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Questions and Answers
What is the main goal of merchandise management?
What type of merchandise has predictable demand and relatively accurate forecasts?
Which of the following is a controllable factor affecting sales projections?
What is the acronym for the merchandise planning process?
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What is the purpose of assortment planning?
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What is the term for the ideal quantities of products that should be in a fulfillment center at any given time?
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What is the purpose of sell-through analysis?
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Which method is used to evaluate vendors based on weighted average scores?
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What type of analysis identifies the performance of individual SKUs in the assortment plan?
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What type of private label brand offers consumers a product comparable to a manufacturer's brand with little price savings?
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What is the primary focus of the 'Terms and Conditions of Purchase' law?
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What is the main objective of a strategic relationship between a retailer and a vendor?
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What is commercial bribery in the context of merchandising?
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What type of private label brand is developed by a national brand and sold exclusively by a particular retailer?
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What is the primary goal of effective negotiation in merchandising?
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What is the primary difference between national brands and private label brands?
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What is a chargeback in merchandising?
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What is the primary difference between gray-market merchandise and diverted merchandise?
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What is the main goal of penetration pricing?
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What is the definition of counterfeit merchandise?
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What is the primary purpose of discount pricing?
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What is value-based pricing also known as?
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What is the opposite of black market merchandise?
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What is the main characteristic of price skimming?
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What is the primary goal of dynamic pricing?
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What is the pricing strategy used by Gucci?
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What is the pricing strategy used by Netflix?
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What is the pricing strategy used by Fashion Nova?
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What is the purpose of keystone pricing?
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What is the pricing strategy used by Costco?
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Study Notes
Merchandise Management
- Merchandise management is the process of offering the correct quantity of the right merchandise in the right place at the right time to meet the company's financial goals.
Types of Merchandise
Staple Merchandise
- Predictable demand
- History of past sales
- Relatively accurate forecasts
Factors Affecting Sales Projections
Controllable Factors
- Promotions
- Store locations
- Merchandise placement
- Cannibalization
Merchandise Planning Process
- Forecast category sales
- Develop an assortment plan
- Determine appropriate inventory level and product availability
- Develop a plan for managing inventory
- Buy merchandise
- Monitor and evaluate performance and make adjustments (FDDDBM)
Merchandise Planning Steps
Forecast Category Sales
- Classify sales opportunities based on confidence level
Assortment Planning
- Select the collection of products to be offered in particular areas and during specified periods
Optimal Inventory Levels
- Ideal quantities of products to have in a fulfillment center at any given time
Product Availability
- Percentage of demand for a particular SKU that is satisfied
Inventory Planning
- Determine the optimal quantity and timing of inventory to align with sales and production capacity
Cycle (Base) Stock
- Inventory that goes up and down due to the replenishment process
Backup (Buffer, Safety) Stock
- Inventory needed to avoid stockout
Monitoring and Adjustment
Three Types of Analyses
- Sell-through analysis
- ABC analysis of assortments
- Multi-attribute analysis of vendors
Sell-through Analysis
- Compare actual and planned sales to determine whether more merchandise is needed to satisfy demand
ABC Analysis
- Identify the performance of individual SKUs in the assortment plan
- Rank orders merchandise by performance measure
Multi-Attribute Method
- Evaluate vendors using a weighted average score for each vendor
Brand Alternatives
National Brands
- Known as manufacturer brands, designed, produced, and marketed by the product to retailers
Private Label Brands
- Also called store brands, house brands, or own brands
- Four types of private label brands:
- Premium brands
- Copycat brands
- Exclusive brands
- Generic brands
Negotiation Issues
- Prices and gross margins
- Additional mark-up
- Terms of purchase
- Exclusivity
- Advertising allowance
- Transportation
Tips for Effective Negotiation
- Choose a good place to negotiate
- Be aware of real deadlines
- Separate the people from problems
- Insist on objective information
- Invent options for mutual gain
- Let them do the talking
- Know how far to go
- Don't burn bridges
- Don't assume
Strategic Relationship
- Emerges when a retailer and vendor commit to building a long-term relationship, investing in opportunities profitable for both parties
Legal and Ethical Issues
Terms and Conditions of Purchase
- Law passed on terms and conditions that vendors cannot offer differently to different retailers for same quality and features products
Commercial Bribery
- Illegal in merchandising to influence buying decisions by offering something valuable
Chargeback
- Deducting owed money by retailers to vendors when payment is missed (unethical in merchandising)
Buybacks
- System that gives favors to vendors by buying back and sniffing space allowance rather than competitors
Counterfeit Merchandise
- Goods made without permission of the owner of a trademark or copyright
Gray-Market Merchandise
- Goods that flow through unintended channels, usually across international borders
Diverted Merchandise
- Similar to gray-market merchandise, except without international borders
Black Market Merchandise
- Occurs when consumer goods are scarce, such as water or gasoline after a natural disaster
Pricing Strategies
Retail Price
- What consumers pay for the finished product
Pricing Strategies
- Cost-plus pricing
- Competitive pricing
- Value-based pricing
- Price skimming
- Discount pricing
- Penetration pricing
- Keystone pricing
- Manufacturer suggested retail price
- Dynamic pricing
- Multiple pricing
- Psychological pricing
- Loss-leader pricing
- Premium pricing
Examples of Pricing Strategies
- Premium pricing: Gucci
- Value-based pricing: Fashion Nova
- Penetration pricing: Netflix
- Competitive pricing: Costco
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Description
Test your knowledge of merchandise management, including types of merchandise, factors affecting sales projections, and merchandise planning. Learn about staple merchandise, controllable factors, and more.
