BM4324 Retail Merchandising & Analytics Lecture 1 PDF

MANAGEMENT E X P E C TAT I O N S ( K E Y P E R F O R M A N C E I N D I C A T O R S ) Retail Merchandising & Analytics Lecture 1 LECTURERS/TUTORS: MS GK LEE E M A I L : L E E _ G E K _ K E O W @ N Y P. E D U. S G...

MANAGEMENT E X P E C TAT I O N S ( K E Y P E R F O R M A N C E I N D I C A T O R S ) Retail Merchandising & Analytics Lecture 1 LECTURERS/TUTORS: MS GK LEE E M A I L : L E E _ G E K _ K E O W @ N Y P. E D U. S G MR JAMES SIM E M A I L : J A M E S _ S I M @ N Y P. E D U. S G 1  ABOUT MODULE This module covers 2 parts: Retail Merchandising Retail Analytics every necessary aspects of the In continuity with the Retail buying process, familiarising students with Buying (BM4323) module, this terminologies of merchandising models, module will move on to the next step the setup of a Live inventory replenishment calendaring, SHOPLINE E-commerce store seasonal and long-term merchandising and Retail Ecommerce & plans, methods of determining mark-ups Sustainability Pop-up with Live and markdowns, turnover, sell- Streaming (Hybrid) through ratios, open-to-buy, and terms of sale. ~~ & LIFE SKILLS (Teamwork & Communication, Critical Thinking Skills, Resilience, Independence Learning Skills…) 4  A S S E S S M E N T FIND THE Official (Open) C O M P O N E N T S SHOPPING BAG! Lecture esp important..1, 2 & 3… Individual ICA Description Date of Assessment % Weightage Week 7 ICA 1 Individual Test 30% 30% (Refer to MDP & BS) Group Presentation Week 9 (Concept Pitch) Replaced by Trunk Show (Held in LT) Group Project Week 14 ICA 2 24% 40% (Ecommerce & Sus Pop-up event) (15/01/2025,Wed) Week 18 ICA 3 Individual Report 30% 30% (Refer to MDP) Total 84% 100% INDIVIDUAL COMPONENT = 84% 5 Official (Open) TRUNK SHOW 2024 25 groups (2 min airtime) Date: 12 Dec 2024 (Thu) Time: 11am -1pm Venue: LTC - Showcase Wares, Publicize - Seek Collaboration, Feedback, Polls, etc 6 1. Create an online e-commerce store using SHOPLINE platform and set up Google Analytics for analysis in S TA RT Week 3 (E-learning week BRAINSTORMING assignment) 2. Trunk Show will be held during THEME: Tutorial hours in Week 9 (LT) GREEN R E TA I L I N G & 3. Everyone is required to participate S U S TA I N A B I L I T Y in Retail Ecommerce & Sustainability Pop-up in Week 14 (ICA 2) 4. Individual report submission date: Week 18 (ICA 3) 7  Learning Unit Learning Plan (LULP) 8  Learning Unit Learning Plan (LULP) 9  Learning Unit Learning Plan (LULP) 10 Official (Open) A little Twist: Week 1-5 (before OPeA): Complete tutorial before lessons (so tutor can help you prepare for test) Week 6 & 15: NO tutorial. Industry guest sharing to prepare for ICA2 & 3 TRUNK SHOW 2024 25 groups (2 min airtime) Week 7 onwards: Date: 12 Dec 2024 (Thu) tutorial11am Minimum/NoTime: questions -1pmto prepare Scrum, focus on integrated Venue: LTC project- Stand up meetings (15min) - Showcase Wares, Publicize - Seek Collaboration, Feedback, Polls, etc 11 Official (Open) TIPS to excel! Active Learning with Gamification & Class Participation -Different activities & formats (Guest sharing, Trunk show, Tutorial time for group discussion & ICA facilitation) TRUNK SHOW 2024 -Tutor 's roles is to scaffold & facilitate classroom activities -First 10min of 25 class groupsfor (2 quick read up, followed by 5-10 min Quiz [KAHOOT] min airtime) Date: 12 Dec 2024 (Thu) -Scoring by group. Winning group gets bonus. Time: 11am -1pm -What is bonus toVenue: you? LTC -ICA2 life skills (active CP, team dynamics), pizza, extra booth fixture during - Showcase Wares, Publicize - Seek Collaboration, Feedback, Polls, etc event? 12 https://www.amazon.com/Art-Retail-Buying-Insiders-Practices- ebook/dp/B006PW2UZU 13 14 Official (Open) LEARNING OBJECTIVES  Understand the 14 key evaluation measures to gauge a buyer’s success  Expectation Overview  Productivity Measures 15 Official (Open) 1. SALES AGAINST BUDGET & AGAINST PREVIOUS YEAR (THE TOP LINE) Indicators of how much more sales the company is anticipating to generate against the previous year Forecast includes – Market trends- e.g omnichannel, digitalization – Political stability- e.g Hong Kong & Thailand riots- sourcing – Commodity price hikes- e.g. electricity tariff increase 6% 2019 – Changes in taxes – e.g. SG increase GST (7-9%) 2021-25 – Foreseeable trends- e.g. fashion trends, eating habits (impossible meat) 16 Official (Open) Plant-based ‘meat’ by Impossible Foods available in S’pore from March 7, 2019 Burger King now serving up meatless, plant-based ‘Impossible Whopper’ on trial in US Burger King’s meatless burger gets endorsement from Singapore’s DPM, saying Even BK employees couldn’t tell the difference that it “can indeed become a big deal” in figh https://mothership.sg/2019/04/burger-king-meatless-plant- against global warming https://www.theonlinecitizen.com/2019/04/04/burger-kings-meatless- based-impossible-whopper/ burger-gets-endorsement-from-singapores-dpm-saying-that-it-can-indeed- become-a-big-deal-in-fight-against-global-warming/ Official (Open) 2. GROSS PROFIT MARGIN AGAINST BUDGET & AGAINST PREVIOUS YEAR (THE BOTTOM LINE) Profits that pays the bill All budgeted expenses are in line with the profits expected 18 Official (Open) 3. ACCUMULATED SALES & GROSS PROFIT FOR YEAR TO DATE  These are the markers or global overview of the business being generated by the buyer  Management will want to study cause of any discrepancies & assist buyer in closing the gap 19 Official (Open) 4. SALES PER SQUARE FOOT A sales-per-square foot figure allows management to assess if a product line of a brand is generating sufficient business on a given sales area. Cosmetics vs Fashion Apparels 20 Official (Open) 5. GROSS PROFIT MARGIN PER SQUARE FOOT For example, in a departmental store, cosmetics usually command greater sales per foot. Thus, Fashion should command HIGHER margin.  Cosmetics offers 25% - 29%  Fashion apparels 40% and above 21 Official (Open) 6. ACTUAL STOCKS AGAINST PLANNED STOCKS  Reflects the efficiency of the products bought  Over the planned stock level – possible reasons:  Goods are not selling as well as anticipated  More goods were bought than planned for  Goods were brought in early to prepare for a big sales event (generally acceptable)  Under-selling / over-buying leads to markdowns and loss of profits 22 Official (Open) 7. STOCK TURN does not equate to profittability as the products maybe selling at a loss/ discount  A ratio of sales to average stocks  Measures the efficiency of the inventory, the retailers’ main source of operating profits  Determines the effectiveness of the merchandise planning and controls in place  Excessive inventory is costly!  Can cost the company as much as 3% per month  Increased expenses in storage, interest, insurance, internal transfers, mark-downs 23 Official (Open) 8. GROSS MARGIN RETURN ON INVENTORY (GMROI)  Evaluates whether a sufficient gross margin is being earned on the products purchased in relation to the investment in inventory required to generate it  Calculate the gross profit margins of the average inventory at cost and dividing this by the average cost of inventory  GPM/Cost of Inventory  A ratio that indicates the number of times gross margin is earned from the inventory investment 24 Official (Open) 9. CONVERSION RATE  Takes into account the number of customers walking into the store or checking into the ecommerce site vis-a-vis the number of transactions being processed  Tool for measuring the efficiency of :  store locations - offline  user experience (UX) / user interface (UI) - online  merchandise categories  selling skills in turning potential shoppers into actual customers 25 Official (Open) 10. AVERAGE SELLING PRICE (ASP) AGAINST THE PLAN  The price at which particular class of merchandise is typically sold  Watches/Jewellery vs Garments/Fashion accessories  ASP of Garments/Fashion is likely to be driven down by products that becomes less attractive or novelty wears off faster  Average selling price goes below plan  Underselling products before the end of their life-cycle  Introducing higher than planned levels of low-priced items  Aggressive price promotions or ill-managed discounts 26 Official (Open) 11. MONTHLY MARK-DOWNS, ACCUMULATIVE MARK-DOWNS & MARK-DOWNS AGAINST BUDGET OR PREVIOUS YEAR  Planned for by monthly and involve a standard set of mark-down percentages implemented on a standard schedule, across all departments or stores  Excessive use of mark-downs equates to loss of profits  Wise buyers can negotiate cooperation or compensation from vendors on mark-downs as part of their purchasing deal 27 Official (Open) 12. STOCK OBSOLESCENCE (OBSL) – YEAR TO DATE OBSL reserves are financial tools based on historical mark-down data that enable retailers to factor into their calculations a certain percentage of mark-downs against sales to clear aged or problematic stock holdings at the end of each season E.g. Reduction of 40% on an inventory that is older than 7 months, 80-90% off for those older than a year The % allocated will normally be higher for fashion than homeware which has a longer life-cycle. 28 Official (Open) 13. SHRINKAGE (DUE TO THEFT OR SPOILAGE)  Retailers plan shrinkage arising from theft or spoilage as a percentage of sales 29 Official (Open) 14. RETURN ON INVESTMENT (ROI)  ROI will calculate the profit returns generated by the inventory invested and is usually expressed as a percentage  $50 / $1000 = 5% ROI  $20 / $1000 = 2% ROI  ROI enables management to evaluate the relative efficiency of the profits generated by the merchandise bought 30 Official (Open) EXPECTATION OVERVIEW  Sales Performance:  vs target or last year; accumulated sales; sales p.s.f.  Profitability:  GP vs target or last year; accumulated GP; GP p.s.f.; GMROI  Stock Turn:  actual stock vs planned stock; stock turn; GMROI  Conversion Rate  Average Selling Price (ASP)  Mark-downs and Stock Obsolescence  Productivity: ROI 31 Official (Open) PRODUCTIVITY MEASURES 1) Stock-to Sales Ratio (STSR) STSR = Beginning stocks / total month’s sales E.g. 3 ways to measure STSR = Beginning stocks / total month’s sales 20,000 / 5,000 = 4 vs. 20,000 / 2,000 = 10 32 Official (Open) PRODUCTIVITY MEASURES 2) Gross Margin Return (GMR) E.g. Sales for the year = $ 100,000 3 ways to measure Margin is 37.5% = $ 37,500 Average inventory cost = $ 15,000 The gross margin return for each $1 investment is $2.50: (margin) $37,500 / (cost of goods) $15,000 = (GMR) $2.50 Also often expressed as GMROI 33 Official (Open) PRODUCTIVITY MEASURES 3) Realized Gross Profit Margin Sales target = $500000 Budgeted margin = 30% 3 ways to measure If promotions generated $600,000 with margin of 25% that brings in same $150,000 in gross profits, is this result satisfactory? (Ans: Not satisfactory result because not following the management’s intention to operate at a higher margin, i.e. lower margin%) 34 Official (Open) 35 Official (Open) 36 Moving more stocks Now with the same 70c costs, around but with lower You can only sell at 93.3c. margin even though total Thus, you lose potential 6.7c in profits margin may be the same Official (Open) What is Alibaba? | CNBC Explains Your sourcing journey begins 37