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Merchandise Management
Process by which a retailer offers the right quantity of the right merchandise in the right place at the right time and meets the companys financial goals. Sense market trends Analyze sales data Make appropriate adjustments
c) image100/PunchStock
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The Category
A merchandise category is an assortment of items that customers see as substitutes for each other. Vendors might assign products to different categories based on differences in product attributes Retailers might assign two products to same category based on common consumers and buying behavior
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Category Management
Category management is the process of managing a retail business with the objective of maximizing the sales and profits of a category.
Department stores manage at category level, but grocery stores manage merchandise around brands and vendors Objective is to maximize the sales and profits of the entire category, not just a particular brand.
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Category Captain
Selected vendor responsible for managing a category Vendors frequently have more information and analytical skills about the category in which they compete than retailers Helps retailer understand consumer behavior Creates assortments that satisfy the customer Improves profitability of category Problems Vendor category captain may have different goals than retailer
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Antitrust Consideration
The vendor category captain could collude with retailer to fix prices It could block brands from access to shelf space Category captains need to temper zeal for control over retailers
Stockbyte/Punchstock Images
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Evaluating Merchandise Management Performance Merchandise managers have control over The merchandise they buy The price at which the merchandise is sold The cost of the merchandise Merchandise managers do not have control over Operating expenses Human resources Real estate Supply chain management Information systems
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GMROI
Gross Margin Return on Investment
A measurement of how many gross margin dollars are earned on every dollar of inventory investment made by the buyer
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GMROI
Inventory Productivity Measures
GMROI = Gross Margin Percent x sales to stock ratio = gross margin net sales = x net sales avg inventory at cost
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Illustration of GMROI
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Net Sales Average inventory at retail Cost of goods sold Average inventory at cost
Month1 + Month2 + Month 3 + Number of months
Average inventory =
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Inventory Turnover
Month Retail Value of Inventory EOM January $22,000 EOM February 33,000 EOM March 38,000 Total Inventory $93,000
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Inventory turnover =
Cost of goods sold Average inventory at cost Net Sales Average cost of
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Approaches for Improving Inventory Turnover Reduce number of categories Reduce number of SKUs within a category Reduce number of items in a SKU BUT if a customer cant find their size or color or brand, patronage and sales decrease!
another approach
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another approach
To improve inventory turnover Buy merchandise more often Buy in smaller quantities which should reduce average inventory without reducing sales
BUT by buying smaller quantities Buyers cant take advantage of quantity discounts so Gross margin decreases Operating expenses increase Buyers need to spend more time placing orders and monitoring deliveries
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Royalty-Free/CORBIS
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Retailers develop fashion forecasts by relying on: Previous sales data Personal awareness Fashion and trend services Vendors Traditional market research
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Personal Awareness
How do fashion buyers know the trends? Internet chat rooms Look in closets Go to the movies Go to rock concerts Go to nightclubs
Ryan McVay/Getty Images
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www.cpfr.org
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Assortment Planning
Variety is the number of different merchandising categories within a store or department
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PhotoLink/Getty Images
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PhotoLink/Getty Images