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
Define assortment plan.
Planning the number of different SKUs that retailer will offer in a certain merchandise category.
(Example: offers 38 different shoes within it’s women’s shoes department)
Variety
(breadth) # of different merchandise categories within a store/department.
Assortment
(depth) # of different SKUs within a category.
Product availability
Percentage of demand for a particular SKU that is satisfied.
Factors that determine variety and assortment
- Retail Strategy of business
- Physical size/characteristics of store
- Merchandise that complements it
- What size of variety and assortment will do to buying behavior
Model Stock Plan
of each SKU in assortment plan buyer wants to have available to purchase in each store
*Plan for how much they want to have at replenishment times
(Macy’s has 38 boxes of that specific high heel in the back)
Base Stock
Indicates desired inventory level for each SKU
-Goes up and down due to replenishment process
(want to have at least 20 pairs behind the counter of those Birkenstocks)
Backup stock
Inventory needed to avoid a stockout
What determines the amount of backup stock?
Demand fluctuations
Lead time for vendor deliver
Frequency of store deliveries
Need more backup stock when…
- retailer wants to give customers more availability
- greater demand fluctuations
- longer lead time from vendor
- more fluctuations in lead time
- lower vendor’s fill rate (% of complete orders received from vendor)
3 Decisions involving allocating merchandise:
1-How much merchandise to allocate
2-What type of merchandise to allocate
3-When to allocate merchandise to different stores
