Chapter 1414Developing Merchandise Plans

RETAIL MANAGEMENT:

A STRATEGICAPPROACH,

9th Edition

BERMANBERMAN EVANS EVANS

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Chapter Objectives

To demonstrate the importance of a sound merchandising philosophy

To study various buying organization formats and the processes they use

To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation

To discuss category management and merchandising software

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Merchandising

Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals.

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Merchandising Philosophy

Sets the guiding principles for all the merchandise decisions that a retailer makes

Should reflect * Target market desires* Retailer’s institutional type* Market-place positioning* Defined value chain* Supplier capabilities* Costs* Competitors* Product trends

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Scope of Responsibility

Full array of merchandising functions* Buying and selling * Selection, pricing, display, customer

transactionsFocus on buying function only

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Figure 14.1 Harry and David’s Merchandising Philosophy

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Micromerchandising

Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets

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Cross-merchandising

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

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Figure 14.2 The Attributes

and Functions

of Buying

Organizations

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Figure 14.3 At Wal-Mart: Developing an Inside Buying Organization

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Functions Performed

Merchandising view* All buying and selling functions

• Assortments• Advertising pricing• Point-of-sale displays• Employee utilization• Personal selling approaches

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Functions Performed

Buying view* Buyers manage buying functions

• Buying• Advertising• Pricing

* In-store personnel manage other functions• Assortments• Point-of-sale displays• Employee utilization• Personal selling approaches

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Figure 14.4 Merchandising Versus Store Management

Career Tracks

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Figure 14.5 Considerations in Devising Merchandise Plans

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Forecasts

Forecasts are projections of expected retail sales for given periods* Components:

• Overall company projections• Product category projections• Item-by-item projections• Store-by-store projections (if a chain)

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Types of Merchandise

Staple merchandiseAssortment merchandiseFashion merchandiseSeasonal merchandiseFad merchandise

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Staple Merchandise

Regular products carried by a retailer* Grocery store staple examples

• Milk• Bread• Canned soup

Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.

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Assortment Merchandise

Apparel, furniture, auto, and other products for which the retailer must carry a variety of products in order to give customers a proper selection

Decisions on Assortment* Product lines, styles, designs, and colors

are projected* Model stock plan

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Fashion and Seasonal Merchandise

Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles

Seasonal Merchandise: Products that sell well over nonconsecutive time periods

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Table 14.1a Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR RELEVANCE for PLANNING

Target market(s) Evaluate whether the target market is conservative or innovative

Goods/ service growth potential

Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life

Fashion trends Understand vertical and horizontal fashion trends, if appropriate

Retailer image Carry goods/ services that reinforce the firm’s image

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Table 14.1b Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR RELEVANCE for PLANNING

Competition Lead or follow competition in the selection of new goods/services

Customer segments Segment customers by dividing merchandise into established-product displays and new-product displays

Responsiveness to consumers

Carry new offerings when requested by the target market

Amount of investment

Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel

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Table 14.1c Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR RELEVANCE for PLANNING

Profitability Assess each new offering for potential profits

Risk Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs

Constrained decision making

Restrict franchisees and chain branches from buying certain items

Declining goods/ services

Delete older goods/services if sales and/or profits are too low

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Figure 14.6 R&D at Wendy’s

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Figure 14.7 The Traditional Product Life Cycle

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Structured Guidelines for Pruning Products

Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes

Gather and analyze detailed financial and other data about these items

Consider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers

After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand

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Figure 14.8 A Selected Checklist for Predicting Fashion Adoption

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Table 14.2a Factors to Consider When Planning Merchandise Quality

FACTOR RELEVANCE for PLANNING

Target market(s) Match merchandise quality to the wishes of the desired target market(s)

Competition Sell similar quality or different quality

Retailer’s image Relate merchandise quality directly to the perception that customers have of retailer

Store location Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality

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Table 14.2b Factors to Consider When Planning Merchandise Quality

FACTOR RELEVANCE for PLANNING

Profitability Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods; turnover may cause total profits to be greater for the latter

Manufacturer versus private brands

Understand that, for many, manufacturer brands connote higher quality than private brands

Customer services offered

Know that high-quality goods require personal selling, alterations, delivery, and so on

Personnel Employ skilled, knowledgeable personnel for high-quality merchandise

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Table 14.2c Factors to Consider When Planning Merchandise Quality

FACTOR RELEVANCE for PLANNING

Perceived goods/ service benefits

Analyze consumers. Lesser quality goods attract customers who desire functional product benefits; High-quality goods attract customers who desire extended product benefits

Constrained decision making

Face reality. Franchises or chain store managers have limited or no control over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers

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Figure 14.9 Retail

Assortment Strategies

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Figure 14.10 Sephora: A Very Deep Assortment of Cosmetics

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Brands

Private(dealer or store)

Manufacturer(national)

Generic

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Table 14.3 The Berman/ Evans Private Brand Test

Match the Retailer with the Brand Name

Retailer Brand

Bloomingdale’s Arizona Jeans

Costco Sam’s Choice

Kmart Michael Graves

J.C. Penney Martha Stewart

Sears Joseph & Lyman

Wal-Mart Kenmore

Target Kirkland

Macy’s Charter Club

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Figure 14.11 Costco’s Approach to Private Brands

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Figure 14.12 Daffy’s Distinctive Branding Strategy

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Figure 14.13 Applying Category

Management

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Merchandising Software

General Merchandise Planning Software

Forecasting SoftwareInnovativeness SoftwareAssortment SoftwareAllocation SoftwareCategory Management Software

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Figure 14.4a Shelf Logic: Software for Category Management Planning

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Figure 14.4b Shelf Logic: Software for Category Management Planning