Planning Merchandise Assortment

Assortment refers to the number of SKUs within a merchandise category, group or

department (depending on the retailers reference).
Assortment planning is the process to determine what and how much should be carried
in a merchandise category. Assortment plan is a trade-off between the breadth and depth of
products that a retailer wishes to carry.
Merchandise management is the process by which a retailer attempts to offer the right
quantity of the right merchandise in the right place at the right time while meeting the
companys financial goals.

Merchandise Assortment Planning is a tradeoff between:
Variety
Assortment
Product Availability

Variety It refers to the number of different categories of merchandise within a store or
department.
Assortment It refers to the number of SKUs within a category.
Product Availability It refers to the percentage of demand for a particular SKU which is
satisfied.
Factors affecting Variety and Assortment
Physical characteristics and layout of the store and internet site.
Workout a balance between too much versus too little assortment.
Work at profitable mix of products.
Corporate strategy towards assortment.

Factors affecting Product Availability
Work out for a tradeoff between inventory investment and product
availability.
Plan sufficient back up of stock to meet each SKUs stock demand.
SKUs stock demand depends upon:
Product availability the retailer wishes to provide.
The fluctuations in demand.
Lead time for the vendor.
Fluctuations in lead time.
The vendors product availability also affects the retailers back up stock.



PLANNING MERCHANDISE ASSORTMENTS

Organize the buying process by categories


Set merchandise financial objectives


Develop an assortment plan



Merchandise planning system

Merchandise planning and control systems can play a key role in increasing profitability.
Merchandise planning systems have enjoyed a very high profile in the retail industry for
some time now.
To put it simply the goal of a merchandise planning system should be to maximise sales and
achieved margins by reducing stock-outs and mark-downs.
In order to achieve this there are a set of clearly defined stages that will be followed by
most retailers using a seasonally based planning system. Non-seasonally based systems will
have similar requirements, but will need greater flexibility in terms of time periods, and will
use different methods of extrapolation.

You should normally expect a Merchandise Planning System to be capable of
providing a large subset of the following:
normalisation of base data
plan seeding
strategic planning (3-5 year time horizon)
channel planning
category level plan
range planning
store grading
assortment planning
line level planning
In-season control and re-forecasting.
store layout design (numeric and visual)

Normalisation of base data
Historic data will contain all sorts of abnormalities due to such things as promotions, branch
refits, bad delivery, bomb scares, and moveable feasts like Easter. If we are to use this data
as a basis for extrapolation we must first remove these abnormalities.

Plan seeding
Seeding is the process of creating the initial version of the plan based on historical data.
Strategic Planning
Is an organization's process of defining its strategy, or direction, and making decisions on
allocating its resources to pursue this strategy.
Channel planning
One of the key areas in merchandise planning is trying to assess the impact of store
openings, closures and refits, and the impact of any new channels such as E-commerce (the
Net New Channel effect).
Category level plan
We are simply moving one section of the plan (a seasons worth) down to a lower level of
time (week) and product (category).
Range Planning
The system should be capable of extending the results so that we can see the effect on
overall margin mix, for example, of a change in cost price of an item.
Store grading
Efficient store grading for assortment planning should ideally be based on planned space as
this is the key determinant of range width in a retail store. (Web stores are a special case
and should be treated differently). If you dont have space data then you will probably use
sales performance to grade with.
Assortment planning
The process to determine what and how much should be carried in a merchandise category.
Assortment plan is a trade-off between the breadth and depth of products that a retailer
wishes to carry.
Line level planning
The final part of most planning systems is to break the category level plans down to a line
level. This is purely on the grounds of manageability. This type of module replicates the
stock cards kept by most buyers / merchandisers, but being fed from a centralised system is
almost always an area of great efficiency gains.
in-season control and re-forecasting.
In season control is a twofold process. Firstly we must monitor the variance between the
forecast and what actually happens when merchandise goes on sale. Secondly we must use
the information constructively to ensure that we maximise profit.


Store layout

A store layout is the design in which a store's interior is set up. Store layouts are well
thought out to provide the best exposure possible. They are designed to create an attractive
image for consumers.

Planogram
Is graphic schematic which shows the precise location of every store keeping unit (SKU) on a
shelf or other merchandise display.

Types of store layout and design
Circulation
The circulation pattern not only ensures efficient movement of large numbers of shoppers
through the store, exposing them to more merchandise, but also determines the character
of the store.
Free flow
The simplest type of store layout in which fixtures and merchandise are group into free
flowing patterns on the sales floor. Customers are encouraged to flow freely through all the
fixtures since there are usually no defined traffic patterns in the store.



Grid layout
The counters and fixtures are placed in long rows or runs, usually at right angles,
throughout the stores. In grid layout customers circulate up and down through the fixtures,
and, in fact, the grid layout is often referred to as a maze.




Loop layout
A loop provides a major customer aisle that begins at the entrance, loops through the store
usually in the shape of a circle, square, or rectangle and then returns the customer to the
front of the store.










Spine layout
A spine layout is based on a single main aisle running from the front to the back of the store,
transporting customers in both directions.




Buying strategies
Retail buying process:
Merchandise planning
Assortment planning
Actual buying and rearrangement
Merchandise planning
For realistic Merchandise planning retail buyer must consider
1) Target market demand
2) Local retail competition
3) Physical expansion needed in the store
4) Planned promotional efforts
5) Trend analysis
6) Seasonal consumer demand
7) Economic condition
Merchandise planning may require fashion forecast, sales forecast.
Objective of Fashion Forecast in merchandise planning.
1) Studying market condition consumer buying behavior.
2) Evaluating up to date fashion trend information.
3) Noting street fashion of target consumer.
Objective of sales forecast in merchandise planning
1) Trend analysis
2) Effective order in term of quantity decisions of specific style,colors, size.
3) To develop efficient and effective inventory control plan.

Two approach used for sales forecast
1) Top-down
4 Steps of top-down forecasting process
Planning sales goal
Planning stock level for company & each store
Planning assortment plan
Making a sales forecast report
2) Bottom-up
3 steps of Bottom-up forecasting process
Determining sales potential for individual item
Planning total sales & stock level by adding
Making a sales forecast report

If item proportion in assortment plan is positively correlated BOTTOM-UP approach is used.
If item proportion in assortment plan is negatively
Correlated TOP-DOWN approach is used.

Assortment Planning
TYPES OF PLAN
UNIT PLAN- It most often refers to qualitative decision.
DOLLAR PLAN- It is quantitative result of assortment planning.
Actual buying and rearrangement plan with vendors
Retail buyer looks for new product.
Vendor evaluation on following criteria
1) Quality of goods
2) Good delivery
3) Product fashion-ability
4) Fair price
5) Styling
6) Reputation
7) Selling history
8) Steady source of supply.



Assortment planning process
It is perceived gap or discrepancy between current state and desired state of
company /store.
Two Major problem with which this step begins.
1) Change in desired state for a store.
2) Change in current store assortment
Internal source of Information:
- Store records, merchandise plan reports, sales people opinion.
External Source of Information
a) Customer panel
b) Consumer magazine & trade publication
c) Vendor opinion
d) Trade associations
e) Competitors
f) Fashion forecast magazine
g) Reporting bureaus.
Qualitative Evaluation
A. Important aspect in evaluation is desired solution to a problem, establishing
criteria of evaluation.
B. Product specific criteria.
1. Quality
2. Color
3. Position on the fashion cycle
4. Styling
5. Distinctiveness
Quantitative Evaluation
Their components are following:
1) Initial markup for period
2) Planned net sales
3) Planned BOM(Beginning of month)
4) Planned ending inventory (EOM)
5) Planned reduction
6) Planned purchases at retail.

Forecasting product selection and sales.
Forecasting Style Selection
Forecasting Color Selection
Forecasting Size Selection


























A
Written Report
In
Marketing Management 3
Retail Management



Submitted to:

Ms. Melody Hate


Submitted by:

Flores, Miguel Sebastian C.
Pinlac, Riva Bianca M.
Vigo, Jenny Lyn T.
Villamor, Abby Pauline C.
Ybanez, Lutgardo jr. P.