Chapter 14

1. Developing Merchandise Plans Chapter 14

2. Objectives • To Demonstrate Importance of Sound Merchandising Philosophy • To Study Buying Organization Formats and Their Processes • To Outline Devising Merchandise Plans • To Discuss Category Management and Merchandising Software

3. Merchandising Philosophy • Scope of Responsibilities • Merchandising Function • Buy • Sell • Buying Function • Buy

4. Advantages of Merchandising-Oriented Philosophy • Smooth Chain of Command • Expertise • Responsibility and Authority Clear • Buyer Involved with Display • Reduced Costs • Buyer Closer to Consumers

5. Advantages of Separate Buying & Selling • Similar Skills Not Needed for Each Task • Higher Morale • Selling Not Secondary • Specialists • Merchandisers Not Always Good Supervisors

6. Merchandising Considerations • Micromerchandising • Cross-Merchandising

7. Formal Informal Centralized Decentralized General Specialized Internal External Resident Buying Office Cooperative Buying Merchandising Buying Buyer Sales Manager Merchandising Buyer Attributes and Functions of Buying Organization Formats Level of Formality Degree of Centralization Breadth Source of Personnel Philosophy Staffing

8. Merchandising • Assistant Buyer • Associate Buyer • Buyer • Divisional Merchandising Manager (DMM) • General Merchandising Manager (GMM)

9. Store Management • Assistant Sales Manager • Sales Manager • Assistant Store Manager • Store Manager

10. Innovativeness Forecasts Assortments Allocation Brands Timing What Makes Retail Shoppers Tick Merchandise Plan

11. Forecasts • Staple Merchandise • Assortment Merchandise • Product Lines etc. • Model Stock Plan • Fashion Merchandise • Seasonal Merchandise • Fad Merchandise

12. Innovativeness • Target Market(s) • Goods/Service Growth Potential • Fashion Trends and Theories • Retailer’s Image • Competition • Customer Segments • Responsiveness to Consumers • Investment Costs • Profitability • Risk • Constrained Decision Making • Declining Goods/Services

13. Growth Introduction Maturity Decline Product Life Cycle Total Retail Sales Time

14. High-Income Innovators Mass Market Low-Income and Laggards Middle-Income Adopters One Basic Offering Greater Variety Less Variety Some Variety Limited or Extensive More Retailers Fewer Retailers More Retailers Penetration or Skimming Lower Prices Lower Prices Wide Range Informative Competitive Limited Persuasive Monopoly- Oligopoly Competition Oligopoly Oligopoly- Competition Product Life Cycle Life Cycle Stage Strategy Variable Introduction Growth Maturity Decline Target Market Good or Service Distribution Intensity Price Promotion Supplier Structure

15. Fashion Trends • Vertical • Horizontal

16. Assortment • Product Quality • Width • Depth

17. Planning Merchandise Quality Target Market(s) Competition Retailer’s Image Store Location Stock Turnover Profitability Manufacturer versus Private Brands Customer Services Offered Personnel Perceived Goods/Service Benefits Constrained Decision Making

18. Assortment Considerations • Impact on Sales and Profit • Space Requirements • Inventory Turnover • Cannibalization

19. Advantages Broad Market Full Selection of Items High Level of Customer Traffic Customer Loyalty One-Stop Shopping No Disappointed Customers Disadvantages High Inventory Investment General Image Many Items with Low Turnover Some Obsolete Merchandise Wide and Deep Assortment

20. Advantages Broad Market High Level of Customer Traffic Emphasis on Convenience Customers Less Costly Than Wide and Deep One-Stop Shopping Disadvantages Low Variety Within Produce Lines Some Disappointed Customers Weak Image Many Items with Low Turnover Reduced Customer Loyalty Wide and Shallow Assortment

21. Advantages Special Image Good Customer Choice in Category(ies) Specialized Personnel Customer Loyalty No Disappointed Customers Less Costly Than Wide and Deep Disadvantages Too Much Emphasis on One Category No One-Stop Shopping More Susceptible to Trends/Cycles Greater Effort Needed to Enlarge the Size of the Trading Area Little (no) Scrambled Merchandising Narrow and Deep Assortment

22. Advantages Aimed at Convenience Customers Least Costly High Turnover of Items Disadvantages Little Width and Depth No One-Stop Shopping Some Disappointed Customers Weak Image Limited Customer Loyalty Small Trading Area Little (no) Scrambled Merchandising Narrow and Shallow Assortment

23. Brands • Manufacturer (National) • Private Label (Dealer)

24. Category Management • Arrange The Way Customers Would • Configuration Function of Time, Space, and Product Utilitization • See to Drive Multiple Item Purchases • Management is Fluid, Dynamic, Proprietary Set of Decisions • Create Unique Consumer Value • Based on Overall Trading-Area Scenarios • Management an Exclusionary Process • Data from Pre-Customer Interface Analysis of Trading-Area Needs • Supplier and Retailer have Different Goals • Management Strategy of Differentiation

25. Category Management Application Unit Sales Few Many High Potential (sleepers) -- Promote more, better position, more facings, display more, sample, back with store coupons Winners -- Promote more, better position, more facings, display more High Direct Product Profitability Underachievers (dogs) -- Raise prices, lower position, cut promotions, consider delisting. Traffic Builders -- Review prices, lower position, expand space, mix with sleepers, display. Low

26. Software • General Merchandising • Forecasting • Innovativeness • Assortment • Allocation • Category Management

27. What You Should Know • The Importance of a Sound Merchandising Philosophy • The Various Buying Organization Formats and Their Processes • Considerations in Devising Merchandise Plans: • Forecasts • Innovativeness • Assortment • Brand Timing • Allocation • Category Management and Merchandising Software

28. Questions? Questions?