PPT

Merchandise Management

  • Definition: A process by which a retailer offers the right quantity of the right merchandise in the right place at the right time, aiming to meet financial goals.

  • Key Components:

    • Sense market trends: Understanding the dynamics affecting consumer behavior and purchasing.

    • Analyze sales data: Evaluating past sales to drive future decisions.

    • Adjust prices and inventory: Making necessary modifications based on the analysis to optimize profit.

Merchandise Management and Investment Portfolio Management

  • Comparison to Traders: Similar to stock exchange traders managing portfolios; retail buyers manage merchandise inventory.

  • Risk Assessment: Both sectors continuously assess the risks associated with purchasing decisions.

Buying Organization

  • Merchandise Classifications and Organization:

    • Structure:

      • Merchandise Groups managed by general merchandise managers (GMM).

      • Departments: Managed by divisional merchandise managers (DMM).

      • Category: A group of items targeting the same customer type.

      • SKU (Stock Keeping Unit): The smallest unit available for inventory control, defined by size, color, and style.

Merchandise Category – The Planning Unit

  • Definition: A distinct manageable group of products/services perceived as interrelated or substitutable.

  • Importance: Serves as the basic unit for merchandising management decisions, potentially varying in definitions among retailers.

Category Management

  • Objective: Maximize sales and profits of an entire category instead of individual brands.

  • Examples: Comparison of categories like breakfast cereals, men’s knitted shirts, and dairy products.

  • Retail Strategies: Department stores manage merchandise at the category level; supermarkets may organize around brands.

Efficient Category Management

  • Managing by Category: Helps to ensure a well-rounded assortment that maximizes profit and performance in allocated space.

  • Category Captain: A favored vendor collaborates with retailers to optimize product placement, promotions, and pricing, but can create conflicts of interest.

Evaluating Merchandise Management Performance

  • ROI as a Measure: Return on Investment (ROI) serves as a general measure, but does not fully account for merchandise managers' limited control over all assets and expenses.

  • Control Factors: Merchandise managers control the merchandise purchased, pricing, and related costs, but not operating expenses or supply chain management.

GMROI - Gross Margin Return on Inventory Investment

  • Importance: A key financial ratio to evaluate merchandising performance, indicating how many gross margin dollars are earned per dollar of merchandise.

  • Calculation:

    • GMROI = Gross Margin Percentage x Sales-to-Stock Ratio

Merchandise Planning Process

  • Steps:

    1. Forecasting category sales and developing an assortment plan.

    2. Outline monthly sales, inventory needs, and budget for new merchandise.

    3. Negotiating with vendors and making purchases based on forecasts.

    4. Ongoing monitoring of sales to make adjustments—not strictly sequential.

Types of Merchandise Management Planning

  • Staple (Basic) Merchandise:

    • Predictable demand, easy forecasting, requires continuous replenishment.

  • Fashion Merchandise:

    • Short-term demand with continuous new product introductions, more challenging to forecast.

    • Seasonal Merchandise: Fluctuating sales based on timing.

Sales Forecasting Factors

  • Controllable: Promotions, store locations, merchandise placement.

  • Uncontrollable: Seasonality, economic conditions, weather.

  • Example: The "Lipstick Index" indicates that lipstick sales rise during economic downturns.

Establishing Control Systems

  • Definition: Systems to manage the flow of merchandise, ensuring minimized inventory while maintaining product availability.

  • Staple Merchandise Control: Automatic reordering systems, monitoring inventory levels to prevent stockouts.

Fashion Merchandise Control Systems

  • Merchandise Budget Plan: A financial plan for the category that dictates monthly spending limits to achieve sales and inventory turnover goals.

Vendor Negotiation Strategies

  • Key Considerations: Price and gross margin, markdown money, advertising allowances.

  • Negotiation Tips: Ensure clear communication, separate people from the problem, and understand the limits of concessions.

Retail Pricing Strategies

  • Types: High/Low pricing, EDLP, markdowns, dynamic pricing, and various discounts like quantity and leader pricing.

Building Brand Equity**

  • Strategies: Create awareness, foster favorable associations, maintain consistent imagery.

Retail Communication Mix**

  • Methods: Direct marketing, online media, mass media advertising, sales promotions, public relations.

  • Planning Approach: Set objectives, determine budget, and evaluate the effectiveness of communication programs.