ) + $3400 $3570

7. Factors Impacting Planned Sales • Target Market Growth or Decline • Economic Conditions • Federal/State/Local Regulations • Competition The planned sales figure is critical in the merchandising plan, as all other budget figures are based off of this number!

8. Determining Retail Stock BOM • Beginning of Month Inventory ( will be the same as End of Month Inventory for the previous month) Ensure there is enough stock to generate sales! Check previous year data to find out how much stock was needed in relation to previous year sales- express as a ratio of EXAMPLE FROM FALCONS’ NEST: August 2013 Gross Sales = $3200 BOM Stock for Aug 2013 = $6400 BOM = 2:1 (6400/3200) = 2 Use this ratio an apply to 2014 planned sales Aug 2014 Planned Sales $3750 X2= $7500 BOM Retail Stock

9. Determining Planned Reductions • Reductions in merchandise; theft; pilfering; clerical error- all impact amount of $ available for planned purchases • Calculate as percentage of Planned Sales • Businesses typically determine from previous year data and often set goals each year to reduce this number EXAMPLE FROM FALCONS’ NEST: • August 2013 Planned Reductions was 10% of Planned Sales which equals $35; Falcons’ Nest wants to reduce planned reduction by 3% from last year: $35 X.03 = $1.05 • August 2014 Planned Reduction = $35 - $1.05 = $33.95

10. Merchandising Factors Effective merchandising means having the right product at the right place at the right time! • Overall Budget (Merchandising Plan) • Product Categories • Product Assortment • Pricing and Markdown Strategy • Receiving and Ticketing • Shortage Control

11. Comparing Merchandise Strategies Class Activity Compare the merchandising strategies (Pricing; Inventory; Product Assortment) of two stores who offer the same products for sale. Create a chart to compare and contrast these strategies. Use Word to complete the assignment and e-mail to mbelote@lcps.org 50 Point Class Assignment