Merchandising Planning Merchandising Planning ProcessProcess

ByBy

Dr.U.SrinivasaraghavanDr.U.Srinivasaraghavan

Steps in Merchandising Planning ProcessSteps in Merchandising Planning Process

Develop inventoryLevel &Product

availability

Plan for managing inventory

Allocate MerchandiseFor stores

Buy Merchandise

Monitor & evaluate & make adjustments

Forcast sales

Develop Assortment Plan

Types of Merchandise planning processTypes of Merchandise planning process

Staple/Basic MerchandiseStaple/Basic Merchandise consist of items consist of items that are in continuous demand over an extended time that are in continuous demand over an extended time period. Examples: paints, notebooks, period. Examples: paints, notebooks,

Fashion Merchandise Fashion Merchandise consists of items that are consists of items that are in demand for a relatively short period of time. New in demand for a relatively short period of time. New products are continually introduced into these categories, products are continually introduced into these categories, making the existing products obsolete. Examples: high-end making the existing products obsolete. Examples: high-end women’s apparel, laptops.women’s apparel, laptops.

A FAD A FAD is a merchandise category that generates a lot of is a merchandise category that generates a lot of sales for a relatively short time, often less than a sales for a relatively short time, often less than a season.Example: some electronic gamesseason.Example: some electronic games

General Features of Staple Merchandise General Features of Staple Merchandise CategoriesCategories

Relatively easy to forcast demand and the Relatively easy to forcast demand and the consequences of making mistakes in forcasting consequences of making mistakes in forcasting are not greatare not great

Predictability of demand makes it easy to plan for Predictability of demand makes it easy to plan for continuous replenishmentscontinuous replenishments

Generating orders for inventory replacement can Generating orders for inventory replacement can be automatic when the inventory falls below a be automatic when the inventory falls below a pre-determined levelpre-determined level

General Features of Fashion Merchandise General Features of Fashion Merchandise CategoriesCategories

Forecasting of sales is much more complexForecasting of sales is much more complex

Buyers for fashion category have much less flexibility in Buyers for fashion category have much less flexibility in correcting forecasting errors.correcting forecasting errors.

The attempt is to be as close to out of stock as possible at The attempt is to be as close to out of stock as possible at the same time that the SKUs become out of fashionthe same time that the SKUs become out of fashion

Seasonal Merchandise categories are treated more or less Seasonal Merchandise categories are treated more or less similar to the fashion merchandise and they consist of similar to the fashion merchandise and they consist of items whose sales fluctuate dramatically depending on the items whose sales fluctuate dramatically depending on the time of the yeartime of the year

Category Life CycleCategory Life Cycle

Total

retail

sales

Time

introduction

growth

maturity

decline

Comparison of Category life cyclesComparison of Category life cycles-fad, fashion, staple --fad, fashion, staple -

FadFad FashionFashion StapleStaple

Sales over many Sales over many seasonsseasons NoNo

yesyes yesyes

Sales of a specific Sales of a specific style over many style over many seasonsseasons

NoNo nono

yesyes

Dramatic variation of Dramatic variation of sales from season to sales from season to next seasonnext season NoNo

yesyes nono

Questions that help buyers in distinguishing Questions that help buyers in distinguishing between a fad and a fashionbetween a fad and a fashion

1.1. Is it compatible with the life style of the consumer? Is it compatible with the life style of the consumer? Innovations that are consistent with the life style of the Innovations that are consistent with the life style of the consumers are more enduring fashions. (Example) Denim consumers are more enduring fashions. (Example) Denim Jeans Vs Leather PantsJeans Vs Leather Pants

22 Does the innovation provide real benefits? (Example) Does the innovation provide real benefits? (Example) Poultry and Fish based products VsMutton based specia;l Poultry and Fish based products VsMutton based specia;l dishesdishes

3.3. Is the innovation more compatible with other changes in Is the innovation more compatible with other changes in the market place? (Example) Cell phones with more the market place? (Example) Cell phones with more mobile , time conscious societymobile , time conscious society

4. Who is adopting?4. Who is adopting?

Forecasting Forecasting Staple Merchandise CategoriesStaple Merchandise Categories

Extrapolating Historical data with Extrapolating Historical data with necessary corrections using necessary corrections using statistical methods like time series statistical methods like time series analysis etcanalysis etc

Forecasting Forecasting Fashion Merchandise CategoriesFashion Merchandise Categories

1.1. Previous sales dataPrevious sales data2.2. Personal awareness – Personal awareness – shop, converse, shop, converse,

act,act,

noticenotice

3. Fashion and trend services3. Fashion and trend services

4.Vendors4.Vendors

5. Market research5. Market research

Assortment PlanAssortment Plan

It is th list of SKUs that a It is th list of SKUs that a merchandiser will offer in a retail merchandiser will offer in a retail categorycategory

Variety Variety is the number of different is the number of different merchandising categories offered and is often merchandising categories offered and is often refered as the breadthrefered as the breadth

Assortment Assortment or depth is the number of SKUs or depth is the number of SKUs offered within a categoryoffered within a category

Determining the Variety & Determining the Variety & AssortmentsAssortments

1.1. Firm’s Retail StrategyFirm’s Retail Strategy

2.2. GMROIGMROI

3.3. Physical characteristics of StorePhysical characteristics of Store

4.4. Complementary MerchandiseComplementary Merchandise

Product AvailabilityProduct Availability

It is the percentage of demand for a It is the percentage of demand for a particular SKU that is satisfied. Also particular SKU that is satisfied. Also known as level of support. Higher the known as level of support. Higher the availability higher is the need for availability higher is the need for buffer /basic stockbuffer /basic stock