Merchandise Planning
🞂 It can be defined as the planning and control of the
merchandise inventory of the retail firm, in a manner
which balances the expectations of the target customers
and the strategy of the firm.
🞂 It benefits the retailer in the following ways :-
🞂 Right assortment of goods
🞂 Adequate depth
🞂 Available at the store when needed
The Process of Merchandising Planning
🞂 Planning is multi-dimensional
🞂 1st dimension – Time span
🞂 2nd dimension – Locational level
🞂 3rd dimension – Merchandise hierarchy level
The Process of Merchandising Planning
🞂 I Developing the Sales Forecast
a) Review past sales
b) Analyzing the changes in the Economic Conditions
c) Analyzing the changes in the sales potential
d) Analyzing the changes in the marketing strategies of the
retail organization and the competition
e) Creating the sales forecast
The Process of Merchandising Planning
🞂 II. Determining the Merchandise required
🞂 Planning in merchandising is at two levels :-
🞂 The creation of the Merchandise budget
🞂 The Assortment Plan
🞂 There are two methods of developing a merchandise plan
🞂 Top down planning
🞂 Bottom up planning
The Process of Merchandising Planning
🞂 II. Determining the Merchandise required
🞂 The merchandise budget comprises of five parts:-
Stock Planned
Sales Plan
support plan reductions
Planned
Gross
purchase
margins
levels
The Process of Merchandising Planning
🞂 II. Determining the Merchandise required
🞂 The assortment plan details the merchandise that will be
sold in each product category.
The Process of Merchandising Planning
🞂 III Merchandise Control – The open to buy (OTB)
🞂 Good inventory control is critical to ensure adequate level
of stock, for the amount of sales being generated.
🞂 Open to buy ensures that the buyer:
🞂 Limits overbuying and underbuying
🞂 Prevent loss of sales due to unavailability of the required
stock
🞂 Maintains purchases within the budgeted limits
The Process of Merchandising Planning
🞂 III Merchandise Control – The open to buy (OTB)
🞂 OTB can be calculated in either units or dollars.
🞂 It is the difference between how much inventory is needed
and how much is actually available.
🞂 Open-to-Buy Formula
🞂 Planned Sales + Planned Markdowns + Planned end of
month Inventory – Planned beginning of Month Inventory
The Process of Merchandising Planning
🞂 IV Assortment Planning
🞂 It involves the quantities of each product that will be
purchased to fit into the overall merchandise plan.
🞂 It includes the type of brands stocked and the level of
exclusivity to be maintained
Buying Merchandise / Merchandise
Procurement
🞂 A key decision to be taken by a buyer is to determine
where he has to buy the merchandise from.
🞂 Determining the source of who would supply the products
to the retailer, in the quantities needed by the retailer, as
per the requirements of the retailer, is an integral part of
the retail function.
Merchandise Sourcing
🞂 Sourcing means finding or seeking out products from
different places, manufacturers or suppliers.
🞂 A decision has to made whether the merchandise should
be sourced from domestic, regional or international
markets
Process of merchandise buying
Identifying the sources of supply
Contacting and evaluating the sources of
supply
Negotiating with the sources of supply
Establishing vendor relations
Analysing vendor performance
Branding options available to the
retailers
🞂 Branding is important in retail to influence customer
perceptions and drive store choice and loyalty.
Private Labels
🞂 When the retailer sells products or a line of merchandise
which is owned, controlled merchandised and sold by the
retailer, it is an own label or private label.
🞂 The label can be the store’s own name or name created
exclusively for the store.
🞂 A private label can be classified as:-
🞂 Store Brand – Big Bazaar
🞂 Umbrella brand – Bare (Pantaloons)
🞂 Individual brands
Need for a Private Label
Identificatio
n of need
gap
Unique
Increased
merchandis
margins Need e
for a
private
label
Changing
Customer
consumer
loyalty
habits
International Sourcing Decisions
🞂 Sourcing not only from local market but also from global
markets is the order of the day.
🞂 The integration and coordination of procurement
requirements across worldwide business units, looking at
common items, processes, technology and suppliers.
Pricing Strategy
🞂 The pricing strategy adopted by the retailer can be of the
following types:
Cost
Oriented
Demand
Oriente
d
Competition
Oriented
Pricing Strategy
🞂 Cost oriented
🞂 Retail price = Cost + Mark up
🞂 If the formula is rearranged, we get
🞂 Mark up = Retail price – Cost
🞂 Mark up should cover operating expenses such as
transportation etc.
Pricing Strategy
🞂 Demand oriented pricing
🞂 It focuses on the quantities that the customers buys at
various prices.
🞂 It largely depends on the perceived value attached to the
product.
🞂 Competition oriented pricing
🞂 The price adopted by the competitor plays a key role.
🞂 The retailer may price the product on par, above or below
the competitor’s price.
Pricing Strategy
🞂 Pricing strategy includes:
🞂 1. Market Skimming
🞂 Charge high prices initially, then reduce them gradually, if
required.
🞂 Inelasticity of demand for the product
🞂 Benefits from high short term profits and effective market
segment.
🞂 Prestige or luxury items
🞂
Pricing Strategy
🞂 2. Market Penetration
🞂 Capture large market share by charging low prices
🞂 Demand is price sensitive
🞂 3. Price Bundling
🞂 It is a form of pricing, where various products are bundled
together and sold as one unit.
🞂 Happy price menu
Pricing Strategy
🞂 4. Leader Pricing
🞂 The retailer sells one or a few products at a deep discount
to increase traffic and sales on complementary items.
🞂 5. Multi – Unit Pricing
🞂 The retailer offers discounts to customers who buy in
quantity.
🞂 For example, one t-shirt being offered for Rs.255 and two
t-shirts for Rs.355
🞂 It helps move slow moving products.
Pricing Strategy
🞂 6. Every day low pricing (EDLP)
🞂 It is adopted by retailers who continually price their
product lower than other retailers in the same area.
🞂 Walmart and Toys R Us
🞂 Retailer assumes that consumers are attracted by low
priced products rather than marketing initiatives.
🞂 7. Odd Pricing
🞂 Prices are set in odd numbers.
🞂 Rs. 199, Rs. 299
🞂 Odd pricing is used to denote lower sales price
Pricing Strategy
🞂 8. Single Pricing
🞂 Charges the same price for the same product under similar
conditions.
🞂 Dollar Shop
🞂 9. Multiple Pricing
🞂 The customer is given discount for making bulk purchases
🞂 One can of soft drink may cost Rs.15, whereas 3 cans cost
Rs. 40
🞂
Pricing Strategy
🞂 10. Variable pricing
🞂 Pricing of goods or services at different levels for different
customers at different times.
🞂 This type of pricing is common among street vendors,
antique dealers, and other small, independently owned
businesses but is not practical for direct marketers, who
rely upon preprinted promotion forms.
🞂 Variable pricing risks the loss of customer goodwill when
one customer discovers another paid less.
Adjustments to Retail Pricing
🞂 Adjustment in retail price needs to be done in order to
meet the market conditions.
🞂 Adjustments to retail price can be done by the way of
markdowns or by the way of promotion.
🞂 Markdowns are a permanent reduction in price.
🞂 Timely markdowns help to improve profitability, increase
turnover and increase profits.
🞂
Adjustments to Retail Pricing
🞂 Promotions are temporary reductions in the price used to
generate additional sales during peak selling periods.
Coupons
🞂 It entitles the holder to a reduced price on the actual
purchase price of the product or service.
🞂 Coupons are digital or printed
🞂 They induce customers to try the product for the first time.
🞂 The key objective with a coupon promotion is to
maximise the redemption rate.
Useful Links…
🞂 https://www.coursera.org/lecture/fashion-retail-transforma
tion/merchandise-planning-j5Ao9
🞂 https://www.youtube.com/watch?v=1qZ50PQPKlo
