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HED 460
Direct Store Delivery
Back door traffic at store 25% of grocery products never see a warehouse
HED 460
DSD Product Characteristics
Shelf life Bread/pastry/salty snacks/beer 30-70 days DSD vs 390 days for warehoused category
Higher SKU velocity 12 units/store/week vs 9 units
HED 460
DSD Product Characteristics
Demand variability Frequent promotions Frequent service
Lower value density Fragility - chips Weight – beer, soft drinks
HED 460
DSD Product Characteristics
Lower value density (cont.) $27/cu. Ft. (dsd) vs $100/cu. Ft. Price divided by space High cost as a % sales
Merchandising difficulty Special equipment
HED 460
Problem
How can you have a low GM but high profit and sales? COGS must be high Expenses must be minimized Emphasis on contribution margin
HED 460
Direct Store Delivery Results
More cash flow 8 days of inventory held with 30 day payment
Turns Contribution Dollars GMROI High % of in-stock
Product Development
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Market Share Growth Strategies
Acquire other businesses Enter into joint ventures Private label/product development
HED 460
Private Label
Merchandise bearing a retailer’s own name brand retailer’s own name another copyrighted name designer with whom the retailer has
an exclusive license
HED 460
Why Private Label?
Many Retailers today, see the value in having their own private label brand.
o Product Differentiationo Control over design/color
assortmento Increase in profits
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Risks involved in Private Labelo No one to ask for markdown $, if
the item is not sellingo Image of store can suffero Quality and appearance of the
product is a direct reflection upon the store
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Importance of Private Label
From 0-100% of merchandise assortments
Grew 5x from 1995-2002 Sears (Craftsman, Kenmore,
Canyon River, Covington) J.C. Penney (Arizona, Hunt Club,
St.John’s Bay)
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Importance of Private Label
Higher profits than national brands differentiation
Private brands, now premium brands Master Choice (A&P) SFA Collection (Saks Fifth Avenue) Faconnable (Nordstrom)
HED 460
History of product development
Foreign competition in early 1980s Firm restructuring Focus on improving existing products Workforces cut drastically Sites closed Innovate or die
HED 460
Product development - Defined
Design and engineering required to create products that are serviceable, producible, salable and profitable
Development of private label merchandise for the exclusive sale by one company
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Product Development Defined
o Taking a 2-D idea and transforming it into a 3-D product to be sold to a consumer
And the consumer wants…
• The “right” color• The “right” fit• The “right” price• The “right” quality• The “right” time (in season)
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Types of Product Development
Original design more processes and lead time more costly and time consuming
Modification reduced development time and
costs
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Types of Product Development
Knock off eliminates many development processes saves time and money
Joint product development Manufacturer and retailer speeds design and decreases wholesaling
time Combination
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The Product Development Team
o MERCHANDISING
• Front End
• Design• Trend Analysis• Merchandising
(Retail Buyer)
o PRODUCTION• Back End
• Product Mgt. (in/out)• Technical• Patternmaking• Sourcing• Vendor Relations• QA/QC
HED 460
Process of Product Development
1. Merchandising (Buyer) works with Design/Trend Dept. on WHAT to offer
• What color the assortment will include• What price the item will sold for• What styling details are necessary• What holes in the branded retail mix need to
be filled• What will give the store a competitive edge
HED 460
Process of Product Development
2. The Production Team brings the product to “life”
• Patternmaking/Design/Technical: the “right” fit
• Design/Merchandising/Product Mgr. Ensure the “right” quality
• Product Mgr negotiates w/factory to get the “right” price and lead-time
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How it is doneo Tools: BOM/spec sheets/artwork/fit
sessions/anaylsiso Communication inside retail team and
outside with vendor/suppliers/factorieso Details: • “all the small things”
• Washcare Instructions• Woven label, Hangtags, UPC codes• Strength and color of sewing thread• Type of plastic bag, how many pcs per carton box• Strength of the carton box• How important is TIME, and quick replenishment• Trade laws/new agreements, NAFTA
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Why are details so important?
Did you ever play that game: draw a circle and a box and at the top of the page, write the words…
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Phase I: Pre-Adoption
Creativity Materials development and selection Style development Pattern making Sample making Product testing Sample review
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Phase II: Post-Adoption
Preparing for production perfecting fit making production patterns writing production specifications sourcing production estimating final costs
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Software - PDM
Creates and maintains product specifications Front and back detailed sketch Garment construction Graded specifications Fabric trim and details Packaging and labeling
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Software - PDM
Used extensively in industry The Gap JCrew Kmart Osh Kosh B’ Gosh J.C. Penney Talbot’s Abercrombie & Fitch