Retail Management - CHAPTER 9 PDF

CHAPTER 9 MERCHANDISE MANAGEMENT Source AT THE END OF THE SESSION, YOU SHOULD BE ABLE TO: Describe the components of merchandise management; Identify a retailer’s merchandise philosophy; Discuss the planning of the merchandise strategy for a retail store; Identify...

CHAPTER 9 MERCHANDISE MANAGEMENT Source AT THE END OF THE SESSION, YOU SHOULD BE ABLE TO: Describe the components of merchandise management; Identify a retailer’s merchandise philosophy; Discuss the planning of the merchandise strategy for a retail store; Identify and explain the types of merchandise; and Compare and critique the main types of brands retailers select. Case: ZARA – affordable fast fashion Zara, one of the world’s most successful fashion retail brands, best knownsourc e for its dramatic introduction of the concept of “fast fashion”. Zara aspires to create responsible passion for fashion amongst a broad spectrum of consumers, spread across different cultures and age groups. There are many factors that have contributed to the success of Zara but one of its key strengths, which has played a strong role in it becoming a global fashion powerhouse as it is today, is its ability to put customers first. The secret to Zara’s success has largely being driven by its ability to keep up with rapidly changing fashion trends and showcase it in its collections with very little delay. From the very beginning, Zara found a significant gap in the market that few clothing brands had effectively addressed. This was to keep Source available pace with latest fashion trends, but offer clothing collections that here (MartinRoll are a combination of high quality and yet, are affordable. Case: ZARA Zara keeps a close watch on how fashion is changing and evolving every day across the world. Based on latest styles and trends, it creates new designs and puts them into stores in a week or two. In stark comparison, most other fashion brands would take close to six months to get new designs and collections into the market. It is through this strategic ability of introducing new collections based on latest trends in a rapid manner that enabled Zara to beat other competitors. It quickly became the people’s favourite brand, especially with those who want to keep up with fashion trends. The media often quotes that the brand produces “freshly baked clothes”, which survive fashion trends for less than a month or two. Zara concentrates on three areas to effectively “bake” its fresh fashions: Shorter lead times (and more fashionable clothes): Shorter lead times allow Zara to ensure that its stores stock clothes that customers want at that time (e.g. specific spring/ summer or autumn/ winter collections, recent trend that is catching up, sudden popularity of an item worn by a celebrity/ socialite/ actor/ actress, latest collection of a top designer etc.). While many retailers try to forecast what customers might buy months in the future, Zara moves in step with its customers and offers them what they want to buy at a given point in time. Lower quantities (through scarce supply): By reducing the quantity manufactured for a particular style, Zara not only reduces its exposure to any single product but also creates artificial scarcity. Similar to the principle that applies to all fashion items (and more specifically luxury), the lesser the availability, the more desirable an object becomes. Another benefit of producing lower quantities is that if a style does not Source generate traction and suffers from poor sales, there is not a high volume available here (MartinRoll Case: ZARA More styles: Rather than producing more quantities per style, Zara produces more styles, roughly 12,000 a year. Even if a style sells out very quickly, there are new styles waiting to take up the space. This means more choices and higher chance of getting it right with the consumer. Zara only allows its designs to remain on the shop floor for three to four weeks. This practice pushes consumers to keep visiting the brand’s stores because if they were just a week late, all the clothes of a particular style or trend would be gone and replaced with a new trend. At the same time, this constant refreshing of the lines and styles carried by its stores also entices customers to visit its shops more frequently. Zara’s principal designer is the customer In 2015, a lady walked into a Zara store and asked the store assistant for a pink scarf, but the store did not have any pink scarves. The same happened almost simultaneously in other stores (different countries),where ladies walked into Zara stores and asked for pink scarves. They all left the stores without any scarves – an experience many other Zara fans encountered globally in different Zara stores over the next few days. 7 days later, more than 2,000 Zara stores globally started selling pink scarves. 500,000 pink scarves were dispatched – to be exact. They sold out in 3 days. How did such lightning fast stocking of pink scarves happen? Customer insights are the holy grail of modern business, and the more companies know about their customers, the better they can innovate and compete. But it can prove challenging to have the right insights, at the right time, and have access to them consistently over time. One of the secrets to Zara’s success includes using Radio Frequency Identification Technology (RFID) in its stores. The brand uses cutting-edge systems to track the location of garments instantly and makes those most in demand rapidly Source available here, (MartinRoll, 2021) Case: ZARA Zara’s super-efficient supply chain Zara’s highly responsive, supply chain enables the export of garments 24 hours, 365 days of the year, resulting in the shipping of new products to stores twice a week. After products are designed, they take around 10 to 15 days to reach the stores. All clothing items are processed through the distribution centre in Spain, where new items are inspected, sorted, tagged, and loaded into trucks. In most cases, clothing items are delivered to stores within 48 hours. This allows Zara to eliminate the need for warehouses and helps reduce the impact of demand fluctuations. Zara produces over 450 million items and launches around 12,000 new designs annually, so the efficiency of the supply chain is critical to ensure that this constant refreshment of store level collections goes off smoothly and efficiently characteristics of Zara’s supply chain that highlight the reasons behind its success: Frequency of customer insights collection: Trend information flows daily into a database at head office, which is used by designers to create new lines and modify existing ones. Standardization of product information: Zara warehouses have standardised product information with common definitions, allowing quick and accurate preparation of designs with clear manufacturing instructions. Product information and inventory management: By effectively managing thousands of fabric, trim and design specifications and their physical inventory, Zara is capable of designing a garment with available stock of required raw materials. Distribution management: Zara’s state-of-the-art distribution facility functions with minimal human intervention. Optical reading devices sort out and distribute more than 60,000 items of clothing an hour.  MERCHANDISE MANAGEMENT The retailer makes a decision in line with their positioning, image, pricing and other important factors on the types of items to select and carry in their stores in order to ensure that the needs of the target market are met and the store makes a profit. sourc e sourc e  MERCHANDISING Getting the right goods in the right sizes and colours, at the right price, at the right location and at the right time, for the righ consumers. In addition, the right time and the right quantity of merchandise must be right for the retailer and the customer.  MERCHANDISING The Right product: Customers' first impression of a product is influenced by its visual appeal. A combination of aesthetic and functional features determines the right product. Customer needs must determine the merchandise range and wants, making it essential to pay attention to trends. The Right place: The right location attracts customers and enables the retailer to be profitable. It is crucial as it speaks to merchandise accessibility. The right place als refers to placing products in-store (physical a online). The Right time: Products must always be available when customers need them. For  MERCHANDISING The Right quantities: Retailers should balance inventory and sales volumes well. This avoids overstocking and ensures that products are alway available for customers. More importantly, retaile should ensure that products match customers' purchasing needs. The Right price: The right price means that customers derive value from the products purchased. Product prices must meet customer expectations and remain competitive, and retaile must ensure that they are still profitable, regardle of high or low pricing. The Right manner: Visual merchandising drives the customer experience. Therefore, it is vital to communicate a product’s appeal to the right customer. It is essential to note that the 6 Rs should conside COMPONENTS OF MERCHANDISE MANAGEMENT Analysis: Analysing the target market so that customers are identified and understood. Planning: Buyers purchase merchandise well in advance of the intended season. They can then decide what will sell in the future. Factors which must be considered are trends and the target market’s buying pattern. Acquisition: Retailers must purchase the merchandise that they are going to sell to their target market. Involves a lot of research, travel and negotiation with potential vendors. COMPONENTS OF MERCHANDISE MANAGEMENT Handling: This means making sure that the logistics are in place for getting merchandise to where it is required, in the right condition. Control: Many buyers and planners are responsible for millions of Rand’s worth of budget. It is an enormous responsibility and one that they have to answer to in terms of how well the money is spent and whether acceptable profits are made.  MERCHANDISE TEAM Merchan Assistant dise Buyer Planner Buyer Manager Responsi Expected Works Assists ble for to reach hand in the merchan goals hand buyer. dise related to with the Provides choices. sales and buyer. operation Oversees profitabili al strategy. ty. Responsi support. Manages ble for Generate buyers Responsi planning s reports. Ensures ble for and Restockin that all purchasin control of g strategie g the merchan s meet merchan product dise. financial dise. range. objective Manages s. the budget allocated  MERCHANDISE PHILOSOPHY The merchandise team is guided by the retailer’s merchandise philosophy when deciding which products to stock. Describes the selected target market, and their needs and desires. Outlines how the merchandise team hopes to satisfy the target market in terms of positioning, image, pricing and any other important factors with respect to the competition and the retailer’s format. MERCHANDISE PHILOSOPHY Woolworths: we are focused on providing our customers with consistent superior quality, flavour, safe, and innovative food at great value. Deliver great value, balancing price with quality, innovation, and sustainability attributes Shoprite: affordable and accessible, Shoprite caters to the mass middle income market by providing its lowest prices on basic goods, including groceries and household products. MrP: targeting a wide range of customers in the mid to upper LSM categories Retailing own-branded merchandise Every Day Low Prices  PLANNING THE MERCHANDISE RANGE  A product range is made up of a number of different products and is expressed in terms of width and depth.  Various terms are used when planning merchandise strategy for a retail store, namely: Variety Assortment Stock-keeping unit Category.  VARIETY Variety - the number of different types of product line offered to the customer and also known as breadth of the merchandise A product line is a group of products that have similar functions, can be substituted for each other and/or complement each other The number of product lines are described in terms of width, and can Hair care be wide or narrowSkin care Shampoo, hair gel, Facial products, body Variety conditioner,is expressed hair food, in terms products, of hand products moisturiser breadth.  ASSORTMENT Assortment: The number of choices offered within a specific type of product. Described in terms of depth: Choices could vary in terms of price points, colours, sizes or brands. A shallow assortment would mean that the store has a limited number of items from which to choose; whereas a deep assortment means that there would be a large number of items to select from. It is expensive to offer both wide variety and deep assortment. I.e. Zara – clothing, accessories, shoes, swimwear, beauty, and perfumes.  STOCK KEEPING UNIT Also known as a SKU A single item of merchandise which is described in detail to differentiate it from other SKUs For example Kelso ladies T-shirt, cap- sleeves, v-neck, red, size 12 Can be described in terms of colour, size, brand, flavour and any other factors which might make a specific product different to another within its range.  CATEGORY Describes a group of merchandise items that either substitute or complement each other A customer would be happy to find all the options that they would be interested in located close together A retailer’s merchandise assortment is usually described in terms of the number of categories that the retailer has on offer. I.e. Food or non-food Office equipment, stationery, ladies; fashion, sportswear DIFFERENT TYPES OF MERCHANDISE Convenience goods: products that consumers are already familiar with, and expect to purchase without too much effort. I.e. Everyday home grocery items. Impulse goods: products are purchased on impulse. I.e. chocolate, gum, sweets, crisps. Shopping products: products that customers ‘shop’ for. Customers normally compare a number of alternative brands before making a final decision. I.e. homeware stores such as @home, Mr Home, Zara Home.  BRANDS AND BRANDING Retailers have a number of options when it comes to deciding what type of brand they will stock in order to satisfy their target market. The three main brand types are: National brands aka manufacturer brands sourc e Private label brands aka store/house brands sourc sourc e e Generic brands – branded free.  Advantages Disadvantages National Can contribute Retailers don’t brand towards good store enjoy taking image instructions from Promotional costs manufacturers are less as the Competition can manufacturer does be intense the promoting Store loyalty can Increased store decrease if the traffic if the brand brand is available is well-known at many stores You can return Prices can be problematic compared from products to the store to store manufacturer. Less profit as prices are higher. Private Can only be No excuses for poor label brand purchased from the products retailer that owns The retailer needs the brand to conduct his or Promotional costs her own promotions can be less, as the Returns are the store is the brand retailer’s problem Increased Difficult to find a  NEXT CHAPTER Discuss the importance of Design and Layout