Retail Buying & Merchandising midterm 1

category strategies

Corporate, business, managerial

corporate level strategy means…

which business are we in?

business level strategy means…

how are we going to operate?

Gap buying Banana Republic and expanding to Kids is an example of

corporate level decision

competitive advantage

comes from the value that firms create for their customers that exceeds the cost of producing that value

true or false: superior financial performance relative to competitors must be achieved for a company to have competitive advantage

true

generic business level strategies

Cost leadership, differentiation, focused cost leadership, focused differentiation

examples of cost leadership

walmart, dollar general

examples of differentiation

sephora, jared, bass pro, nordstrom

examples of focused cost leadership

costco, sam’s club

examples of focused differentiation

whole foods, build a bear, harrods

blue ocean strategy

companies that attempt both cost leadership and differentiation (eventually turns red) ex: trader joe’s

sources of merchandising data

financial performance, competitor research, industry trends, customer insights

primary data collection

customized surveys, focus groups, interviews, observations. can be relatively affordable

secondary data collection

more big picture data. can be very expensive

STEEP analysis

sociocultural, technological, economic, ecological, political

porter’s 5 forces

threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, all leading to rivalry among existing competitors

available resource for industry reports

IBIS world

porter’s competitor analysis

-reveals competitor’s weaknesses

-reveals competitor’s likely responses

-anticipates future moves

external relationships of the buyer

suppliers, vendors, brokers, manufacturers, wholesalers

these can be vendor or buyer intitiated, most likely inherited

internal relationships of buyer

private brands, product development, operations, logistics

these can be even trickier than external

distributive v integrative negotiations

it’s all about who you are negotiating with

integrative is more collaborative

intelligence quotient

wonderlic test used in NFL combine

emotional intelligence

a person’s abilities to perceive, identify, understand, and successfully manage emotions in self and others

starts with self awareness

two types of interpersonal relationships

complementary and reciprocal

Emotional Intelligence takeaways

-EQ can be learned

-it can also be improved

category

groups of products belonging to a similar family, either as substitutes or complementary

item role: traffic builder

category management

the ongoing collaboration between retailer and suppliers to design offering and value chain to support consumer demand in the most profitable way

2 components of assortment strategy

-width of product variety (types of items within a category)

-depth of products offered (how many variations of one particular product)

line review

the methodical process a buyer and their
buying team go through to decide which items to carry within their allocated linear shelf space; in layman’s terms, potential suppliers are submitting their “application” to work together

modular

the the visual representation of how items
selected during the line review will be arranged within the linear section

“mod” or '“planogram”

example of substitute

olive oil and vinegar being in the same aisle as salad dressing

example of complements

tortillas, shells, beans, diced tomatoes being in the same aisle

Variety

best buy=narrow

target/walmart= wide

deciding how to pick items

customer need state (keep the customer first)

product quality and value

specs, expectations, packaging and messaging

channel selection

in store, online, 1p/3p, omnichannel

Incrementality, cannibalization, transferable demand

incrementality: will this bring new customers to new category

transferable demand: if I take away an item, will customers leave or shift to new product

product development

stages involved in bringing a product from concept or idea through market release and beyond

product development cycle

Idea

define it

test it

design it

brand it

fund it/protect it

make it

launch it

amazon’s product development method

“working backward” method

start with the customer and draft the press release

google’s product development method

employee’s are encouraged to spend 20% of their time thinking up new ideas

rapid prototyping

“fail well”

Idea step of product development cycle

Opportunity recognition

-market gaps

-competitive landscape

-resource changes

-true innovation

Define it step

Data and insights

-feasibility analysis

-a lot of products end here

Protect it step

intellectual property

-coca cola obtaining a trademark, copyright, and patent

Make it step

make or buy decision

-transaction cost economics

-should we make this ourselves or contract it out

Line

horizontal (depth)

options: diet coke, coke, sprite, fanta

Ladder

vertical (sizes, packaging)

options: can, bottle, mini, 12 pk, 24 pk

price elasticity

understanding how your customers respond to price increases and decreases

elastic

very responsive

ex: clothing, soft drinks, cereal

inelastic

not very responsive

medication, cigarettes

expandability

getting more money from customer sooner

consumption

Use, occasion, impulsivity, marketing & sales support

purchasing

Stock-up, perishability, expensive vs inexpensive,
physical size

opening price point

the lowest price of a particular item in a certain product category

goal: attract customers and establish perception of value

customer price perception

99 cent ending (left digit effect)

odd v even price ending

choice effect

if you give consumers size choices, they will choose the middle or largest size

anchor pricing

showing what the price was before the markdown

pricing strategies

-cost plus

-MSRP

-competitive

-loss leading

-dynamic

-price skimming

-keystone

-multiple

cost plus pricing

make the product, add a fixed percentage on top of the costs, and sell it for the total

apparel, produce

competitive pricing

using competitors’ pricing data as a benchmark and consciously pricing your products below theirs

walmart

price skimming

charges the highest initial price that customers will pay, then lowers it over time.

apple, designer bags

keystone pricing

doubling the wholesale cost they paid for a product to set a healthy profit margin

small businesses

MSRP pricing

price a manufacturer recommends retailers use when selling a product

barnes and noble

dynamic pricing

continuously adjusts its prices based on different factors, such as competitor pricing, supply, and consumer demand

amazon, uber

multiple pricing

offers a group of products or services at a lower price than if each item were sold separately

bombas

loss leading pricing

increasing the average transaction value

costco, target

types of promotions

-BOGO

-buy in bulk

-rollbacks

-discounts

-coupons

-loyalty programs