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Understand Merchandise Planning in Retailing. The Merchandise Plan A budgeting tool that helps retailer or buyer to meet department goals ▫Planned sales.

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Presentation on theme: "Understand Merchandise Planning in Retailing. The Merchandise Plan A budgeting tool that helps retailer or buyer to meet department goals ▫Planned sales."— Presentation transcript:

1 Understand Merchandise Planning in Retailing

2 The Merchandise Plan A budgeting tool that helps retailer or buyer to meet department goals ▫Planned sales ▫Planned stock ▫Planned Reductions ▫Planned purchases

3 Merchandise and strategies for managing the merchandise mix Staple Goods ▫Goods that are constantly in demand Convenience Goods ▫Small, inexpensive goods that are purchased frequently Fashion Goods ▫Items that constantly change, popular at a certain time Seasonal Goods ▫Goods that are popular at certain times of the year

4 The Buyers Job Determines amount of money available for purchases Determines which merchandise to buy Determines best vendor to buy from Negotiates terms and discounts with vendors Determines when merchandise will arrive at store

5 Buying Activities Planning ▫Role of buyer: purchase goods for resale. ▫Best way to plan is through merchandise planning. ▫Merchandise planning include these four elements:  planned sales,  beginning of the month inventory  planned purchases  planned reductions.

6 Buying Activities (cont.) Researching ▫Research determines the best vendor ▫Factors to consider when selecting:  Production Capabilities  Past Experiences  Product and Buying Arrangements  Special Services  Discounts  Payment Arrangements

7 Determining available money Open-to-buy ▫Amount of money available to make purchases Planned purchases – (merchandise received + Merchandise Ordered) = Open-To-Buy

8 Determining What Customers Want Target Market Information ▫Know what merchandise those customers will buy Sales records ▫What has done well in the past Customer preferences Customer Requests ▫Want Slip  Informs buyer of a specific item that a customer wants but the retailer does not carry Shopping the competition ▫Visit competing stores to see what they are carrying

9 Vendor Selection Vendor ▫Company form which the buyer purchases merchandise Negotiating terms and discounts ▫Dating terms  When the bill for the merchandise has to be paid  2/10 net 30  If the buyer pays in ten days they get a 2% discount the bill must be paid in thirty days

10 Vendor Selection Shipping Terms ▫How the merchandise will get to the store and who will pay for the shipping FOB ▫Free on board ownership of merchandise in transit determines if freight charges are free Timing Merchandise Deliveries ▫Merchandise must arrive at exactly right time to be sold and make maximum profit

11 Types of Buying Centralized Buying ▫Used by large retail chains ▫Buying everything from one location Quantity discounts ▫Offered for large or bulk purchases Decentralized Buying ▫Buying decisions are made at the local store level

12 Using the marketing mix to make buying decisions Product ▫Determining what to buy and what to sell Place ▫Where to buy from Price ▫What the markup will be how much to pay for merchandise Promotion ▫Which products will sell the most and be easy to promote

13 Determining what to buy Internal sources ▫Store records ▫Management ▫Sales staff External sources ▫Customers ▫Magazines, trade journals and trade shows ▫Vendors ▫Trade associations ▫competitors

14 Merchandise Life cycle Introduction ▫Few sale, limited customers, availiable at few locations Growth ▫Customers begin to accept product, sales increase Acceptance ▫Greatest customer acceptance, highest sales Decline ▫Customers get tires of product, gets marked down

15 Pricing Merchandise Factors affecting selling price ▫Cost of merchandise ▫Expenses of getting it to the store ▫Share of retailers overhead expenses ▫Return on investment ▫Competition ▫supply and demand ▫Customer acceptance

16 Receiving Process RECEIVE Receive Merchandise from Carrier, Check PO/Invoice/Shipping Documents CHECK Match Invoice to the items shipped Check for any Missing or Damaged Items Quantity check Indirect check Quality check MARK Selling Price – label inventory with sales price Other Information – label inventory with any other information: Expiration Date, Materials, Tags, Sales,… MOVE To sales floor Display creation

17 Preparing Merchandise Unpacking Merchandise ▫Removing wrapping…duh Ticketing Merchandise ▫Putting price on merchandise Security Tags ▫Self explanatory Presentation ▫Hung, displayed, stocked

18 Checking Merchandise Blind Check Method ▫Most accurate, check every box Direct Check Method ▫Use the most, check off merchandise on invoice Dummy Invoice Method ▫Combo of Blind Check and Direct Check ▫Records merchandise received, check against invoice. Spot Check Method ▫Least amount of time, least accurate

19 Returns To Vendors Reasons For Returns ▫Received an item that was not ordered ▫Order was canceled after shipment ▫Excess of items shipped out ▫Late arrival of merchandise ▫Unsold merchandise returned for credit Procedures For Handling Returns ▫Varies from vendor to vendor ▫Once returned business will receive credit memorandum.

20 Inventory control Managing inventory levels to make sure there is enough to meet sales goals with out having too much ▫Physical inventory system  Retailers physically count merchandise in stock ▫Perpetual inventory system  Keep track of what is bought and sold on a daily basis using computers and point of sale terminals

21 Inventory Shrinkage ▫Differences between what’s in stock and what should be in stock. Causes Of Shrinkage ▫Theft ▫Employee errors Shrink Prevention ▫Educating employees ▫Planning ▫Security

22 Other Factors Return on Investment ▫Figure representing the profit of merchandise Cost-price=difference/expenses=ROI $5-$3.80=$1.20/$4.00=.30 or %30 Market Share ▫One retailers part of all the retailers sales ▫Figured for single product, group of merchandise, or the business as a whole

23 Markup and Markdown Markup ▫Difference between cost of merchandise and selling price ▫Factors affecting markup  Competition  Supply and demand  Customer acceptance Markdown ▫Reduction in original selling price ▫Reasons for markdown  Reduce inventory  Generate additional sales

24 Stock turnover The number of time the average inventory is sold during a time period, usually a year ▫Stock turnover in UNITS = number of units sold average number of units of stock on hand ▫Stock turnover in DOLLARS = dollar sales of units average dollar value of merchandise on hand

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