Transcript MERCHANDISE PLANNING

MERCHANDISE
PLANNING
CHAPTER 6
MERCHANDISING DECISIONS
• ENABLES RETAILERS TO MAKE BETTER
DECISIONS ABOUT MERCHANDISE
NEEDED TO MEET SALES GOALS FOR
THEIR BUSINESSES.
• CHALLENGE: PROVIDING THE RIGHT
MERCHANDISE AT THE RIGHT PRICES, AT
THE RIGHT TIME
THE MERCHANDISE PLAN
• A BASIC BUDGETING TOOL THAT ASSISTS THE RETAILER
OR BUYER IN MEETING DEPARTMENT OR
CLASSIFICATION GOALS.
• PREVIOUS YEAR TO CREATE PLAN FOR CURRENT YEAR
COMPONENTS
• PLANNED SALES – DOLLAR FIGURES REFLECT SALES
NEEDED TO MEET GOAL FOR MONTH
• PLANNED STOCK- $ OF MERCHANDISE A STORE NEEDS TO
MEET PLANNED SALES GOAL
• PLANNED REDUCTIONS- $ OF ANY DECREASE IN THE
SELLING PRICE OF MERCHANDISE ( MARKDOWNS,
ADJUSTMENTS, LOSS FROM SHOPLIFTING)
• PLANNED PURCHASES- $ OF NEEDED MERCHANDISE TO
MEET PLANNED SALES GOALS.
$= DOLLAR AMOUNTS
MERCHANDISE LIFE CYCLES
• REFERS TO CUSTOMER ACCEPTANCE LEVELS AND
BUYING LEVELS OF AN ITEM OF MERCHANDISE OR
PRODUCT.
• 4 STAGE CYCLE
INTRODUCTION
GROWTH
ACCEPTANCE
DECLINE
http://www.quickmba.com/marketing/product/lifecycle/
CYCLE
MERCHANDISE ASSORTMENT
PLANNING TOOLS
• RETAILERS LOOK TO IMPROVE AND
REFINE THEIR PURCHASING.
• STUDY SALES AND INVENTORIES TO FIND
WAYS TO IMPROVE
TYPES OF MERCHANDISE
• STAPLE MERCHANDISE
• SELLS WELL OVER A LONG PERIOD OF TIME
• EX: T-SHIRTS SELL SEASON AFTER SEASON; WHITE, BLACK, RED, NAVY
POPULAR COLOR
• FASHION MERCHANDISE
• SELLS WELL FOR SEVERAL SEASONS, BUT NOT YEAR AFTER YEAR
• EX: WOMENS PLEATED SKIRT IN STYLE FOR A FEW SEASONS BUT
AFTERWARDS INTEREST IS LOST
• SEASONAL MERCHANDISE
• SELLS WELL AT CERTAIN TIMES, OR SEASONS, OF THE YEAR
• EX: HOLIDAY; CHRISTMAS, HALLOWEEN
• CONVENIENCE MERCHANDISE
• MERCHANDISE BOUGHT WIHTOUT MUCH PLANNING OR THINKING
• EX: DRUGSTORE CUSTOMERS WILL BUY HEADACHIE REMEDIES; GUM
BUYING MERCHANDISE
• UNDERSTANDING THE ROLE THAT BUYING
PLAYS IS IMPORTANT FOR UNDERSTANDING
THE RETAIL BUSINESS.
• BUYING THE RIGHT MERCHANDISE TO SATISFY
CUSTOER NEEDS IS ONE OF THE MOST
IMPORTANT DECISIONS IN THE RETAIL MIX.
THE BUYER’S JOB
• RIGHT AMOUNT OF MERCHANDISE IS CRITICAL
• TOO MUCH, SLOW TURN AROUND, IF NOT ON
DEMAND
• TOO LITTLE, MAY RESULT IN LOSS OF SALE
• WHEN IS THE RIGHT TIME TO BUY?
• LARGE RETAIELRS EMPLOY BUYERS, SMALLER
RETAILERS DO IT THEMSELVES
• BUYER REQUIRES ACCURATE KNOWLEDGE OF
TARGET-MARKET CUSTOMERS AND IN DEMAND
PRODUCT
1. DETERMINING AVAILABLE
MONEY
• DETERMINED BY THE MERCHANDISE PLAN
• OPEN-TO-BUY - AMOUNT OF MONEY AVAILABLE TO
PURCHASE MERCHANDISE AFTER OTHER PURCHASES
HAVE BEEN SUBTRACTED.
• AMOUNT IS FIGURED FOR A MONTH OR SEASON
• PLANNED PURCHASES – (MERCHANDISED RECEIVED +
MERCHANDISE ORDERED)= OPEN-TO-BUY
OPEN-TO-BUY
• TOM IS RUNNING A BEACH SHOP. IN JUNE, PLANNED
PURCHASES TOTAL $3,300. SHE’S ORDERED
MERCHANDISE THAT COSTS $1,400 AND RECEIVED A
SHIPMENT OF GOGGLES WORTH $300. WHAT IS THE
OPEN TO BUY FIGURE?
ANSWER
3,300 – (300+1,400) = 1,600
2. WHAT CUSTOMERS WANT
• TARGET-MARKET INFO: DETERMINE
MERCHANDISE CUSTOMERS WILL BUY
• SALES RECORDS: BASED ON PAST PURCHASES
• CUSTOMER PREFERENCES: ITEMS LIKED MORE
THAN OHTERS; SALES ASSOCIATES CAN LEARN
BY TALKING TO CUSTOMERS
• CUSTOMER REQUESTS: ITEMS NOT AVAILABLE
CAN BE REQUESTED; SPECIFIC; SPECIAL
ORDER
• SHOPPING THE COMPETITION: BUYER WILL
SHOP OR VISIT COMPETITOR LOOKING FOR
IDEAS, STYLES, SALES, AMBIANCE, ETC.
3. VENDOR SELECTION
• A COMPANY FROM WHICH A BUYER PURCHASES
MERCHANDISE.
• SHOP VENDOR LOOKING FOR QUALITY, PRICE, AND
RELIABILITY
• DETERMINING QUALITY OF MERCHANDISE IS CRITICAL.
YOU WANT MIDDLE GROUND; NOT LOWER OR
HIGHER
4. NEGOTIATING TERMS AND
DISCOUNTS
• BUYER’S OBJECTIVE: TO MAKE PROFIT
• DATING TERMS DEAL WITH THE DATE WHEN THE BILL
FOR MERCHANDISE HAS TO BE PAID TO VENDOR.
• 2/10, NET 30
• 2% DISCOUNT OF TOTAL BILL IF PAID WITHIN 10 DAYS
OF SHIPMENT, OR PAY FULL BILL WITHIN 30 DAYS
• SHIPPING TERMS REFER TO HOW MERCHANDISE WILL
GET FROM THE MANUFACTURER TO THE STORE;
• WHO PAYS FOR THE SHIPPING ( MANUFACTURER OR
BUYER);
• AND WHEN OWNERSHIP OF THE MERCHANDISE
CHANGES HANDS.
• IMPORTANT:
• 1. SHIPPING CAN BE VERY COSTLY, ADD TO COST
OF MERCHANDISE IF STORE HAS TO PAY
• 2. OWNER OF MERCHANDISE WHILE IN TRANSIT MUST
PAY INSURANCE TO COVER LOSS OR DAMAGE
• 3. OWNER WHILE TRANSIT, MUST FILE ANY CLAIMS
FOR LOSS OR DAMAGE
5. TIMING MERCHANDISE
DELIVERIES
• BUYER DETERMINES BEST TIME FOR MERCHANDISE TO
ARRIVE.
• ARRIVING AFTER THE FACT, WILL RESULT IN LOST OF
SALE AND CUSTOMER
TYPES OF BUYING
• CENTRALIZED BUYING OCCURS WHEN ALL BUYING
FOR THE CHAIN IS COMPLETED FROM ONE
LOCATION.
EX. BUYER FOR MACYS SHOE DEPARTMENT WILL
PURCHASE ALL THE SHOES FOR ALL STORES
FROM
ONE LOCATION.
QUANTITY DISCOUNTS ARE OFFEREDFOR LARGE OR
BULK PURCHASES.
DECENTRALIZED BUYING MEANS THAT BUYING
DECISIONS ARE MADE AT THE LOCAL STORE LEVEL.
PRICING
MERCHANDISE
FACTORS AFFECTING SELLING PRICE
• PRICE TOO HIGH, CUSTOMERS WILL NOT BUY
• PRICE TOO LOW, CUSTOMERS MAY NOT SEE ANY
VALUE IN THE MERCHANDISE
• TO MAKE PROFIT, SELLING PRICE MUST INCLUDE:
1. COST OF MERCHANDISE
2. EXPENSES OF GETTING MERCHANDISE TO STORE
3. SHARE OF RETAILER’S OVERHEAD EXPENSE
4. RETURN ON INVESTMENT
• MARKUP IS THE TERM USED TO EXPRESS THE
DIFFERENCE BETWEEN THE COST PRICE OF
MERCHANDISE/SERVICES AND THE SELLING PRICE OF
THE MERCHANDISE.
• TELEVISION
• STORE PAYS $500
• CUSTOMER PRICE $1,200
• MARKUP $ 700
3 MAJORS FACTORS AFFECT SELLING
PRICE
• 1. COMPETITION
• RETAILERS CONSIDER PRICES THEIR COMPETITORS
ARE CHARGING FOR THE SAME OR SIMILAR
MERCHANDISE/SERVICE.
• CHARGING SAME = MEETING THE COMPETITION
• RETAILERS RELY ON CUSTOMER LOYALTY AND
CONVENENCE
2. SUPPLY AND DEMAND
• LAW STATES:
• IF THE SUPPLY IS LIMITED, PRICES ARE HIGHER.
• IF SUPPLY IS PLENTIFUL, PRICES ARE LOWER.
• DEMAND IS THE QUANTITY THAT CUSTOMERS WILL BUY.
• SUPPLY IS THE QUANTITY OF MERCHANDISE THAT IS
•
•
•
•
AVAILABLE FOR PURCHASE.
EX. HOLIDAY DECORATIONS
PRICES ARE HIGHER BEFORE HOLIDAY THAN AFTER
SUPPLIES ARE LIMITED, CUSTOMERS WILLING TO PAY
HIGHER.
EX. CUSTOMERS WILLING TO PAY MORE FOR PEACHES
DURING OFF-SEASON THAN IN.
3. CUSTOMER ACCEPTANCE
• WILL CUSTOMER ACCEPT YOUR
MERCHANDISE/SERVICE BASED ON PRICE?
• KNOW YOUR TARGET-MARKET WELL ENOUGH TO
PREDICT AND JUDGE LEVEL OF ACCEPTANCE
OTHER FACTORS
• 1ST CONCERN IS PROFIT
• RETURN ON INVESTMENT IS A PERCENTAGE FIGURE
USED TO EXPRESS THE RETURN ( OR PROFIT) ON THE
COST OF MERCHANDISE OR SERVICE PLUS THE
EXPENSES NECESSARY TO SELL THE
MERCHANDISE/SERVICE.
• http://www.investopedia.com/terms/r/returnoninvest
ment.asp
• MARKET SHARE IS ONE RETAILER’S PART OF THE TOTAL
SALES OF MERCHANDISE AND SERVICES BY ALL
RETAILERS IN THE SELLING AREA.
• TO INCREASE SALES, RETAILER MIGHT LOWER PRICE.
MARKDOWNS
• A REDUCTION IN THE ORIGINAL SELLING PRICE.
• SALE ITEMS
• REASONS:
• ATTRACT NEW CUSTOMERS
• REDUCE INVENTORY - SELL MERCHANDISE NOT SELLING AS
WELL AS EXPECTED
• GENERATE NEW SALES
• PART OF DOING BUSINESS
• PART OF THE MERCHANDISE PLAN ALLOWING FOR PRICE
REDUCTIONS UNDER PLANNED REDUTIONS.
SELLING MARKDOWN
MERCHANDISE
• METHODS TO LIQUIDATE LEFTOVER MERCHANDISE
• 1. SELL, OR JOB-OUT TO ANOTHER RETAILER SUCH AS
•
•
•
•
T.J. MAXX
2. CONSOLIDATE AND SELL TO ANOTHER STORE
UNDER SAME OWNERSHIP
3. USE INTERNET
4. DONATE AND USE AS TAX DEDUCTION
5. CARRY OVER INTO NEXT SEASON