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Chapter 1414Developing Merchandise Plans
RETAIL MANAGEMENT:
A STRATEGICAPPROACH,
9th Edition
BERMANBERMAN EVANS EVANS
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Chapter Objectives
To demonstrate the importance of a sound merchandising philosophy
To study various buying organization formats and the processes they use
To outline the considerations in devising merchandise plans: forecasts, innovativeness, assortment, brands, timing, and allocation
To discuss category management and merchandising software
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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.
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Merchandising Philosophy
Sets the guiding principles for all the merchandise decisions that a retailer makes
Should reflect * Target market desires* Retailer’s institutional type* Market-place positioning* Defined value chain* Supplier capabilities* Costs* Competitors* Product trends
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Scope of Responsibility
Full array of merchandising functions* Buying and selling * Selection, pricing, display, customer
transactionsFocus on buying function only
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Figure 14.1 Harry and David’s Merchandising Philosophy
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Micromerchandising
Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets
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Cross-merchandising
Retailers carry complementary goods and services to encourage shoppers to buy more
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Figure 14.2 The Attributes
and Functions
of Buying
Organizations
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Figure 14.3 At Wal-Mart: Developing an Inside Buying Organization
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Functions Performed
Merchandising view* All buying and selling functions
• Assortments• Advertising pricing• Point-of-sale displays• Employee utilization• Personal selling approaches
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Functions Performed
Buying view* Buyers manage buying functions
• Buying• Advertising• Pricing
* In-store personnel manage other functions• Assortments• Point-of-sale displays• Employee utilization• Personal selling approaches
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Figure 14.4 Merchandising Versus Store Management
Career Tracks
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Figure 14.5 Considerations in Devising Merchandise Plans
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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)
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Types of Merchandise
Staple merchandiseAssortment merchandiseFashion merchandiseSeasonal merchandiseFad merchandise
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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.
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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
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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
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Table 14.1a Factors to Bear in Mind When Planning Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Target market(s) Evaluate whether the target market is conservative or innovative
Goods/ service growth potential
Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life
Fashion trends Understand vertical and horizontal fashion trends, if appropriate
Retailer image Carry goods/ services that reinforce the firm’s image
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Table 14.1b Factors to Bear in Mind When Planning Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Competition Lead or follow competition in the selection of new goods/services
Customer segments Segment customers by dividing merchandise into established-product displays and new-product displays
Responsiveness to consumers
Carry new offerings when requested by the target market
Amount of investment
Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel
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Table 14.1c Factors to Bear in Mind When Planning Merchandise Innovativeness
FACTOR RELEVANCE for PLANNING
Profitability Assess each new offering for potential profits
Risk Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs
Constrained decision making
Restrict franchisees and chain branches from buying certain items
Declining goods/ services
Delete older goods/services if sales and/or profits are too low
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Figure 14.6 R&D at Wendy’s
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Figure 14.7 The Traditional Product Life Cycle
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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
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Figure 14.8 A Selected Checklist for Predicting Fashion Adoption
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Table 14.2a Factors to Consider When Planning Merchandise Quality
FACTOR RELEVANCE for PLANNING
Target market(s) Match merchandise quality to the wishes of the desired target market(s)
Competition Sell similar quality or different quality
Retailer’s image Relate merchandise quality directly to the perception that customers have of retailer
Store location Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality
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Table 14.2b Factors to Consider When Planning Merchandise Quality
FACTOR RELEVANCE for PLANNING
Profitability 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
Manufacturer versus private brands
Understand that, for many, manufacturer brands connote higher quality than private brands
Customer services offered
Know that high-quality goods require personal selling, alterations, delivery, and so on
Personnel Employ skilled, knowledgeable personnel for high-quality merchandise
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Table 14.2c Factors to Consider When Planning Merchandise Quality
FACTOR RELEVANCE for PLANNING
Perceived goods/ service benefits
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
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Figure 14.9 Retail
Assortment Strategies
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Figure 14.10 Sephora: A Very Deep Assortment of Cosmetics
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Brands
Private(dealer or store)
Manufacturer(national)
Generic
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Table 14.3 The Berman/ Evans Private Brand Test
Match the Retailer with the Brand Name
Retailer Brand
Bloomingdale’s Arizona Jeans
Costco Sam’s Choice
Kmart Michael Graves
J.C. Penney Martha Stewart
Sears Joseph & Lyman
Wal-Mart Kenmore
Target Kirkland
Macy’s Charter Club
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Figure 14.11 Costco’s Approach to Private Brands
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Figure 14.12 Daffy’s Distinctive Branding Strategy
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Figure 14.13 Applying Category
Management
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Merchandising Software
General Merchandise Planning Software
Forecasting SoftwareInnovativeness SoftwareAssortment SoftwareAllocation SoftwareCategory Management Software
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Figure 14.4a Shelf Logic: Software for Category Management Planning
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Figure 14.4b Shelf Logic: Software for Category Management Planning