MARKETING AND MERCHANDISING NINE ACTIVITIES OF MARKETING MERCHANDISING ACTIVITIES

1. PRODUCT PLANNING AND DEVELOPMENT 2. STANDARDISATION AND GRADING 3. BUYING AND ASSEMBLING 4. SELLING PHYSICAL DISTRIBUTION ACTIVITIES

5. STORAGE 6. TRANSPORTATION 7. 8. 9. SUPPORTING ACTIVITIES MARKETING FINANCE MARKET RISK BEARING OBTAINING AND ANALYSING MARKET INFORMATION

BASIC FUNCTIONS OF MERCHANDISING 1. PLANNING 2. BUYING 3. SELLING THE FUNDAMENTAL CONSIDERATION OF FASHION MERCHANDISING IS TO STOCK WHAT CONSUMERS ARE LIKELY TO ACCEPT. RIGHT WITH RESPECT TO STYLES, COLOURS, PRICE, PLACE,TIME, ETC MARKETING AND MERCHANDISING MARKETING: IDENTIFIES CUSTOMERS, DETERMINES WHAT PRODUCTS TO OFFER TO CUSTOMERS AND HOW TO DO SO, WHILE MEETING THE FINANCIAL RETURN OBJECTIVE OF THE COMPANY MERCHANDISING: PROCESS THROUGH WHICH PRODUCTS ARE DESIGNED, DEVELOPED AND PROMOTED TO THE POINT OF SALE. STEPS IN FASHION MERCHANDISING 1. PLANNING: FASHION IS SUBJECT TO CHANGE AND THE PLANNING MUST HAVE FLEXIBILITY

PLANNING BASED ON HOW MUCH WE EXPECT TO SELL AND HOW MUCH INVENTORY IT WILL TAKE TO SECURE THAT SELLING PLANNING THE ASSORTMENTS CUSTOMER ORIENTATION: KNOWING WHAT PEOPLE WANT, WHEN THEY WANT AND HOW MUCH THEY WOULD PAY FOR IT. PREPARATION OF SIX MONTH BUYING PLANS WHICH REQUIRE THE KNOWLEDGE OF FASHION TRENDS AND MARKET CONDITIONS AND ECONOMIC FACTORS MOST IMPORTANAT FACTOR IN PLANNING IS FLEXIBILITY. BUYING: BUYING IS DONE BY CLASSIFICATIONS PRICE LINES SIZES QUANTITIES

2.

BUYING IS DEPENDANT ON CUSTOMER DEMAND ESTIMATED BY STUDY OF CUSTOMER WANTS AND NEEDS THE SUCCESSFUL BUYER KNOWS WHAT CUSTOMER WANTS, WHEN THEY WANT IT AND HOW MUCH THEY WANT TO PAY FOR THE GOODS. BUYING INVOLVES THE FOLLOWING FUNTIONS

1. CHOOSING THE RESOURCE 2. SELECTING THE MERCHANDISE 3. SECURING THE BEST TERMS 4. ACTUAL PLACING THE ORDER. THE BUYER IS RESPOSIBLE FOR NOT ONLY WHAT TO BUY AND WHEN TO BUY, BUT ALSO WHERE TO BUY AND HOW MUCH TO SPEND. BUYING RESPONSIBILITIES INCLUDES: ESTABLISHING AND MAINTAINING EFFECTIVE BUYING RELATIONSHIP WITH VENDORS. ADEQUATELY STOCKING THE DEPARTMENTS PRICELINES AND SECURING THE BEST POSSIBLE MARK UP ON ALL PURCHASES SUPERVISING THE PHYSICAL INVENTORY OR STOCK COUNTS TO VERIFY THE ACCURACY OF THE STOCK RECORDS.

3. SELLING: BUYING IS DEPENDENT ON CUSTOMER DEMAND. DEMAND DETERMINED BEST BY THE ACTUAL CUSTOMER RESPONSE TO THE TO GOODS MADE AVAILABLE BY THE BUYING FUNCTION. SO BUYING FUNCTION CANNOT EXIST WITHOUT INVOLVEMENT IN SELLING FUNCTION. THIS FUNCTION INCLUDES COMMUNICATION AND PROMOTIONAL ACTIVITY. GOODS WELL BOUGHT ARE HALF SOLD TREND TOWARDS CENTRAL BUYING- MERCHANDISE PRESENTATION TO THE CUSTOMER IS BECOMING A FUNCTION OF SALES MANAGER RATHER THAN BUYING A STORE REGARDLESS OF ITS SIZE, CANNOT AND SHOULD NOT STOCK, ALL THE MERCHANDISE AVAILABLE IN THE MARKET. THE CRUX OF MERCHANDISING : SELECTING THE MERCHANDISE WITH CERTAIN CHARACTERISTICS THAT ARE INDICATIVE OF TASTES OF CUSTOMERS OF A STORE AND IN SUCH ASSORTMENTS, DEPTHS AND PRICE LEVELS THAT MAKE FOR A PROPER RATE OF SALE DECIDED UPON BY THE CUSTOMER.

FASHION MERCHANDISING FACTORS THAT MAKE FASHION MERCHANDISING UNIQUE. 1. OBSOLESCENCE FACTOR 2. HIGHER MARKDOWN 3. FASTER TURNOVER 4. SEASONAL FACTORS 5. SALES PROMOTION OBSOLESCENCE FACTOR OBSOLETE = NO LONGER IN USE OR DISCARDED FASHION IN MANY CATEGORIES OF MERCHANDISE UTILITY VALUE IS A STRONG FACTOR. BUT IN FASHION THE EMOTIONAL PULL IS AN ALL CONSUMING ELEMENT. IT CAN BE READILY SEEN THAT WHAT IS NOT ACCEPTED BECOMES OBSOLETE. MERCHANDISE IS INITIALLY PRICED AT A LEVEL THAT WILL MAKE FOR A DESIRED PROFIT CONSUMERS ACCEPTANCE = BUYERS SUCCESS

LACK OF ACCEPTANCE MEANS SLOW OR NON SELLING STYLE NEW SELLING PRICE TO MOVE IT OUT OF STOCK HIGHER MARKDOWNS: RIGHT MERCHANDISE AT RIGHT PRICE LEVEL IS THE KEY TO SUCCESS PRODUCT OBSOLESCENCE LEADS TO MARK DOWN FIRST MARKDOWN SHOULD BE DEEP ENOUGH SO THAT THERE IS AN IMMEDIATE APPEAL TO CONSUMERSAND THAT THE STOCK CAN BE MOVED OUT QUICKLY STRONG RELATION BETWEEN THE ITEM AND TIME OF THE SEASON IT IS MARKED DOWN

FASTER TURNOVER: FASHION CHANGE FAST BY CONSTANTLY CHANGING STYLES IN STOCK, THE MERCHANDISE IS KEPT IN GOOD CONDITION

SEASONAL FACTORS: FASHION DEPENDS ON THE SEASON OF THE YEAR, WHEN THE SEASON IS OVER, THE MERCHANDISE FADES WITH IT. VERY RARELY MERCHANDISE IS KEPT IN STORAGE FOR THE FOLLOWING YEAR. IT IS ENTIRELY DANGEROUS EACH BUYER THREFORE FOLLOWS THE PRINCIPLE WHAT IS PURCHASED MUST BE SOLD SALES PROMOTIONS: FASHION PRODUCTS SALES PROMOTIONS ARE AN IMPORTANT PART. PRESENTATION: IN CASE OF FASHION PRODUCTS PRESENTATION OF PRODUCT TO CONSUMER IS OF UTMOST IMPORTANT WHERE? RETAILERS WHOLESALERS BUYING HOUSES / BUYING AGENCIES EXPORT HOUSES

WHOLESALER EXPORTER RETAIL CHAIN PUBLICATION LEVEL:

RETAILER BUYING HOUSE

CONSUMER

TRADE PUBLICATIONS: Eg WOMENS WEAR DAILY , INFORMATION DIRECTED TO PEOPLE WITHIN INDUSTRY. FASHION MAGAZINES: Eg VOGUE, GLAMOUR, INFORMATION DIRECTED TO CONSUMERS BUT AVIDLY REFERRED BY RETAILERS AS WELL AS WHOLESALERS

PUBLICATION MERCHANDISING: PLANNING: SELECTION OF IMPORTANT THEMES OF THE SEASON BUYING: SPECIFIC MERCHANDISE AVAILABLE FROM MANUFACTURERS FOR STORES SELLING: COMMUNICATION OF THEIR IDEAS. PROMOTIONS. THE CAREER OF FASHION BUYING AND MERCHANDISING KNOWLEDGE IS ALWAYS LESS EXPENSIVE THAN IGNORANCE FASHION BUSINESSMANY AREAS OF INTEREST, EXPERTISE & OPPORTUNITY: PRODUCTION OF FIBRES & FABRICS MANUFACTURE OF APPARELS DISTRIBUTION & RETAILING ADVERTISING & PROMOTION MERCHANDISING & BUYING

STUDY OF SUCCESSFUL RETAILERS REVEALS THAT LARGEST REWARDS USUALLY GO TO MERCHANDISERS AND BUYERS. SOME FASHION BUSINESSES SUCCEED WITH SMALLER STOCKS, SOME NEED LARGER ASSORTMENT, SOME WORK ON SMALL MARK UPS AND SOME NEED LARGER ONES; SOME TURN THEIR STOCKS MANY TIMES, WHILE OTHERS SUCCEED WITH LESS TURN OVER AND FREQUENTLY WITH LOWER MARKDOWNS. SOME SPEND MUCH FOR ADVERTISING, OTHERS LITTLE. BUT NONE SUCCEED WITHOUT FASHION MERCHANDISERS, WHO RESPOND TO THE NEEDS OF THEIR CUSTOMERS

ASSERTIVE ENTREPRENEURIAL STREET SMART SELF CONFIDENT COMFORTABLE MAKING DECISIONS OF SIGNIFICANT DOLLAR MAGNITUDE ACTION ORIENTED ANALYTICAL AT EASE WITH NUMBERS DEAL EFFECTIVELY WITH MANY DIFFERENT TYPES OF PEOPLE UNDERSTAND WHAT IS FASHION & WHAT IS CONVENTION MUST CULTIVATE, SIXTH SENSE ABOUT FASHION DIREXN

DEDICATION: LOVE OF CHALLENGE WILLINGNESS TO SACRIFICE PERSONAL TIME DURING EVENINGS OR WEEKENDS SATISFACTION AT TRIUMPHS OPTIMISM EVEN AFTER TEMPORARY SET BACKS

ENTHUSIASM: UNDYING ENTHUSIASM ABOUT HIS OR HER JOB IS THE KEY TO BUILDING A SUCCESSFUL CAREER. ENTHUSIASM EXTENDS TO ALL ASPECTS OF WORK HONESTY : DEALING WITH OTHERS IN A BUSINESS SITUATION IS ALWAYS EASIER AND MORE FULFILLING WHEN ALL PARTIES PERCEIVE THAT THEY CAN TRUST EACH OTHER MAINTAIN HONESTY AND INTEGRITY IN THE VERY ACT OF BUYING. GIVE EVERY VENDOR AND ITEM A CHANCE TO SUCCEED.

A HONEST BUYER WOULD VIEW POTENTIAL NEW SOURCES WITH AN OPEN MIND THEY ALSO MUST BE HONEST IN RELATION TO THEIR CUSTOMERS IN THE AREA OF QUALITY AND PRICE THEIR HONESTY MUST ALSO EXTEND TO AN ABILITY AND WILLINGNESS TO PURCHASE FASHION GOODS WHICH MIGHT NOT CATER TO THEIR OWN PERSONAL PREFERENCES. BUT WHICH THEY RECOGNISE AS STYLES THAT ARE LIKED AND WANTED BY CUSTOMERS.

AWARENESS: CONSTANT ALERTNESS. THE MORE QUICKLY TRENDS RISE AND FALL, THE MORE QUICKLY A MERCHANDISER MUST BE AWARE OF THE CYCLE AND ACT ON IT. KEEN AWARENESS OF THE WORLD AROUND THEM. STAMINA: THE LONG AND HARD HOURS OF THE JOB REQUIRE A GREAT AMOUNT OF PHYSICAL STAMINA. GOOD HEALTH MENTAL STAMINA AND EMOTIONAL STAMINA COPE WITH PRESSURES OF THE JOB

DECISION MAKING SKILLS: TAKING DECISIONS QUICKLY AND DECISIVELY AND IS NOT AFRAID OF RISK INTUITION, CONFIDENT, CAPABLE AND A LEADER IN THE FIELD OF FASHION

MATHEMATICAL ABILITY: ADEPT IN ANALYSING INFORMATION PRESENTED IN NUMERICAL TERMS AND TRANSLATING THAT INFORMATION INTO MERCHANDISING STRATEGY VENDOR PRICES ARE QUICKLY TRANSLATED INTO STORE PRICES IN THE BUYERS MIND.

COMMUNICATION SKILLS: CONSTANT CONTACT WITH PEOPLE, VENDORS, SALES ASSOCIATES AND CUSTOMERS ETC. BEING ABLE TO COMMUNICATE EFFECTIVELY WITH ALL OF THOSE PEOPLE IS VITAL IN DOING THE JOB WELL. ORAL PRESENTATION ARTICULATE MERCHANDISING IDEAS AND CONCEPTS. NEGOTIATION SKILLS: DEALING WITH VENDORS SHREWED AND PERSUASIVE BUYERMORE VALUE FOR MONEY BUYERS KNOWLEDGE KEY ELEMENT IN NEGOTIATION MANAGERIAL SKILLS: TEAM WORK, EFFECTIVE MANAGEMENT SKILLS. FAIR, TACTFUL AND IMPARTIAL MANAGER WILL EARN RESPECT OF HIS OR HER STAFF.

STORES MERCHANDISING POLICY: ESSENTIAL ELEMENTS IN ESTABLISHING MERCHANDISING POLICIES: PRICE RANGE OFFERINGS HIGH, MODERATE, LOW OR THE VERY LOWEST QUALITY STANDARDS- FINEST AVAILABLE, UNSPECIFIED QUALITY OR IMPERFECT. BREADTH AND DEPTH OF ASSORTMENT NARROW AND DEEEP OR BROAD AND SHALLOW EXCLUSIVITY EMPHASIZED OR NOT EMPHASIZED FASHION LEADERSHIP FASHION LEADER OR MIDDLE OF THE ROAD OR FASHION FOLLOWER MAINTENANCE OF BASIC STOCK; USUALLY IN STOCK, ALWAYS IN STOCK OR BASIC STOCK UNIMPORTANT MERCHANDISE PLAN: THE OBJECTIVE OF BUYING 1. TO SATISFY THE NEEDS AND WANTS OF YOUR CUSTOMER 2. TO MAKE A PROFIT FOR COMPANY BUYERS CANNOT MEET THESE GOALS BY MERE CHANCE. IT TAKES CAREFUL AND CLEAR PLANNING. EARNING A PROFIT: THE REWARD FOR CAREFUL PLANNING IS THE PROFIT YOU WILL MAKE FOR YOUR COMPANY PROFIT IS THE AMOUNT OF MONEY THAT IS LEFT OVER AFTER ALL OF THE MERCHANDISE THAT IS OFFERED FOR SALE HAS BEEN PURCHASED AND ALL OF THE EXPENSES RUNNING THE BUSINESS HAVE BEEN PAID BUSINESS EXPENSES: ADVERTISING, SALARIES, RENT, UTILITIES, EQUIPMENT, SUPPLIES, TAXES ETC GROSS MARGIN= NET SALES COST OF GOODS SOLD GROSS MARGIN- EXPENSES= PROFIT COST OF GOODS SOLD % COST OF GOODS SOLD= -------------------------------NET SALES GROSS MARGIN % GROSS MARGIN = ---------------------------NET SALES

PROFIT % PROFIT EARNED = ----------------NET SALES SIMILARLY WE CAN CALCULATE % EXPENSES ALSO TO EARN BEST POSSIBLE PROFIT, YOU WILL NEED TO PLAN BOTH THE AMOUNT OF MONEY YOU NEED TO FINANCEYOUR PURCHASES AND AMOUNT OF REVENUE YOU EXPECT TO REALIZE FROM SALES. BASIC TOOLS 1. DOLLAR MERCHANDISE PLAN 2.OPEN TO BUY. THE MAJOR GOALS OF CAREFUL AND SCIENTIFIC PLANNING IN RETAIL MERCHANDISING ARE 1. TO MAINTAIN AN INVENTORY THAT IS NEITHER TOO LARGE NOR TOO SMALL FOR ANTICIPATED CUSTOMER DEMAND 2. TO TIME THE DELIVERY OF PURCHASE SO THAT MERCHANDISE IS AVAILABLE FOR SALE IS NEITHER TOO EARLY NOR TOOLATE FOR CUSTOMER DEMAND 3. TO KEEP PURCHASES IN LINE WITH STORES ABILITY TO PAY FOR THEM. 4. TO HAVE FUNDS AVAILABLE FOR PURCHASE OF NEW GOODS WHEN THEY MAY BE NEEDED ELEMENTS OF MERCHANDISE PLAN: SALES, STOCKS, MARKDOWNS AND PURCHASES ALSO INCLUDE INITIAL MARK UP, GROSS MARGIN, STOCK SHORTAGE & OVERAGE, CASH DISCOUNTS, STOCK TURNOVER, SELLING SALARIES AND ADVERTISING EXPENSES. PLANNING SALES: FIRST STEP IN THE PREPARATION OF A MERCHANDISE PLAN IS TO MAKE A REALISTIC ESTIMATE OF PERSPECTIVE SALES DURING THE UPCOMING SEASON. REVIEW PAST SALES FIGURES EXTERNAL AND INTERNAL FACTORS

GENERAL FASHION TRENDS ESTIMATE SALES FOR SEASON AND BREAK DOWN FOR EACH OF THE SIX MONTHS. SALES FIGURES- LAST YEARS FIGURES ARE IMPORTANT, MAY REVIEW LAST TWO OR THRE YEARSFIGURES. -SHARE OF PARTICULAR DEPARTMENTS SALES IN TOTAL SALES

GROWTH RATE GOOD MERCHANDISE PLAN IS BOTH SPECIFIC AND FLEXIBLE. AS SEASON ACTUALLY GETS UNDERWAY, REVIEW FIGURES FREQUENTLY. ALL PLANS ARE SUBJECT TO CHANGE THAT MAY OCCUR FOR VARIETY OF REASONS. ALL PLANS ARE SUBJECT TO CHANGE THAT MAY OCCUR FOR A VARIETY OF REASONS EXTERNAL CONDITIONS: OUT SIDE STORE OR ITS CONTROL. GENERAL ECONOMIC CONDITIONS COMPETITIVE SITUATION SPENDING POWER OF COMMUNITY STRIKES AND SHUTDOWNS DEMOGRAPHIC CHANGES ABSENCE OR PRESENCE OF COMPETITION

INTERNAL FACTORS: WITHIN STORE OR ITS CONTROL PHYSICAL CHANGES EXTENT OF PROMOTION PLANNED. SALES TARGETS FASHION TRENDS: MOST IMPORTANT FACTOR IN INFLUENCING SALES. MONTHLY SALES GOALS: SALES FIGURES FOR WHOLE SEASON PLAN FOR EACH OF SIX MONTHS USE OF PERCENTAGES PREVIOUS YEARS SALES FIGURES IN THE SAME MONTH PERCENTAGE EACH MONTH HAS CONTRIBUTED TO TOTAL ANNUAL SALES CONSUMER DEMAND VARIES SEASONALLY AS WELL AS MONTHLY CHANGE IN NO. OF BUSINESS DAYS FROM MONTH TO MONTH DEPARTMENT TO DEPARTMENT VARIATION

HOLIDAYS AND OTHER SPECIAL DAYS LIKE VALENTINES DAY ETC, GIVE RISE TO VARIATION IN DEMAND LOSS OF SALES DUE TO DELIVERY DELAYS.

CLIMATIC CONDITIONS SALES PROMOTIONS BY COMPETITORS NEW STORE, PAST SALES RECORDS WILL NOT AVAILABLE. MARKET STUDIES, CONSULTATION WITH OTHER MERCHANTS WILL HELP. PLANNING STOCK: ESTIMATE THE AMOUNT OF STOCK THAT WILL BE NEEDED TO SUPPORT THE PLANNED MONTHLY SALES. ESTIMATE BEGINNING OF THE MONTH (BOM) STOCK THAT YOU NEED TO SUPPORT PLANNED SALES. THERE MUST BE AN ADEQUATE OPENNING ASSORTMENT ON HAND, IN SUFFICIENT QUANTITY TO MEET ANTICIPATED CUSTOMER DEMAND UNTIL STOCK REPLACEMENT FOR GOODS SOLD CAN BE SECURED. ANTICIPATED SALES.

THE PALNNING MUST BE SUCH THAT THE DESIRED SEASONAL STOCK TURNOVER MAY BE REALIZED, MARK DOWNS ARE MINIMIZED, AND A STEADY FLOW OF NEW, INTERESTING MERCHANDISE IS ASSURED THROUGHOUT THE SEASON. VARIATIONS IN MONTHLY STOCK GOALS: STOCKS SHOULD BE BROUGHT TO A PEAK JUST PRIOR TO THE TIME WHEN SALES ARE EXPECTED TO REACH THEIR PEAK.

BOM STOCK PLANS SHOULD BE REDUCED AS SELLING SEASON APPROACHES ITS CLOSE AND DEMAND DECREASES TWO OTHER FACTORS CAN HELP YOU TO REDUCE INVENTORY AS THE SEASON ENDS. MARK DOWN UNSOLD SEASONAL GOODS BRING IN NEW GOODS THAT ARE OFFERED AS MANUFACTURERS CLOSE OUT. THESE ARE USUALLY PURCHASED AND RESOLD AT PRICES LOWER THAN EARLIER IN THE SEASON. STOCK- SALES RELATIONSHIP: GUIDED BY TWO TYPES MONTHLY STOCK SALES RATIO AND DESIRED RATIO OF SEASONAL STOCK TURNOVER. MONTHLY STOCK SALES RATIO: THE NO. OF MONTHS THAT WOULD BE REQUIRED TO DISPOSE OF A BOM INVENTORY AT THE PLANNED RATE OF SALES FOR THAT MONTH.

BOM STOCK STOCK SALES RATIO = --------------------------------SALES FOR THE MONTH THIS IS AN IMPORTANT TOOL FOR COMPARISON AND ANALYSIS. BOM STOCK= PLANNED SALES * STOCK SALES RATIO STOCK TURNOVER: NO.OF TIMES THAT AN AVERAGE STOCK OF MERCHANDISE (INVENTORY) HAS BEEN TURNED INTO SALES DURING A GIVEN PERIOD NET SALES STOCK TURNOVER= --------------------------AVERAGE INVENTORY THE RATE OF STOCK TURN OVER IS HIGHER IN WOMENS APPAREL THAN IN MENS CLOTHING. IT IS ALSO HIGHER IN DEPARTMENTS FEATURING LOWER RANGES THAN IN THOSE FEATURING HIGHER PRICE RANGE. THE RATE WHICH YOUR STOCK IS TURNED INTO SALES DIRECTLY AFFECTS YOUR PROFIT. SINCE YOU CAN RECEIVE NO INCOME UNTIL MERCHANDISE IS SOLD. PLANNED MARK DOWNS: MARK DOWNS ARE REDUCTIONS IN THE SELLING PRICE OF MERCHANIDSE. THE FIRST MARK DOWN SHOULD BE THE CHEAPEST AND IT SHOULD ALSO BE THE DEEPEST. MONEY LAID OUT FOR MERCHANDISE IS VERY IMPORTANT, IT CANNOT BE TIED UP IN THE GOODS THAT WONT MOVE. MARK DOWNS ARE AN EFFICIENT WAY OF MEETING THE PRICE COMPETITION. BECAUSE OF RAPIDLY CHANGING CONSUMER DEMAND MARK DOWNS ARE GENERALLY LARGER AND GREATER IMPORTANCE IN FASHION GOODS DEPARTMENT THAN IN DEPARTMENT IN WHICH MERRCHANDISE IS NOT AFFECTED AS MUCH BY SEASONAL FASHION CHANGE. MARK DOWNS CAN BE EXPRESSED AS BOTH A DOLLAR AMOUNT AND A PERCENT. DOLLAR AMOUNT: REFERS TO THE DIFFERENCE BETWEEN PREVIOUS SELLING PRICE OF AN ITEM AND THE REDUCED SELLING PRICE. MARK DOWN PERCENTAGE: AMOUNT OF DOLLAR MARK DOWN TAKEN DURING A GIVEN PERIOD, EXPRESSED AS % OF SALES. DOLLAR MARK DOWN

MARK DOWN % = ---------------------------------NET SALES IN DOLLARS FACTORS IN PLANNING MARK DOWNS: A CERTAIN % OF ANY RETAIL STORES STOCK WILL ALWAYS HAVE TO BE MARK DOWN BEFORE IT CAN BE SOLD. SOME STOCK MAY HAVE TO BE MARK DOWN MORE THAN ONCE. SINCE MARK DOWNS RESULT IN LOWERED GROSS MARGINS, YOU MUST PLAN AND CONTROL THEM CAREFULLY.

MARK DOWNS ARE USUALLY PLANNED AS A% OF EACH SEASONS PLANNED SALES. THEN ALLOTMENT TO INDIVIDUAL MONTHS. CHIEF FACTORS TO BE CONSIDERED IN ESTABLISHING SEASONAL MARK DOWN GOALS ARE THE PAST EXPERIENCE OF THE STORE OR DEPARTMENT. TRENDS IN WHOLESALE PRICES. MARK DOWNS TEND TO INCREASE IN PERIODS OF FALLING WHOLESALE PRICES AND VICE VERSA. COMPARATIVE FIGURES OF SIMILAR STORES AMOUNT OF OLD STOCK ON HAND AT THE BEGINNING OF A NEW SEASON

WHILE ALLOCATING A SEASONS MARK DOWN ESTIMATE TO INDIVIDUAL DATES THROUGH OUT THE SEASON WHEN SEASONAL DEMAND ARE EXPECTED TO OCCUR STORE POLICY- LARGE STORES TEND TO TAKE MARK DOWNS WHILE THERE IS STILL SUFFICIENT CUSTOMER DEMAND TO MOVE THE GOODS QUICKLY AT MINIMUM PRICE REDUCTIONS. SMALL STORES TEND TO POSTPONE TAKING MARK DOWNS PREFERRING TO CLEAR THEIR STOCKS ONLY THE END OF A SELLING SEASON PLANNING PURCHASES: IT IS THE TERM USED TO INDICATE THE AMOUNT OF MONEY YOU CAN SPEND ON MERCHANDISE DURING A GIVEN PERIOD WITHOUT EXCEEDING THE VALUE OF THE INVENTORY PLANNED TO BE ON HAND AT THE END OF THAT PERIOD LARGE STORES PURCHSES ARE PALNNED ON A MONTHLY BASIS SMALL STORES, ON A SEASONAL BASIS.

FORMULA FOR CALCULATING PLANNED PURCHASES: EOM STOCK + PLANNED SALES+ PLANNED MARK DOWNS= TOTAL NEEDS OF THE MONTH

--- BOM STOCK = PLANNED PURCHASES SUPPLEMENTAL ELEMENTS: MARK UP : DIFFERENCE BETWEEN THE COST PRICE AND THE RETAIL PRICE OF THE MERCHANDISE. RETAIL PRICE COST PRICE RETAIL MARK UP % = ---------------------------------------RETAIL PRICE RETAIL PRICE COST PRICE COST MARK UP % = ---------------------------------------COST PRICE INITIAL MARK UP : THE DOLLAR DIFFERENCE BETWEEN THE DELIVERED COST OF MERCHANDISE AND THE RETAIL PRICE PLACED ON IT, WHEN IT IS BROUGHT INTO STOCK IS CALLED INITIAL MARK UP. THE RETAIL STORES INITIAL MARK UP % TO ENSURE THAT THE INCOME DERIVED FROM SALES WILL BE ADEQUATE TO COVER ALL EXPENSES INCURRED IN THE OPERATION OF THE BUSINESS ANTICIPATED REDUCTION IN THE RETAIL VALUE OF THE INVENTORY, SUCH AS MARK DOWNS, EMPLOYEE DISCOUNTS. A REASONABLE MARGIN OF PROFIT FOR THE STORE.

GROSS MARGIN: = NET SALES NET COST OF MERCHANDISE SOLD GROSS MARGIN % GROSS MARGIN SOLD = -------------------------NET SALES CASH DISCOUNTS : THESE ARE PERCENTAGES OR PREMIUMS ALLOWED BY MANUFACTURERS OFF THEIR INVOICES IF PAYMENT OF INVOICE IS MADE WITHIN CERTAIN SPECIFIED PERIOD OF TIME. CASH DISCOUNTS EARNED ARE AN IMPORTANT SOURCE OF ADDITIONAL INCOME FOR A STORE OR DEPARTMENT. CASH DISCOUNTS INCREASE GROSS MARGIN, BECAUSE THEY REDUCE ACTUAL COST OF MERCHANDISE PURCHASES. TERMS OF SALE: THE COMBINATION OF ALLOWABLE DISCOUNTS ON PURCHASES AND TIME ALLOWED FOR TAKING SUCH DISCOUNTS IS REFERRED TO AS TERMS OF SALES.

STOCK SHORTAGES AND OVERAGES: DOLLAR DIFFERENCE BETWEEN BOOK INVENTORY AND PHYSICAL INVENTORY. STOCK SHORTAGE : BOOK INVENTORY MORE THAN PHYSICAL INVENTORY. STOCK OVERAGE: BOOK INVENTORY LESS THAN PHYSICAL INVENTORY. OPERATING EXPENSES: TWO KINDS OF EXPENSES 1. DIRECT EXPENSES: OCCUR AS A DIRECT RESULT OF THE OPERATION OF A SPECIFIC DEPARTMENT. THESE WOULD CEASE IF DEPRTMENT IS CLOSED. 2. INDIRECT EXPENSES: THOSE THAT DO NOT DIRECTLY RESULT FROM THE OPERATION OF AN INDIVIDUAL DEPARTMENT, BUT SHARED BY ALL DEPARTMENTS OF THE STORE. SIX MONTH PLAN IN MOST STORES DOES NOT INCLUDE A BUDGET FOR INDIRECT EXPENSES, BUT THEY ARE INCLUDED IN THE PLANNING OF INITIAL MARK DOLLAR MERCHANDISE PLAN: THE SIX MONTH DOLLAR MERCHANDISE PLAN IS BASED ON THE DOLLAR VALUE OF ANTICIPATED SALES, OPTIMUM STOCK LEVELS, NECESSARY MARK DOWNS, ALLOWABLE PURCHASES. DOLLAR PLAN IS AN ESSENTIAL PART OF MERCHANDISE PLANNING FOR REASONS. INDICATES THE MINIMUM SALES OBJECTIVE OF THE STORE OR DEPT. IT SERVES TO GUIDE MANAGEMENT IN PLANNING FOR AND CONTROLLING THE CAPITAL NEEDED FOR INVENTORY INVESTMENT THROUGHOUT THE PERIOD. IT SERVES AS A GUIDE IN PLANNING PURCHASES. IT PROVIDES MANAGEMENT WITH MEANS OF MEASURING THE RESULT OF MERCHANDISING EFFORTS BY ESTABLISHING SEASONAL GOAL FIGURES LIKE PLANNED S

OPEN TO BUY: A MAJOR TOOL USED BY RETAIL BUYERS TO CONTROL FUTURE INVENTORIES IS A DEVICE CALLED OPEN TO BUY, WHICH MAY BE DEFINED AS THE AMOUNT OF MERCHANDISE, EITHER AT COST PRICE OR AT RETAIL, THAT THE BUYER IS OPEN TO RECEIVE INTO INVENTORY DURING A CERTAIN TIME PERIOD BASED ON THE PLANS FORMULATED. IT MAY BE PREPARED WEEKLY OR MONTHLY AND PROVIDES A METHOD OF ALLOCATING PURCHASES SO THAT PLANNED STOCK LEVELS MAY BE MAINTAINED. IT MAY BE BROKEN DOWN ACCORDING TO A SEPARATE MERCHANDISE CATEGORIES WITHIN A DEPARTMENT. OTB MAY BE CALCULATED EITHER IN DOLLARS OR IN UNITS. FOR EXAMPLE, A BUYER HAS PLANNED PURCHASES FOR THE MONTH OF AUGUST AT $ 2000. BY AUG 20, THE BUYER HAS SPENT $ 1500 FOR MERCHANDISE THAT HAS BEEN RECEIVED OR THAT WILL BE RECEIVED INTO THE DEPARTMENT BEFORE

THE END OF MONTH. THIS LEAVES $ 500 FOR THE BUYER TO SPEND DURING THE REMAINING TIME. THERE FORE THE BUYER IS OPEN TO BUY $ 500 WORTH OF MERCHANDISE ON AUGUST 20. PLANNED PURCHASES = $ 2000

-- MERCHANDISE ON ORDER = $ 1500 = OPEN TO BUY = $ 500

IN PRACTICE, HOWEVER, THE OPEN TO BUY FORMULA IS MORE COMPLICATED. ADJUSTMENTS ARE OFTEN NECESSARY DUE TO FLUCTUATIONS IN REDUCTIONS, SALES AND AVAILABILITY OF GOODS. ALSO, MERCHANDISE ORDERED BUT NOT YET RECEIVED MAY FURTHER COMPLICATE THE OPEN TO BUY FIGURE. PLANNED SALES : 50,000

+ PLANNED REDUCTIONS:10,000 +PLANNED EOM STOCK : 40, 000 -------------TOTAL NEEDS OF THE MONTH : 100,000 -- BOM STOCK PLANNED PURCHASES = 75,000 -- MERCHANDISE ON ORDER = 30,000 = OPEN TO BUY : 45,000 THE OPEN TO BUY FIGURE SHOWS HOW MUCH MERCHANDISE MAY BE RECEIVED INTO A PARTICULAR DEPARTMENT DURING THE COURSE OF A MONTH WITHOUT EXCEEDING THE PLANNED INVENTORY AT THE END OF THE MONTH. 25,000