Developing Merchandise

Plans

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
14-2

Merchandising
Activities involved in acquiring
particular goods/ services and
making them available at the
places, times, prices, and
quantities 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

It should reflect
Target market desires
Retailers institutional type
Market-place positioning
Defined value chain
Supplier capabilities
Costs
Competitors
Product trends
14-4

Scope of Merchandising Responsibility

Full array of merchandising functions
Buying and selling
Selection, pricing, display, customer
transactions

OR
Focus on buying function only

14-5

Micromerchandising
Retailers adjust shelf-space
allocations to respond to customer
differences and other differences
among local markets.

14-6

Cross-Merchandising
Retailers carry complementary
goods and services to encourage
shoppers to buy more.

14-7

Figure 14-2:
Attributes
and
Functions
of
Buying
Organizations

14-8

Merchandising and Store Functions

Performed
Merchandising view
All buying and selling functions

Assortments
Advertising pricing
Point-of-sale displays
Employee utilization
Personal selling approaches

14-9

Merchandising and Store Functions

Performed (cont.)
Buying view
Buyers manage buying functions:

Buying
Advertising
Pricing

In-store personnel manage other tasks:

Assortments
Point-of-sale displays
Employee utilization
Personal selling approaches
14-10

Figure 14-4a:
Merchandising
Career Track at
Macys

14-11

Figure 14-4b:
Store
Management
Career Track at
Macys

14-12

Figure 14-5: Devising Merchandise Plans

14-13

Forecasts
These 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)
14-14

Types of Merchandise
Staple merchandise
Assortment merchandise
Fashion merchandise
Seasonal merchandise
Fad merchandise

14-15

Staple Merchandise
Regular products carried by a retailer
Grocery store 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, automotive, and other

categories 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 in 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

firms image
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Table 14-1b: Factors in 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 in Planning Merchandise

Innovativeness
FACTOR

RELEVANCE for PLANNING

Profitability

Assess each new offering for potential

profits

Risk

Be aware of the possible tarnishing of the

retailers 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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Structured Guidelines for Pruning Products

Select items for possible elimination on the basis

of declining sales, prices, profits, and appearance

of substitutes
Gather and analyze detailed financial/
miscellaneous data about these items
Consider non-deletion 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: Predicting Fashion Adoption

14-23

Table 14-2a: Factors in 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

Retailers image

Relate merchandise quality directly to the

perception that customers have of retailer

Store location

Consider the impact of location on the

retailers image and the number of
competitors, which, in turn, relate to quality
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Table 14-2b: Factors in Planning Merchandise

Quality
FACTOR

RELEVANCE for PLANNING

Profitability

Recognize that high quality goods generally

bring greater profit per unit than lesserquality goods; turnover may cause total
profits to be greater for the latter

Manufacturer
versus private
brands

Understand that, in the minds of many

consumers, manufacturer brands connote
higher quality than private brands

Customer services Know that high-quality goods require

offered
personal selling, alterations, delivery, etc.
Personnel

Employ skilled, knowledgeable personnel for

high-quality merchandise
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Table 14-2c: Factors in 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, so independent retailers that buy
from a few large wholesalers are limited to
the range of quality offered by those
wholesalers
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Retail Assortment Strategies

Width of assortment refers to the number of distinct
goods/service categories (product lines) a retailer
carries.
Depth of assortment refers to the variety in any one
goods/service category (product line) a retailer
carries.
An assortment can range from wide and deep
(department store) to narrow and shallow (box store).

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Category Management
Category management is a merchandising
technique used to improve productivity.
It is a way to manage a retail business that
focuses on the performance of product category
results rather than individual brands.
It arranges product groupings into strategic
business units to better meet consumer needs
and to achieve sales and profit goals.
Retail managers make merchandising decisions
that maximize the total return on the assets
assigned to them.
14-28

Figure 14-13: Applying Category Management

14-29