Developing Merchandise Plans

Merchandising

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 Philosophy

Sets the guiding principles for all the merchandise decisions that a retailer makes

Should reflect Target market desires Retailer’s institutional type Market-place positioning Defined value chain Supplier capabilities Costs Competitors Product trends

Scope of Responsibility

Full array of merchandising functions Buying and selling Selection, pricing, display, customer transactions

Focus on buying function only

Micromerchandising

Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets

Cross-merchandising

Retailers carry complementary goods and services to encourage shoppers to buy more

Figure 14.2 The Attributes

and Functions

of Buying

Organizations

Functions Performed

Merchandising view All buying and selling functions

AssortmentsAdvertising pricingPoint-of-sale displaysEmployee utilizationPersonal selling approaches

Functions Performed

Buying view Buyers manage buying functions

Buying Advertising Pricing

In-store personnel manage other functions Assortments Point-of-sale displays Employee utilization Personal selling approaches

Figure 14.5 Considerations in Devising Merchandise Plans

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)

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

MilkBreadCanned 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

Fashion and Seasonal Merchandise

Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles

Seasonal Merchandise: Products that sell well over nonconsecutive time periods

Table 14.1a Factors to Bear in Mind When Planning Merchandise Innovativeness

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

Table 14.1b Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR RELEVANCE for PLANNING

Competition Lead or follow competition in the selection of new goods/services

Customer segments

Segment customers by dividing merchandise into established-product displays and new-product displays

Responsiveness to consumers

Carry new offerings when requested by the target market

Amount of investment

Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel

Table 14.1c Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR RELEVANCE for PLANNING

Profitability Assess each new offering for potential profits

Risk Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs

Constrained decision making

Restrict franchisees and chain branches from buying certain items

Declining goods/ services

Delete older goods/services if sales and/or profits are too low

Figure 14.7 The Traditional Product Life Cycle

Structured Guidelines for Pruning Products

Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes

Gather and analyze detailed financial and other data about these items

Consider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers

After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand

Table 14.2a Factors to Consider When Planning Merchandise Quality

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

Table 14.2b Factors to Consider When Planning Merchandise Quality

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

Table 14.2c Factors to Consider When Planning Merchandise Quality

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

Brands

Private(dealer or store)

Manufacturer(national)

Generic

Merchandising Software General Merchandise Planning Software(Limited

brands) Forecasting Software(arthur planning software) Innovativeness Software(data color international) Assortment Software(marketmax) Allocation Software(sts system allocation softaware) Category Management Software(shelf builder,shelf

logic)