Transcript Understand Merchandise Planning in Retailing

Understand Merchandise
Planning in Retailing
The Merchandise Plan
• A budgeting tool that helps retailer or buyer to
meet department goals
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Planned sales
Planned stock
Planned Reductions
Planned purchases
Merchandise and strategies for
managing the merchandise mix
• Staple Goods
▫ Goods that are constantly in demand
• Convenience Goods
▫ Small, inexpensive goods that are purchased frequently
• Fashion Goods
▫ Items that constantly change, popular at a certain time
• Seasonal Goods
▫ Goods that are popular at certain times of the year
The Buyers Job
• Determines amount of money available for
purchases
• Determines which merchandise to buy
• Determines best vendor to buy from
• Negotiates terms and discounts with vendors
• Determines when merchandise will arrive at
store
Buying Activities
• Planning
▫ Role of buyer: purchase goods for resale.
▫ Best way to plan is through merchandise planning.
▫ Merchandise planning include these four elements:
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planned sales,
beginning of the month inventory
planned purchases
planned reductions.
Buying Activities (cont.)
• Researching
▫ Research determines the best vendor
▫ Factors to consider when selecting:
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Production Capabilities
Past Experiences
Product and Buying Arrangements
Special Services
Discounts
Payment Arrangements
Determining available money
• Open-to-buy
▫ Amount of money available to make purchases
• Planned purchases – (merchandise received + Merchandise Ordered) = Open-To-Buy
Determining What Customers Want
• Target Market Information
▫ Know what merchandise those customers will buy
• Sales records
▫ What has done well in the past
• Customer preferences
• Customer Requests
▫ Want Slip
 Informs buyer of a specific item that a customer wants but the
retailer does not carry
• Shopping the competition
▫ Visit competing stores to see what they are carrying
Vendor Selection
• Vendor
▫ Company form which the buyer purchases
merchandise
• Negotiating terms and discounts
▫ Dating terms
 When the bill for the merchandise has to be paid
 2/10 net 30
 If the buyer pays in ten days they get a 2% discount the
bill must be paid in thirty days
Vendor Selection
• Shipping Terms
▫ How the merchandise will get to the store and who
will pay for the shipping
• FOB
▫ Free on board ownership of merchandise in
transit determines if freight charges are free
• Timing Merchandise Deliveries
▫ Merchandise must arrive at exactly right time to
be sold and make maximum profit
Types of Buying
• Centralized Buying
▫ Used by large retail chains
▫ Buying everything from one location
• Quantity discounts
▫ Offered for large or bulk purchases
• Decentralized Buying
▫ Buying decisions are made at the local store level
Using the marketing mix to make
buying decisions
• Product
▫ Determining what to buy and what to sell
• Place
▫ Where to buy from
• Price
▫ What the markup will be how much to pay for
merchandise
• Promotion
▫ Which products will sell the most and be easy to
promote
Determining what to buy
• Internal sources
▫ Store records
▫ Management
▫ Sales staff
• External sources
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Customers
Magazines, trade journals and trade shows
Vendors
Trade associations
competitors
Merchandise Life cycle
• Introduction
▫ Few sale, limited customers, availiable at few locations
• Growth
▫ Customers begin to accept product, sales increase
• Acceptance
▫ Greatest customer acceptance, highest sales
• Decline
▫ Customers get tires of product, gets marked down
Pricing Merchandise
• Factors affecting selling price
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Cost of merchandise
Expenses of getting it to the store
Share of retailers overhead expenses
Return on investment
Competition
supply and demand
Customer acceptance
Receiving Process
RECEIVE
CHECK
MARK
MOVE
• Receive Merchandise from Carrier, Check PO/Invoice/Shipping Documents
• Match Invoice to the items shipped
• Check for any Missing or Damaged Items
• Quantity check
• Indirect check
• Quality check
• Selling Price – label inventory with sales price
• Other Information – label inventory with any other information: Expiration Date, Materials, Tags,
Sales,…
• To sales floor
• Display creation
Preparing Merchandise
• Unpacking Merchandise
▫ Removing wrapping…duh
• Ticketing Merchandise
▫ Putting price on merchandise
• Security Tags
▫ Self explanatory
• Presentation
▫ Hung, displayed, stocked
Checking Merchandise
• Blind Check Method
▫ Most accurate, check every box
• Direct Check Method
▫ Use the most, check off merchandise on invoice
• Dummy Invoice Method
▫ Combo of Blind Check and Direct Check
▫ Records merchandise received, check against
invoice.
• Spot Check Method
▫ Least amount of time, least accurate
Returns To Vendors
• Reasons For Returns
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Received an item that was not ordered
Order was canceled after shipment
Excess of items shipped out
Late arrival of merchandise
Unsold merchandise returned for credit
• Procedures For Handling Returns
▫ Varies from vendor to vendor
▫ Once returned business will receive credit
memorandum.
Inventory control
• Managing inventory levels to make
sure there is enough to meet sales
goals with out having too much
▫ Physical inventory system
 Retailers physically count merchandise
in stock
▫ Perpetual inventory system
 Keep track of what is bought and sold
on a daily basis using computers and
point of sale terminals
Inventory Shrinkage
▫ Differences between what’s in stock and what
should be in stock.
• Causes Of Shrinkage
▫ Theft
▫ Employee errors
• Shrink Prevention
▫ Educating employees
▫ Planning
▫ Security
Other Factors
• Return on Investment
▫ Figure representing the profit of merchandise
Cost-price=difference/expenses=ROI
$5-$3.80=$1.20/$4.00=.30 or %30
• Market Share
▫ One retailers part of all the retailers sales
▫ Figured for single product, group of merchandise,
or the business as a whole
Markup and Markdown
• Markup
▫ Difference between cost of merchandise
and selling price
▫ Factors affecting markup
 Competition
 Supply and demand
 Customer acceptance
• Markdown
▫ Reduction in original selling price
▫ Reasons for markdown
 Reduce inventory
 Generate additional sales
Stock turnover
• The number of time the average inventory is sold
during a time period, usually a year
▫ Stock turnover in UNITS
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number of units sold
average number of units of stock on hand
▫ Stock turnover in DOLLARS
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dollar sales of units
average dollar value of merchandise on hand