MAR3231 Merchandising and Merchandise Plan

Merchandising

The act of acquiring goods and making them available at the places, times, prices, and quantities that enable a retailer to reach its goals.

Merchandising focuses on

on the “Product” aspect of the marketing mix

Merchandising Philosophy

Sets the guiding principles for all the merchandise decisions made by the retailer

Merchandising Philosophy to reflect:

Target market desires

Retailer’s institutional type

Market-place positioning

Defined value chain

Supplier capabilities

Costs

Competitors

Product trends

Urban outfitters philosophy

young-adult (18-to-28 year old) lifestyle brand

Free people philosophy

young (25-to-30 year old), contemporary women’s

Anthropologie philosophy

grown-up women, aged 28-to-45 years, “with a little more money in her pocketbook”

PetSmart and Petco

Merchandising philosophy example

Scope of Merchandising

Merchandising roles and responsibilities vary from company to company

Buying←————> all merchandising functions

Buying

Involves selecting and purchasing goods sold by the retailer

All buying and selling functions

Assortments

Advertising pricing

Point-of-sale displays

Employee utilization

Personal selling approaches

Assortment

Range of products a retailer sells

Assortment examples

Dry dog food, wet dog food, meat rolls, dog treats

Pricing

Petco - $6.50 for 1 lb.

Chewy- $9.99 for 2.5 lb.

Point of Sale Displays

Promotional structures placed at or near retail checkout to capture attention and encourage impulse decisions

Selling Techniques

Prospecting, discovery, active listening, etc

Employee Utilization

Measuring percentage of employee’s available work hours spent on productive, billable tasks

Micromerchandising

Retailers adjust shelf-space allocations to respond to customer differences and other differences among local markets.

Micromerchandising example

Women and Beer consumption

Prefer 6 packs

25% women account for total beer consumption in US and 37% craft beer consumption

Cross-merchandising 

Retailers carry complementary goods and services to encourage shoppers to buy more.

Cross merchandising example

First aid kits with bikes, candy with children’s toys 

Cross merchandising rules

Know “what” your customer is purchasing

Too many firms focus on the product and not the benefit

“Southwest Airlines is successful because the company understands it's a customer service company. It also happens to be an airline.”

Theodore Levitt

“People don’t want to buy a quarter inch drill, they want to buy a quarter inch hole”

Look for solutions

Merchandising Planning

The process retailers use to offer the right kind of product, at the right place, and at the right price. 

Merchandising Planning end goal

To maximize sales while also ensuring you minimize markdowns.

Devising Merchandise Plan

Forecasts

Assortments

Timing

Brands

Innovativeness

F*CK ALL THE B*TCHES and IDIOTS

Forecasts

projections of expected retail sales for given periods

Forecast components

Overall company projections

Product category projections

Item-by-item projections

Store-by-store projections (if a chain)

Forecasting company

Athbomber, WGSN, Pantone

Timing

Can relate to:

• Seasonality

• Special events

• Movie release

• New product releases

Ex: airpods, christmas cakes, fall coffee

Brands

Manufacturer (national, ex: amazon)

Private (dealer or store)

Generic (heinz vs off brand ketchup)

Advantages of Private Labels versus National brands

Store Loyalty

Differentiation Strategy

Increased Channel power over suppliers

Higher profit margins on private labels

Store Loyalty

A 10% increase in private label purchases, increases that retailer’s market share of that household by 3%.

Differentiation Strategy

Opportunity to differentiate store on the basis of recipe, styling, value, features.

Ex: cookie butter recipe

Increased channel power over suppliers

Depends on strength of private label versus national brand

Higher profit margins on private labels

25 to 30% higher (but no return privileges, co-op promotions, slotting fees, and warehousing support).

Assortment

An assortment strategy in retailing involves the number and type of products that stores display for purchase by consumers.

Assortment example (Aldi’s)

One of Aldi’s key strategies is to limit its product selection, which allows the chain to keep prices low while also focusing on quality.

• Aldi is on average 17% cheaper than Walmart

Innovativeness

Retail innovativeness refers to a retailer's ability to introduce new and creative ideas and approaches to the retail industry.

Innovativeness can include

New products/services

New shopping experience

Unique marketing or sales strategy

Ex: Obsess

Implementing Merchandise Plans

1. Gather information

2. Selecting and interacting with merchandise sources

3. Evaluate

4. Negotiate

Gathering information

A retailer gathers information about merchandise decisions from a variety of sources

Who do they gather info from

Consumer

Suppliers

Manufacturers

Wholesalers

Where can retailers track consumer preferences?

Through consumer loyalty programs

How to track preferences

1. Use a simple point system

2. Use a tier system to reward loyalty

3. Charge an upfront fee for VIP benefits

4. Use nonmonetary programs around customer values

5. Partner to provide all-inclusive offers

Loyalty program examples

Delta Skymiles, DSW

Merchandise Sources

Company-owned

• one strategic business unit within the retail company

Outside, regularly used supplier

Outside, new supplier

Merchandise Sources

Whole Foods, Sherwin Williams

Inspection

Occurs on every single unit delivered

Ex: shipping boxes

Sampling

Used with regular purchases of large quantities of breakables, perishables, or expensive items

Ex: cars

Description

items are not sampled or inspected