Merchandising

SECTION THREE MERCHANDISE MANAGEMENT Irwin/McGraw-Hill

Levy/Weitz: Retailing Management, 3/e

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Chapter 12 Planning Merchandise Assortments Irwin/McGraw-Hill

Levy/Weitz: Retailing Management, 3/e

©The McGraw-Hill Companies, Inc., 1998

TM 12-1

Merchandise Management Issues Planning Merchandise Assortments (Chapter 12)

Organize the Buying Process by Categories Set Merchandise Financial Objectives Develop an Assortment Plan Buying Systems (Chapter 13)

Fashion Merchandise Buying Systems

Staple Merchandise Buying Systems

Allocate Merchandise to Stores Analyze Merchandise Performance 08/21/97 Irwin/McGraw-Hill 08/01/97 Irwin/McGraw-Hill Levy/Weitz: Retailing Management, 3/e

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Standard Merchandise Classification Scheme and Organizational Chart

TM 12-2

Click to edit Master title style Chairman MerchandiseOriented partner

Merchandise Group

Sr. vice pres merch mgr Women’s ready-to-wear

Sr. vice pres merch mgr Men’s, chld’s, intimate apparel

Planning Group

Sr. vice pres merch mgr Cosmet, shoes, jewelry, access.

Sr. vice pres merch mgr Soft home furn., kitchen

Div. merch manager

Div. merch manager

Div. merch manager

Div Dir..

Young men’s, boys’ apparel

Children’s apparel

Intimate apparel

Planning

• Click to edit Master text styles

V.P. Planning

– Second level

Department

Div. merch manager Men’s suits, slacks, dress– shirts

Div. merch • Third level manager

Classification

Men’slevel sportsFourth wear, Polo • Fifth level

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Preteen

Girls’

Girls’

Toddlers’

Infants’

Little boys’

accessories

Size 7-14

Size 4-6

Sportswear

Dresses

Swimwear

Mgr. Planning

Category SKU

Girls Levi jeans, sz 5, stone washed blue, straight leg

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Outerwear

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TM 12-3

Illustration of GMROI MILK Gross Margin

$

Sales Average Inventory GMROI

= Gross Margin

x

Net Sales Milk

GMROI

=

$2,000

x

= $150,000 $300,000

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2,000

$150,000

150,000

300,000

1,000

75,000

Net Sales

=

Average inventory

$150,000 Caviar GMROI

WINE

x *

$150,000

Average Inventory

=

$ 2,000

1,000

1,000

$300,000

$300,000

75,000 * X

Gross Margin

=

150,000

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TM 12-4

GMROI and Inventory Turnover for Selected Departments in Department and Specialty Stores GMROI

Inventory Turnover

Dept. Specialty Dept. Stores Stores Stores

Specialty Stores

Female apparel

230

350

2.6

3.2

Adult female accessories

180

280

1.9

2.5

Men/boys apparel & access.

160

220

2.0

2.4

Infant/children clothing & access. 210

160

2.6

2.4

Footwear

110

140

1.4

1.7

Home furnishings

120

220

1.7

1.8

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Source: Alexandra Moran, ed. MOR 1996 Edition: Merchandising and

* Operating Results of Retail Stores in 1995, 71st ed. (New York: John 6 Wiley ©The McGraw-Hill Companies, Inc.,61998 & * Sons), pp. 4-7. ©The McGraw-Hill Companies, Inc., 1998

The Category Product Life Cycle Total Retail Sales

TM 12-5

Decline Growth Maturity Introduction

Time Strategy variable Target market Variety Distribution Intensity Price

Introduction High-income Innovators One basic offering Limited or extensive Penetrating or skimming Informative

08/21/97Promotion Irwin/McGraw-Hill 08/01/97 Irwin/McGraw-Hill Levy/Weitz: Retailing Management, 3/e

Growth

Maturity

Middle-income adapters Some variety

Greater variety

More retailers

More retailers

Wide range

Lower prices

Fewer retailers Lower prices

Competitive

Limited7

* Persuasive *

Mass market

Decline Low-income and laggards Less variety

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TM 12-6

Variations of the Category Life Cycle

Fad

Fashion

Staple

Seasonal

Sales over many seasons

No

Yes

Yes

Yes

Sales of a specific style over

No

No

Yes

Yes

No

Yes

No

Yes

many seasons

Sales vary dramatically from

TIME

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TIME

SALES

SALES

SALES

Illustration

SALES

one season to the next

TIME

TIME 8

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TM 12-7

Sales for Levi Jeans at Trendsetters Department Store

SALES ($000) DOLLARS

400 350 300 250 200 150

Fall sales

Winter sales

Spring & summer sales

100 50 0 1

4

7

10

YEAR Note: The peaks show the fall sales, typically 40 percent of annual sales; the horizontal lines typify 15 percent of annual sales each in spring and summer; and the black dots (the winter sales) are typically 30 percent of annual sales. These data are for illustrative purposes only. They do, however, represent typical growth patterns for a category like jeans.

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Relationship between Inventory Investment and Product Availability

Inventory investment Dollars

TM 12-8

600 500 400 300 200 100 0 80 85 90 95 Product Availability (Percent)

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TM 12-9

Cycle and Backup Stock

Units Available

150 -

Order 96 Cycle Stock

100 Buffer Stock

50 -

0-

1

2

3

4

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TM 12-10

Assortment Plan for Girls’ Jeans Styles

T

R A

D I

$20

T

I

$35

O

N A L

Price levels

$20

Fabric composition

Reg denim Stonewashed

Reg denim Stonewashed

Reg denim Stonewashed

Colors

Light blue

Light blue

Light blue

Light blue

$35

B O O T

Light blue

$45

$25 $25 Reg denim Stonewashed

$40 $40 Reg denim Stonewashed

Colors

Light blue

Light blue

Light blue

Light blue

Indigo

Indigo

Indigo

Indigo

Black

Black

Black

Black

*

*

Light blue

C U T

Price levels Fabric composition

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$45

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TM 12-11

Size Distribution for Traditional $20 Denim Jeans in Light Blue for a Large Store SIZE Length

1

2

4

5

6

8

10

12

14

Short

2

4

7

6

8

5

7

4

2

%

9

17

30

26

34

21

30

17

9

units

2

4

7

5

8

4

6

3

2

%

9

17

30

21

34

17

26

12

9

units

0

2

2

2

3

2

2

1

0

%

0

9

9

9

12

9

9

4

0

units 100% 429 units

Medium

Long Total

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TM12-12

Predicting Fads Does it fit with basic lifestyle and value changes? How important is the product’s benefits to the consumer? Is the product based on a basic trend or a side effect of that trend? Is the new development supported by deveopments in other area? Which groups of consumers have changed?

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