Purchasing Products and Services

• Explain the role of a merchandising plan• Explain the elements of a merchandising

plan• Compare merchandising strategies of two

stores with similar products• Analyze forms used in purchasing

Role of the Buyer

•Industrial Markets- manufacturing and service businesses•Resellers’ Market- wholesale and retail operations

Re-Sellers’ Markets

•Purchase Goods for Resale•Forecast Customers’ Needs•Buy Necessary Products•Plan far in advance of selling season•Know how much of each item to purchase

Six Month Merchandise Plan

• Budge that estimates planned purchases for six month period of time• Allocates funds• Determines WHAT is purchased• Determines HOW MUCH is purchased•Must analyze target market in planning

PRIOR to completing six month plan

Parts of Merchandise Plan

• Planned Sales – based on previous year sales data; sales goal• Retail Stock BOM (Beginning of Month Inventory) –

Used to ensure enough stock to accommodate sales volume; Buyer checks previous year data for stock needed in relation to sales• Retail Reductions- reductions in price of merchandise;

shortages of merchandise including clerical errors, pilfering, shoplifting• Planned Purchases- retail dollar purchase needed to

achieve sales and inventory projection for each month

Determining Planned Sales

Use previous year data for a specific month to help determine this figure then project or use sales goal (% of increase or decrease) to calculate

EXAMPLE FROM FALCONS’ NESTAugust 2013 Gross Sales: $3400Sales Goal: 5% IncreaseAugust 2014 Planned Sales = ($3400x.05 ) + $3400

$3570

Factors Impacting Planned Sales

•Target Market Growth or Decline•Economic Conditions• Federal/State/Local Regulations•Competition

The planned sales figure is critical in the merchandising plan, as all other budget

figures are based off of this number!

Determining Retail Stock BOM• Beginning of Month Inventory ( will be the same as End of

Month Inventory for the previous month) Ensure there is enough stock to generate sales!

Check previous year data to find out how much stock was needed in relation to previous year sales- express as a ratio

of EXAMPLE FROM FALCONS’ NEST:

August 2013 Gross Sales = $3200BOM Stock for Aug 2013 = $6400BOM = 2:1 (6400/3200) = 2Use this ratio an apply to 2014 planned salesAug 2014 Planned Sales $3750 X2= $7500 BOM Retail Stock

Determining Planned Reductions• Reductions in merchandise; theft; pilfering; clerical

error- all impact amount of $ available for planned purchases• Calculate as percentage of Planned Sales• Businesses typically determine from previous year

data and often set goals each year to reduce this number

EXAMPLE FROM FALCONS’ NEST:• August 2013 Planned Reductions was 10% of Planned

Sales which equals $35; Falcons’ Nest wants to reduce planned reduction by 3% from last year: $35 X.03 = $1.05

• August 2014 Planned Reduction = $35 - $1.05 = $33.95

Merchandising Factors

Effective merchandising means having the right product at the right place at the right time!

• Overall Budget (Merchandising Plan)• Product Categories• Product Assortment• Pricing and Markdown Strategy• Receiving and Ticketing• Shortage Control

Comparing Merchandise Strategies

Class ActivityCompare the merchandising strategies (Pricing; Inventory; Product Assortment) of two stores who offer the same products for sale.

Create a chart to compare and contrast these strategies.

Use Word to complete the assignment and e-mail to mbelote@lcps.org 50 Point Class Assignment