Selling the right products of the right quantity

Question 1

Factors to consider when selecting products

Answer 1

Merchandisers help set the prices to maximise profits and manage the performance of the ranges, planning promotions and markdowns as necessary. They also oversee the delivery and distribution of stock and deal with any problems with suppliers when and as they arise. The question arises how can a retailer have the right selection of merchandise?

 In this regard, a retailer must consider the following factors:
Price vs. quality
Store image
Fashion
Quantity and variety 
Ease of selling
Compatibility
New merchandise 
Profitability

Question 2

Price vs. quality

Answer 2

Customers are much more informed today.
Internet, globalisations and technology have made customer more conscious of prices and qualities of products.

Its the retailers responsibility to know what quality the consumer wants and what price they are willing to pay for that.

Question 3

Store image

Answer 3

When selecting merchandise to offer it is important to take the store image in consideration. Ensure that he image that the retailer wants to portray is not damaged by the range of products on offer.

Question 4

Fashion

Answer 4

How fashion consciousness are the consumers? Some wants to be the first to own something others will wait for the majority before they accept it.

Question 5

Quantity and variety

Answer 5

How much merchandise can be offered?
Behaviour of consumer might rely on the type of mercandise that is on offer.
Fashion items and other retail goods requier retailers to carry a wide assortment of merchandise in many size and colors.

Even the best merchandise policies have to be modified to fit the resources of the retailer- merchandise that is in the greatest demand should be stocked.

Question 6

Ease of selling

Answer 6

A retailer would prefer products to sell as fast as possible with as little effort as possible.
This type of product would largely determine how easily it would sell.
Some products needs demonstration and explanation. Packaging does a lot to attract the consumer.

Question 7

Compatibility

Answer 7

Does the merchandise suit the store? Items on display should compliment each other by being consistent in quality, price range, style and the way they will be used.

Question 8

New merchandise

Answer 8

New merchandise increases the risk as it has not yet been proven. It may be that a product has been in the market for some time and has established itself in the market. In such case the retailer may decide to add this product to its range.

Question 9

Profitability

Answer 9

Aim of all products on offer is to make profit. Will the suggested retail price allow for mark-up to meet profit goals. How will each product contribute to sales and offers?

Question 10

Assortment Checklist

Answer 10

A clean storefront?
Price?
Store image?
Fashion?
Quantity and Variety?
Ease of selling?

Question 11

Merchandise Planning

Answer 11

An important goal in successful merchandising is to assist the process of achieving the planned level of buying profitability.

Fashion is slow moving stock from season to season. Staple stock can be standard stock for example underwear and socks that looks the same every season.

Question 12

Define Buying Profit

Answer 12

“Buying profit” can be defined as the difference between the cost price paid for a garment and the retail selling price in the shop

Question 13

Problems in planning

Answer 13

Planning in detail can be a problem for fashion retailers as any fashion range is made up of a multitude of styles.

Some styles may be part of a coordinated range of garments, which naturally are displayed and sold together, while the majority are sold as individual garments.

Question 14

The importance of the merchandiser in planning

Answer 14

The merchandiser plays a key role in working with the buyer to achieve the right balance of products within the season’s range by using a balance of previous sales history combined with forward sales/ trend predictions

Merchandise planning is a demanding task.

Question 15

Starting the planning process

Answer 15

The merchandise planning process generally starts six months to one year ahead of the start of a season.

Question 16

The importance of historic sales patterns

Answer 16

Historic sales patterns look at the best and the worst sellers from a previous season and are depicted in a report format to show “lessons learned”.

A dull repeat of old formulas isn’t needed.
A fashion business must not repeat historic buying failures, although a successful history is no guarantee of future success in the fickle world of fashion.

Question 17

Bottom up planning

Answer 17

Bottom-up planning is the analysis that begins with what was sold: how much, what kind, when and at what price. Projections are then made for the coming sales period and investment in merchandise is based on previous sales. Bottom-up planning is a daily task of every merchandise manager.

Question 18

Top- Down Planning

Answer 18

When proposed sale target figures come downward from a higher level in the organisation.
This can be dangerous in the fashion retail industry as fashion business is made up of a multitude of changing elements; such as style, colour, garments, fabrics etc.

Question 19

Interactive planning

Answer 19

The combination of top-down and bottom-up planning is called interactive planning. It is a teamwork approach with input from all the firm’s constituencies.
Although it is time-consuming, it is the most accurate merchandising plan.

Question 20

Study Jackson (2001:94–95) on the importance of historic sales patterns and then answer the questions below:

Answer 20

¡ What are key sales ratios? Why do you need to use them? ¡ What is top-down and bottom-up planning?

Question 21

How will an effective merchandiser go about the planning?

Answer 21

The effective merchandiser will analyse the previous sales history to help plan the basic sales framework for daily, weekly, monthly and seasonal sales patterns.

However, it requires quick thinking, reaction and experience to cope with all those sudden unplanned factors that tend to occur when they are least expected.

Question 22

Define Stock turn and stock intake planning

Answer 22

Stock turn is simply a way of measuring how many times a business changes the stock that it has on offer to the customer during the course of a trading year (Jackson, 2001:100).

Question 23

To measure annual stock turn there is a simple formula that can be applied by the merchandiser:

Answer 23

Stock turn = Stock turn = Annual sales value/ Average monthly stock value

Question 24

Why is stock turn important for the retailer?

Answer 24

In the fashion industry it is very important for a retailer to “turn” their stock as many times as possible throughout the season or year. Without regular change and update of stock, a fashion retailer becomes stale and boring.

Question 25

Why do fashion retailers refer to weekly stock cover? | How do you work it out?

Answer 25

The degree to which a merchandiser gets involved with the day-to-day management of stock in stores can vary. Read Jackson (2006:143–147) on the automated distribution system, replenishment to pattern, sales reactive replenishment and smoothing factors, dummy branch numbers and the dangers of automatic allocation systems.

Question 26

Planning Staple Stock

Answer 26

Its not difficult because what have been sold in the past will probably sell again in the future. All wholesalers and many manufacturers help retailers make lists of what individual staple goods they should have in stock. Some will even make regular stock counts to insure that the items are recorded before inventory levels get to low. This will change as customer demand or supplier offering change. Some non-staple stock are demanded so much that they become staple stock. The easy way to control the buying of basic stock is to re-oder at regular intervals according to a minimum and maximum quantity that has been set for each item. Retailers need to know how much they sell weekly, how often they place orders and how long it takes for merchandise to be delivered and ready for sale. The minimum amount is what what should be on hand to cover sales during the oder period. The maximum stock is the amount of stock that should be on hand or ready to oder at any time

Question 27

Planning Non staple stock

Answer 27

Pre set order and quantities and automatic re orders are not possible with non staple goods. Retailers should consider price, size, colour, and style to help them select the non staple items that will satisfy customer demands

Question 28

Planning by Price

Answer 28

It is necessary to offer a few different prices for the merchandise in each category. This is because the purchasing power and quality demands of customers vary. In addition most clients like to compare similar items before deciding what to buy.

Question 29

Planning by Size

Answer 29

Knowing what size to oder is important to retailers buying merchandise such as home furniture or clothing, tools or tiles. Retailers need to buy to meet the demands of customers.

Question 30

Planning by Color

Answer 30

Colour has become an important factor. In some cases such as in women shoes the colour can become more important that the material of which the merchandise goods are mede of.

Question 31

Planning by Style

Answer 31

Trade magazine, suppliers representatives and competitors can provide useful information as to what styles to carry. However nothing can replace having a good knowledge of your consumers tastes.

Question 32

Planning the variety and assortment of merchandise

Answer 32

Planning the variety and assortment of merchandise requires one to focus on several decisions. Sales of different items needs to be monitored to establish what items sell and what does not sell. Items that do not sell needs to be removed or reduced in stock level to allocate more space for the products that do sell. Sort similar merchandise into groups to determine which products sell the most and which items generates the most sales. Concrete evidence of which product consumers are buying is is needed in oder to facilitate the decision on which products should be dropped. Most retailers use computer programs to monitor sales and stock levels of products. It is important to consider the classification of merchandise as well as various product decisions when deciding what kind of merchandise to keep in stock.

Question 33

Classifying Merchandise

Answer 33

The product-mix concept refers to the full range or mixture of product lines and product items

Question 34

Product Line

Answer 34

Can be defined as the grouping of related products. (cooldrinks) Product lines are divided into merchandising groups, merchandising classes and merchandising categories.

Question 35

Product Item

Answer 35

Is a product within the product line. (Rasberry 350ml) Within a product line, a product item is distinguishable by its brand, style, size, colour, material, price or any combination of these factors

Question 36

Merchandising Groups

Answer 36

Is a broadly related line of products that retailers and consumers associate together. according to their end use.

Question 37

Merchandising Class

Answer 37

Closely related line of products within a merchandise group. It distinguishes the particular consumer need more clearly.

Question 38

Merchandising Category

Answer 38

Is a specific line of products within the merchandising class.

Question 39

Brand

Answer 39

Is a distinctive grouping of products identified by name, term, design, symbol or any combination of these markings.

Question 40

Style

Answer 40

Style refers to the characteristics or distinctive form, outline or shape of a product item.

Question 41

Category

Answer 41

Is an assortment of items that the consumer sees as reasonable substitutes for one another.

Question 42

Merchandise can be classified into three different departments.

Answer 42

Departments can be divided into classifications, classifications into sub- classifications, sub- classifications into lines, lines into units and units into stock keeping units

Question 43

Product Considerations

Answer 43

Variety and assortment Product compatibility Product life cycle Brand and quality

Question 44

Variety and Assortment

Answer 44

The number of different product items a retailer has to offer within a particular product line. A shallow Assortment contains a limited quantity of product items where a deep assortment means that a retailer offers a large number of product items in a particular product line. A wide assortment of merchandise contains a wide variety of product lines, while a narrow assortment contains limited variety of product lines.

Question 45

These parameter can be used to establish the merchandising mix of a retailer. There are four possible alternatives or product mix strategies.

Answer 45

Narrow variety / Shallow Assortment Wide Variety / Shallow assortments Narrow variety/Deep Assortment Wide variety/ Deep assortment

Question 46

Narrow variety / Shallow Assortment

Answer 46

Only a few products are offered and not a deep range

Question 47

Wide Variety / Shallow assortments

Answer 47

A wide range of items are on offer but only a few options/sizes are available for each.

Question 48

Narrow variety/Deep Assortment

Answer 48

A small number of different items are on offer but there are huge quantities of each.

Question 49

Wide variety/ Deep assortment

Answer 49

A large number of product items are available and there is a huge number of each.

Question 50

Product Compatibility

Answer 50

The kind of merchandise to keep in stock will be determined by the amount of product compatibility a retailer wishes to have. Products may substitute or compliment each other. Products can be substitutes for each there when different products can be used for the same purpose. Products compliment each other when the one is used in conjunction with the other. The quality of merchandise stocked will be determined by target markets, competition, brands to be stocked, accompanying services, shop image and merchandise type.

Question 51

Product Life Cycle

Answer 51

Retailers have to determine in which stages of the product life cycle their product are, for this will most certainly influence the kind of merchandise that they keep. They must know if their product is a fad, a fashion, staple products or seasonal merchandise.

Question 52

A Fad

Answer 52

Generates many sales for a relatively short time, which is often less than a season.

Question 53

A Fashion

Answer 53

Lasts several seasons and a sale may vary dramatically from one season to the next. The risk with fashion products is the uncertainty of customers' acceptance of the fashion and the possible duration of the acceptance.

Question 54

Staple Products

Answer 54

Are in continues demand over a extended period of time

Question 55

Seasonal Merchandise

Answer 55

Is inventory where sales fluctuate dramatically according to the time of the year.

Question 56

Brand and Quality Considerations

Answer 56

Retailers depend on brand names to distinguish themselves from competing retail organisations. The consumer may have a positive perceptions of the brand and become loyal customers to the store. Retailers must carefully determine the proper mix of manufactured brands and house brands. Retailers offer customers a wide variety to protect their margins.

Question 57

Manufactured Brands

Answer 57

Are produced and distributed by manufacturers and are easily recognisable.

Question 58

House Brand

Answer 58

Retail Firms develop in house brands or "no name" brands for sale at their stores only. Buying trends are shifting to house brands because they are cheaper.

Question 59

The quality level of merchandise being stocked

Answer 59

This is influenced by the customer segments the retailer wishes to serve. Options range from stocking merchandise with high quality for high income group to lower quality for the low income group, which appeals to the mass market.

Question 60

The following factors influence the quality level decision:

Answer 60

``` Target Markets Competition Brands to be stocked Accompanying Services Shop Image Merchandise Type ```

Question 61

Target Markets

Answer 61

The target market selected by the retailer will have an impact on the type and quality of merchandise. It is generally assumed that lower income group will be interested in lower priced products and therefore a lower quality.

Question 62

Competition

Answer 62

Tot stay competitive retailers will try to offer a higher quality product that its competitors at the same price or at least the same quality.

Question 63

Brands to be stocked

Answer 63

Brand names are perceived to be of better quality and even the name of a store contributes to wards a perception of quality.

Question 64

Accompanying Services

Answer 64

Such as after-sale services, installation and product repairs influence customers perception of quality of the store. There for accompanying services can enhance or diminish the quality of a store

Question 65

Shop Image

Answer 65

Plays an important role in the perception of quality.

Question 66

Merchandise Type

Answer 66

the type of merchandise will influence the perceived quality. (Glossy paged magazines)