Exam 2 Flashcards
Define the paradox of choice:
having too many options to choose from, can cause consumers stress and problematize decision-making.
How do retailers utilize paradox of choice?
Through selling, they purposefully offer lots of choices, but advertise certain aspects for people to buy a specific item
Define Paralysis:
The aspect of being overwhelmed with the options presented and giving up. This is bad for business because it prevents a purchase being made.
Define Buyer’s Remorse:
When a customer feels as though they regret making a purchase, and should have gone with another option.
How do you mitigate buyer’s remorse?
Limit the number of items offered
Offer more customer service for the product.
Give more information about products.
Micro-Merchandise (Personalize what they see).
Shelf Layout (Strategic placement of products).
Define Escalation of Expectation:
With lots of choices available, our expectations rise and that produces less satisfaction.
Define Merchandise Management:
process involved in attempting to offer right quantity of the right merchandise, in the right place, at the right time, in order to meet the company’s financial goals
What is a buyer responsible for?
A buyer is responsible for selecting the merchandise carried by the retailer, and setting a strategy to market that merchandise.
They devise and control sales / profit projections for several product categories.
Other tasks include:
Planning assortment, negotiation with vendors, oversee in-store displays.
What’s the correct categorization of the buyer organization?
Merchandise group –> Department –> Classification –> Category –> SKU
Define Merchandise Group organization and who manages it.
Merchandise grouping is the process of where certain products or items are organized according to group.
Each merchandise group is managed by a GMM (General Merchandise Manager), and a senior VP.
(Example: All Wal-Mart apparel have a GMM that handles clothes and shoes).
Define Department buying organization:
Merchandise groups are made up of departments. These departments are managed by Divisional Merchandise Managers. (DMM)
Example: All of Women’s clothing would be a department.
Define the classification buying organization:
Every department is made up of multiple classification, or a grouping of items targeting the same customer type.
Example: Men’s clothing, men’s shoes, men’s shaving products, beard trimmers, etc). They all target men.
Define the Category buying organization:
Each buyer manages several merchandise categories. (Sportswear, fruit, etc).
Categories are groupings of merchandise that customers think are related, or can be substituted for.
ALL DECISIONS IN MERCHANDISING ARE MADE FROM THE CATEGORY LEVEL. IT”S THE MOST IMPORTANT LEVEL BC SKU IS TOO SMALL, AND CLASSIFICATION IS TOO BIG.
SKU buying organization
the smallest unit available for inventory control.
- can be characterized by size, color, style
Define Micro-Merchandising:
Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets.
(Example: Walmart Stores in Fayetteville cater towards college students, Springdale has a higher Hispanic population and has more hispanic foods / goods, etc.)
Define Cross-Merchandising
retailers carry complementary goods and services to encourage shoppers to buy more.
Example: Putting batteries next to the electronic toys near Christmas.
Define the Merchandising Planning Process in order: (7 Steps)
1: Forecast category sales
2: Develop assortment plan
3: Determine appropriate inventory level and prod. availability
4: Develop plan for managing inventory
5: Allocate merchandise for stores
6: Buy merchandise
7: Monitor and evaluate performance and make adjustments
What are the 3 types of merchandise:
Staple Merchandising, Seasonal Merchandise, Fashion Merchandise
staple merchandise
basic products; continuous amount over time; will be around forever
-very few new product introductions
-ex: eggs, milk, socks, paper.
seasonal merchandise
items whose sales fluctuate dramatically depending on the time of year
-will have a great record of sales we can look back on
-only difference to staples is that with seasonal it changes based on time of year. Hope to zero out inventory by the end of the season.
-ex: coats, sunscreen, Halloween candy, etc
fashion products
type of product or way of behaving that is temporarily adopted by a large number of consumers because the product or behavior is in style. In demand only for a relatively
short period of time. New products are continually introduced into these categories, making the existing products obsolete
-tend to last 2-3 seasons
-ex: hair trends, fashion trends, tiktok product trends.
forecasts
projections of expected retail sales for given periods
components of forecasts (4 bullets)
-overall company projections
-product category projections
-item-by-item projections
-store-by-store projections (if a chain)
forecasts for different merchandise
Staple Merchandise should be based on extrapolating historical sales because sales are constant from year to year.
Alter if you are putting in new stores or for new fashions.
-seasonal products will be based on previous year; change a little for some new products.
-for fashion products, look at marketing research, talk to buyers, look at Category Life Cycle
variations of the category life cycle
-fad: Immediately goes up, then dies.
-fashion – goes up quickly in intro and growth, hits peak in maturity then declines very fast
-staple – incredibly long maturity stage
controllable factors affecting sales projections. (4)
-promotions
-store locations
-merchandise placement – end cap vs. in aisle, bottom shelf or middle shelf
-cannibalization – within your store or chain; buyer cannibalizes each others sales in same category
uncontrollable factors sales projections (5)
-seasonality
-weather
-competitive activity
-product availability
-economic conditions
Staple Merchandise Characteristics: (3)
Predictable Demand, history of past sales, relatively accurate forecast.
Fashion Merchandise Characteristics: (3)
Unpredictable demand, limited sales history, difficult to forecast sales.
Define assortment plan:
: a set of SKUs that a retailer will offer in a merchandise category in each of its stores and channels. It reflects the variety and assortment that the retailer plans to offer in that category
six things to keep in mind when developing an assortment plan
strategy: reflect the retailers strategy (Kum&Go vs. Lowe’s will be very different)
-GMROII: gross margin return on inventory investment; a buyers ROI; only accounts for what a buyer can control
-trade off between too little and too much (paradox of choice vs. long tail theory)
-think about how much you can physically hold (store and warehouses)
-complimentary merchandise: some products won’t sell unless you carry their compliments (conditioner and shampoo, toothpaste and toothbrush)
-budget: each buyer is given $$ budget they can spend
never out list
-list of those products that must always be in stock and the amount of each to be purchased
-primarily consists of staples (think about how bad it would be if a grocery store ran out of milk or eggs)
model stock plan
-list the number of each SKU in the assortment plan that the buyer wants to have available for purchase in each store/channel
-works hand in hand with assortment plan
Silly-Bands article summary:
Fads come and go extremely quickly. If you’re not careful, you could end up losing big time because of how fads and trends die.
why are fads dangerous?
very unpredictable and you end up with a bunch of leftover inventory that nobody wants
how do you know when a fad is over?
when they hit the unpopular segment of the population
how to slow down a fad
-limit availability to product
-make it expensive
-if you can slow down a fad enough to make it a fashion, you can start to predict it
