Chapter 9 - Merchandise Management Flashcards
Merchandise Management
The process involved in planning and controlling the available budget to make sure there is the correct type and amount of merchandise selected and supplied, so that the needs of the target market are met and the site makes profit.
Getting the right goods in the right sizes at the right price at the right location for the right consumers in the time time and quantity.
Components of Merchandise Management
P A A C H
Analysis
- analysing the target market so that customers are identified and understood.
Planning
Buyers buy merchandise well in advance if intended season so they can plan when to sell what.
This is influenced by economic factors such as fluctuating interest rates.
Acquisition
- Purchasing the merchandise they want to sell to their TM, this involves a lot of research, travel and negotiation with vendors.
Handling
- getting logistics in place to ensure merchandise is where it’s required to be in the right condition.
Control
- many buyers and planners repository for millions of rands it is quintessential to having the answer of how well money is spent and if good enough profits are made.
Merchandising team
Merchandise Manager
- fully responsible for choosing the merchandise for a particular section of the business
- Oversees strategies and ensures they meet financial objective
Merchandise Buyer
- responsible for purchasing merchandise and managing allocated budget.
Merchandise Planner
- works hand in hand with the buyer
- plans and controls the product range
Assistant Buyer
- provides operational support to Buyer
- restocking and generating reports
Merchandise Philosophy
Describes the selected target market for the retailer and their requirements.
Describes the way the target market will be satisfied in terms of positioning, image, pricing and any other factors with regards to completion and retail offering.
SKU
Stock keeping unit is a single item of merchandise that is different from any others.
Category
Category is a word used to describe a group of merchandise items that either substitute or complement each other.
Pasta and pasta sauce
Assortment is a number of categories
Different types of merchandise
Convenience goods
- familiar products that consumers expect to purchase without much effort.
They stick to tier favorite brands. They will switch brands without much thought as well.
Impulse goods
- Convenience goods purchased at impulse, therefore they rely on being displayed well to grab the consumers attention. Aisle of Sweets
Shopping products
- Products that consumers compare interns of brand, price, fit etc. More time is done of purchasing decision because more time and resources are allocated by customer. These products are situated eighth next to each other to take advantage of retailers buying decision .
Speciality goods:
Products that customers are prepared to search for and travel some distance to find. An alternative offering is not acceptable. Characterized by luxury goods. Jewelry and special health products
Category Management
A strategic way to managing products used by both suppliers and retailers.
INSTITUTE OF GROCERIES DISTRIBUTION
- “ category management is the strategic management of product groups through trade partnerships which aim to maximize sales and profit by satisfying consumer and shopper needs”
Eg Pnp. Butchery, Fresh Fish, Fruit and Vegetables and Beverages
Can be used to link product performance to customer satisfaction between competing brands.
Category Captain
Manages a particular category and is responsible for its profitability and growth.
Chosen from retailers staff
Advantage is that they have a great knowledge
Disadvantage is that it’s difficult for a representative of a supplier to be objective and would make decisions that benefit the brand.
Category Performance Indicators
Traffic: Categories that gain a lot of attention and are well known, regularly purchased items. Eg Back to School Items
Spend builders: used to generate additional spending. Eg impulse goods or multi pack goods
Profit builders: Used to steer customers away from just buying discounted goods. Price is not a factor. Eg skincare products and cosmetics
Edge creators: Products that differentiate the store from its competitors
Loyalty builders: products that keep consumers returning. Eg Fresh fruit and vegetables
Planogram
Planogram is a visual aid or picture that shows the layout of the category in store. Combined with the category management principles, a planogram is produced using computer software.
The planogram supplies a detailed diagram of exactly where each product should be placed to increase sales and profitability.
Many stores hire specialist to prepare this type of information, but some retails have their own in-house department.
Why use planograms ?
They had to make sure that every square metre of space is used in the best possible way
Planograms of give the store an attractive look, which appeals to customers and keep them satisfied
They improve inventory control and this helps to make sure that out of stocks are less frequent.
They assist with the replenishment of stock.
They will help position products in the best way.
Category life cycle
Knowing there category life cycle will help retailer know which products to purchase, when as well as the quantities and assortments.
Introduction
A category that is new to country or retailer, sales are low and customers don’t know about them yet. Therefore it is a risk to stock such products. However offering something new creates interest and excitement.
Growth
Customers become more aware, and sales escalate and profits increase. The marketplace becomes more competitive and price promotions become necessary. Eg Fashion brands to fashion forward people.
Maturity
Everyone who is going to purchase this product has done so, fashion forward people more onto other, new products so the retailer must ensure to offer more variations and even their own brands. Price competition rises and profits begin to drop as other competitors battle for lower prices. Producers try to maintain this life cycle for as long as possible. Coca Cola has been here for a very long time.
Decline
Something new enters the market and existing category loses its appeal to customers. Conservative customers continue to purchase for a while however.
Often a large markdown is needed to attract bargain hunters and clear remaining stock.
Four Variations of the Category Life Cycle
Fad Merchandise
- a product that generated a large volume of sales for a short period of time. Risk is high in case buyers adapt a “wait and see” attitude. Eg Popular but impractical fashion fads
Fashion merchandise
- products that are polo Ilse for a longer period of time. Popular for a life cycle of about 3-4 years.
Seasonal Merchandise
- describes products that are popular at certain times of the year.
Staple merchandise
- describes products that are in continuous use. Retailers can predict replenishment process and therefore risk is low as well as margins
Brand types
National brands
- Also known as manufacturer brand that is designed and produced by the manufacturer often in an international scale. Customers know what to expect even before they go into buying such a product.
Private label brands
- Store Brands or House Brands, these are owned and distributed by retailers. Mostly cheaper than national brands in the same category. Eg No Name
Generic brands
- The have no name are are identified by product description. Often priced lower than other brands. The pharmaceutical business is well known for this.
