Retail Marketing Management PDF

# Retail Marketing Management ## Merchandise Management **By:** Mr. Navin Raj Saroj, MBA (Marketing) To be successful, retailers must make competent decisions on what to buy, in what quantities, and at what time. The overall choice of merchandise sends a clear message to consumers about the compa...

# Retail Marketing Management ## Merchandise Management **By:** Mr. Navin Raj Saroj, MBA (Marketing) To be successful, retailers must make competent decisions on what to buy, in what quantities, and at what time. The overall choice of merchandise sends a clear message to consumers about the company they are purchasing from. The selection and presentation of merchandise enables a key source of difference for a store to differentiate itself from another. ## Merchandise The main objective of a store layout is to maximize the interface between customers and merchandise. This provides easy accessibility for customers to view the store's offerings. ## What is Merchandise Management? Merchandise Management focuses on planning and controlling a retailer’s inventories. The role has to balance the financial requirements of the company with a merchandise purchasing strategy. The complex role of merchandise management can be defined as: - The planning and implementation of the acquisition, handling and monitoring of merchandise categories for a retail organization. The outcome of merchandising is a set of "rights" achieved through the merchandising process. ## Merchandise Plan Consideration 1. Marketing Consideration 2. Merchandise Strategy Option 3. Type of Customer Base 4. Financial Consideration 5. Merchandise Assortment search ## Inventory Turnover - Net Sales/Average Inventory at Retail store - Cost of Merchandise Sold/ Average Inventory at cost - Units sold / Average inventory at retail store ## Methods of Planning and Calculating Inventory Levels - Beginning of Month Stock = Planned Monthly sales + Basic stock - Average stock for season = Total Planned sales for season / Estimated Inventory Turnover - Average Monthly Sales = Total Planned sales for season/ No. of Months ## Beginning of month @ retail = - Average stock for season + planned monthly sales + average monthly sales ## Week's supply Method = - Beginning of month stock (BOM) = Average sales × No. of weeks to be stocked - Average weekly sales = Estimated total sales for the period / Stock turnover rate for the period ## Stock-to-Sales Method - It is an approach to maintain a specific ratio of goods on hand to sales. - Stock to Sales ratios can be calculated from a retailer's own historical results or from external sources as long as they are reliable. - **Shrinkage:** Is the difference between the amount of merchandise reported on the inventory stock system and what is available for sale or on the shelves. - **Markdowns:** Are lowering of the prices of the merchandise so that the reduction (markdown) acts as a promotion. Examples are special sales periods, moving sluggish lines, damage or soiling, end of range offers, or price competition from competitors or manufacturers who may have made adjustments to their prices. - **Employee Discounts**: Reduction and offer value to the employee working at the store. ## Role of Merchandiser The merchandiser is responsible for planning and controlling operational activity. The Merchandiser is responsible for planning and controlling stock ranges and replenishment. Successful execution of the role will require close liaison and support for smooth supply for the retail buyer. ## Planning Includes - Understanding the target market groups - Agreeing regional and branch sales forecasts - Collecting information on competitors and any new branch plans - Taking into consideration branding and corporate policy - Agreeing merchandise budget - Liaison and initial discussion with buyer(s). ## Managing variations in demand The merchandiser, as part of the above planning approach, needs to contend with the extent to which demand for product lines fluctuates. The merchandiser has to have intimate knowledge of customers and the type of demand for the product being sold. - The Fashion Product - Staple Merchandise - Seasonal Merchandise ## Category Management Category management is related to decision-making over groups of products that are selected and placed to satisfy use occasions or consumption patterns. This is based upon strategic retailing principles that attempt to maximize sales and profits and may also include trade patterns. Unsold merchandise at the end of a trading day represents a lost opportunity. The category offering must be managed to maximize sales and profits. This relies on creating ranging and merchandising, pricing, new product introductions, and promotions which are based upon the approach to marketing focused upon the consumer. ## Category Management Category management would be relatively straightforward if sales volumes remained constant over time, but they do not. Retailers need to plan fulfillment for promotions to meet customer expectations efficiently. Karona (1998) indicated that category management is now about creating closer relationships between suppliers and retailers. ## Challenges faced by Retailers - Product development and sourcing - Supplier management - Buying - Merchandising - Distribution - Retail operations ## Range Planning ### Width and Depth A retailer's stock range can be described in terms of width and depth with the extent of each determined by company policy. - **Width:** Relates to the number of categories. - **Depth:** Relates to the sizes, styles, and prices within a product class. ## Developing the range planning and merchandise allocation plan - Understand the selection process of consumers - Deciding upon core and seasonal merchandise - Agreeing the range - e.g. style, size, and color mix - depth and width - Taking into consideration the sales-to-stock level targets - Relating the range plans to individual stores and possible promotional plans ## Range Planning (Cont.) ### Store grading Store grading is normally conducted on the basis of floor sales area. - **Narrow and Deep:** A tall, narrow rectangle shape - **Can be Modified in available space:** This shape can be altered to fit the amount of space available. - **Square:** A square shape. - **Broad and Shallow:** A wide, short rectangle shape. ## Range Planning (Cont.) - **Space Allocation** - **Fixture Layout** - **In store Layout** The layout of the store has to be strategically designed to make effective use of merchandise and passage to draw customer attention to the store's offerings. Examples are home lien items, electronic items, mobile zones, furniture, men's ladies and kids wear, footwear, and toys. ## Basis of Retail Merchandising - **Product and merchandising management** is key activity in the management of retail business. - The primary function of retailing is to **sell merchandise.** - **One of the most strategic aspects of the retail business** is to decide the merchandise mix and quantity to be purchased. - Merchandising can be termed as the **planning, buying, and selling of merchandising.** ## Retail Merchandise Management - **The analysis, planning, acquisition, handling, and control of merchandise investments of a retail operation.** - **Analysis:** Retailers must be able to correctly identify their customers before they can ascertain consumer desires and needs/requirements for making a good buying decision. - **Planning** is important because merchandise to be sold in the future must be bought now. - **Acquisitions** because the merchandise needs to be procured from others, either distributors or manufacturers. - **Handling** involves seeing that the merchandise is where it is needed and in the proper condition to be sold. - **Control** is required since the function of merchandise involves spending money for acquiring products. It is necessary to control the amount of money spent on buying. - **The planning involved in marketing the right merchandise at the right place at the right time in the right quantities at the right price.** ## Merchandising Management System - **Retail Logistic** - **Buying** - Merchandise Buying - Ordering - Handling - **Distribution into store** - **Hand of the consumer** ## Merchandise Buying - Merchandise Buying - Identify sources of supply - Contact sources of supply - Evaluate sources of supply - Negotiate with sources of supply ## 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 - **Gross margin Return on Inventory (GMROI)** - **Inventory Turnover** - **Basic Stock Method** - **Percentage Variation Method** - **Weeks' supply Method** - **Stock to Sales Method** ## Methods of Merchandise Planning: Gross margin Return on Inventory (GMROI) *GMROI = Gross Margin Percent x sales to stock ratio* *= (gross margin/net sales )x (net sales/average inventory at cost)* *= gross margin/average inventory at cost* ## Methods of Merchandise Planning: Inventory Turnover - Inventory turnover = Net Sales/Average inventory at retail - Inventory turnover = Cost of goods sold/Average inventory at cost - Average inventory = Month1 + Month2 + Month 3 +.../Number of months ## Methods of Merchandise Planning: Basic Stock Method - Average monthly sales for the season = Total planned sales for the season/Number of months in the season - Average stock for the season = Total planned sales for the season/Estimated inventory turnover rate for the season - Basic stock = Average stock for the season - Average monthly sales for the season - Beginning-of-Month (BOM) = Basic stock + Planned monthly sales ## Methods of Merchandise Planning: Percentage variation method (PVM) The (PVM) can be calculated as follows: *BOM stock =Average stock for season X 1/2[1 + (Planned sales for the month/Average monthly sales)]* ## Methods of Merchandise Planning: Weeks' supply method (WSM): - Number of weeks to be stocked = Number of weeks in the period/Stock turnover rate for the period - Average weekly sales = Estimated total sales for the period/Number of weeks in the period - BOM stock = Average weekly sales X Number of weeks to be stocked ## Methods of Merchandise Planning: Stock-to-sales method (SSM) Average BOM stock-to-sales ratio for the season = Number of months in the season/Desired inventory turnover rate ## Determinants of Merchandise Mix - Breadth - Depth - Constraints - Finances - Space - Turnover - Market ## 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 - Stocking of merchandise can be at store or at warehouse - In either case, the receiving function must inspect, verify, and log in deliveries and compare to the vendor invoice - Price marking of product must be performed, if required ## Visual merchandising - Can be termed as the orderly, systematic, logical, and intelligent way of putting stock on the floor. - VM is the art of presentation, which puts the merchandise in focus. It educates the customers, creates desire, and finally augments the selling process. ## Questions ## Thank you