Chapter 12: Managing the Merchandise Planning Process Flashcards
Define merchandise category.
Assortment of items that customers see as substitutes for each other.
(Products assigned to categories based on attribute differences or common buying behavior.)
Category Management.
Managing business while striving to get most sales/profits in that category (not just brand.)
Ex: Breakfast cereal category vs Kellogg’s Corn Flakes
or
Dairy Product Category vs Carnation milk brand
Category caption is…
a selected vendor responsible for managing a category.
(people that control the retailers entire category, like a vendor taking care of ALL of the breakfast cereal)
Issues: Vendor category captain may have different goals than retailer
2 Types of Measurements for Manager’s Performance
1- GMROI (Gross Margin Return on Investment)
Gross margin percent x sales-to-stock ratio
2-Inventory Turnover
(1-Gross Margin Percent) x sales-to-stock ratio
Purpose of managing inventory turnover.
Helps assess the buyer’s performance.
Average Inventory
(Month 1 + Month 2 + Month 3…)/Number of Months
Inventory Turnover =
Cost of Goods Sold/Average Inventory at Cost
2 Types of Merchandise Mgmt
1-Staple (Basic) Merchandise Categories
2-Fashion Merchandise Categories
Staple (Basic) Merchandise
- Demand is always continuous
- Limited new product introductions into market
- Easy to forecast demand
- Continuously replenished
Fashion Merchandise
- Short demand period
- Continous introductions of new products (think of trends) and old things become obsolete (go out of style)
- Shoes, computer, women’s fashion
Merchandise Mgmt Process
3 steps
1-Forecasting Sales
2-Developing an assortment plan
3-Determining appropriate inventory level
How do you develop an accurate sales forecast?
Understand the nature of the PLC.
Collect enough data on product and it’s competitors.
Work with vendors to coordinate merch delivery/manufacturing dates.
Controllable factors affecting sales projections
Promotions
Store Locations
March Placement
Cannibalization (too many of your company’s stores in same locations that they eat up one another’s sales)
Uncontrollable factors affecting sales projections
Seasonality
Weather
Competitive activity (what others are doing)
Product availability (what manufacturers are able to make)
Economic conditions (in your country or necessary part giving country)
To forecast fashion merchandise categories you should look at…
Previous sales data
Market research
Vendors
Fashion/trend services
