Merchandise Management: Buying and Handling the Merchandise Mix

Goals for Chapter 9

Goals for Chapter 9

Describe a Merchandise Logistic System

Goals for Chapter 9

Describe a Merchandise Logistic System Discuss Merchandise Buying Process

Goals for Chapter 9

Describe a Merchandise Logistic System Discuss Merchandise Buying Process Discuss Merchandise Ordering Process

Goals for Chapter 9

Describe a Merchandise Logistic System Discuss Merchandise Buying Process Discuss Merchandise Ordering Process Discuss Merchandise Handling Process

Goals for Chapter 9

Describe a Merchandise Logistic System Discuss Merchandise Buying Process Discuss Merchandise Ordering Process Discuss Merchandise Handling Process Examine 21 Common Buying Errors

Retail Logistics

Retail Logistics
The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer

Retail Logistics
The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer Consists of three subsystems

Retail Logistics
The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer Consists of three subsystems Merchandise Buying

Retail Logistics
The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer Consists of three subsystems Merchandise Buying Merchandise Ordering

Retail Logistics
The process of managing the integrated flow of merchandise from buying, through distribution, into the retail store, and ultimately into the hands of the consumer Consists of three subsystems Merchandise Buying Merchandise Ordering Merchandise Handling

Merchandise Buying

Merchandise Buying
Four step process

Merchandise Buying
Four step process Identify sources of supply

Merchandise Buying
Four step process Identify sources of supply Contact sources of supply

Merchandise Buying
Four step process Identify sources of supply Contact sources of supply Evaluate sources of supply

Merchandise Buying
Four step process Identify sources of supply Contact sources of supply Evaluate sources of supply Negotiate with sources of supply

Buying Process

Buying Process
Some considerations:

Buying Process
Some considerations: Manufacturer versus Wholesaler as vendor

Buying Process
Some considerations: Manufacturer versus Wholesaler as vendor Determine suitability of product - quality, colors, durability, etc.

Buying Process
Some considerations: Manufacturer versus Wholesaler as vendor Determine suitability of product - quality, colors, durability, etc. Determine suitability of Distribution - available, order time, consistency, etc.

Buying Process
Some considerations: Manufacturer versus Wholesaler as vendor Determine suitability of product - quality, colors, durability, etc. Determine suitability of Distribution - available, order time, consistency, etc. Price

Buying Process
Some considerations: Manufacturer versus Wholesaler as vendor Determine suitability of product - quality, colors, durability, etc. Determine suitability of Distribution - available, order time, consistency, etc. Price Promotional support

Buying Process
Some considerations: Manufacturer versus Wholesaler as vendor Determine suitability of product - quality, colors, durability, etc. Determine suitability of Distribution - available, order time, consistency, etc. Price Promotional support Service support

Methods of Merchandise Planning

Methods of Merchandise Planning

Gross margin Return on Inventory (GMROI)

Methods of Merchandise Planning

Gross margin Return on Inventory (GMROI) Basic Stock Method

Methods of Merchandise Planning

Gross margin Return on Inventory (GMROI) Basic Stock Method Percentage Variation Method

Methods of Merchandise Planning

Gross margin Return on Inventory (GMROI) Basic Stock Method Percentage Variation Method Weeks supply Method

Methods of Merchandise Planning

Gross margin Return on Inventory (GMROI) Basic Stock Method Percentage Variation Method Weeks supply Method Stock to Sales Method

Determinants of Merchandise Mix

Determinants of Merchandise Mix

Variety

Determinants of Merchandise Mix

Variety Breadth

Determinants of Merchandise Mix

Variety Breadth Depth

Determinants of Merchandise Mix

Variety Breadth Depth Constraints

Determinants of Merchandise Mix

Variety Breadth Depth Constraints

Finances

Determinants of Merchandise Mix

Variety Breadth Depth Constraints

Finances Space

Determinants of Merchandise Mix

Variety Breadth Depth Constraints

Finances Space Turnover

Determinants of Merchandise Mix

Variety Breadth Depth Constraints

Finances Space Turnover Market

Exhibit 9.1

Dimensions of and Constraints on Optimal Merchandise Mix

Dollar Merchandise Constraints
Optimal Merchandise Mix

Space Constraints

Variety Depth Breath

Market Constraints

Merchandise Turnover Constraints

Retailing, 3rd Edition, Dunne and Lusch Copyright 1999 by Harcourt Brace & Company All rights reserved.

Pricing by Vendors

Pricing by Vendors
List prices (remember Robinson-Patman)

Pricing by Vendors
List prices (remember Robinson-Patman) Trade Discounts

Pricing by Vendors
List prices (remember Robinson-Patman) Trade Discounts Quantity Discounts

Pricing by Vendors
List prices (remember Robinson-Patman) Trade Discounts Quantity Discounts Seasonal Discounts (Deals)

Pricing by Vendors
List prices (remember Robinson-Patman) Trade Discounts Quantity Discounts Seasonal Discounts (Deals) Cash discounts

Pricing by Vendors
List prices (remember Robinson-Patman) Trade Discounts Quantity Discounts Seasonal Discounts (Deals) Cash discounts Promotional allowances

Pricing by Vendors
List prices (remember Robinson-Patman) Trade Discounts Quantity Discounts Seasonal Discounts (Deals) Cash discounts Promotional allowances Who pays the freight

Merchandise Ordering

Merchandise Ordering
Traditional Purchase Order System (often adversarial relationship)

Merchandise Ordering
Traditional Purchase Order System (often adversarial relationship) Quick Response System - uses computer technology (partnership of vendor and retailer)

Merchandise Ordering
Traditional Purchase Order System (often adversarial relationship) Quick Response System - uses computer technology (partnership of vendor and retailer) Electronic Data Interchange technology connecting retailer and vendor in a quick response system

Merchandise Ordering
Traditional Purchase Order System (often adversarial relationship) Quick Response System - uses computer technology (partnership of vendor and retailer) Electronic Data Interchange technology connecting retailer and vendor in a quick response system Just-in-Time Delivery Systems Reduces inventory requirements

Merchandise Ordering
Traditional Purchase Order System (often adversarial relationship) Quick Response System - uses computer technology (partnership of vendor and retailer) Electronic Data Interchange technology connecting retailer and vendor in a quick response system Just-in-Time Delivery Systems Reduces inventory requirements Direct Store Delivery (DSD) - no warehouse; vendor delivers directly to store

Merchandise Handling

Merchandise Handling
Stocking of merchandise can be at store or at warehouse

Merchandise Handling
Stocking of merchandise can be at store or at warehouse In either case, receiving function must inspect, verify and log in deliveries and compare to vendor invoice

Merchandise Handling
Stocking of merchandise can be at store or at warehouse In either case, receiving function must inspect, verify and log in deliveries and compare to vendor invoice Price marking of product must be performed, if required

Retailing, 3rd Edition, Dunne and Lusch

Copyright 1999 by Harcourt Brace & Company All rights reserved.

1. Failures to analyze previous years

merchandise results before going to market or making purchases.

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1. Failures to analyze previous years

2.

merchandise results before going to market or making purchases. Failure to have kept records from the previous year.
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3. Determining only the quantity and

leaving the merchandise selection to the vendor, especially size and color selections.

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Copyright 1999 by Harcourt Brace & Company All rights reserved.

3. Determining only the quantity and

leaving the merchandise selection to the vendor, especially size and color selections. Using too many vendors.
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4.

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5.

Merchandise whose sizes and/or colors were wrongly bought or in too large quantity or were wrongly delivered and prove to be disproportionate to customer demand at regular prices.

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5.

Merchandise whose sizes and/or colors were wrongly bought or in too large quantity or were wrongly delivered and prove to be disproportionate to customer demand at regular prices. 6. Not helping out inexperienced buyers.
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7. Failure to know the selling season

for your market.

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7. Failure to know the selling season

for your market.

8. Buying too many items

rather than just a few styles.
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9. Buying too many hot, new

styles.

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9. Buying too many hot, new

styles.

10. Failure to make small initial

purchases, that can be followed up by reorders.
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11. Failure to determine if buyer can

deliver on time the merchandise ordered or accepting changes by the manufacturer.

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11. Failure to determine if buyer can

deliver on time the merchandise ordered or accepting changes by the manufacturer. Buying too broad of a product line.
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12.

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13. Failure to cancel past due

orders.

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13. Failure to cancel past due

orders. 14. Making the last re-order once too often. The last may arrive just in time to be marked down.
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15. Failure to negotiate all possible

discounts from the vendor.

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15. Failure to negotiate all possible

discounts from the vendor. 16. Failure to study the market sufficiently so as to know the best quality merchandise and best price.
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17.

Failure to ask one of the following questions: a. Does your company substitute ship? b. Does your company backorder often? c. How long has your company been in business?.

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17.

Failure to ask one of the following questions: a. Does your company substitute ship? b. Does your company backorder often? c. How long has your company been in business?. Failure to shop the competition so as not to buy identical items.
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18.

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19. Failure to talk with the central

office (where applicable) in order to see what other buyers services are offered.

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19. Failure to talk with the central

office (where applicable) in order to see what other buyers services are offered. 20. Failure to buy enough merchandise, resulting in lost sales volume.
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21. Buying your personal preferences,

instead of the markets preferences.

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CONFLICTS IN BUILDING A MODEL STOCK PLAN

Maintain Strong In-Stock Position in Genuinely New Items Stock Basic Popular Items Avoid the 90 Percent of Products That Will Fall During Introduction Have Inventory Dollars to Capitalize on Opportunities Maintain High Margin Goals

Maintain Higher Turnover Goals

Have Selection

Dont Confuse Customer

Utilize Space
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Dont Congest Store

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Summary

Summary
Merchandise Management is extremely important aspect of Retail Operations Many consider it the MOST important)

Summary
Merchandise Management is extremely important aspect of Retail Operations Many consider it the MOST important) Good merchandise management does not guarantee success but bad merchandise management almost certainly will result in failure