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136 Cards in this Set
- Front
- Back
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Merchandise management overview |
The process by which retailers try to offer: theright product, of the right quantity, in the right place, at the right time, soas to meet the company’s financial goal. |
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Merchandise group |
The highestclassification level. Each merchandise group is managed by a generalmerchandise manager (GMM), senior VP. EX: women's apparel; men's, children's apparel, intimate apparel; cosmetics, shoes, jeweler, assures, home and kitchen |
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Department |
Departments aremanaged by a divisional merchandise manager (DMM). Second level in merchandise classification, focusingon a more particular merchandise segment EX: men's dress apparel, men's sportswear |
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classification |
A group of itemstargeting the same customer type, such as girls’ sizes 4-6. can be treated as a market segment |
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merchandise category-planning unit |
More specific merchandise items EX: dresses for girls sizes 4-6 customer see item within a category as substitutes for each other category is the basic unit of analysis for making merchandising management decisions, Maximizing the sales and profits of a category |
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category management |
the process of managing a retail business with the objective of maximizing the sales and profits of a category objective is to maximize the sales and profits of the entire category, not just a particular brand EX: breakfast cereal category vs kellogg corn flakes |
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Category captain |
Preferred vendor to help manage a particular category EX: Nike help mange sport shoes Benefits: easier to manage Challenge: unfair to other vendors, could be harmful to the wholesales |
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the buying organization |
Merchandise group: men's wear department: young dress apparel classification: men's trousers category: Jeans SKU: Levi, 501, size 26 waist, 32 inseam |
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Evaluating merchandise management performance |
Merchandise managers have control over themerchandise they buy, the price at which the merchandise is sold, the cost ofthe merchandise. Do not have control over operating expenses, human resources,real estate, supply chain management, information systems. |
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GMROI |
gross margin return (inventory) on investment. Howmuch gross margin dollars are earned on every dollar of inventory investmentmade by the buyer. Formula: GMROI= gross margin/Avg. inventory at cost |
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Average inventory |
sum up the monetary value of inventory each time inventory is taken within a time period and divide this figure by the number of times inventory was calculated within the period. |
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inventory turnover |
the number of times, on average, within a period of (e.g.: 6 months or a yr) that the retailer sells its inventory and replaces it. inventory turnover rate = cost of goods sold/average inventory at cost |
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approaches for improving inventory turnover rate |
reduce number of categories, reduce number of SKUs within a category, reduce number of items in a SKU but if customer can't find their size or color or brand, sales decrease |
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staple merchandise category |
continuous demand over an extended time period,limited number of new product introductions, easy to forecast, continuousreplenishment, hosiery = basic casual apparel. |
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Fashion merchandise category |
in demand for a relatively short period of time,continuous introductions of new products, making existing products obsolete,athletic shoes, laptop computer, women’s apparel. |
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forecasting category sales |
retailers develop fashion forecasts by relyingon previous sales data, personal awareness, fashion and trend services,vendors, traditional market research. |
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forecasting staple merchandise |
consumer demand predictable, forecast accuracyrelative accurate forecast, merchandise management system continuousreplenishment. |
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forecasting fashion merchandise |
consumer demand unpredictable, forecast accuracydifficult to forecast sales, merchandise budget plan; open to buy system |
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Developing an Assortment Plan |
a list of the SKUs that a retailer will offer ina merchandise category and reflects the variety and assortment that the retailerplans to offer in a merchandise category. |
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variety |
is the number of different merchandising categories within a store or department |
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assortment |
is the number of the SKUs within the category |
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Model stock plan |
summary of the typical store inventory for amerchandise category. |
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product availability |
percentage of demand for a particular SKU thatis satisfied, ABC classification of merchandise: A – higher product availability,B- medium, C=lower is acceptable |
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cycle base stock |
inventory that goes up and down due to the replenishment process |
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backup (buffer, safety) stock |
inventory needed to avoid stockout |
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importance of backup stock |
choosing an appropriate amount of backup stock is critical to successful assortment planning if back is too low-> loose sales and customers If the backup stock is too high-> scare financial resources will be wasted on needless inventory that could be more profitably invested in more variety or assortment |
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factors determining backup stock |
higher product availability retailer wishes to provide to customers greater the fluctuation in demand longer lead time from the vendor more fluctuations in lead time lower vendors fill rate |
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staple merchandise planning |
buyer determines: basic stock or assortment plan, level of backup inventory System: monitors inventory levels, automatically reorders when inventory gets below a specified level |
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lead time |
the amount of time between the initiation of production and the merchandise finally delivered to the store |
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fill rate |
the percentage of complete orders received from a vendor EX: MU bookstore ordered 100 "retailing management" from amazon. Amazon delivered 90, fill rate = (90/100)*100% = 90% |
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order point |
the point at which new order needs to placed (if inventory below this quantity, then retailer needs to place new order or will run out of stock before next order arrives.) order point= sales/day (lead time + review time) + buffer stock |
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control system for managing inventory of fashion merchandise |
system for managing fashionmerchandise categories is typically called a merchandise budget plan. Specifieshow much money can be spent each month to achieve the sales, margin, inventoryturnover and GMROI objectives. Not a complete buying plan—doesn’t indicate whatspecific SKUs to buy or in what quantities. By sales volume |
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allocating merchandise to stores |
how much merchandise to allocate to each store,what type of merchandise to allocate, when to allocate the merchandise todifferent stores. |
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amount of merchandise allocated |
smaller stores require a proportionally higherinventory allocation than larger stores because the depth of the assortment orthe level of product availability is too small, customers will perceive it asbeing inferior. |
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sell through analysis |
compares actual and planned sales to determinewhether more merchandise is needed to satisfy demand or whether pricereductions are required. |
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ABC analysis |
an ABC analysis identifies the performances ofindividual SKUs in the assortment plan. Rank- orders merchandise by someperformance measure. |
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brand alternatives |
major type of retail brands |
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national brands |
designed, produced, and marketed by a vendor andsold by many retailers. |
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store brands |
developed by a retailer and only sold in the retailer’soutlets. |
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Retailers branding approach |
similar to national brands, retailers use their name to create a private label for merchandise. The Gap, Victoria's Secert use a family brand approach. all of private label merchandise is associated with their name. Macy's uses a portfolio approach: a portfolio of private label brands with different merchandise types |
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Categories of private brands |
premium, copycat, exclusive brands, generic brands |
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premium |
comparable to, even superior to, manufacturer's brand quality, with modest price savings |
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copycat |
imitate the manufacturer's brand in appearance and packaging, perceived as lower quality, offered at a lower price |
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exclusive brands |
developed by a national brand vendor and sold exclusively by the retailer |
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generic brands |
target a price-sensitive segment by offering a no frills product a discount price |
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advantages of national labels |
help retailers build their image and traffic flow reduces selling and promotional expenses more desired by customers customers patronize retailers selling the branded merchandise push some of the financial risk onto the vendor |
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disadvantages of national labels |
lower margins vulnerable to competitive pressures limit retailer's flexibility |
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advantages private labels |
unique merchandise not available at competitive outlets exclusivity boosts store loyalty difficult for customers to compare price with competitors higher margins |
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disadvantages of private labels |
require significant investment in design, global manufacturing sourcing need to develop expertise in developing and promoting brand unable to sell excess merchandise typically less desirable for customers |
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Buying national brand merchandise |
buying decision for fashionapparel/assecories 5-6 times a year, many months before delivery, buyingdecision for staple merchandise less frequent and continuous replenishment |
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NationalBrand Buying Process: |
meet with vendors (trade shows, wholesale marketcenters), discuss performance of vendor’s merchandise during the previousseason, review the vendor’s offering fro the coming season, may place ordersfor the coming season, sometimes they do not buy a market, but reviewmerchandise, return to their offices to discuss with the buying team beforenegotiating with vendors |
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global sourcing |
Costs associated with global sourcing decisions remote production facilities in developing economies with low labor costs Foreign currency fluctuations, tariffs, longer, lead times, increased transportation cots, obsolete cots and inventory caring costs from larger inventories |
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managerial issues |
quality control, time to market, social political factors, difficult for collaborative supply chain management based on short and consistent lead times, human rights and child labor |
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negotiating with vendors |
two-way communication designed to reach an agreement when two parties have both shared and conflicting interest |
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strategic relationships |
retailer and vendor committed to maintaining relationships over the long-term and investing in mutually beneficial opportunities |
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counterfeit merchandise |
Goods made and sold without the permission of the owner of a trademark, a copyright, or a patented invention that is legally protected in the country where it is marketed. Major problem is counterfeiting intellectual property |
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chargebacks |
a practice used by retailers in which they deduct money from the amount they owe a vendor without getting vendor approval two reasons: merchandise isn't selling, vendor mistakes |
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tips for negotiating |
choose a good place tonegotiate, be aware of real deadlines, separate people from problem, insist onobjective information, invent options for mutual gain, let the other party dothe talking, know how far to go, don’t burn bridges, don’t assume |
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negotiating issues |
price and gross margin (margin guarantees,slotting allowances), additional markup opportunities, purchase terms,exclusivity, advertising allowances, transportation |
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price sensitivity |
determines how many pieces of a product will be sold at a particular price point. measured by price elasticity the percentage change in quantity sold in response to the percentage change in retail price |
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price elasticity |
elasticity = percent change in quantity sold / percent change in price |
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important features fro price elasticity |
measures the price sensitivity of consumers value is negative higher the absolute vale the more price sensitive are the consumers |
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competition |
develop lines of private label merchandise negotiate with national brands manufacturers for exclusive distribution rights have vendors make unique products for the retailer |
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markup |
the difference between retail price and the cost of the merchandise. markup is in amount of dollars |
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markup formula |
retail price = cost of merchandise + markup markup = retail price - cost of merchandise |
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markup percentage |
markup as the percentage of the retail price retail price - cost of merchandise / retail price X 100 |
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Initial markup % retail |
R-C/R x 100 |
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initial markup % Cost |
R-C/C X 100 |
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set retail price |
retail price = cost of merchandise/1-markup percentage |
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maintained markup percentage |
actual retail price - cost of merchandise/actual retail price |
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break even analysis |
break even sales to generate a target profit break even volume and dollars to justify introducing a new product, product line or department break even sales change needed to cover a price change purpose to determine the minimum quanitity |
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reductions |
markdowns discount to employees inventory shrinkage due to shoplifting and employee theft |
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price techniques |
competitive psychological pricing strategies discount pricing strategies other pricing startegies |
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price competition |
more competition, lower price retailers care about heir competitors price retailers always try to reduce competition among themselves |
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predatory pricing
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set price low enough to drive competitors out of the business incentive: monopoly the market and then charge high price on consumers |
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resale price maintenance |
manufacturers suggested retail price standardize prices among different locations but actually charge a higher price and reduce price competition |
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price bundling |
offer two or more different products or services for sale at one price benefits: increase both unit and dollar sales |
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Communication methods |
impersonal and paid: advertising, sales promotion, store atmosphere, web site, community, building Personal and paid: personal selling, email, direct mail, -commerce Unpaid and impersonal: publicity unpaid and personal: word of mouth |
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paid personal communication |
retail salespeople are primary vehicle for providing paid personal communication to customers personal selling- salespeople satisfy needs through face to face exchange of information email- retailers inform customers of new merchandise, receipt of order or when order has been shipped direct mail mobile commerce |
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unpaid impersonal communication |
publicity is communication through significant unpaid presentations about the retailer, usually a news story, in impersonal media newspaper, tv coverage, maces thanksgiving day parade |
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unpaid personal communication |
word of mouth can be favorable and can be detrimental social shopping |
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social shopping |
a communication strategy in which consumers use internet to engage in the shopping process by exchanging preferences, thoughts and opinions products/services reviews |
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personal selling |
involves face to face interaction with theconsumer with the goal of selling the consumer merchandise or services |
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sales promotions |
coupons, rebates, premiums, samples, specialevents, pop up stores |
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public relations |
managing communications and relationships toachieve various objectives. (building and maintaining a positive image of theretailer, handling or heading off unfavorable stories or events, maintainingpositive relationships with the media |
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brands |
distinguishing name or symbol, such as logo,that identifies the products or services offered by a seller and differentiatesthose products and services form those offered by competitors. |
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Valueof Brand Image to retailers (brand equity): |
attract customers, build loyalty, higher pricesleading ot higher gross margin, reduced gross margin, reduced promotionalexpenses, facilitates entry into new markets. EX: Gap-> gap kid |
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value of brand image to customers |
promises consistent quality, simplifies buyingprocess, and reduces time and effort searching for information about aproduct/retailer, risk reducer |
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branding process |
multifunctional process that highlights a proposed value for a product/service and transforms it into a real consumer experience |
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creating the brand story |
brand background, mission statement: mainly targets internal audience, vision statement: mainly targets external audience Brand level: brand by company: use the business name itself as a brand, or brand by product: create separate brands and promote each individually as a separate entity Brand identity: symbols, colors, package, graphic, etc authors of the brand story: company, customer, media |
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positioning your brand |
telling the brand story through the products/services product mix: features, price, distribution, support identity: symbols and personality |
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communication |
build brand awareness and brand image |
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brand evaluation |
Brand Equity after telling your story, what is your brand worth? |
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brand equity concept |
It stresses the importance of thebrand’s role in marketing strategies. No common viewpoint on how itshould be conceptualized andmeasured Brand equity is defined in terms ofthe marketing effects uniquelyattributable to the brand. |
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creating brand awareness |
memorable name symbols event sponsorship repeated exposure |
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consistent reinforcement |
the retailers brand image is developed and maintained throughout he retailers communication mix |
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brand extensions |
gap -> gap kids talbots -> talbots mens sears -> sears auto centers and the great outdoors pottery barn -> pottery barn kids |
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planning the retail communication program |
establish communication objectives establish budget allocate budget implement and evaluate programs |
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establish objectives |
communication objectives: specific goals related to the retail communication mix's effect on the customer's decision-making process long term: ex: creating or altering a retailers brand image short term: ex: increasing store traffic |
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allocate the promotional budget |
the retailer decides how much of its budget to allocate to specific communication elements, merchandise categories, geographic regions, or long and short term objectives. |
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store design objectives |
implement retailers strategy, build loyalty,increase sales on visits, control cost, legal considerations (Americans withdisabilities act), design trade offs. |
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store design and retail strategy |
design must be consistent with and reinforce theretailers strategy by meeting the needs of the target market, building asustainable competitive advantage, the primary objective of store design isimplementing the retailers strategy: meets needs of target market, build asustainable competitive advantage, displays the stores image. |
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build loyalty |
store design provides utilitarian benefits whenit enables customers to locate and purchase products in an efficient and timelymanner with minimum hassle. Store design provides hedonic benefits by offeringcustomers an entertaining and enjoyable shopping experience |
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increase sales on visits |
store design has a substantial effect on which products customers buy, howlong they stay in the store, and how much they spend during a visit.. |
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control costs |
control the cost ofimplementing the store design and maintain the stores appearance, store designinfluences: shopping experience and thus sales, labor costs, inventoryshrinkage. |
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Legal Considerations: American with disabilitiesacts: |
Protects people with disabilities fromdiscrimination in employment, transportation, public accommodations,telecommunications and activities of state and local government. |
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design trade offs |
ease of locating merchandise for plannedpurchases, giving customers adequate space to shop, exploration of store,impulse purchases, productivity of using this scarce resource for merchandise. |
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demand/destination merchandise |
product that customers have decided to buy before entering the store |
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impulse merchandise |
product that are purchased without prior plans |
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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 toeach other |
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style of layout: Grid |
easy to locate merchandise allows more merchandise to be displayed cost efficient does not encourage customers to explore store seen in discount, supermarkets and drug stores |
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style of layout: Racetrack |
loop with a major aisle that has access todepartments, draws customers around the store, provide different viewing anglesand encourage exploration, impulse buying, more often used in department stores. |
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Storelayout: Free form: |
fixtures and aisles arranged asymmetrically, providesan intimate, relaxing environment that facilitates shopping and browsing,pleasant relaxing ambiance doesn’t come cheap, inefficient use of space, moresusceptible to shoplifting, used in specialty stores and upscale department stores. |
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location |
identifies the location of merchandise and guides customers |
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category signage |
identifies types of products and located near the goods |
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promotional signage |
relates to specific offers-sometimes in windows |
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point of sale |
near merchandise with prices and product information |
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lifestyle images |
creates moods that encourage customers to shop |
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Signageand Graphics |
coordinate signage to store’simage, use appropriate type faces on signs, inform customers, use them asprops, keep them fresh, limit the text on signs, use appropriate typefaces onsigns. |
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feature areas |
areas within a store designed to get thecustomers’ attention, entrances, freestanding displays, cash wraps, end caps,promotional aisles, walls, windows, fitting rooms. |
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space management |
the space within stores and on the stores’shelves are fixtures is a scare resource. The allocation of store space tomerchandise categories and brands, the location of departments or merchandisecategories in the store |
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space allocated to merchandise categories |
productivity of allocated space, merchandiseinventory turnover, impact on store sales, display needs for the merchandise. |
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Locationof Merchandise Categories and Design Elements: |
highly trafficked areas, storeentrances and near checkout counter, highly visible areas, end aisle anddisplays |
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visual merchandising |
the presentation of a store andits merchandise in ways that will attract the attention of potential customersFixtures: straight rack,gondolas, rounder, four-way fixture |
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straight rack |
holds a lot of apparel hard to feature specific styles and colors found often in discount and off price stores |
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rounder |
smaller than straight rack holds a maximum amount of merchandise easy to move around customers can't get frontal view of merchandise |
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four-way |
hold large amounts of merchandise allows customers to view entire garment hard to maintain because of styles and colors fashion oriented apparel retailer |
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gondolas |
versatile grocery and discount stores some department stores hard to view apparel as that are folded |
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merchandise presentation techniques |
Idea-Oriented Presentation Style/Item Presentation Color Organization Price Lining Vertical Merchandising Tonnage Merchandising large quantities of merchandise displayed together Frontal Presentation display as much of the product as possible to catch thecustomer’s eye |
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idea orientation presentation |
Present merchandise based on aspecific idea or the image of thestore Encourage multiplecomplementary purchases • Women’s fashion • Furniture combined in room settings • Sony Style mini-living rooms |
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Creatingan Appealing Store Atmosphere: |
the design of an environment throughvisual communications, lighting, colors, music, and scent to stimulate customer’sperceptual and emotional responses and ultimately to affect their purchasebehavior |
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arrangement rules |
merchandise is arranged by style first, then color, then size color form light to dark within each size vertical arrangement |
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lighting |
highlight merchandise, structure space andcapture a mood, energy efficient lighting, downplay features |
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Color: |
warm colors produce emotional,vibrant, hot and active responses; cool colors have a peaceful, gentle andcalming effect. Culturally bounded |
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music |
control the pace of storetraffic, create an image and attract or direct consumers’ attention, a mix ofclassical or soothing music encourage shoppers to slow down, relax, and take agood look a the merchandise, thus stay longer and purchase more |
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scent |
has a positive impact on impulsebuying behavior and customer satisfaction, scents that are neutral producebetter perceptions of the store than no scent, customers in scented storesthink they spent less time in the store than subjects in unscented stores |
