Developing Merchandise Plans

Merchandising
Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals.

Merchandising Philosophy
Sets the guiding principles for all the merchandise decisions that a retailer makes Should reflect

Target market desires Retailers institutional type Market-place positioning Defined value chain Supplier capabilities Costs Competitors Product trends

Scope of Responsibility
Full array of merchandising functions

Buying and selling Selection, pricing, display, customer transactions

Focus on buying function only

Micromerchandising
Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets

Cross-merchandising
Retailers carry complementary goods and services to encourage shoppers to buy more

Figure 14.2 The Attributes and Functions of Buying Organizations

Functions Performed
Merchandising view

All buying and selling functions

Assortments Advertising pricing Point-of-sale displays Employee utilization Personal selling approaches

Functions Performed
Buying view

Buyers manage buying functions

Buying Advertising Pricing Assortments Point-of-sale displays Employee utilization Personal selling approaches

In-store personnel manage other functions

Figure 14.5 Considerations in Devising Merchandise Plans

Forecasts
Forecasts are projections of expected retail sales for given periods

Components:

Overall company projections Product category projections Item-by-item projections Store-by-store projections (if a chain)

Types of Merchandise
Staple merchandise Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise

Staple Merchandise
Regular products carried by a retailer

Grocery store staple examples

Milk Bread Canned soup

Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.

Assortment Merchandise
Apparel, furniture, auto, and other products for which the retailer must carry a variety of products in order to give customers a proper selection Decisions on Assortment

Product lines, styles, designs, and colors are projected Model stock plan

Fashion and Seasonal Merchandise

Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles Seasonal Merchandise: Products that sell well over nonconsecutive time periods

Table 14.1a Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR Target market(s) Goods/ service growth potential RELEVANCE for PLANNING Evaluate whether the target market is conservative or innovative Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life Understand vertical and horizontal fashion trends, if appropriate Carry goods/ services that reinforce the firms image

Fashion trends Retailer image

Table 14.1b Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR Competition Customer segments RELEVANCE for PLANNING Lead or follow competition in the selection of new goods/services Segment customers by dividing merchandise into established-product displays and new-product displays

Responsiveness to Carry new offerings when requested by consumers the target market Amount of investment Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel

Table 14.1c Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR RELEVANCE for PLANNING

Profitability
Risk

Assess each new offering for potential profits

Be aware of the possible tarnishing of the retailers image, investment costs, and opportunity costs Restrict franchisees and chain branches from buying certain items Delete older goods/services if sales and/or profits are too low

Constrained decision making Declining goods/ services

Figure 14.7 The Traditional Product Life Cycle

Structured Guidelines for Pruning Products

Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes Gather and analyze detailed financial and other data about these items Consider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand

Table 14.2a Factors to Consider When Planning Merchandise Quality

FACTOR Target market(s) Competition RELEVANCE for PLANNING Match merchandise quality to the wishes of the desired target market(s) Sell similar quality or different quality

Retailers image
Store location

Relate merchandise quality directly to the perception that customers have of retailer
Consider the impact of location on the retailers image and the number of competitors, which, in turn, relate to quality

Table 14.2b Factors to Consider When Planning Merchandise Quality

FACTOR RELEVANCE for PLANNING

Profitability

Manufacturer versus private brands

Customer services offered

Personnel

Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods; turnover may cause total profits to be greater for the latter Understand that, for many, manufacturer brands connote higher quality than private brands Know that high-quality goods require personal selling, alterations, delivery, and so on
Employ skilled, knowledgeable personnel for high-quality merchandise

Table 14.2c Factors to Consider When Planning Merchandise Quality

FACTOR Perceived goods/ service benefits RELEVANCE for PLANNING Analyze consumers. Lesser quality goods attract customers who desire functional product benefits; High-quality goods attract customers who desire extended product benefits

Constrained decision making

Face reality. Franchises or chain store managers have limited or no control over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers

Brands
Manufacturer (national) Private (dealer or store)

Generic

Merchandising Software
General Merchandise Planning Software(Limited brands) Forecasting Software(arthur planning software) Innovativeness Software(data color international) Assortment Software(marketmax) Allocation Software(sts system allocation softaware) Category Management Software(shelf builder,shelf logic)