Chapter 9 Merchandise Buying and Handling

1. Chapter 9Merchandise Buying and Handling Eric Sanders Ryan Snell

2. Merchandise Management • Analysis: Correctly identify customers needs and wants • Planning: Merchandise must be purchased 6-12 months in advance • Acquisition: Merchandise must be bought from distributors or manufacturers • Handling: Assure the merchandise is where it needs to be, and in proper shape to be sold • Control: Over large inventory investments to ensure adequate returns on merchandise

3. Planning Dollar Inventory Investment • Basic Stock Method: Basic stock level plus variable amount based on expected sales for period • Percentage Variation Method: Assumes the percentage variation in monthly stock from average stock should be half as great as the percentage variation in monthly sales from average sales

4. Planning Dollar Inventory Investmentcont… • Weeks Supply Method: Inventory level should be set equal to a predetermined number of weeks supply, which corresponds to desired rate of stock turnover • Stock to Sales Method: Inventory planned for the beginning of the month is a ratio of stock to sales obtained from a trade association or retailers historical records

5. Inventory Planning Choosing the right merchandise mix • Variety: Number of lines (menswear, women’s wear, sporting goods, etc…) • Breadth: Number of brands found in a particular merchandise line • Depth: Number of stock-keeping units within each brand of the merchandise line

6. Constraining Factors • Dollar merchandise constraints: only so much money to spend on inventory • Space constraints: important to fit everything in store while maintaining a nice shopping environment • Turnover Constraints: Must keep merchandise in stock, but not have merchandise left over • Market Constraint: Must fit into the type of retailer you wish to be: specialty store vs. variety store

7. JCPenney Makes Shifts in Structure. • First step was to bring in outside help…Vanessa Castagna • She implemented change by centralizing all buying functions… this allows store management to focus on delivering a excellent shopping experience. • Centralized buying process isn’t all that new, but if a retailer wants to stay competitive it must adapt or they will be gone. • The new buying process is but one piece of their overall strategy…example women’s magazines.

8. Implementing Change • New home office merchandise action teams…responsible for assortment, planning, & selling. • Focus on reducing inventory levels, and will be supported by new software based on sales history data. • The new game of retailing involves reaching the customer through nontraditional ways… Internet, catalogs and other marketing methods. • FairMarket Inc. is an Auction network that features merchandise overstock from JCPenney’s.

9. Key Benefits • Reduces inventory. • Higher turnover…more adaptable to trends. • Better customer service for better shopping experience. • Fashionable merchandise.

10. Thank You Any Questions?