• MERCHANDISING
• Merchandising means the 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.
• Merchandising should reflect
– Target market desires
– Retailer’s institutional type
– Market-place positioning
– Supplier capabilities
– Costs
– Competitors
– Product trends
• MICRO MERCHANDISING
• Retailer adjusts shelf-space allocations to
respond to customer and other differences
among local markets
• Retailers carry complementary goods and
services to encourage shoppers to buy more
• CROSS MERCHANDISING
• Retailers carry complementary goods and
services to encourage shoppers to buy more
• Merchandising functions
– All buying and selling functions
• Assortments
• Advertising pricing
• Point-of-sale displays
• Employee utilization
• Personal selling approaches
• CONSIDERATIONS IN DEVISING MERCHANDISE
PLANS :
• A. Forecasts
• B. Innovativeness
• C. Allocation
• D. Timing
• E. Brands
• MERCHANDISING 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
• 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.
• 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 is provided to project specific items
• FASHION AND SEASONAL MERCHANDISE
• Fashion Merchandise: Products that may have
cyclical sales due to changing tastes and lifestyles
• Seasonal Merchandise: Products that sell well
over nonconsecutive time periods
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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 firm’s image
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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
Retailer’s image
Relate merchandise quality directly to the perception that
customers have of retailer
Store location
Consider the impact of location on the retailer’s image and the
number of competitors, which, in turn, relate to quality
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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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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
• 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.
• 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
• Fashion Merchandise: Products that may have
cyclical sales due to changing tastes and lifestyles
• Seasonal Merchandise: Products that sell well
over nonconsecutive time periods
• STAPLE MERCHANDISE PLANNING
• Buyer Determines:
– Basic Stock or Assortment Plan
– Level of Backup Inventory
• System :
– Monitors Inventory levels
– Automatically reorders when inventory gets below
a specified level
• INVENTORY LEVELS
• Cycle (base) stock: inventory that goes up and
down due to the replenishment process
• Backup (buffer, safety) stock : Inventory needed
to avoid stockout
• Order Point
• the point at which inventory available should not
go below or else we will run out of stock before
the next order arrives
• Order Quantity
When inventory reaches the order point, the
buyer needs to order enough units so the
cycle stock isn’t depleted and sales dip into
backup stock before the next order arrives.
Order Quantity = Order Point – Quantity
Available
• TECHNIQUES TO PLAN INVENTORY LEVELS
ARE :
• 1. Basic stock method
• 2.Percentage variation method
• 3. Week’s supply method
• 4. Stock to sales method
• Merchandise Budget Plan
• Plan for the financial aspects of a merchandise
category
• Specifies how much money can be spent each
month to achieve the sales, margin, inventory
turnover, and GMROI objectives
• Not a complete buying plan--doesn’t indicate
what specific SKUs to buy or in what
quantities
• Steps In Developing A Merchandise
Budget Plan
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Set margin and inventory turn goals
Seasonal sales forecast for category
Breakdown sales forecast by month
Plan reductions – markdowns, inventory loss
Determine stock needed to support forecasted
sales
• Determine “open to buy” for each month
When inventory reaches the order point, the
buyer needs to order enough units so the
cycle stock isn’t depleted and sales dip into
backup stock before the next order arrives.
Order Quantity = Order Point – Quantity
Available
• TECHNIQUES TO PLAN INVENTORY METHODS
• Basic stock method : In this method a retailer
carries more items than he expects to sell over
a specified period. There is a cushion if sales
are more than anticipated, shipments are
delayed, or customers want to select from a
variety of items.
• Basic stock = average monthly stock –average
monthly sales
• Beginning of the month planned inventory
level : Planned monthly sales + basic stock
• Percentage variation method :
• This method is recommended if stock
turnover is more than six times a year or
relatively stable
• Beginning of month planned inventory level=
Planned average monthly stock x estimated
average monthly sales
• Weeks’ supply method forecasts average sales
weekly. In this method too much merchandise
may be stocked in peak periods and too little
during slow periods.
• Beginning of month planned inventory level=
Average estimated weekly sales x number of
weeks to be stored x number of weeks to be
stored
• In the stock to sales method a stock to
sales ratio is maintained
• Stock-to-Sales Ratio specifies the amount of
inventory (in retail dollars) that should be on
hand at the beginning of the month to
support the sales forecast and maintain the
inventory turnover objective for the category
• Evaluating the Merchandise Budget Plan
• Inventory turnover GMROI, sales forecast are
used for both planning and control
• After the selling season, the actual performance
is compared with the plan
– Why did performance exceed or fall short of the plan?
– Was the deviation from the plan due to something
under the buyer’s control?
– Did the buyer react quickly to changes in demand by
either purchasing more or having a sale?