Buad 474 Chapter 9

Front 1

Merchandise Management

Back 1

is the analysis, planning, acquisition, handling, and control of the merchandise investments of a retail operation. Analysis is used because retailers must be able to correctly identify their customers before they can determine the needs and wants of their consumers. Planning occurs because merchandise must be purchased 6-12 months in advance of the selling season, acquisition is used because with the exception of service retailers, merchandise needs to be bought from others, either distributors or manufacturers. Handling assures that the merchandise is where it is needed and in the proper shape to be sold. Control of the large dollar investment in inventory is important to ensure an adequate financial return on the retailer’s merchandise investment.

Front 2

Open to buy (OTB):

Back 2

refers to the dollar amount that a buyer can currently spend on merchandise without exceeding the planned dollar stocks.
Planned sales ($75,000)+ planned reductions ($7,500) +EOM planned retail stock ($300,000) – BOM stock ($225,000)= planned purchases at retail ($157,500) – commitments at retail for current delivery ($15,000)= open to buy.

Front 3

Common buying errors:

Back 3

1. Buying merchandise that is priced either too high or too low for the store’s target market.
2. Buying the wrong type of merchandise (too many tops and not enough skirts) 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 vendors assist the buyer by adding new items and/or new colors to the existing mix (all too often, the original order is merely repeated, resulting in limited selection

Front 4

Merchandise line

Back 4

is a group of products that are closely related because they are intended for the same end use (all TV) ; are sold to the same customer group (junior miss clothing); or fall within a given price range (budget women’s wear).

Front 5

Variety

Back 5

refers to the number of different merchandise lines that the retailer stocks in the store. Department stores have large variety of merchandise lines, on the other hand Petsmart carries only one basic merchandise line, pet supplies.

Front 6

Breadth (or assortment):

Back 6

the number of merchandise brands that are found in a merchandise line. For example a supermarket will have a wide breadth or assortment in the number of different brands of mustard that it carries: 6 or 7 national brands or regional, a private brand, and a generic brand. 7 eleven has little breath in that it will generally carry only one or two brands in any merchandise line

Front 7

Depth

Back 7

is the average number of stock-keeping units within each brand of the merchandise line.
Supermarket must decide which sizes and types of French’s mustard to carry.

Front 8

Optimal Merchandise Mix:

Back 8

Variety, Depth, Breath. Constraints: Dollar Merchandise Constraints, Market Constraints, Merchandise Turnover constraints, Space Constraints. Every store has a different optimal merchandise mix, the merchandise mix is what will attract the consumer to the store.

Front 9

Vendor profitability analysis statement

Back 9

Is a tool used to evaluate vendors and shows all purchases made the prior year, the discount granted, the transportation charges paid, the original markup, markdowns, and finally the season-ending gross margin on that vendor’s merchandise.

Front 10

Confidential vendor analysis

Back 10

Is identical to the vendor profitability analysis but also provides a three-year financial summary as well as the names, titles, and negotiating points of all the vendor’s sales staff. This last piece of information is based on the notes taken by the buyer after the previous season’s buying trip.