STORE management

Store is to follow certain activities which are managed through use of various resources. Store
management is concerned with ensuring that all the activities involved in storekeeping and stock
control are carried out efficiently and economically by thestore personnel. A store management
system executes store operations, utilizing a correspondence mechanical assembly In the store,
associated with no less than one store terminal by method for a first line Inside the store and
associated with a server by a second line outside the store. The correspondence mechanical
assembly judges the operation kind of every operation demand sent from the store terminal and,
when the operation sort is a first operation, forms the operation demand and, when the operation
sort is a second operation, transmits the operation solicitation to the server so that the server forms
the operation demand.
STORE LAYOUT

A retail store layout (whether physical or digital) is the strategic use of space to
influence the customer experience. How customers interact with your
merchandise affects their purchase behavior. The interior retail store layout has
two important components:

 Store Design: The use of strategic floor plans and space

management, including furniture, displays, fixtures, lighting, and
signage. Website designers and user experience (UX)
researchers use space management techniques and web design
principles to optimize e-commerce websites. We’ll further discuss
a variety of popular retail floor plans later in this article.
 Customer Flow: This is the pattern of behavior and way that a
customer navigates through a store. Understanding customer
flow and the common patterns that emerge when customers
interact with merchandise based on the store layout is critical to
retail management strategy. Physical retailers are able to track
this using analytics software and data from in-store video and the
wifi signal from smartphones. For example, solution providers like
RetailNext provide shopper analytics software for retailers to
understand flow and optimize the customer experience based on
in-store video recordings. The technology also exists to track the
digital customer flow and online shopping behavior. Using
“cookies” and other software, online retailers can track customer
behavior, including how customers interact with their website.
While the exterior retail store layout includes exterior store design and
customer flow, it also includes the following factors:

 Geographic location of the retail store (real estate)

 Size of the building and length of the walkways accessible from

the entrance and exit

 Use of furniture and exterior space for people to gather and

interact

 Style of architecture of the retail building

 Color of paint and choice of exterior building materials

  Design of the physical entrance and exterior window displays

The objective of retail store design is to positively impact customer experience

and create value, which is the primary goal of retailers in the supply chain.

Types of store layout

Grid Store Layout

The grid store layout design is a familiar, repetitive pattern favored by retail
drugstores like Walgreens and hardware stores like Ace Hardware. According
to Ebster, there are multiple advantages to the grid layout, including the
following:

 Customers can move quickly through an efficient floor space

using standard fixtures and displays.

 The presentation is uniform and comfortable due to its

popularity, creating a seamless customer experience.

 Design simplifies inventory control for the retailer - a key to

retail strategy that leverages store design to maximize
profitability.
However, the downside of this layout is the lack of aesthetics and the “sterile
and uninspiring” environment often associated with its use. To counter this,
Ebster recommends effective signage to guide customers and create a
“cognitive map” of the store.

Loop Store Layout

Also known as the “racetrack” layout, think of the loop design as the “yellow
brick road” of retail store layouts. Ebster uses this analogy to describe the way
a loop store layout uses a path to lead customers from the entrance of the store
to the checkout area. This is a versatile choice for store design when
implemented with another layout style or used as a prominent feature of the
retail store. Ebster recommends this layout for a larger retail space (over 5,000
square feet) and encourages a clear and visible loop for customer flow.
Designers accomplish the loop effect by making the floor path a standout color,
lighting the loop to guide the customer, or using a different floor material to
mark the loop. Lines are not recommended, as they can be a psychological
barrier to some customers, potentially discouraging them from stepping away
from the loop and interacting with merchandise. Ebster encourages a loop
design that rewards the customer with interesting visual displays and focal
points on the way to the checkout area.

Straight Store Layout

The straight store layout is efficient, simple to plan, and capable of creating
individual spaces for the customer. Plus, a basic straight design helps pull
customers towards featured merchandise in the back of the store. Merchandise
displays and signage is used to keep customers moving and interested.

Liquor stores, convenience stores, and small markets use the straight design
efficiently. However, the drawback is the simplicity: Depending on how a
customer enters the store and moves past the transition zone, it may be more
difficult to highlight merchandise or draw them to a specific location.

Diagonal Store Layout

Just as the name implies, the diagonal store layout uses aisles placed at
angles to increase customer sightlines and expose new merchandise as
customers navigate through the space. A variation of the grid layout, the design
helps guide customers to the checkout area. Small stores can benefit from this
space management option, and it is excellent for self-service retailers because
it invites more movement and better customer circulation.
When the checkout is located in the center and possibly raised up, the diagonal
layout offers better security and loss prevention due to the extra sightline effect.
The downside of this layout is that it doesn’t enable the customer to shortcut
toward specific merchandise, and the risk of narrow aisles is higher.

Angular Store Layout

The name of this design is deceptive, as the “angular” store layout relies on
curved walls and corners, rounded merchandise displays, and other curved
fixtures to manage the customer flow. Luxury stores use this layout effectively
because, according to Herb Sorenson’s research from Inside the Mind of the
Shopper: The Science of Retailing, customers notice free-standing product
displays 100 percent of the time (end cap displays - those at the end of aisles -
also get noticed 100 percent of the time).
There is a perception of higher quality merchandise that the angular layout
leverages to target the appropriate customer behavior in that environment. And
although this design sacrifices efficient space use, because of the rounded
displays and limited shelf space, if a retailer has sufficient inventory storage
away from the sales floor, this layout is useful in creating a unique perception.

Geometric Store Layout

Popular with retailers targeting trendy millennials and Generation Z

demographics, a geometric layout offers artistic expression and function when
combined with the appropriate displays and fixtures. The unique architecture of
some retail stores, including wall angles, support columns, and different ceiling
styles mix well with the uniqueness of a geometric layout.

Merchandise displays and fixtures of various geometric shapes and sizes

combine to make a statement, often as an extension of the retailer's overall
brand identity. Clothing and apparel stores use a variety of environmental
merchandising strategies (for example, music, scents, and artwork) with the
geometric layout to enhance the customer experience.

Mixed Store Layout

The mixed store layout uses design elements from multiple layouts to create a
flexible option for retailers. Department stores use a compelling mix of straight,
diagonal, and angular concepts, among other design elements, to create a
dynamic flow through a range of departments featuring a variety of
merchandise.

Large grocery store chains also successfully combine mixed store layout
elements. For example, customers have the flexibility to navigate through a grid
layout for their basic groceries but feel compelled to search the angular
displays featuring high-margin wine, beer, and imported cheeses. The
advantages of combining different store layouts seems apparent, but the space
and resource requirements to maintain this design can pose difficulties to
retailers.

Free Flow Store Layout

A free flow layout rejects typical design patterns and styles commonly used to
influence customer behavior. In a free flow layout, the intent is not to lead the
customer using predictable design patterns, displays, or signage. There are no
specific design rules followed for this retail store design, and customers have
more liberty to interact with merchandise and navigate on their own. For this
reason, the free flow layout is sophisticated in its simplicity.

Ebster points out that customers feel less rushed in this creative environment.
Retail stores look less sterile in the free flow design, and merchandise may
seem more intriguing. The only limitation for retailers using this layout is the
overall space available, but that doesn’t mean that the research on customer
navigation behavior and tendencies shouldn’t be accounted for as well. The
main disadvantage to this experimental design layout is the risk of confusing
customers past the point of their preferred behavior and disrupting customer
flow.

Visual merchandising :fixtures

Visual merchandising refers to anything that can be seen by the

customer inside and outside a store, including displays, decorations,
signs and layout of space. The overall purpose of visual
merchandising is to get customers to come into the store and spend
money.

Point of Purchase

Point of purchase displays are some of the most important displays in any retail store.
You’ll find these next to the cash register or the doors. This is where you need to place
your fast-moving merchandise such as candy, cheap items, and popular goods. Many
stores use the point of purchase display racks for sale items, or items close to the expiry
date. Customers can’t miss items on a point of purchase stand so make the most of this
high-traffic area with IDW custom point of purchase displays.

Gondola
Gondolas are two-sided, so they work best in the middle of a store. These units are
typically free-standing and can be moved around to suit your space. This is a useful unit
if you have heavy goods, as it will be constructed from steel. Grocery stores often use
them to display tinned goods.

Table Displays

Are you looking for a display unit for craft items or smaller merchandise? Table displays
are perfect for this. You can create an inviting tableau of items to entice your customers
to buy. Place a table display near the entrance of your store and decorate it for seasonal
holidays.

Garment Racks

Garment racks are essential if you stock garments, but they are also useful for other
apparel such as ties, hats, and scarves.

Specialty Displays

Specialty displays can be used for anything out of the ordinary. For example, if you sell
chilled or refrigerated goods, you will need an open display where goods are kept fresh
but are still accessible to your customers. Research has shown that customers are more
likely to buy items from an open refrigerated display unit than a closed unit. Specialty
units are also used for wine and luxury goods such as jewelry. Cardboard display
stands can be made to be giant structures for all out promotion as well.

Peg Boards

Peg boards are perfect for small items. The great thing about peg boards is that you can
move shelves, bins, and hooks around to suit the type of merchandise you are selling.
They are very flexible and work well with other types of mainstream display units.

Grid Walls
Grid wall systems are light and easily customizable. Move shelving around and attach
hooks to suit your store. Grid walls are easy to clean and don’t attract dust in the same
way as some other types of display units.

Once you have determined what type of merchandise you are selling, it’s time to select
the right display units. You will most likely need a range of different units. Work out a
floor planbased on how you anticipate customers are going to explore the store. Place
your most attractive items near the front of the store, as this will draw people in through
the door.

Usage of Signage and Graphics

 Location – identifies the location of merchandise and guides customers

 Category Signage – identifies types of products and located near the goods
 Promotional Signage – relates to specific offers – sometimes in windows
 Point of sale – near merchandise with prices and product information
Digital signage’s

Visual Content delivered digitally through a centrally managed and controlled network and
displayed on a TV monitor or flat panel screen

• Superior in attracting attention

• Enhances store environment

• Provides appealing atmosphere

• Messages can target demographics

Eliminates costs with printing, distribution and installing traditional signage

Space Planning

 Productivity of allocated space (sales per square foot, sales per linear foot)

 Merchandise inventory turnover

 Impact on store sales

 Display needs for the merchandise

Prime Locations for Merchandise

 Highly trafficked areas

 Store entrances
 Near checkout counter

Highly visible areas

 End aisle
 Displays
Location of Merchandise Categories

 Impulse merchandise – near heavily trafficked areas

 Demand/Destination merchandise – back left-hand corner of the store
 Special merchandise – lightly trafficked areas (glass pieces, women’s lingerie)
 Adjacencies – cluster complimentary merchandise next to each other

Location of Merchandise within a Category: The Use of Planograms

Planogram: a diagram that shows how and where specific SKUs should be placed on retail
selves or displays to increase customer purchases

Visual Merchandising: Fixtures

A. Straight rack

B. Rounder (bulk fixture, capacity fixture)

C. Four-way fixture (feature fixture)

D. Gondolas
Straight Rack
 Holds a lot of apparel
 Hard to feature specific styles and colors
 Found often in discount and off-price stores
Rounder
 Smaller than straight rack
 Holds a maximum amount of merchandise
 Easy to move around
  Customers can’t get frontal view of merchandise
Four-Way
 Holds large amount of merchandise
 Allows customers to view entire garment
 Hard to maintain because of styles and colors
 Fashion oriented apparel retailer

Creating an Appealing Store Atmosphere

The design of an environment through visual communications, lighting, colors, music, and
scent to stimulate customers’ perceptual and emotional responses and ultimately to affect
their purchase behavior

Lighting
 Highlight merchandise
 Structure space and capture a mood
We are using in store:
 Flood light
 Pin light
 Spot light
Color:
Color creates a powerful emotional and visual stimulus.
Warm colors (red, gold, yellow) produce emotional, vibrant, hot, and active responses
Cool colors (white, blue, green) have a peaceful, gentle, calming effect
 We are using in store:
 Pastels, white, black
 Pastels to feel comfortable
 White is totally reflective,
awakening openness, and creativity.

Music
Control the pace of store traffic, create an image, and attract or direct consumers’ attention
A mix of classical or soothing music encourage shoppers to slow down, relax, and take a
good look at the merchandise thus to stay longer and purchase more
 We are using in store
 Country music
 Latest trend example Starboy
 Somebody that I use to know
 Running Running
 Cross my he
Scent

It create a positive impact on impulse buying behavior and customer satisfaction

Lavender –
 To create peaceful environments
 lavender refreshing, rich, warm, bold, intense, balancing and sweet. the smell of
lavender can reduce signs of depression and anxiety. Outside of
Rose
 The smell of roses is thought to be relaxing and restorative
 it encourages us to breath deeply and slowly.

MERCHANDISING PLAN

Initial Markup percent: DOLLAR MERCHANDISE PLAN

Planning To Buy: The Dollar Merchandise Plan:

It is a guide for a futuristic period and includes monetary values only. It does not describe
units, assortments or quantities of merchandise. It balances planned sales and planned
stocks in monetary values. It includes:
1. Cash Discount: discounts allowed by vendors for payment of invoices prior to a
specified date.
2. Stock Turnover: Net Sales divided by average inventory at retail.
3. Shortage: Difference between book inventory in retail dollars and the physical
inventory at retail; stated as a percent of net sales.
4. Average Stock: Beginning‐of‐the month inventories divided by the number of months
in the period.
5. Difference between the cost of merchandise and the original
retail price.
6. Gross Margin Percent: Difference between net sales and total merchandise costs. It
must be high enough to cover all operating expenses and taxes as well as profit.

Elements of the Merchandise Plan:

1. Planned Sales: sales in monetary values estimates for the total plan period broken
down for each month of the plan.
2. Planned Stock: Estimated money value of the Inventory needed at the beginning of
each month of the plan.
Stock Turnover = Net Sales in terms of value / Average Inventory Values.
3. Planned Markdowns: estimated reductions in terms of monetary values from the retail
value of the goods for each month of the plan.
Markdown % = Markdown in Value / Net sales in Value.
4. Planned Purchases: It is the difference between what is needed and what is on hand.
Estimated money to be spent for purchases for each month of the plan.
Planned Purchases = planned monthly sales + planned end‐of‐the‐month stock + planned
monthly markdowns – planned beginning‐of‐the month stock.
5. Planning Reductions: Lowering or marking down the retail price of merchandise.
Reductions are planned because only rarely can all the merchandise purchased be sold at
the originally set retail price.
a. Markdowns are either promotional or permanent and these adjust the initial retail price
downward temporarily or set a new retail respectively.
b. Markup Cancellation: Adjust the amount of mark‐up that was put on an item
originally, thereby lowering the retail price.
• Keystone Markup: It is an amount that equals the cost of the merchandise, or 50%
retail mark‐up.
• Short‐Markup: It is less than Keystone.

4 Open‐to‐Buy:
It is used as a control device to see that purchases are made according to the merchandise
plan and the needs exceeds the merchandise available.
OTB = planned sales + planned end‐of‐the‐month stock – present inventory – goods on
order.
• Controls: These are the methods employed to help a retailer track the business to
see how it is doing and how effective the merchandising strategies are.
• Standards: Effective control systems have established standards, a means of
measuring performance through accepted guidelines that help to monitor
performance.
• Periodic Inventory: It is a method of stock control in which the retailer physically
counts merchandise at designated time period.
• Perpetual Inventories: It is a stock control methods that provide a continuous
record of the movement of incoming and outgoing merchandise.
Vendor Matrix / Key Resource List: These matrices or lists are based on the premise that
fewer resources or suppliers are better than many, in order for the resources to be as
beneficial to the retailer as possible.

Dollar Merchandise Planning

Merchandise management is the analysis, planning, acquisition, handling, and control of

the merchandise investments of a retail operation.
A. Buyers, working with upper management, are responsible for the dollar planning of
merchandise requirements.
1. Inventory is the largest investment that retailers make.
2. Gross margin return on inventory (GMROI) incorporates into a single measure both
inventory turnover and (gross) profit. Its formula is:
(Gross margin/Net sales) x (Net sales/Average inventory at cost) = (Gross
margin/Average inventory at cost)
B. Once planned sales for the period have been determined, the merchandise manager can
then use one of four methods for planning dollars invested in stock:
1. Basic Stock Method (BSM) is a technique for planning dollar inventory investment that
allows for a base stock level plus a variable amount of inventory that will increase or
decrease at the beginning of each sales period in the same dollar amount as the period’s
expected sales.
a. BSM can be calculated as follows:
1. Average monthly sales = Total planned sales for season/Number of months in
season
2. Average stock for season = Total planned sales for season/Estimated inventory
turnover rate for season
3. Basic Stock = Average stock for the season - average monthly sales for the season
4. Beginning-of-the-Month (BOM) Stock = Planned monthly sales + Basic stock
b. The basic stock method works best when a retailer has a low turnover rate or sales are
erratic.
2. Percentage variation method (PVM) is a technique for planning dollar inventory
investments that assumes that the percentage fluctuations in monthly stock from average
stock should be half as great as the percentage fluctuations in monthly sales from average
sales.
a. It is computed as follows:
BOM Stock = Average Stock for season x 1/2[1+(Planned sales for the month/Average
monthly sales)]
b. This method is used when the retailer has a high annual inventory turnover rate (i.e.,
six or more times a year).
3. The weeks' supply method (WSM) is a technique for planning dollar inventory
investments that states that the inventory level should be set equal to a predetermined
number of weeks’ supply, which is directly related to the desired rate of stock turnover.

a. The WSM is calculated as follows:

(1). Number of weeks to be stocked = # weeks in period/stock turnover rate for period
(2). Average Weekly Sales = estimated total sales for period/# weeks in period
(3). BOM Stock = average weekly sales x # weeks to be stocked.
b. This method is used by retailers where inventories are planned on a weekly, not
monthly basis, and where sales do not fluctuate substantially.
4. Stock-to-Sales Method (SSM) is a technique for planning dollar inventory investments
where the amount of inventory planned for the beginning of the month is a ratio (obtained
from trade associations or the retailer’s historical records) of stock to sales.
II. Dollar Merchandise Control
A. The dollars planned for merchandise need to be controlled, and this can be
accomplished with a technique called open-to-buy (OTB). OTB refers to the dollar
amount that a buyer can currently spend on merchandise without exceeding the planned
dollar stocks.
B. OTB is calculated as follows:
1. Planned sales for the month
2. Plus planned reductions for the month
3. Plus end-of-month stock
4. Minus beginning-of-month stock
5. Equals planned purchases at retail
6. Minus commitments at retail for current delivery
7. Equals open-to-buy at retail
C. The OTB should not be thought of as a fixed quantity that cannot be exceeded when
consumer needs arise. However, changes in OTB should be rare. If there are frequent
changes, then the sales planning process is flawed. Some common buying errors that
cause problems with OTB include:
1. Buying merchandise that is priced too high or too low for the store's target market
2. Buying the wrong type of merchandise, or buying merchandise that is too trendy
3. Having too much or too little basic stock on hand
4. Buying from too many vendors
5. Failing to identify the season's hot items early enough in the season
6. Failing to let the vendor assist the buyer by adding new items and/or new colours to the
retailer’s merchandise mix.
D. Merchandise planning is a dynamic process subject to many changes. Consider the
implications that could arise in planning your stock levels as a result of:
1. Sales for the previous month being lower or higher than planned
2. Reductions being either higher or lower than planned
3. Shipments of merchandise being delayed in transit.
Understanding the consequences of each of these situations illustrates the relationship
between merchandising activities and the merchandise budget.

III. Inventory Planning:

The dollar merchandise plan is only the starting point in merchandise management. Once
the retailer has decided how many dollars can be invested in inventory, the dollar plan
needs to be converted into an actual inventory plan. On the sales floor, items, not dollars,
are sold. The assortment of items that will comprise the merchandise mix must then be
planned.
A. An optimal merchandise mix has three dimensions. Each dimension is describes an
aspect of a merchandise line. A merchandise line is a group of products that are closely
related because they are intended for the same end use; are sold to the same customer
group; or fall within a given price range.
1. Today some retailers manage categories, or lines, as a strategic business unit. When
using category management, buyers are no longer concerned with the GMROI of a single
product; instead, they manage the GMROI for an entire line or category.
2. The three dimensions of the merchandise mix are:
a. Variety, which refers to the number of different lines the retailer stocks in the store.
b. Breadth, also called assortment, refers to the number of merchandise brands found in a
merchandise line.
(1) Breadth can be a problem for retailers selling private label brands.
(2) A Battle of the Brands occurs when retailers, in determining the breath of the product
assortment, have their own products competing with the manufacturer's products for shelf
space and control over display location.
c. Depth refers to the average number of SKUs (stock-keeping units) within each brand
of the merchandise line.
B. A retailer's merchandise mix can, in addition to satisfying customer wants, actually
shape those wants and impact whether and what customers purchase. Therefore, just as
the trading areas for each store in a chain are different, the optimal mix will be different
for every store.
1. There are four constraining factors that influence the design of the optimal
merchandise mix:
a. Dollar merchandise constraint: There seldom will be enough dollars to
emphasize all three dimensions of variety, breadth, and depth.
b. Space constraint: If depth or breadth is wanted, space is needed. If variety is to be
stressed, enough empty space is needed to separate the distinct merchandise lines.

c. Merchandise turnover constraint: As the depth of the merchandise increases,

more and more variations of the product must be stocked to serve smaller
segments; thus, average turnover is likely to decrease.
d. Market constraints: The above three dimensions have a profound effect on how
the market perceives the store and the customers the store will attract.
2. Constraining factors make it impossible to maximize all dimensions of the
merchandise mix. However, if retailer is going to lose customers, it should lose the less
profitable ones by properly mixing its merchandise in terms of variety, breadth, and depth
within the dollar, space, turnover, and market constraints.
C. After deciding the relative emphasis to be placed on the three dimensions of the
merchandise mix, the retailer needs to decide when to order and reorder the desired
merchandise line items.
1. Ideally, a retailer would receive the ordered merchandise just as it is needed.
2. When selling a seasonal item, the retailer would want to be completely sold out of
the item on the planned out-of-stock date.
3. The retailer tries to achieve optimum efficiency on its inventory dollars by closely
monitoring its inventory using UPC or barcode data.
D. Due to conflicts, unit stock planning is an “exercise in compromise” because
everything cannot be stocked. Several conflicts are summarized below:
1. Maintain a strong in-stock position on genuinely new items while trying to avoid
the 90 of percent new products that fail in the introductory stage.
2. Maintain an adequate stock of the basic popular items while having sufficient
inventory dollars to capitalize on unforeseen opportunities.
3. Maintain high merchandise turnover goals while maintaining high margin goals.
4. Maintain adequate selection for customers while not confusing them.
5. Maintain space productivity and utilization while not congesting the store.

6 Months Merchandising Plan

 • One of the most difficult tasks facing the retail merchandiser is determining what to
carry.
• Careful planning is necessary if the retailer is to carry the ‘right’ stock in the ‘right’
quantities.
• Thus planning is of great importance in merchandising goods to achieve a profit.
• To a great; extent, the success or failure of the merchandising division is dependent on
the degree and quality of the planning that takes place.

Sales Forecast Process

Planning Sales

 Actual planning begins with sales.

 Planned Sales are the projected s ales for the period that is planned.
 Sales are planned on net basis (gross sales – customer returns
 % Sales increase or decrease =
this year planned sales – last year actual sales
------------------------------------------------------- x 100
 last year actual sales

Plan Purchase

 It represents the merchandise that is to be purchased during any give n period.

 Planned Purchases = Planned Sales + Planned Reductions + Planned EOM- Planned
BOM Stock

Plan Reduction
Markdowns, employee discounts and inventory shrinkage come under the heading of planned
reductions.
Markdowns: Markdowns are deductions in prices and m ay occur because of many reason s
ranging from bad quality of merchandise, competitive products, change in trends, etc.
Employee Discounts: The discounts given to the employees for buying the company’s
products.
Shrinkage: It is the lo ss of merchandise due to theft or pilferage.
Planned Mark-ups

 Markup in Rupees= Selling price-Cost price

 Markups vary depending on the type of the product, the audience that it is targeted
and the mark et trends.
Gross Margin

 It is the difference between the selling price and the cost of the product, less
reductions for marked owns, shrinkage and employee discounts.
 To deter mine the G M for each month, all purchases and inventories must
be converted to cost price.
Planning Stocks

 The buyer determines the amt of stock needed at the beginning of each month(BOM)
in order to meet the planned sales figures.
 Retailer use a variety of methods to plan stock in order to provide a balanced
inventory in relation to estimated sales.
1. The basic stock method
2. Stock – sales ratio method
The Basic Stock Method
 Basic stock is defined as the minimum stock that should be maintained.
 The BOM stock be sufficient to cover the sales for that month and allow for a reserve
of the basic stock.
 There should be a basic inventory on hand that remains constant regardless of the rate
of sale.

Stock-Sales Ratio Method

 BOM stock = Planned Monthly Sales x Stock-Sales Ratio
 Stock-Sales Ratio = BOM Stock / Net sales for the month
 End of month EOM = Beginning inventory of next month
 Monthly planned purchase at retail = Sales + EOM stock + Markdown – BOM stock
 Planned Purchase at Cost = Gross Margin% = Profit % + Expense %
  The stock to be carried at the beginning of the month is determined by adding value of
basic stock to planned sales
 BOM Stock = Planned sales + Basic stock
Basic Stock = Average Stock – Average Monthly Sales
Average stock = Planned sales for the season/ Stock turn for season
Average Monthly Sales = Planned sales for the season/ No of months in the season

Completing six month merchandise plan

1.assembles last year figures
2.planned sales

Somethings to consider are:

(a) Sales Performance Coming Into the Season
What percentage increase or decrease is the class, department, or total store expecting
coming into the season compared to the previous year? There’s no guarantee that it will
continue, but if sales are up 15% over last year and the new season is only three months
away, you may be more optimistic than pessimistic in your forecasting.
(b) Monthly Promotions
Planning your promotions at least six months in advance will be necessary if you hope to
have an effect on performance. A promotional philosophy followed by too many retailers
is to run two clearance sale ads per year, and if sales are soft they might run another ad or
two.
This may have been acceptable in the boom years, but a "seat of the pants" approach like
this is a recipe for disaster in today's environment. Advertising and promotion suggests a
number of promotional strategies, one of which is to promote in periods when sales and
margins are strong (e.g. back to-school, Xmas and Mothers Day).
(c) How are the Customers Changing?
This has more impact when planning at the class level and is most noticeable in areas of
fashion. Are there new styles or markets that pose either an opportunity or a threat to this
class of merchandise?
Consider the case of the family shoe store where western boots, as a class, was
expanding. This style trend will obviously affect our buying plan. Other demographic
changes that may affect your buying include the baby boomer trends (e.g. they’re aging,
saving more, spending less, putting on weight, etc.).
(d) Economic Factors
Unemployment rates, interest rates, dollar value fluctuations and inflation may all have
an effect on the buyer’s crystal ball. If these factors are creating economic drag on our
customers, there will certainly be an effect on what they purchase from us. You may have
to move price points down, source new suppliers, or even adjust your forecasts.
Step #3: Planned Reductions
Markdowns, employee discounts and inventory shrinkage come under the heading of
planned reductions. These three figures affect our ending gross margin, so they must be
considered when calculating department and class profitability. Since they also affect
inventory levels, they must be projected to ensure enough merchandise is on hand to
attain forecasted sales levels.
(a) Planned Markdowns
Taking any markdowns is a difficult task for most retailers to face. Shoddy merchandise
and bad weather are factors that may be out of the retailer's control. However, the buyer
must start by analyzing last year's markdown numbers very closely. Some factors to
consider are:

· Markdowns as a percentage of sales by month.

· How aggressive are this year's pricing policies?
· When did we promote last year and how will it change?
· How were deliveries last year and did they affect our markdowns?
(b) Employee Discounts
As a percentage of sales, this figure remains relatively constant from one year to the next
unless company policy changes. Therefore, it is then safe to use last year's dollar figure as
a percentage of sales and apply it to the sales projections for the current period.
(c) Shrinkage
The retailers need to calculate the shrink percentage from past experiences. Like
employee discounts, the acceptable method of calculating the shrinkage dollar amount
per month is to use the year-end shrink percent multiplied by the monthly sales
projection.
Step #4: B.O.M. & E.O.M. Planned Inventory Levels
Planning End-of-Month (E.O.M.) or Beginning-of-Month (B.O.M.) inventory levels (one
month’s “ending” is the next month’s “beginning”) is another important element of the
six month merchandise plan. Inventory is by far the number one dollar asset within the
company, and careful planning is required to ensure an adequate return on investment is
attained.
Stock-to-Sales Method
The Stock-to-Sales Method is a popular way to forecast how much inventory is required
to attain monthly sales projections. Stock-to-sales (S/S) is a ratio of the amount of
inventory on hand at a particular date to the sales for the same period, and is calculated as
follows:
S/S ratio = Stock on hand E.O.M (at retail value) / Sales for the same month
When using the S/S method for planning stock levels, the buyer selects the S/S ratios he
desires each month. Desired S/S ratios are usually obtained by referencing previous
seasons. The selected ratio is then multiplied by the projected period sales to get the
desired E.O.M inventory level. The Stock-to-Sales Ratio also provides you with an
estimate of what your Inventory Turnover will be.
Step #5: Inventory Stock Turns
Inventory stock turns measure the rate at which merchandise is sold from your store
compared to the inventory level on hand. The higher the rate, the more profit the buyer
brings to the company and the better your cash flow will be. Stock turns are calculated by
dividing the total sales for the season by the season’s average ending inventory (at retail
value).
Season Average Inventory = Sum of E.O.M. Inventory / Months in Season

Stock turn rate = Total sales for season / Season average inventory
Step #6: Gross Margin Return On Inventory Investment (GMROII)
While the standard Inventory Turnover ratio tells you how efficiently you are moving
your inventory, it ignores the profitability of this inventory movement. For example, an
item with a low gross margin and high sales will show a higher turnover rate. However,
this is obviously not as desirable as moving inventory with higher (or even average) gross
margins. Basically, it produces a lot of activity, but with fewer financial results.
Gross Margin Return On Inventory Investment has become the standard inventory
statistic for many retailers because it reflects the movement of inventory relative to
profitability, rather than to sales. This is a better measure of inventory performance
because retailers are more interested in profitability than sales.

Step #7: Planned Purchases

Once sales projections, stock reductions and stock levels have been established, you can
calculate your planned purchases. The planned purchase figure is also the buyer’s first
"open-o-buy" estimate. Using the August figures from the sample six month plan, the
formula for planned purchases is as follows:
Planned Purchases = EOM Inventory + Sales + Reductions - BOM Inventory
Step #8. Planned Markup
After calculating how much inventory to purchase, retailers must determine the initial
markup for these retailers must determine the initial markup for these goods. This may
fluctuate between different classes of goods within a department. The original markup
must allow for a final profit after paying all operating costs, reductions, cost of goods,
etc. Most retailers have a target markup they want to start with. This markup percentage
is calculated by dividing the markup in dollars by the retail price. Markup dollars is the
difference between the cost price and the selling price. i.e. Our shoe store buys men's
slippers for $10 and follows the manufacturer's suggested retail of $20 which is a 50%
markup percentage, otherwise known as gross margin.
Markup dollars = Selling price - Cost price
Step #9: Gross Margin
Gross margin is the difference between the selling price and the cost of the product, less
reductions for markdowns, shrinkage and employee discounts. Hopefully, what is left
after these reductions is enough to pay all operating expenses and leave the retailer with a
profit. In our six month plan, we work in retail dollars. To determine the gross margin for
each month, all purchases and inventories must be converted to cost price. Using our
family shoe store illustration, note that price. In the family shoe store illustration, note
that we have a 50% markup on all goods. To calculate cost price, multiply the inventories
and purchases by the original markup percent (in this case 50%).

Example: Using the month of August from the six month plan, we must first convert to
cost figures by multiplying opening/closing inventories and purchases by 50%. Next, we
calculate Cost of Goods Sold (C.O.G.S.) as follows:
C.O.G.S. = B.O.M. Inventory + Purchases - E.O.M. Inventory.
Finally, we determine Planned Gross Margin like this:
Planned Gross Margin = Period sales - C.O.G.S. / Period sales
Preparing a seasonal merchandise plan makes the critical task of buying that much easier.
This is no different from the need for an architect to design a house before he starts
building it. During this process, remember to follow these key suggestions:

a. Become proficient (if you aren’t already) in the use of a computerized

spreadsheet program.
b. Begin with a higher original markup so your first markdowns can be
meaningful without killing gross margin.
c. Plan some markdowns for each month as you offer instore specials for the
“sale- only” buyer.
d. Become proficient at performing physical inventory counts, so you can
obtain accurate figures at least four times per year.
BUDGET CALCULATION
 No Official Records of Forever 21 (Annual report)
 Sales Figure Taken from Annual report of Aditya Birla Group.
 27% of Profit gets through forever 21.
 Currently in Loss.
 10% Growth Rate Each Year.
 2017-18 Turnover= 66,33,00,00,000cr. (Aditya Birla)
 Forever 21-: 300,00,00,000 cr. (Approx.)
 21 Stores in India in 2017-18
 Divided in different ratios among the categories.
 Planned Stale for one Entire Store in a year- 66666666.666 cr. (Approx.)
PLANNED SALES DEPARTMENT-WOMEN
Planned Sales for the Entire Store (6 months) = 33333333.333

Planned Sales (Entire Women Department) = 33333333.333*60

Planned Sales (Entire Women Department) = 2,00,00,000(Approx.)

Planned Sales for Women (3 Categories) = 2,00,00,000*60%=1,20,00,000

Planned Sales for Women (Category Tops) = 50% of 1,20,00,000= 60,00,000

Planned Sales for Women (Category Bottom) = 30% of 1,20,00,000= 36,00,000

Planned Sales for Women (Category Dress) = 20% of 1,20,00,000= 24,00,000

Assortment planning
For February
Assortment values
Six month merchandising plan

ispatguru.com/stores-management/
https://www.smartsheet.com/store-layout:

https://homebusinessmag.com/management/different-display-types-used-store/