Direct Store Delivery

Back door traffic at store

25% of grocery products never see a warehouse
HED 460

DSD Product Characteristics

Shelf life

Bread/pastry/salty snacks/beer

30-70 days DSD vs 390 days for warehoused category

Higher SKU velocity

12 units/store/week vs 9 units
HED 460

DSD Product Characteristics


Demand variability

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Frequent promotions
Frequent service
Lower value density

Fragility - chips

Weight – beer, soft drinks
HED 460

DSD Product Characteristics


Lower value density (cont.)


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$27/cu. Ft. (dsd) vs $100/cu. Ft.
Price divided by space
High cost as a % sales
Merchandising difficulty

Special equipment
HED 460

Problem

How can you have a low GM but high profit and sales?

COGS must be high

Expenses must be minimized

Emphasis on contribution margin
HED 460

Direct Store Delivery Results

More cash flow

8 days of inventory held with 30 day payment

Turns

Contribution Dollars

GMROI

High % of in-stock
HED 460

Product Development

Market Share Growth Strategies



Acquire other businesses
Enter into joint ventures
Private label/product development
HED 460

Private Label

Merchandise bearing a retailer’s own name brand

 retailer’s own name another copyrighted name
 designer with whom the retailer has an exclusive license
HED 460

Why Private Label?
Many Retailers today, see the value in
having their own private label brand.
o o o
Product Differentiation
Control over design/color assortment
Increase in profits
HED 460

Risks involved in Private Label o o o
No one to ask for markdown $, if the item is not selling
Image of store can suffer
Quality and appearance of the product is a direct reflection upon the store
HED 460

Importance of Private Label




From 0-100% of merchandise assortments
Grew 5x from 1995-2002
Sears (Craftsman, Kenmore, Canyon
River, Covington)
J.C. Penney (Arizona, Hunt Club,
St.John’s Bay)
HED 460

Importance of Private Label


Higher profits than national brands
 differentiation
Private brands, now premium brands

Master Choice (A&P)


SFA Collection (Saks Fifth Avenue)
Faconnable (Nordstrom)
HED 460

History of product development

Foreign competition in early 1980s

Firm restructuring




Focus on improving existing products
Workforces cut drastically
Sites closed
Innovate or die
HED 460

Product development - Defined
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
Design and engineering required to create products that are serviceable, producible, salable and profitable
Development of private label merchandise for the exclusive sale by one company
HED 460

Product Development Defined o
Taking a 2-D idea and transforming it into a 3-D product to be sold to a consumer
And the consumer wants…
•
•
•
•
•
The “right” color
The “right” fit
The “right” price
The “right” quality
The “right” time (in season)
HED 460

Types of Product Development


Original design
 more processes and lead time
 more costly and time consuming
Modification
 reduced development time and costs
HED 460

Types of Product Development



Knock off
 eliminates many development processes
 saves time and money
Joint product development


Manufacturer and retailer speeds design and decreases wholesaling time
Combination
HED 460

The Product Development Team
• o
MERCHANDISING
Front End o
•
PRODUCTION
Back End
•
•
•
Design
Trend Analysis
Merchandising
(Retail Buyer)
•
•
•
•
•
•
Product Mgt. (in/out)
Technical
Patternmaking
Sourcing
Vendor Relations
QA/QC
HED 460

Process of Product Development
1.
Merchandising (Buyer) works with
Design/Trend Dept. on WHAT to offer
•
•
•
•
•
What color the assortment will include
What price the item will sold for
What styling details are necessary
What holes in the branded retail mix need to be filled
What will give the store a competitive edge
HED 460

Process of Product Development
2.
•
•
•
The Production Team brings the product to “life”
Patternmaking/Design/Technical: the “right” fit
Design/Merchandising/Product Mgr. Ensure the
“right” quality
Product Mgr negotiates w/factory to get the
“right” price and lead-time
HED 460

How it is done o
• o o
Tools: BOM/spec sheets/artwork/fit sessions/anaylsis
Communication inside retail team and outside with vendor/suppliers/factories
Details:
•
•
•
•
•
•
•
“all the small things ”
Washcare Instructions
Woven label, Hangtags, UPC codes
Strength and color of sewing thread
Type of plastic bag, how many pcs per carton box
Strength of the carton box
How important is TIME, and quick replenishment
Trade laws/new agreements, NAFTA
HED 460

Why are details so important?
Did you ever play that game: draw a circle and a box and at the top of the page, write the words…
HED 460

Phase I: Pre-Adoption

Creativity

Materials development and selection





Style development
Pattern making
Sample making
Product testing
Sample review
HED 460

Phase II: Post-Adoption

Preparing for production
 perfecting fit



 making production patterns writing production specifications sourcing production estimating final costs
HED 460

Software - PDM

Creates and maintains product specifications





Front and back detailed sketch
Garment construction
Graded specifications
Fabric trim and details
Packaging and labeling
HED 460

Software - PDM

Used extensively in industry







The Gap
JCrew
Kmart
Osh Kosh B’ Gosh
J.C. Penney
Talbot’s
Abercrombie & Fitch
HED 460