Chapter 9Chapter 9 Merchandise Buying and Merchandise Buying and

HandlingHandling

Eric SandersEric Sanders

Ryan SnellRyan Snell

Merchandise ManagementMerchandise Management• Analysis: Correctly identify customers needs Analysis: Correctly identify customers needs

and wantsand wants• Planning: Merchandise must be purchased Planning: Merchandise must be purchased

6-12 months in advance6-12 months in advance• Acquisition: Merchandise must be bought Acquisition: Merchandise must be bought

from distributors or manufacturers from distributors or manufacturers • Handling: Assure the merchandise is where Handling: Assure the merchandise is where

it needs to be, and in proper shape to be it needs to be, and in proper shape to be soldsold

• Control: Over large inventory investments to Control: Over large inventory investments to ensure adequate returns on merchandiseensure adequate returns on merchandise

Planning Dollar Inventory Planning Dollar Inventory InvestmentInvestment

• Basic Stock Method: Basic stock level Basic Stock Method: Basic stock level plus variable amount based on plus variable amount based on expected sales for periodexpected sales for period

• Percentage Variation Method: Percentage Variation Method: Assumes the percentage variation in Assumes the percentage variation in monthly stock from average stock monthly stock from average stock should be half as great as the should be half as great as the percentage variation in monthly sales percentage variation in monthly sales from average salesfrom average sales

Planning Dollar Inventory Planning Dollar Inventory InvestmentInvestment

cont…cont…• Weeks Supply Method: Inventory level Weeks Supply Method: Inventory level

should be set equal to a predetermined should be set equal to a predetermined number of weeks supply, which number of weeks supply, which corresponds to desired rate of stock corresponds to desired rate of stock turnoverturnover

• Stock to Sales Method: Inventory planned Stock to Sales Method: Inventory planned for the beginning of the month is a ratio for the beginning of the month is a ratio of stock to sales obtained from a trade of stock to sales obtained from a trade association or retailers historical records association or retailers historical records

Inventory PlanningInventory Planning

Choosing the right merchandise mixChoosing the right merchandise mix• Variety: Number of lines (menswear, Variety: Number of lines (menswear,

women’s wear, sporting goods, etc…)women’s wear, sporting goods, etc…)• Breadth: Number of brands found in a Breadth: Number of brands found in a

particular merchandise lineparticular merchandise line• Depth: Number of stock-keeping units Depth: Number of stock-keeping units

within each brand of the merchandise within each brand of the merchandise lineline

Constraining FactorsConstraining Factors

• Dollar merchandise constraints: only so much Dollar merchandise constraints: only so much money to spend on inventorymoney to spend on inventory

• Space constraints: important to fit everything Space constraints: important to fit everything in store while maintaining a nice shopping in store while maintaining a nice shopping environmentenvironment

• Turnover Constraints: Must keep merchandise Turnover Constraints: Must keep merchandise in stock, but not have merchandise left overin stock, but not have merchandise left over

• Market Constraint: Must fit into the type of Market Constraint: Must fit into the type of retailer you wish to be: specialty store vs. retailer you wish to be: specialty store vs. variety storevariety store

JCPenney Makes Shifts in JCPenney Makes Shifts in Structure.Structure.

► First step was to bring in outside help…First step was to bring in outside help…Vanessa Castagna Vanessa Castagna

► She implemented change by centralizing all She implemented change by centralizing all buying functions… this allows store buying functions… this allows store management to focus on delivering a management to focus on delivering a excellent shopping experience.excellent shopping experience.

► Centralized buying process isn’t all that new, Centralized buying process isn’t all that new, but if a retailer wants to stay competitive it but if a retailer wants to stay competitive it must adapt or they will be gone. must adapt or they will be gone.

► The new The new buying buying process is but one piece of process is but one piece of their overall strategy…example women’s their overall strategy…example women’s magazines. magazines.

Implementing ChangeImplementing Change

► New home office New home office merchandise action teams…merchandise action teams…responsible for assortment, planning, & responsible for assortment, planning, & selling.selling.

► Focus on reducing inventory levels, and will Focus on reducing inventory levels, and will be supported by new software based on sales be supported by new software based on sales history data. history data.

► The new game of retailing involves reaching The new game of retailing involves reaching the customer through nontraditional ways… the customer through nontraditional ways… InternetInternet, , catalogs catalogs and other marketing and other marketing methods.methods.

► FairMarket Inc. is an Auction network that FairMarket Inc. is an Auction network that features merchandise overstock from features merchandise overstock from JCPenney’s. JCPenney’s.

Key Benefits Key Benefits

►Reduces inventory.Reduces inventory.►Higher turnover…more adaptable to Higher turnover…more adaptable to

trends.trends.►Better customer service for better Better customer service for better

shopping experience.shopping experience.►Fashionable merchandiseFashionable merchandise..

Thank YouThank You

Any Questions?Any Questions?