Selling the right products of the right quantity Flashcards
Factors to consider when selecting products
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
Price vs. quality
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.
Store image
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.
Fashion
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.
Quantity and variety
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.
Ease of selling
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.
Compatibility
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.
New merchandise
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.
Profitability
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?
Assortment Checklist
A clean storefront? Price? Store image? Fashion? Quantity and Variety? Ease of selling?
Merchandise Planning
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.
Define Buying Profit
“Buying profit” can be defined as the difference between the cost price paid for a garment and the retail selling price in the shop
Problems in planning
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.
The importance of the merchandiser in planning
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.
Starting the planning process
The merchandise planning process generally starts six months to one year ahead of the start of a season.
The importance of historic sales patterns
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.
Bottom up planning
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.
Top- Down Planning
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.
Interactive planning
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.
Study Jackson (2001:94–95) on the importance of historic sales patterns and then answer the questions below:
¡ What are key sales ratios? Why do you need to use them? ¡ What is top-down and bottom-up planning?
How will an effective merchandiser go about the planning?
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.
Define Stock turn and stock intake planning
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).
To measure annual stock turn there is a simple formula that can be applied by the merchandiser:
Stock turn = Stock turn = Annual sales value/ Average monthly stock value
Why is stock turn important for the retailer?
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.
Why do fashion retailers refer to weekly stock cover?
How do you work it out?
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.
Planning Staple Stock
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
Planning Non staple stock
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
Planning by Price
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.
Planning by Size
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.
Planning by Color
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.
Planning by Style
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.
Planning the variety and assortment of merchandise
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.
Classifying Merchandise
The product-mix concept refers to the full range or mixture of product lines and product items
Product Line
Can be defined as the grouping of related products. (cooldrinks)
Product lines are divided into merchandising groups, merchandising classes and merchandising categories.
Product Item
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
Merchandising Groups
Is a broadly related line of products that retailers and consumers associate together. according to their end use.
Merchandising Class
Closely related line of products within a merchandise group. It distinguishes the particular consumer need more clearly.
Merchandising Category
Is a specific line of products within the merchandising class.
Brand
Is a distinctive grouping of products identified by name, term, design, symbol or any combination of these markings.
Style
Style refers to the characteristics or distinctive form, outline or shape of a product item.
Category
Is an assortment of items that the consumer sees as reasonable substitutes for one another.
Merchandise can be classified into three different departments.
Departments can be divided into classifications, classifications into sub- classifications, sub- classifications into lines, lines into units and units into stock keeping units
Product Considerations
Variety and assortment
Product compatibility
Product life cycle
Brand and quality
Variety and Assortment
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.
These parameter can be used to establish the merchandising mix of a retailer.
There are four possible alternatives or product mix strategies.
Narrow variety / Shallow Assortment
Wide Variety / Shallow assortments
Narrow variety/Deep Assortment
Wide variety/ Deep assortment
Narrow variety / Shallow Assortment
Only a few products are offered and not a deep range
Wide Variety / Shallow assortments
A wide range of items are on offer but only a few options/sizes are available for each.
Narrow variety/Deep Assortment
A small number of different items are on offer but there are huge quantities of each.
Wide variety/ Deep assortment
A large number of product items are available and there is a huge number of each.
Product Compatibility
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.
Product Life Cycle
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.
A Fad
Generates many sales for a relatively short time, which is often less than a season.
A Fashion
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.
Staple Products
Are in continues demand over a extended period of time
Seasonal Merchandise
Is inventory where sales fluctuate dramatically according to the time of the year.
Brand and Quality Considerations
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.
Manufactured Brands
Are produced and distributed by manufacturers and are easily recognisable.
House Brand
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.
The quality level of merchandise being stocked
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.
The following factors influence the quality level decision:
Target Markets Competition Brands to be stocked Accompanying Services Shop Image Merchandise Type
Target Markets
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.
Competition
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.
Brands to be stocked
Brand names are perceived to be of better quality and even the name of a store contributes to wards a perception of quality.
Accompanying Services
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
Shop Image
Plays an important role in the perception of quality.
Merchandise Type
the type of merchandise will influence the perceived quality. (Glossy paged magazines)
