Merchandising at Nine West

Retail Stores
Group 5:
Rajesh Choudhary 12P158
Rohan Khandelwal(12P164)
Vishal Agarwal(12P179),
Aditi Pandey(12P183)
 Outline
Introduction
Retail footwear industry
Shoe design and construction
Company Background
NWRS Merchandising org structure
Merchant incentive structure (1 slide) - Rajesh
Store org structure and incentive structure
Merchant decision process
Decisions to be taken
Recommendations
 Merchandising

Purchase
Individual Quantity
product Inventory
Demand Management
forecasting

Product
Markdowns
Assortment

Product
Market
Merchandising Display and
Trends
Advertising

Changes to be incorporated in the merchandising

 The Retail Footwear Industry
Market Sizing CAGR (1990-95): 0.44%
32.5
32
31.5
31
1990 1995
Premium Segment Woman:
Women Shoe Market:
Market Size: $16 Bn (46%) Shoes marked 74.50% to 99.49%: Sales
Average Shoe Purchase per annum : 5 per increased 1.8% (1990-95)
woman Differentiating factor: Quality and Style
Non - Athletic Women Shoe Market : Premium on Country of manufacture (Italy
$10.3 Bn and France)
Expected Growth rate : 3-5%
 Shoe Design and Construction
Design process started as a masterful work of art
A creative created a series of sketches
Designers selected the raw material supplier and
tanneries
Sketches were used to form the proposed vision
for wholesale line
Key was the perfect construction of last
Production process was complex and there were
around 130 stages
Manufacturing lead time could go up to 10 days
 Company Background
Founded by Jerome Fisher and Vincent Comuto in New York in 1977
as a manufacturer and wholesaler of womens footwear
More than 7000 retail stores in 40 countries
Retail division was started in 1983 and contributed around 49% of
the revenue
In 1996, sales grew by 28% to $1.6 bn and net income increased by
33% to $95 mn
Company international presence and high growth was achieved
through addition of new stores and acquiring other footwear
companies
In May 1995, the acquisition of U.S. Shoe Corporations footwear
division, made them largest womens footwear company
In future company is intended to evolve into a complete life-style
company
 Merchandising Organization Structure
Merchandising organization was responsible for
assortment, pricing, purchasing, and store display at each store
Retail Directors performed functions similar to other retail companies
merchandisers
Responsible for 50-60 stores
Managed style selections, purchasing, pricing, and display
Reported to a merchandise manager who in turn reported to the president of
NWRS
Presidents role
Responsible for allocating decisions for creating a point of view across the
entire organization
To oversee the compliance of retail directors with company goals
NWRS was divided by region
They held the view that product can be customized specific to
demographic, market trends, and eliminated competition between retail
directors
It did not believe in having extensive planners, rather, they expected buyers
to be creative. Buyers and planners frequently worked together as a team
 Merchant Incentive Structure
Retail directors were rewarded based on performance and year-end bonuses

Since the outcomes of a regional director were easier to monitor then the
actions themselves, compensation and performance based rewards were tied
to outcomes rather than behavior

Retail Director:
Capable of earning up to 15% of their annual salary for such rewards
To be eligible, he or she had to exceed both goals and plans

Bonus had three components:

Actual performance compared to plan 50%
Total NWRS actual performance 25%
Earnings per share 25%
 Store Organization and Incentive Structure
Field organization was responsible for day-to-day operations
Because of the NWRSs centralization, retail directors relied on regional sales
managers to be their eyes and ears.
Regional and area sales managers qualified for a 15% and 10% bonus
Five or six area sales managers would report to one regional sales manager
Each store employed a store manager, and several assistant managers.
The store manager was responsible for producing weekly business analysis
and highlighting the stores successes and failures.
They were reviewed based on annual sales, expenses, turnover, and
shrinkage
Field employees were rewarded based on the achievement of sales and by
reviews by corporate EPS
Importance of promotion declined due to
The reluctance of store managers to relocate consequent to a promotion
The companys generally slow growth
 Merchant decision process
Planning began roughly ten months prior to the arrival of merchandise in
stores (Time consistent across shoe industry)
Demand Forecasting
Retail directors broke this down by store and SKU, and used a combination of
historical data, exogenous variables, and intuition.
Reliance on historical variables to forecast demand.
Risk and Reward considered for each product portfolio
Fashion trend forecasting
Seasonal Budgeting
Capital Allocation for inventory decisions to various product categories, and
created sales and gross margin plans for each retail Director
Exact figures were derived from historical data, analytical monitoring, and
strategic direction to project a six-month
The ultimate objective was to make certain the most promising opportunities
underwent the planning process when the final budget was approved.
 Merchant decision process
Merchant Product Selection and Quantity Commitments
Shoe week show to preview the upcoming fall collection..
Forecast initial store quantity commitments ( 40-50% of the entire seasons buy )
NWRS is vertically integrated, so merchants were able to postpone some decisions
Rolling Financial Forecasting
Forecasts updated if a major event occurred
Showcasing successes and supported funding for specific products or locations
Merchandise Display Decisions
Recommendations communicated as planagrams.
Merchandise was put together in groups to be aesthetically pleasing
Correct order of shipment was ensured
Retail Pricing, Inter- store Transfers, Re-orders and Markdowns
Suggested retail price to ensure consistency in pricing
40 50% of merchandise was generally secured at regular price
After a products lifestyle the product sold to off-price retailers to ensure brand integrity.
 Decisions to be taken
Success in entry into lifestyle products
Changes in merchant organization structure
Changes in merchant decision process to make
it condensed and efficient
Changes in companys incentive systems, both
in the store and merchandising organizations
Increasing use of IT in the market
 Recommendations
Expanding into the lifestyle market
Vertical integration would require much more work, but would allow
the company to maintain total control over all aspects of products.
Nine West would have to hire new product designers, production
specialists, market researchers, etc. to ensure the success of the brand
Instead of vertically integrating this new product, Nine West may
either choose to license select product, or, or acquire small companies
altogether.
With acquisition, they would be able to alter the new company to fit
into the Nine West vision. It would be greatly beneficial for the
acquired company to already have a strong sourcing department, as
existing Nine West employees would most likely be unfamiliar with
manufacturing this new product
However, a synergy would still exist between management in NWRS
and new companies
Thank You