buying plan. (1)

Haute Hanger

Buying Plan for Haute Hanger

FASH464 Fashion Merchandising: Planning, Policies and Implementation

Dr. Irene Foster

By: Lara Garnett

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Contents Annual Sales Plan I ......................................................................................................................... 1

Skeletal Statement ....................................................................................................................... 1

Monthly Sales Plan...................................................................................................................... 2

References ................................................................................................................................... 4

Merchandise Demand II .................................................................................................................. 5

Competitive Survey ..................................................................................................................... 5

Trends of Fall 2014 ..................................................................................................................... 7

Accessories and Jewelry.............................................................................................................. 7

Dresses ........................................................................................................................................ 9

References ................................................................................................................................. 10

Unit Price And Cost III ................................................................................................................. 11

Planned Markup ........................................................................................................................ 11

Company Markdown Policy...................................................................................................... 14

Types of Market Pricing ............................................................................................................ 15

References ................................................................................................................................. 17

Vendors IV .................................................................................................................................... 18

Types of Vendors ...................................................................................................................... 18

Buying Strategy ......................................................................................................................... 19

Vendor Analysis ........................................................................................................................ 20

References ................................................................................................................................. 22

Pre-Plan Buying For August Opening V ...................................................................................... 23

Open to Buy .............................................................................................................................. 24

References ................................................................................................................................. 27

Buying Trip VI .............................................................................................................................. 28

References ................................................................................................................................. 34

Negotiation VII ............................................................................................................................. 35

Warren Sofia Jewelry ................................................................................................................ 37

Bijoux Wholesale ...................................................................................................................... 37

Rose Wholesale ......................................................................................................................... 38

References ................................................................................................................................. 40

Distribution VIII ........................................................................................................................... 41

Flow and Distribution................................................................................................................ 41

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Stock Delivery Process.............................................................................................................. 42

Marking System ........................................................................................................................ 42

Price Ticket ............................................................................................................................... 43

References ................................................................................................................................. 44

Merchandise Control IX ............................................................................................................... 45

Inventory System....................................................................................................................... 45

Merchandise Available .............................................................................................................. 47

Retail Deductions ...................................................................................................................... 48

Ending Inventory Value ............................................................................................................ 49

Gross Margin and Cost of Goods .............................................................................................. 50

Stock Turns ............................................................................................................................... 50

Gross Margin Return on Investment ......................................................................................... 51

Average Weeks of Supply ......................................................................................................... 52

References ................................................................................................................................. 54

Appendix A ................................................................................................................................... 55

Appendix B ................................................................................................................................... 56

Appendix C ................................................................................................................................... 62

Appendix D ................................................................................................................................... 64

Appendix E ................................................................................................................................... 66

Appendix F.................................................................................................................................... 67

Appendix G ................................................................................................................................... 70

Appendix H ................................................................................................................................... 77

Appendix I .................................................................................................................................... 78

Bibliography ................................................................................................................................. 81

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Annual Sales Plan I

Skeletal Statement

A Skeletal Statement is crucial to gaining knowledge about the financial standing of a business.

The skeletal statement contains three basic merchandising factors which is composed of net

sales, cost of merchandise sold, expenses, plus gross margin and profit (Cynthia R. Easterling,

2013). Each component of the skeletal statement plays an intricate role in the functionality of a

business. According to Easterling (2013), Gross margin and profit are margins or “results”; these

factors are the remainders after two or more of the basic factors interact (p.45). Gross margin can

be defined as the difference between the net sales and cost of merchandise sold. A skeletal

statement can also be referred to as a profit and loss statement, operating statement, or income

statement. These statements overall summarize the income, cost of merchandise sold, and

expenses given during a specified time period which could be a month, a quarter, a season, or a

year. Skeletal (P&L) statements can be prepared for an intended department, an entire store, or

several stores that consist of a district or region within a corporation (Cynthia R. Easterling,

2013). Businesses strongly utilize profit and loss statements because the company figures can be

compared to previous statements and industry wide figures.

In Appendix A Table A.I shows Haute Hanger’s skeletal statement. The expected net

sales generated by the company is $782,210.00. In order to project whether Haute Hanger will

generate a profit, the net sales is multiplied by the expected profit percentage. According to

Moran (1998), the company is projected to generate a profit of $18,706.77 (p. 86). This will

provide the company a knowledgeable outlook of the market, and to making informed buying

decisions.

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Skeletal Statement

Net Sales $782,710.001 100.00%

COG $457,728.81 58.48%

GM $324,981.19 41.52%2

EXP $306,274.42 39.13%3

P $18,706.77 2.39%

Table 1.1

Monthly Sales Plan

In order to configure the monthly planned sales projections, the net sales is taken and then

multiplied by the monthly percent. It is important that a business projects monthly sales in order

to develop their “individual retail strategy and build a sustainable competitive advantage to

generate a continuing stream of profits” (Weitz, 2012). To calculate the monthly sales plans for

Haute Hanger, the projected net sales of $782.710.00 was multiplied by the percentage. It was

projected that Haute Hanger is expected to generate the most profit during the month of

December. It is essential that by forecasting category sales and developing an assortment plan for

merchandise in selected categories, helps determine the amount of inventory needed to support

the forecasted sales and assortment plan (Weitz, 2012, p.308). This assists buyers in developing a

plan that “outlines the sales for each month, the inventory needed to support the sales, and the

money that can be spent on replenishing sold merchandise and purchasing new merchandise”

(Levy & Weitz, p. 308). In Appendix A Table A.2 shows an detailed breakdown of planned sales

monthly. It is shown below in Table I.II Haute Hanger’s monthly planned sales goals.

1 Net Sales, Developed in Business Plan by Barter, Garnett, Gundel, Lehrer, Matvichuk 2 Moran, 1998 p.86 3 Moran, 1998

3

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

Planned Sales Monthly

Series1

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References

Moran, A. (1998). The combined financial, merchandising, and operating results of retail stores

in 1997. FOR/MOR 1998 Edition p.73-76

Easterling, E. L. (2013). Merchandising Mathematics for Retailing. New Jersey: Prentice Hall

Weitz, L. &. (2012). Retailing Management. New York: The Mcgraw Companies.

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Merchandise Demand II

Competitive Survey

A competitive survey was constructed analyzing three main competitors that sell similar

merchandise to Haute Hanger. The competitors that were measured included Francescas,

Neiman Marcus, and Forever 21. There are crucial factors that were considered when

constructing a competitive survey which is at, above, and below market pricing. Competitive

pricing is the same as “at market pricing and is defined by Easterling (2013), as pricing that has

comparable products exactly at or near the same price as the competitors prices for those

products (p. 143). Below market pricing or “leader pricing” occurs when a retailer offers brand-

name merchandise at special or reduced prices. Lastly, prestige pricing or above-the-market

pricing is often utilized by select retailers to feature luxury or high quality items that are very

fashionable and also highly exclusive. By having highly exclusive goods and a superior level of

personal service, this reduces the ability of the consumer to compare prices (Easterling, 2013).

Another important factor that is considered for a new storefront is the categories the

following competitors are offering. Haute Hanger’s at market competitor is Francescas and for

accessories the company offers a relatively wide selection in watches, sunglasses, swimwear

cover-ups, scarves & wraps, belts, leg wear, and hair categories. In the apparel department

specifying in dresses, Francesca’s categories consisted of prints, casual, day to night, and date

night dresses. The company’s below market competitor includes Forever 21 and their accessory

department was composed of jewelry, bags and wallets, hair accessories, sunglasses or eyewear,

scarves and gloves, belts, socks, and lastly home or gift. The dress department was composed of

cocktail, going out, mini, midi & maxi, high-low, and little black dress. The last store observed

was Niemen Marcus and featured an above market pricing strategy and offered exclusive

categories in accessories which included sunglasses and eyewear, scarves, wraps, belts, gloves,

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hats, capes, ponchos and vests, along with tech covers for phone and ipads. The dress department

offered luxury brands in categories of daytime, work, party, cocktail, formal and maxi. The

competitor that was found to carry the most variety in styles was Neiman Marcus. Francesca

offered a small selection of styles, but created scarcity within the store environment to encourage

impulse buys. In Appendix B Table B .1explicitly details the criteria Haute Hanger utilized in

both departments considered when purchasing merchandise, such as color, number of styles,

material composition, and price point. The following chart is used as a competitive analysis of all

three competitors Francesca’s, Neiman Marcus, and Forever 21.Refer to Appendix B Tables B.2-

B.4 to see competitor analysis. In Figure II.I the chart categories and specifications that Haute

Hanger followed to build a competitive survey are shown below.

Department

category

Color

# of styles

material

Price

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Trends of Fall 2014

Accessories and Jewelry

The following trends for Fall of 2014 were analyzed in order to make informed

purchasing decisions for the upcoming season. The accessory trends that are readily on the rise

include oversized dangling earrings, bejeweled super sized necklaces that varied in length to

choker style adhering close to the neck to falling right above the waistline. Trends for earrings in

relation to size were large, long, and dangling. For colorations in earrings, it remained in cool

tones such as grays, dark maroon tints, and black. The only consistent warm tone that was

speculated was gold. There were a variety of styles in earrings which included fringe at the

bottom of dangling earrings, large geometric sizes ranging from rectangular to square shapes.

Other shapes that were shown included the classic round hoop earrings with smooth to sharp

edges. According to Vogue, “bamboo oversized hoops echoed Olivier Roustiens urban

jungle”(Vogue, 2014). Several jewelry selections in the earring department mimicked stacked

gold three dimensional shapes together. In Appendix B Figure B.10., gold creole hoops can be

shown as a new evolving trend for Fall 2014.

As for trends in necklaces, size is oversized and extremely large. The colorations

observed for necklaces include a variation in color from light pastel blue to drabby dark maroon

and brown undertones. Other colors include dark navy blue, royal blue, black, mustard yellow,

and rose pink. The styles are large floral designs, fringe, tassels, and round beads. Also seen in

Vogue Fall 2014 jewelry trends included thick chokers, dangling necklaces, and shiny crystal

statement chokers. Designers that featured large statement jewelry pieces were Alexandra Wang

who focused primarily on “colored knitwear, working in all black silhouettes, paired with

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graphic spiky Swarovski crystal statement chokers”(Vogue, 2014). In Appendix B Figure B.11

Large statement chokers designed by Alexander Wang are illustrated. Swarovski is one of the

largest crystal suppliers to jewelry manufacturers (Swarovski, 2014).

In bracelets the size included oversized, long, and stacked in multiples on the models

wrist. Colors shown were dark and light gray, black, rose petal gold, light turquoise, white,

mustard yellow, and the classic gold. Styles ranged from round, long and cuffed, to cuffed with

dangling gold chains. On several cuffed bracelets the company logo was oftentimes presented.

Refer to Appendix B Figure B.12. to see company logos and cuff style bracelets. Rings seen for

Fall 2014-Winter 2015, ranged in several sizes from small to oversized and in multiples across

the fingers. Apparent colors for Fall were dark forest green, black, gray, turquoise blue, dark

violet, silver, gold, and teal (Style,2014). The styles mostly seen in rings were in multiples,

geometrically shaped, and some rings contained fringe. Another trending ring pattern was animal

figures at the face of the ring of a tiger or elephant. Ring styles, colors, and sizes can be seen in

Appendix B Figure B.5. The last accessory evaluated was watches. The watches ranged in color

from silver, gold, and black. The types of styles seen were chains, watches that appeared to

mimic bracelets, plastic material, and lastly leather basic straps. In Appendix B Figure B.6 styles

of watches are shown (Rose Wholesale, 2014). In Figure II.II the following Fall 2014 color trend

report is shown below. According to Pantone color institute director Leatrice Eiseman (2014),

“This is a season of untypical colors—more reflective of the imagination and ingenuity, which

makes for an artful collection of colors and combinations not bound by the usual hues for

fall”(Pantone, 2014).

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Figure II.II (Pantone, 2014)

Dresses

Dresses from casual to dressy wear are an essential type of apparel that makes a statement for not

only the buyer, but the consumer as well. There are a high assortment of dresses that represent

different sets of color, silhouette, and style that buyers must analyze before purchasing. Colors

that were seen in dresses for Fall 2014, were silver, black, orange, rose petal, cool silver tones,

mustard yellow, and white (Style, 2014). The silhouettes for dresses included A-line sixties style,

flowy and maxi length, boxy shaped and broad in shoulder panel, or shapely at the top half of the

dress but flowy towards the bottom half. A variety of styles in dresses included patterned,

embroidered, and styles that contained fur trim at the collar or at the bottom half of the dress. In

Appendix B Figure B.7-B.9 the silhouette, style, and color is displayed.

The consumers of Haute Hanger are considerably style conscious, and the target

market is between the ages of 18-35 with a relatively high disposable income. The trends

analyzed are crucial in the deciding factor of what type of styles, product lines, and assortment of

colors to be represented within the store environment. This will achieve customer satisfaction,

and consumers will have a strong loyalty to the company brand.

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References


Pantone. (2014). Retrieved from Womens Fashion: Color that Transcends Time and Place:

http://www.pantone.com/pages/fcr/?season=fall&year=2014&pid=3

Warren Sofia Jewelry. (2014) Retrieved from Wholesalers and Distributors of Costume Jewelry:

http://www.warren-sofiajewelry.com/index.php?page=4&title=Fashion

Bracelets&section=products.php&cat=BR#

Rose Wholesale. (2014). Retrieved April 19, 2014, from Sparkling Jewerly And Watches, for

effortless elegance and casual chic: http://www.rosewholesale.com/cheap-online/jewelry-

watches-c2/

Style. (2014). Retrieved from Accessory Jewerly Trends:

http://www.style.com/accessories/search/jewelry

Swarovski. (2014). Retrieved from Styles and Trends in Jewerly:

https://www.swarovski.com/Web_US/en/customer_service?contentid=10007.190290#4

Vogue. (2014). Retrieved from Vogue Jewerly Trends for Fall/Winter 2014-2015:

http://en.vogue.fr/jewelry/runway-trends/diaporama/fall-winter-2014-2015-jewelry-

trends-fw2014-fashion-week-celine-balmain-fendi-chanel-saint-

laurent/17884/image/986210#!creole-hoops-at-balmain


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Unit Price And Cost III

Planned Markup

It is important that a business utilizes an organizational structure in the buying process. In every

category a buyer is purchasing for, there is a merchandise group, department, classification, and

category (Levy & Weitz, 2012, p.303-305). The two departments that are being purchased for

which include accessories, and women’s dress apparel. A classification can be defined as “an

assortment plan or the set of SKU’s that a retailer will offer in a merchandise category”(Levy &

Weitz, 2012). Under the accessories department, there are five distinct classifications which

includes jewelry such as earrings, necklaces, bracelets, rings, and watches. When a retailer

deciphers unit price of each item being held in the store, it is important to find the markup

percentage. Markup can be defined as “the difference between the retail price and the cost of an

item” (Levy & Weitz, 2012 p.379). Below In Figure III.I the following equation is utilized to

find the markup percentage for Haute Hanger.

Retail Price = Cost of Merchandise + Markup

Markup Percentage = 𝑅𝑒𝑡𝑎𝑖𝑙 𝑃𝑟𝑖𝑐𝑒−𝐶𝑜𝑠𝑡 𝑜𝑓 𝑀𝑒𝑟𝑐ℎ𝑎𝑛𝑑𝑖𝑠𝑒

𝑅𝑒𝑡𝑎𝑖𝑙 𝑃𝑟𝑖𝑐𝑒

The markup percentage was calculated by taking the retail price point and subtracting

it by the cost of merchandise. According to Levy & Weitz (2012), “most retailers set prices by

marking up an item’s cost to yield a profitable gross margin, then this initial price is adjusted on

the basis of insights about customer price sensitivity and awareness of competitive pricing”

(p.379). It is important that Haute Hanger has the correct markup percentages in order to be

successful. The markup percentages were configured by the following formula above, and by

taking the average of Haute Hanger’s at market competitor Francesca’s price points for both

departments and in all classifications. The markup percentage was chosen in order for the

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business to cover basic operating expenses along with being an effective method to increasing

sales and profits (Levy & Weitz, 2012). Another component necessary for a company to remain

competitive in the retail industry is the use of mark downs or “price changes”. Markdowns are

defined as slight or significant reductions in reflected in price in order to be an effective tool for

generating consumer traffic, increasing sales, and acquiring money to purchase new merchandise

(Easterling, 2013, p.149).The markup percentage was chosen in order for the business to cover

basic operating expenses along with being an effective method to increasing sales and profits.

A crucial element in order for Haute Hanger buyers to be successful is by purchasing the

right merchandise and having merchandise categories. Haute Hanger will be purchasing for two

departments resulting in fifty-percent of the total stores merchandise. Each department is then

divided into categories which include classifications and sub-classifications. Levy & Weitz

(2012) define classifications as the third level for categorizing merchandise and organizing

merchandise management activities (p.304). In Appendix C, Table C.1 shows explicit

breakdown of the departments including percentage of merchandise within each classification.

Sub-classifications are often utilized by a buyer to specify in further detail the items to purchase

from a vendor. The specifications of sub-classifications often include and are not limited to

color, size, material, and silhouette. The accessory department consists of five classifications

which include earrings, necklaces, bracelets, rings, and watches. In Figure III.II, is the

percentage breakdown of the first department which contributes to twenty-percent of the stores

merchandise.

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Figure III.II

The second department is women’s Apparel in dresses which composes of 30% of the

stores merchandise. This department also contains classifications which include casual, formal,

prints, party, and business/daytime dresses. Through thorough investigation of Haute Hangers

competitors, the sub-classifications were then determined. The women’s dress department is then

broken down by color, sizes, and silhouette. In Appendix C, Chart C.2-C.3 shows the number of

total departments in Haute Hanger and the percentage breakdown of each. These percentages

were taken from the average percentages of Haute Hangers at market competitor Francesca’s

(Francesca’s, 2014). In Figure III.III, represents the percentage breakdown of the second

department below

30%

10%20%10%

30%

Department 1 Accessories

Earrings Necklaces bracelets Rings watches

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Figure III.III

Company Markdown Policy

Haute Hanger will be following markdown policies to ensure continual movement of stock, and

the business is always making a profit. According to Easterling (2013),

“Markdowns serve several purposes such as stimulating sales of slow moving or inactive

stock, disposing of broken assortments, discontinued lines, damaged merchandise,

providing funds for the purchase of new merchandise, and meeting competitors prices for

the same or similar merchandise” (p. 149).

Markdowns are essential for a business because they assist a retailer in moving merchandise.

Often times markdowns are used as a merchandising tool to draw consumer traffic to a given

area. If markup policies are instilled for Haute Hanger, the business will also attract consumers

that are highly price conscious, and will still be able to purchase at the store. Excessive

markdowns also provide the company insight on items that were not attracting sufficient amount

of consumers (Easterling 2013). This will allow buyers for Haute Hanger to allocate and adjust

future assortments. In order to effectively markdown merchandise, “the timing of markdowns

relates directly to the amount of the markdowns needed in order to sell merchandise and protect

40%

10%10%

30%

10%

Dresses

Formal Prints Party Dress Business Dress

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the gross margin or profit potential (Easterling, 2013 p.150). Timing is imperative in markdowns

as it can be highly beneficial on turnover. Markdowns can decrease the value of the inventory

and increase sales.

Types of Market Pricing

There are different types of market pricing that the retail industry utilizes. Market pricing is

essential in defining what class level a given business is at. Pricing policies affect the overall

success of a retail establishment. When Haute Hanger observed competitors in the area, it found

that Francesca’s is close in target market and merchandise assortment therefore the boutique

offered competitive pricing. Since Francesca’s is not located in the same proximity as Haute

Hanger, the companies pricing will meet or beat their competitors pricing, formally known as at-

the-market pricing strategy. Several retailers that exhibit this type of pricing strategy lures

consumers into believing that the retailer offers the lowest prices (Easterling, 2013). Even though

Haute Hanger will make occasional price adjustments for consumers who demand a lower price,

the company’s products may be initially priced higher than those of other competitive stores

(Easterling, 2013 p.144).

It is important that a business employs initial markup on merchandise. According to

Easterling (2013), initial markup is the markup that is placed on merchandise as it is received

into the store. Initial markup can be planned by working with either dollar figures or percents

(Easterling, 2013 p.123). Businesses use initial markup because it reveals whether the retail price

of goods is sufficient enough to cover expenses, reductions and provide a company a profit.

Another type of markup commonly used is average markup. Average markup is defined as by

using the total cost and total retail of the merchandise (Easterling, 2013 p.115). A key component

for measuring how much a retailer is selling in actuality is the sell-through equation. Sell-

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through is defined as a measure a retailer uses to tell how much of a style or product has been

sold and is the best indicator of the selling success of an item. In Figure III.IV – Figure III.VI

shows the equation used for calculating the initial markup percentage, average markup, and sell-

through. The average price point for Haute Hanger varied from each departmental classification.

The price range for accessories was from $14.00-22.00. In the second department of women’s

dresses, the price range was from $49.00-104.00. In Appendix C, Table C.3 –C.4, shows a

breakdown of the average units and price points per sub-classification. In Appendix C, C.5

shows a detailed percentage breakdown of what each department represents.

𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑎𝑟𝑘𝑢𝑝 % =𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 + 𝑃𝑟𝑜𝑓𝑖𝑡 + 𝑅𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛𝑠

𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 + 𝑅𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛𝑠

Figure III.IV

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑀𝑎𝑟𝑘𝑢𝑝 = 𝑈𝑛𝑖𝑡𝑠 𝑥 𝐶𝑜𝑠𝑡 𝑃𝑟𝑖𝑐𝑒

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑀𝑎𝑟𝑘𝑢𝑝 = 𝑈𝑛𝑖𝑡𝑠 𝑥 𝑅𝑒𝑡𝑎𝑖𝑙 𝑃𝑟𝑖𝑐𝑒

Figure III.V

𝑆𝑒𝑙𝑙 − 𝑇ℎ𝑟𝑜𝑢𝑔ℎ % =(𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑜𝑛 ℎ𝑎𝑛𝑑 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑜𝑛 ℎ𝑎𝑛𝑑)

𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑜𝑛 ℎ𝑎𝑛𝑑

Figure III.VI

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References

Cynthia R. Easterling, E. L. (2013). Merchandising Mathematics for Retailing. New Jersey:

Prentice Hall .

Francescas, (2014). Uniquely Francescas Annual Report. Retrieved at:

http://files.shareholder.com/downloads/ABEA-

67ZODQ/2942757147x0x667959/795B6255-217B-4011-92EC-

DBCF2AA45915/2012_Annual_Report_FRAN.pdf [Accessed 3 Mar. 2014].


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Vendors IV

Types of Vendors

After Haute Hanger has successfully planned the store budget and has made sales projections for

three and six month increments, the next step is to purchase the right assortment of merchandise

for the store. Haute Hanger’s buyer will then select merchandise among three vendors, keeping

in mind wholesale price, color, style, size, and silhouette. A vendor, who can also be formally

referred to as a resource or a supplier, is a person or firm such as a manufacturer, importer, or

wholesaler, from whom a retailer purchases goods (Easterling, 2013). It is key that a retailer

purchases from the correct vendor that is suitable to their target markets needs.

By selecting the correct vendor, the vendor improves the retailers profit margin and

also enables retailers to offer their customers lower prices or better service (Easterling, 2013).

During the buying process, the appropriate color selection, style, size and silhouette of apparel

and accessories are thoroughly looked into before purchasing. There are two types of vendors

Haute Hanger purchased from which included the NEAC or New England Apparel Club, and

online vendors. When having a relationship with vendors, the buyer will be responsible for

negotiating the wholesale price of goods, but also negotiate the terms of sale, transportation

arrangements, services, and stipulations to be included in the purchase contract (Easterling, 2013

p.80). In Appendix D Figure D.1-D.2 shows the website page of the two online vendors used for

both jewelry and dress apparel.

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Buying Strategy

The three vendors Haute Hanger bought merchandise from was Rose Wholesale, BijouxUSA,

and Warren Sofia Jewelry. Rose Wholesale would be 60% of the buying because the companies

dress and accessory selection offered were variety of colors, sizes, and styles that would fit the

target market of the company. The two remaining vendors focused primarily on accessories.

Warren Sofia Jewelry and BijouxUSA represented 20% of the buying. Warren Sofia Jewelry had

a wide variety in accessory assortments, and were able to successfully purchase each

classification needed. Since Haute Hanger is a mix between the casual and dressy woman, a

vendor that contains both types of merchandise is vital to the company’s success. The accessory

department represents 20% of the buying, and 30% for the dress department.

Two common buying strategies that buyers use in the retail industry is the

concentrated strategy and dispersion. Concentrated buying is defined as having limited suppliers,

quantity discounts, and quick delivery (Foster, 2014). Another universal buying strategy is

dispersion and is defined as greater variety, awareness of “hot” items, ensures backup sources of

supply, and promotes competitive services (Foster, 2014). Fashion merchandise often is less

concentrated. Since Haute Hanger is in a highly competitive market of surrounding boutiques

offering to a similar target market, it is vital to have new and trendy merchandise replenished on

a continual basis. The buying strategy Haute Hanger will employ is through dispersion. The

company will use this strategy because it offers a greater variety in product, and in a small

boutique setting it is important at maintaining a trendy and fashion forward brand image.

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Vendor Analysis

As part of the buying process, it is important to analyze vendors in terms of criteria they can

offer. In Appendix D Table D.3, shows a vendor matrix that was constructed that ranked each

supplier. A likert scale was developed ranking one as not important and five of extreme

importance. The vendor that contained the highest score would be considered for re-order by

Haute Hanger.

Each vendor was precisely analyzed to meet the following criteria. The first vendor contacted

was Warren and Sofia Jewelry at the New England Apparel Mart. The representative was

Geoffrey Hayes and could be contacted by both phone and email which can be found in

Appendix D Table D 4. The representative also provided the buyer a product line sheet of all the

wholesale prices on jewelry assortments through their online website. The buyer was then

prompted for a business ID and password for access on those prices. In Appendix D Table D.5 is

the list used by Haute Hanger for wholesale price on specific items. In Figure IV.I shows a

picture of the suppliers’ logo and a jewelry necklace. The vendor was chosen by the buyer

because of its exceptionally handcrafted jewelry pieces, but also for its outstanding quality.

4

Figure IV.I

4 Warren Sofia Jewelry, 2014

21

The second vendor that was contacted was BijouxUSA and was an online vendor.

When using online suppliers navigating successfully on an online site when looking for

merchandise is highly convenient. The buyer chose BijouxUSA because it offered a variety of

assortment in jewelry; several ring styles, colors that were trending for Fall 2014, and an mixture

of sizes for accessories. At the bottom of the site, there was contact information where you could

call a number to speak directly to a representative if a buyer had a special request. In Figure IV.II

is a detailed picture of the company logo.

5

Figure IV.II

The last vendor the buyer contacted was another online vendor called Rose Wholesale.

This vendor was chosen because it is offered a wide variety in jewelry selections and dress

apparel along with packaged bundled deals for purchasing items over 10 units. It is important

that a buyer negotiates the best price possible in vendor relations because it allows a business to

purchase large quantities at a discounted price. In Figure IV.III is a picture of the online suppliers

logo.

6

Figure IV.III

5 BijouxUSA, 2014 6 Rose Wholesale, 2014

22

References


Prentice Hall .

Foster , I.. A. (2014). The Merchandise Buying Process Power Point. Retrieved from<

http://Blackboard.framingham.edu>



watches-c2/





http://blackboard.framingham.edu/

23

Pre-Plan Buying For August Opening V

In order for Haute Hanger to accomplish opening the store in August, the company will have to

precisely measure how many units of merchandise and the amount of money needed to open.

According to Levy & Weitz (2012), open-to-buy is defined as

“After the merchandise is purchased on the basis of the merchandise budget plan, the

open-to-buy system is used to keep track of the actual merchandise flows, what the present

inventory level is, when merchandise is scheduled for delivery, and how much has been sold to

customers” (p.322).

After determining the inventory level of the business, it is important the buyer “will forecast

SKU and category sales, which determine the assortment plan and establishes the model stock

plan” (Levy & Weitz, 2012, p. 318). This will also assist Haute Hanger in developing a detailed

assortment plan of specific SKU’s that are in high demand. By determining variety and

assortment, this provides Haute Hanger with an operational retail strategy. A company’s breadth

and depth of the assortment in a merchandise category can overall affect the retailers brand

image (Levy & Weitz, 2012, p.314). The open to buy system is vital to a business’s success

because without keeping track of merchandise flow, merchandise could be delivered when it is

not needed, creating an over-abundance, or be unavailable when it is needed, creating a deficit

(Levy & Weitz, 2012).

Haute Hanger will be utilizing bottom up planning and is defined as “involving lower

levels in the company developing performance objectives that are aggregated up to develop

overall company objectives” (Levy & Weitz, 2012, p. 159). By having lower management

communication, buyers and store managers estimate what they can achieve, and predictions that

are constructed are transmitted up the organization to the corporate executives (Levy & Weitz,

24

2012). Another type of planning a business can employ is top –down planning which means

goals set at the top of the organization are passed down to lower operating levels. There are main

differences between these two strategic types of planning includes where level of performance

goals have been established. The bottom-up strategy is rated the best fit for Haute Hanger

because the company is a small business in relation to chain boutique stores. Therefore the

buyers and managers are highly knowledgeable on the type of merchandise that sells. In Figure

V.I below displays the first 3 months of planned sales of the month of October, including EOM,

and BOM.

Figure V.I

Open to Buy

The chart above represents Haute Hangers monthly sales for the period of August

through October. In order to calculate Haute Hangers open to buy allowance for August 2014,

the equation would involve adding planned sales, plus reductions, plus EOM (End of Month),

and subtracting BOM (Beginning of Month). The projected monthly sales percentages were

directly obtained from Moran (1998) because Haute Hanger is a new storefront and does not

encompass previous sales figures from past years.

After the Open to Buy allowance was calculated, the average stock was then

calculated by taking the first three months Haute Hanger is in business August, September,

October and then adding the first three months together, and dividing it by the turnover rate of

2.81% (Moran, 1998, p.11). Stock turn or turn over rate can be defined as “the number of times

the average stock is sold during a given period of time in relation to the sales for the same

25

period” (Easterling, 2013). Turnover is extremely crucial to a business because it is often used as

a tool for evaluating and measuring the efficiency of a firms operation (Easterling, 2013).

The next component assessed was the calculation of basic stock. Basic stock can be

calculated by the average stock subtracted by average sales for the three month period. BOM is

the beginning of the month inventory, which is $ 68,451.38 for the month of October. The BOM

is primarily used for the buyer to determine the amount of stock needed in order to meet planned

sales figures (Easterling, 2013). To calculate the BOM, the planned sales for the month are added

to the basic stock inventory on hand. In Appendix E Table E.1 it shows the planned sales for

each month starting at August 1st 2014 -July 2015 fiscal year.

In Appendix E Table E.2 explicitly details the department breakdown of number of

units purchased, wholesale price, average retail price, and the overall dollar value amount of

units purchased. Some of the main color trends of Fall 2014 were presented in the department

classification chart. The sub classifications represented include colors of black, mustard yellow,

silver, orange, and rose petal. In sizes, there is a wide variation that included Extra Small, Small,

Medium, Large, and Extra Large. These type of charts are vital for buyers and managers of

stores because it creates knowledge and awareness of the SKU assortment specifications of

merchandise bought. According to Levy & Weitz (2012), there are three aspects that go into

SKU assortment and variety of merchandise. Variety “is the number of merchandise categories a

retailer offers” (p.32). It is important that a new storefront offers the best variety in a given

department, in order to give the consumer more options to choose from. Assortment can be

defined as “the number of different items offered in a merchandise category” (Levy & Weitz,

2012, p.32). Both of these aspects of merchandise assortment are referred to as breadth of

26

merchandise and depth of merchandise. Each different item of merchandise is called a “stock-

keeping unit” or SKU (Levy & Weitz, 2012).

Within each department there will be specific classifications. In the accessories

department it includes earrings, necklaces, bracelets, rings, and watches. The sub-classification

Haute Hanger was purchasing for in accessories was in color and material. The colors selected

for the Fall 2014 season included gray, maroon, silver, black, and gold. Material was chosen as a

sub classification because watches and bracelets can vary greatly in the types of material it can

be constructed in. The materials chosen were gold, silver, titanium, sterling silver, lead and

nickel free. For the second department womens dresses, the sub-classifications included color

and size. In order to determine which colors should be selected to buy, competitors were

carefully analyzed, runway shows, and pantone and style (2014) trend reports. Other sources of

information about trends included trade shows such as the New England Apparel Club (NEAC,

2014). For dresses, the sub-classification of colors included orchid purple, royal blue, black, red,

silver, misted yellow, cypress green, and sangria. The colors were chosen from the pantone trend

report for 2014. In section II Merchandise Demand Figure II.II shows the entire range of colors

for Fall season 2014 (Pantone, 2014). The sizes chosen for Haute Hanger included x-small,

small, medium, large, and extra large. These were based off of the Haute Hangers main

competitor Francesca’s (2014).

27

References


Prentice Hall

Francescas (2014). Francesca's | Womens Clothing Stores & Online Boutique Retrieved at

http://www.francescas.com/ [Accessed 23 Apr. 2014].

Neacshow (2014). New England Apparel Club Retrieved at:

http://www.neacshow.com/





Weitz, L. &. (2012). Retailing Management. New York: The Mcgraw Companies


28

Buying Trip VI

For the buying trip Haute Hanger will be attending two trade shows. The first trip Haute Hanger

will be attending at the New England Apparel Club located at the Royal Plaza Trade Center at

181 Boston Post Road in West Marlboro MA, 01752. The last trip will be located in Syracuse

NY and the Syracuse NY Super show hosted on September 28-29th will feature an assortment of

women’s apparel and accessory lines. The first trip to West Marlboro MA, 01752 will primarily

be focusing on the accessory line designers Warren Sofia Jewelry, Carissima Bijoux, and Frank

Lyman Design. These types of shows are only open to Wholesale Representatives, and qualified

retailers (NEAC, 2014). The New England Apparel Club is a nonprofit organization with the

primary objective of conducting efficient women's apparel trade shows and was founded in 1945.

This type of organization was sufficient because it had a long history of service to both the

apparel and accessories industries (NEAC,2014). A picture of the Trade show location can be

found in Appendix F Figure F.1 and the Tradeshow Calendar in Appendix F Figure F.2. Haute

Hanger will be primarily buying for the spring season of 2015. Below in Figure VI.I is a picture

of the Spring collection catalog for NEAC.

29

7

Figure VI.I

When the buyers will be attending the trade shows the type of product a buyer will be

purchasing for is the newest spring season collections in both accessories, and womens apparel.

The buyer has an Open-To-Buy amount of $126,199.70 and a Beginning-of-the-month BOM of

$74,812.41. An open-to-buy system is continuously used by buyers because “it compares the

planned end-of-month inventory to the actual end-of-month inventory. When sales are greater

than planned, the system determines how much merchandise to buy, in terms of dollar the buyer

has available, in order to satisfy the increased consumer demand” (Levy & Weitz, 2012, p. 323).

The Beginning-of-Month is a variable taken into account because it determines how much stock

the buyer needs in order to meet sufficient planned sales figures (Easterling, 2013). The buyer

for Haute Hanger does not intend on purchasing more than the Open-to-Buy Amount because

Haute Hanger is only purchasing for 50% of store departments. In order to continuously

replenish merchandise and push new merchandise in store it is important that a buyer does not

spend the entire Open-to-buy. By having a closely monitored Open-to-buy system a buyer is

7 (NEAC, 2014)

30

accurately able to keep track of merchandise that is purchased and the quantity. This system

allows a buyer not to over or under buy items.

Haute Hanger plans on visiting three vendors at the NEAC trade show. The three

vendors include Warren Sofia Jewelry, Carissima Bijoux, and Frank Lyman Design. The criteria

when evaluating these vendors includes Quality, Delivery, Price, Merchandise Mix, and History.

Reference to Appendix D Figure D.3 to see the Vendor Matrix chart (Foster, 2014). When

visiting these vendors, Haute Hanger is mainly buying for spring dresses, and spring accessories.

To see the department breakdown of the number of units purchased, wholesale price point and

sub-classifications, refer to Appendix E Table E.2.

Since Haute Hanger is a new start up business, if an opportunity to trade up was

presented, Haute Hanger would trade up, but due to being a new business the company’s primary

focus is to look for promotional merchandise. The trends for Spring and Summer that were

precisely analyzed included color, style, and silhouette. For accessories, the specifications the

buyer looked at were strictly color and style. The colors trending for accessories include bright

royal blue, hot pink, all different tints and shades of green, brown, black, and a mix of neutral

tones. The two main styles that could be seen in accessories was chunky, geometrical shapes,

fringe, and zebra print. In Figure VI.II shows the vibrant and unique shapes of accessories. To

view more of the projected trends for Spring 2015 accessories, see Appendix F. Figure F.3.

31

8

Figure VI.II

When analyzing dress trends, the main colors varied depending on the occasion the

dress was being used for. There was a variance of colors which ranged from bright red, coral,

mustard yellow, black, gray, and pastel shades of light rose, and ivory. The main styles of

dresses for formal wear such as wedding or prom, featured flowy fabric but on the upper half of

the body it remained relatively tight fitted. For casual wear dresses were free flowing, or box

shaped. In Figure VI.III shows an example of a formal dress with a pastel shade ivory. The

silhouette of dresses ranged from A-line shape, flowy, square shaped, and maxi. To view more of

the trending styles of dress apparel refer to Appendix F Figure F.4-F.5 Spring 2015 Trends for

Dresses.

8 (WeConnectFashion,2014)

32

9

Figure VI.III

Haute Hanger will take advantage of Trade (functional) discounts and cash discounts.

A discount is “a reduction in price allowed by the vendor, and trade discounts are a percent

deducted from the list price of the vendor” (Easterling, 2013, p.82). The company are utilizing

trade discounts because typically a list price set by the vendor is significantly higher than the

typical retail price. It is important that Haute Hanger pays within a given specified time frame in

order to receive a trade discount. This strategy is often used to make the consumer think they are

receiving a better value (Easterling, 2013). Another discount Haute Hanger will be using is cash

discounts. A cash discount is a percent reduction from the quoted cost allowed for prompt

payment of an invoice (Easterling, 2013,p.84).

Negotiation is an essential part of the buying process. According to Easterling (2013),

In many retail organizations, the buyer is responsible for negotiating the cost of the merchandise.

The buyer acts as the retailers agent in dealing with vendors and has the responsibility to

represent the retailer in an ethical manner (p.81). Another element to buying merchandise, is

9 (WomensWearDaily, 2014)

33

purchasing overseas. “When purchasing goods from overseas, retailers should be familiar with

legislation that regulates competition and affects pricing policies (Easterling, 2013, p.81).

In order for Haute Hanger to have a competitive advantage in the market place, it is

vital that the company explores non domestic markets or foreign trade. Staple merchandise such

as casual dresses that do not require complex construction may be considered for foreign trade.

This will reduce costs, and will broaden the company’s horizons. Since Haute Hanger is a new

business, starting with foreign trade through online resources creates convenience, and a gradual

way of developing connections with vendors. It is imperative that Haute Hanger develops

alliances and long term relationships with independent firms overseas (Levy & Weitz, 2012).

34

References


Prentice Hall .

Neacshow (2012) New England Apparel Club Retrieved at:


Weconnectfashion (2014). WeConnectFashion Trends| MAGIC SOURCING GALLERIES S/S

2015. FASHION SNOOPS, International Trend Forecasting Report For Fashion

Business. Retrieved:

http://weconnectfashion.com/fido/getarticle.fcn?&type=trends&SearchString=s/s+2015&

id=737870PM0000086&start=1&tr=18


Womens Wear Daily (2014). Fashion, Beauty and Retail News - WWD.com. Retrieved at:

http://www.wwd.com


http://weconnectfashion.com/fido/getarticle.fcn?&type=trends&SearchString=s/s+2015&id=737870PM0000086&start=1&tr=18


http://www.wwd.com/

35

Negotiation VII

Negotiations are an essential part of the buying process. By getting the right price for a select

amount of merchandise can assist the retailer in being successful. According to Easterling

(2013), retailers should be aware of all considerations that will assist them in negotiating with

vendors for the best prices (p.80). Even though wholesale prices are usually established by a

vendor, retailers oftentimes are able to reduce the net cost of merchandise by negotiating for

discounts, transportation, allowances, rebates, and services (Easterling, 2013). Negotiating with

suppliers is important for the buyer to purchase the merchandise at a reasonable cost and still be

able to make a high profit margin of these items.

Haute Hanger plans to develop long term relationships with vendors that offer prices

at a low enough cost where the company will produce a high enough profit margin. During the

negotiation process it is important that a buyer is knowledgeable about the product, the type of

merchandise the company is looking for, the types of trends occurring in the market, and the

overall needs for the company. Building a sustainable competitive advantage is the final element

in a retailers approach to developing a strong retail strategy (Levy & Weitz, 2012, p.114). There

are four main elements in building strong partnering supplier relationships which includes

awareness, exploration, expansion, commitment (Levy & Weitz, 2012, p.360). The buyer first

explores the benefits and costs of a potential partnership. As the buyer develops more knowledge

and information about the product, several buyers often utilize joint promotional programs .“If

both parties continue to find the relationship mutually beneficial, it moves to the commitment

stage and becomes a strategic relationship”(Levy & Weitz, 2012, p.361).

Another component to the buyer-vendor relationship is negotiating terms with the

vendors they are having a business relationship with. A buyer must know legal issues in regards

36

to terms and conditions of purchase. The Robinson-Patman Act makes it illegal for vendors to

offer different terms and conditions to different retailers for the same merchandise and quantity

(Levy & Weitz, 2012, p.361). A buyer for Haute Hanger has to be trained and highly

comprehensive of the terms a vendor can offer. As discussed in the previous section, VI. Buying

Trip Haute Hanger will be using Trade (functional) and cash discounts. After establishing a

strong relationship with vendors, this will allow Haute Hanger to receive extended amount of

time to pay for merchandise through negotiation.

The three months Haute Hanger will be using to display the specifications of dating,

discount dates, invoice received, and when payments are due are October, November, December

and January. From each vendor Haute Hanger will purchase one staple item. The three vendors

Haute Hanger will be purchasing from are Warren Sofia Jewelry, Bijoux Wholesale, and Rose

Wholesale. Haute Hanger will read the terms associated with the type of payment. A term is

referred to as cash discount and dating. Dating can be defined as the time limit for the payment

of an invoice. It also is refers to the length of time the retailer has to pay the invoice and the time

during which the cash discount was taken. (Easterling, 2013, p.84-87).

37

Warren Sofia Jewelry

10

Figure VII.I

The first vendor Haute Hanger is buying from is Warren Sofia Jewelry. The item purchased was

a coral multi-pack necklace at $8.50 wholesale price. The first dating term used was 3/10 net 30.

Regular dating or “normal dating is calculated from the date of an invoice, which is usually the

date the merchandise is shipped (Easterling, 2013, p.88). In regular dating, Haute Hanger will

have a 3% percent discount if the invoice is paid within 10 days. If not paid within 10 days, the

complete or net amount is due 30 days from the invoice. In Figure VII.I shows the item that was

purchased. The exact amount was due on the invoice was $8.50 multiplied by a total of 47 units

resulting in a total of $401.27. In Figure VII.II shows the invoice calculations for Warren Sofia

Jewelry. See Appendix G Table G.1 for Sofia Jewelry Invoice.

Warren Sofia Jewelry Invoice #165 3/10 net 30

Invoice Date: Oct-15-2014

Last day for discount: October 15th 15+10= Oct 25th

If not paid by discount date: 31-16=14 30-16= Nov 14th

Payment Due Date: November 14th, 2014

Figure VII.II

Bijoux Wholesale

The second supplier Haute Hanger purchased from was an online vendor Bijoux Wholesale. The

item that was purchased was a thick gold hoop earring for $1.87 at wholesale price point. The

dating term used was EOM or End-of-Month, with EOM dating; the discount date is calculated

10 Warren Sofia Jewelry, 2014

38

from the end of the month instead of the date of the invoice (Easterling, 2013, p.88). Also with

EOM dating the buyer must be aware that the net period is an additional 20 days. Invoices dated

on or after the 26th of the month is considered to be dated the first of the following month

(Easterling, 2013). In figure VII.III shows the jewelry item that was purchased from Bijoux

Wholesale. The exact amount that was due on the invoice was $1.87 multipled by 293 units,

equaling to a total of $548.59. In figure VII.IV, shows the invoice calculations for Bijoux

Wholesale. Refer to Appendix G Table G.2 for Bijoux Wholesales Invoice.

Figure VII.III

Bijoux Wholesale Invoice #182 8/10 EOM

Invoice Date: Nov-11-2014

Last day for discount:

Dec-10-2014*discount date is the 10th of every

month due to invoice being dated before 26th of

month with EOM terms

If not paid by discount date: 10+20 = 30

Payment due: Jan-30-14

Figure VII.IV

Rose Wholesale

The last importer Haute Hanger purchased from was Rose Wholesale, another online vendor.

The apparel item that was ordered was a beige maxi dress at $8.18. The dating terms are ROG,

and the dating is calculated from the date the merchandise is received by the retailer, rather than

39

the date on the invoice (Easterling, 2013, p.88). In Figure VII.V shows the dress that was

ordered. The total number of units ordered was 168 multiplied by $8.18, resulting in $1,374.24.

Below in Figure VII.VI, are the invoice calculations for Rose Wholesale. Refer to Appendix G

Table G.3 for Rose Wholesales Invoice.

11

Figure VII.V

Rose Wholesale Invoice #187 2/10 ROG

Invoice Date: November 8 2014 Date Received: November 14

Last day for discount: Nov 24th, 2014 14+10=nov 24th

If not paid by discount: 24-20=4 * use date received not invoice

Payment due: December 11th, 2014

Figure VII.VI

Haute Hanger created a business calendar to help achieve organization, and a structure

of when specific merchandise will arrive. This will assist the business in remembering when bills

are due. Also by paying bills on time, and receiving discounts, it will help the company save

money. This will also achieve a sustainable competitive advantage by having more cash flow on

11 Rose Wholesale, 2014

40

hand and maintaining strong vendor relationships. Refer to Appendix G Calendar G4- G.7 for

calendar months of October, November, December, and January.

References


Prentice Hall.


41

Distribution VIII

Flow and Distribution

The distribution process is a critical step in ensuring that consumer’s needs and wants are met.

According to Levy & Weitz (2012),

“Retailers are the connection between customers and product manufacturers. It is the

retailer’s primary responsibility to gauge customer’s wants and needs and work with

other members of the supply chain which includes distributors, vendors, and

transportation companies. This ensures the merchandise that customers want is available

when they want it” (p.248).

Several large companies utilize distribution centers to process shipment of apparel and other

goods to retail stores, but since Haute Hanger is not a chain, vendors will ship merchandise

directly to the store. The advantages of having product shipped directly to a store location, is the

retailer has more control over the flow of merchandise and overall lowers inventory cost. The use

of Supply Chain Management is “a set of activities and techniques firms employ to efficiently

and effectively manage the flow of merchandise from the vendors to the retailers customers”

(Levy & Weitz, 2012, p.248). By a business having efficient supply chain management it can

provide both a strategic and competitive advantage that overall increases product availability and

inventory turnover (Levy & Weitz, 2012). Haute Hanger plans on establishing solid relationships

with vendors and having sufficient supply chain management information systems. This will

result in the overall company getting a higher return on assets. In Appendix H Figure H.1 shows

the flow of merchandise in the order of factory, vendor, delivery, store and consumer.

42

Stock Delivery Process

By having effective supply chain management it provides a company two main benefits. The two

benefits are fewer stock outs, and tailored assortments (Levy & Weitz, 2012, p.250). A company

having control of the flow merchandise and how effective it sells can provide the retailer key

information about the target customer, and their needs. It also assists Haute Hanger in collecting

information about the target consumers shopping behavior and the type of purchases made (Levy

& Weitz, 2012). In order to establish fewer stock outs a company must engage in knowing

information about where merchandise is located at all times. A stock out is defined as “when a

SKU that a customer wants is not available” (Levy & Weitz, 2012, p. 250). Haute Hanger will

establish strong profit margins by knowing when certain items in the store are effectively selling,

and when to re-order from the vendor. Another factor involved by having effective supply chain

management is tailored assortments (Levy & Weitz, 2012). Haute Hanger will adjust assortments

due to climate change, offering more winter oriented clothing during peak times in the season.

This will satisfy the consumer demand, and strengthen customers loyalty to the brand.

Marking System

Another process involved in the distribution of products is making merchandise “floor-ready”

(Levy & Weitz, 2012). The tasks involved during that process includes ticketing, marking, and

placing apparel on hangers. Ticketing and marking refer “to affixing price and identification

labels to the merchandise” (Levy & Weitz, 2012, p.257). Haute Hanger will personally design

the company labels to be unique and adhere to the brand image. Typically price ticketing and

marking occurs in distributions centers but due to Haute Hanger being a small business, the

vendors will be responsible for issuing a reverse purchase order and initiate replenishment

(Foster, 2014).

43

According to Foster (2014) there are three types of price marking systems which

include blind, semi-blind, and simple check. Blind check involves an intricate scanning system,

where the invoice is blank. Most businesses use the blind check because it is the most effective at

preventing shrinkage inside a store. Semi-blind is when a company states “on a list the

merchandise on the invoice, and compares it to the list of the invoice from the vendor” (Foster,

2014).This allows for cross-checking of the number of units and merchandise ordered. Simple

check is “the most unreliable and leaves for vulnerable errors” (Foster, 2014). Since Haute

Hanger is a small business, the best and most cost effective way for a checking system would be

through a semi-blind check.

Price Ticket

Haute Hangers price ticket will represent the brand colors and aesthetics. The components that

will be included on the price ticket will include a SKU bar in order for cash registers to properly

scan merchandise, a style number, size, and price. Tickets are often used to inform the buyer of

what type of item they are purchasing and the type of style the garment is. Price tickets offer a

business, a system of keeping track of merchandise, and also allowing for categorization of

merchandise by style, size, or price point. The price ticket will also provide a company inventory

statistics of how much is currently selling and which style. In Figure VIII.Idisplays Haute

Hangers price ticket at the front with company color and logo. Refer to Appendix H, Figure H.2

for the back and front of the price ticket, as well as company aesthetics.

Figure VIII.II

44

References

Foster , I.. A. (2014). Buying Process: Merchandise Ordering. Retrieved from<




45

Merchandise Control IX

Inventory System

The logistical aspects of the business will be further discussed in this section in relation to

inventory control systems. The first necessary step in monitoring the success rate of specific

merchandise SKU’s is through the Merchandise Management Planning Process. During this

process retailers use two different types of merchandise management planning systems (Levy &

Weitz, 2012, p. 309). These types of merchandise management systems are staple and fashion

merchandise categories. Staple merchandise are categories that are in continuous demand over an

extended amount of time and fashion merchandise are in demand only for a relatively short

period of time (Levy & Weitz, 2012). Buyers must be knowledgeable about which items are

categorized staple and fashion merchandise items for inventory levels to stay operating at

efficient levels. Haute Hanger will develop a process of merchandise control in order to measure

these levels.

Merchandise control is “the process of designing and maintaining inventory systems

for controlling the planned balance between inventory and sales” (Foster, 2014). The next step

involved in the inventory process Foster states, (2014) is the inventory information system which

is a set of methods and procedures for collecting and processing merchandise data pertinent to

the planning and control of merchandise inventories (Foster, 2014). Haute Hanger will plan on

establishing an effective inventory system that will provide the company information about the

average SKU assortments of merchandise that is selling. It is important that the company is

highly informed on the types of inventory systems. The first system is called perpetual inventory

which is continuous and compares sales made through POS terminals with the shipments that are

received by the store (Levy & Weitz, 2012, p.320). The advantage of this system is the

information that is able to be generated automatically and instantly. This will provide Haute

46

Hanger stock on hand counts immediately. The second inventory information system is called

periodic physical inventory. This type of inventory control system involve gathering stock

information intermittently (1 or 2) times a year and also engages an actual physical count (Foster,

2014). The downfall of a periodic physical inventory system is that it does not determine

shortages.

Cost method terminology used frequently by merchandisers and buyers is FIFO and

LIFO. The term FIFO stands for (first in first out) and can overstate profits during inflationary

times – also providing more taxes. LIFO stands for (last in first out) recent acquisitions costs

determines price (Foster, 2014). LIFO method is use of LIFO results in ending inventory that

includes the beginning inventory as well as one or more additional layers added during the

period (Mcgraw-Hill, 2014). The last method used is Retail Method Inventory or RIM. Several

retailers utilize RIM because it provides two main objectives which are to maintain a perpetual

or book inventory in terms of retail dollar amounts, and to maintain records that make it possible

to determine the cost value of the inventory at any time without taking a physical inventory

(Levy & Weitz, 2012, p. 337). Haute Hanger will determine the most effective inventory system

to use by knowing which method provides the most accurate results in ending inventory levels.

Haute Hanger will use the perpetual book method because it provides the company

immediate results and are able to see up to date inventory information. Haute Hanger will use

this in combination with physical inventory systems and LIFO system. In order to get accurate

results of quantities represented in the store by the end of the fiscal year, the perpetual book

method should be used in addition to other inventory information systems.

47

Merchandise Available

In order for Haute Hanger to compute the company’s inventory levels, the retail method will be

used. The retail method will provide four necessary measurements to determine financial and

operating costs possible. These four components include total merchandise available, cost

complement, retail deductions, and ending inventory value. In Table XI.I represents Haute

Hangers total merchandise available for the month of August. The cost complement was then

computed by taking the cost value of inventory, and dividing it by retail value of inventory. Cost

complement is the difference between retail percent (100%) and markup percentage (Easterling,

2013).

Table IX.I Total Merchandise Available

Total Merchandise Available Cost Retail

Beginning Inventory (Nov) $ 43,750.30

$ 74,812.41

(+)net purchases (OTB Nov) $ 74,266.50

$ 126,994.70

(+) additional mark ons (10%) $ 7,481.24

(+) freight charges (5%) $ 2,187.51

total merchandise available $ 120,204.31

$ 209,288.34

Cost Complement $

120,204.31 $ 209,288.34

= 57.43%

48

Retail Deductions

After Haute Hanger calculated the total merchandise available and cost complement, the next

step was to determine retail deductions. Retail deductions determine the total merchandise

available for sale (Foster, 2014). According to Easterling (2013), the types of retail deductions

are net sales, net markdowns, and discounts to employees or special customers (p.176). In net

sales customer returns and allowances are subtracted from gross sales. Also in net markdowns,

markdown cancellations are subtracted from markdowns. Lastly, in discounts to employees,

“these type of deductions are treated as deductions from total merchandise handled” (Easterling,

2013, p.176). In Table IX.II, the total retail deductions for Haute Hanger are shown.

Retail Deductions

Sales for Period $ 69,661.19

(+) markdowns $ 17,415.30

(+) discounts (+) shortages (estimated)

(= total retail deductions)

$ 87,076.49

49

Ending Inventory Value

Once the total retail reductions are calculated, Haute Hanger must compute the ending inventory

value. To evaluate ending inventory value Easterling states (2013), “the retail value of the

closing book or physical inventory (when available) is converted to its approximate cost value by

multiplying the retail value by the cost percent calculated in cost complement” (p.186). Below in

Table IX.III, the ending inventory value is verified.

Table IX.III Ending Inventory Value


Total merchandise available at retail $ 209,288.34

(-) total retail Deductions $ 87,076.49

(=Ending inventory at retail $ 122,211.86

Ending inventory at retail $ 122,211.86

X cost complement 57.43%

(=Ending inventory at COST) $ 70,192.12

50

Gross Margin and Cost of Goods

Haute Hanger then deciphers the calculation of gross cost of merchandise sold. To compute the

cost of goods sold and the gross margin, it is the difference between the cost value of total

merchandise handled and cost value of the ending inventory or closing book inventory

(Easterling, 2013, p.186). In order to calculate the total cost of merchandise sold, Easterling

states (2013), gross cost of merchandise sold is adjusted by cash discounts and alteration costs;

cash discounts are subtracted and then alternation costs are added (p.186). The calculations are

shown in Table IX.IV of Cost of Goods and Gross Margin.

Table IX.IV Cost of Goods and Gross Margin

Total Merchandise available at cost $ 120,204.31

(-) ending inventory at cost $ 70,192.12

(=COST of Goods Sold) $ 50,012.19

Sales for the period $ 69,661.19

(-) Cost of goods sold $ 50,012.19

(=Gross Margin) $ 19,649.00

Stock Turns

According to Easterling (2013), turnover is an essential tool in evaluating the efficient use of

capital invested in inventory or (stock). After the computation of ending inventory value, and

Haute Hanger is knowledgeable on the stores stock, the stock turnover is then evaluated. The

stock turn is defined as the number of units the average stock is sold during a given period of

time in relation to the sales for the same period (Easterling, 2013, p.220). To find the stock turn

over Haute Hanger will use the first three months BOM and the third months EOM. Average

51

stock on hand is determined by taking the sum stock on hand beginning of the period, at each

period, and end of period divided by the number of listings (Foster, 2014). Below in Table IX.V,

displays both the stock on hand, and stock turnover.

Table IX.V Average Stock

Average Stock

Nov 1 BOM $ 74,812.41

Dec 1 BOM $ 114,730.62

Jan 1 BOM $ 54,461.95

Jan 30 EOM $ 54,845.41

Total Sum of (Nov BOM, Dec BOM, Jan BOM, Jan EOM)

$ 298,850.38

Total Inventory $ 74,712.59

Table IX.VI Stock Turnover

Net Sales retail (period)/ Ave Stock Retail Stock Turn

Stock Turn Over at Retail 228551.32/ 74,712.59 3.06 Cost of goods (period)/Ave Stock Cost

Stock Turn Over Cost 133,656.81/43,691.93 3.06

Gross Margin Return on Investment

As Easterling states (2013), “a good measure of inventory profitability is gross margin return on

inventory” (p. 195). GMROI is a ratio that measures the efficiency of the investment in

inventory. In order to calculate the GMROI it is computed by dividing the dollar gross margin by

average inventory at cost then adding the beginning-of-the-month (BOM) cost inventory for each

month in the period plus end-of-month (EOM) cost inventory for the last month in the period and

dividing by 7 for a season and 13 for annually (Easterling, 2013, p.195). GMROI provides

52

critical information to the buyer and retailer about “whether an adequate gross margin is being

earned compared with the investment in inventory”(Easterling, 2013). The calculations are

presented below in Table IX.VII.

Table IX.VII Gross Margin Return on Investment

GMROI

Gross Margin (yr)/Average Stock $324,981.19/$74,712.59

$4.35

There are two components of GMROI which includes inventory turn over and sales to

stock ratio. By having a high turn-over rate, new merchandise is able to re-enter the store and

ultimately attract more consumers (Levy & Weitz, 2012). As Levy & Weitz (2012) state,

“increasing the amount of new merchandise also improves employees morale, therefore

motivation to sell new merchandise increases sales resulting in a higher inventory turnover”

(p.308). Also when inventory turnover inevitably increases after increased profit margins, more

money is generated to buy new merchandise (Levy & Weitz, 2012). Other benefits of high turn-

over as Foster (2014) states is “fresher merchandise, fewer mark-downs, less-depreciation,

lower-expenses which reduces inventory expense, greater-sales that generate more consumer

interest, and a higher return that increases sales, decreases stock, more productivity, and lastly

efficient use of capital” (Foster, 2014).

Average Weeks of Supply

In order for a business to plan stocks, the average week of supply has to be calculated. Easterling

(2013) explains that weeks supply is defined “as a method of planning stock whereby the needed

inventory is equal to the sales for a specific number of weeks” (p.224). This assists a retailer in

knowing the turnover stock rate and the average of when merchandise needs to be replenished.

53

The weeks supply is calculated by taking the number of weeks in the period and dividing it by

desired stock turnover rate for the period (Easterling, 2013, p. 225). Below in Figure IX.I details

the equation used to find weeks supply. In Table IX.VIII shows the weeks supply calculations

for Haute Hanger. All elements including merchandise available, retail reductions, ending

inventory value, gross margin and cost of goods, stock turns, GMROI and average weeks of

supply can be located in Appendix I Table I.I involved in Haute Hanger’s merchandise control

Figure IX.VIII

𝑊𝑒𝑒𝑘𝑠 𝑆𝑢𝑝𝑝𝑙𝑦 =# 𝑜𝑓 𝑤𝑒𝑒𝑘𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑃𝑒𝑟𝑖𝑜𝑑

𝑆𝑡𝑜𝑐𝑘 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑓𝑜𝑟 𝑃𝑒𝑟𝑖𝑜𝑑⁄

Table IX.III Average Weeks of Supply


# of weeks in a yr/stock turn 52 stock turn 3.06

= 17 weeks

54

References

Connect. Mcgraw-Hill (2014). The Retail Inventory Method. Retrieved at:

http://connect.mcgrawhill.com/sites/0077328787/student_view0/ebook/chapter9/chbody1

/the_retail_inventory_method.htm


Foster , I.. A. (2014). Merchandise Control Power Point. Retrieved from<

http://Blackboard.framingham.edu



55

Appendix A

A.I Haute Hanger Skeletal Statement

Net Sales $ 782,710.00 100.00%

COG $ 457,728.81 58.48%

GM $ 324,981.19 41.52%

EXP $ 306,274.42 39.13%

P $ 18,706.77 2.39%

A.2 Haute Hanger Planned Sales

56

Appendix B

B.1 Competitive Survey For Haute Hanger

Department

category

Color

# of styles

material

Price

B.2 Competitive Analysis Forever 21

57

(Forever 21, 2014)

B.3 Competitive Analysis Neiman Marcus

(Neiman Marcus, 2014)

58

B.4 Competitive Analysis Francescas

(Francescas, 2014)

59

B.5 Rings Styles

(Vogue, 2014)

B.6 Styles of Watches

(Rose Wholesale, 2014)

B.7 Dress Trends based on Color Fall 2014

(Harpers Bazaar, 2014)

60

B.8 Dress Trends based on Style Fall 2014


B.9 Dress Trends based on Silhouette Fall 2014


61

B.10 Evolving Trends in Accessories “Creole Gold Hoop Earrings”

(Vogue, 2014)

B.11 Fall/Winter 2014-2015 Evolving Accessories

(Vogue, 2014)

B.12 Bracelets Trends for Fall 2014

62

Appendix C

Table C.1 – C.2 Accessory Department Breakdown

(Francescas, 2014)

C.2 Dress Department Breakdown

0.00%

10.00%

20.00%

30.00%

Earrings Necklaces

bracelets Rings watches

Percentage by Classification 30.00% 10.00% 20.00% 10.00% 30.00%

Dollar Amount Per Classification $234,813.00 $78,271.00 $156,542.00 $78,271.00 $234,813.00

Axi

s Ti

tle

Department Breakdown

0.00%

10.00%

20.00%

30.00%

40.00%

Casual Formal Prints PartyDress

BusinessDress

Percentage by Classification 40.00% 10.00% 10.00% 30.00% 10.00%

Dollar Amount Per Classification $313,084.00 $78,271.00 $78,271.00 $234,813.00 $78,271.00

Axi

s Ti

tle

Department Breakdown

63

Table C.3 - C.4 Average Price Points and Units for Department 1 and 2

Table C.4

C.5 Total Number of Departments Percentage Breakdown

30.00%

20.00%20.00%

30.00%

Total Department Percent Breakdown

Tops Bottoms Accessories Dresses

64

Appendix D

Figure D.1 Example of Wholesale Vendor Websites

(Rose Wholesale, 2014)

D.2

(BijouxUSA,2014)

D.3 Vendor Matrix

65

D.4 Vendor Contact List

D.5 Table of Whole Sale Prices by Vendor Warren Sofia Jewelry

(Warren Sofia Jewelry, 2014)

66

Appendix E

Table E.1 Planned Sales for Haute Hanger August 1st 2014 - July 2015

Table E.2 Department Breakdown and Number of Units Purchased per Classification

67

Appendix F

F.1Location of NEAC in West Marlboro MA (New England Apparel Club)

(NEAC, 2014)

F.2 NEAC Calendar of Tradeshow Times

(NEAC, 2014)

68

F.3 Accessory Trends for Spring 2015

(WeConnectFashion,2014)

F.4 Figure VI._ Dress Trends for Spring 2015

(TheKeytoChic,2014)

69

F.5 Figure VI._ Flowy and Pastel Trend

(Womens Wear Daily, 2014)

70

Appendix G

G.1 Invoice for Warren Sofia Jewelry

71

G.2 Invoice Calculations for Bijoux Wholesale

72

G.3 Invoice Calculations for Rose Wholesale

73

G.4 October Calendar for Warren Sofia Jewelry

74

G.5 November Calendar for Bijoux Wholesale

75

G.6 December Calendar for Rose Wholesale

76

G.7 January Calendar for Rose Wholesale

77

Appendix H

H.1 Figure H._ Merchandise Flow Diagram

→ → → →

H.2 Haute Hangers Price Ticket Aesthetics

Front Back

78

Appendix I

I.1

Total Merchandise Available Cost Retail

Beginning Inventory (Nov) $ 43,750.30

$ 74,812.41

(+)net purchases (OTB Nov) $ 74,266.50

$ 126,994.70

(+) additional mark ons (10%) $ 7,481.24

(+) freight charges (5%) $ 2,187.51

total merchandise available $ 120,204.31

$ 209,288.34

Cost Complement $ 120,204.31

$ 209,288.34

57.43%

Retail Deductions

Sales for Period $ 69,661.19

(+) markdowns $ 17,415.30

(+) discounts

(+) shortages (estimated)

(= total retail deductions) $ 87,076.49


Total merchandise available at retail $ 209,288.34

(-) total retail Deductions $ 87,076.49

(=Ending inventory at retail $ 122,211.86

Ending inventory at retail $ 122,211.86

X cost complement 57.43%

79

(=Ending inventory at COST) $ 70,192.12

Total Merchandise available at cost $ 120,204.31

(-) ending inventory at cost $ 70,192.12

(=COST of Goods Sold) $ 50,012.19

Sales for the period $ 69,661.19

(-) Cost of goods sold $ 50,012.19

(=Gross Margin) $ 19,649.00

Average Stock

Nov 1 BOM $ 74,812.41

DeC 1 BOM $ 114,730.62

Jan 1 BOM $ 54,461.95

Jan 30 EOM $ 54,845.41

$ 298,850.38

Total Inventory no of listings Ave Stock $ 74,712.59

Stock Turn

Net Sales retail (period)/ Ave Stock Retail 3.06 $ 228,551.32 $ 74,712.59

Cost of goods (period)/Ave Stock Cost Stock Turn $ 133,656.81 3.06

80

$ 43,691.93

$ 133,656.81

Number of Units/Average Stock on Hand units

$ 4.35

Gross Margin (yr)/Average Stock $ 324,981.19

$ 74,712.59

Net Sales/Stock on hand X gross margin/net sales $ 69,661.19

$ 4.35

stock on hand $ 74,712.59

gross margin $ 324,981.19

planned sales $ 69,661.19


# of weeks in a yr/stock turn 52 17 weeks

stock turn 3.06

81

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