ch9_merch_buying_handling_S2011

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Unformatted text preview: Chap
9
–
Merchandise
Buying
&
Handling
 Major
Func+ons
in
Merchandise
Planning
 Vendor
 Nego+a+on
 Vendor
 Contract
 PO
&
SKU
 Crea+on
 Visual
 Merchandising
 Receipt
 Sales
Floor
 Loca+on
 Replenishment
 SKU
Review
 Markdowns
 Considera+ons
in
Devising
Merchandise
Plans
 Financial
Merchandise
Management
 A retailer decides what, when, and how many products are purchased  DOLLAR
CONTROL

involves
 planning
and
monitoring
a
 retailer’s
financial
investment
in

a
 group
of
related
merchandise
over
 a
stated
period
  UNIT
CONTROL

relates
to
the
 quan++es
of
individual
SKUs
of
 merchandise
a
retailer
handles
 during
a
stated
period
 Dollar
Merchandise
Planning
 •  Basic
Stock
Method
 •  Weeks’
Supply
Method
 •  Stock‐to‐Sales
Method
 Gross
Margin
Return
on
Investment
 •  Ques+on
–
how
do
you
measure
how
much
 gross
margin
a
category
is
genera+ng
and
how
 oQen
is
it
turning?
 Answer
–
this
is

 what
GMROI
 measures.
 How
to
Calculate
GMROI:
 Total
Gross
Margin
$
For
a
Period
 
Avg
Inventory
for
the
Period
 Inventory
 Turnover
 $
 Where
 would
you
 LOW
TURN

 HIGH
TURN
 like
to
be?
 LOW
GM
 LOW
 GMROI
 AVERAGE
 GMROI
 HIGH
GM
 AVERAGE
 GMROI
 HIGH
 GMROI
 Basic
Stock
Method
 “Ski
&
Skate
Shack”
 Inventory
 Level
$
 BASIC
STOCK
 Jan



Feb



Mar



Apr



May



June



Jul




Aug



Sep



Oct




Nov



Dec
 Basic
Stock
Method
 “Ski
&
Skate
Shack”
 Inventory
 Level
$
 BASIC
STOCK
 Jan



Feb



Mar



Apr



May



June



Jul




Aug



Sep



Oct




Nov



Dec
 Percentage
Varia+on
Method
 Week’s
Supply
 Method
is
used
when
 inventories
are
 planned
on
a
weekly
 basis,
and
demand
 stays
relaSvely
steady
 throughout
the
 period.
 Weeks’
Supply
Method
 Weeks’
Supply
Method
 •  No.
of
weeks
stocked(“NWS”)
=
#
of
weeks
in
 period/turnover
rate
for
period
 •  Average
weekly
sales
(“AWS”)
=
Est
total
sales
 for
period
/
no.
of
weeks
in
period
 •  BOM
stock
=
AWS
X
NWS
 Stock‐to‐Sales
Method
 4
Quarter
Merchandise
Plan
 Planned: BOM Stock Q1 Q2 Q3 Q4 $225,000 $270,000 $180,000 $210,000 $75,000 $90,000 $60,000 $70,000 Markdowns $3,750 $7,200 $3,000 $3,500 EOM Stock $270,000 $180,000 $210,000 $200,000 Purchases @ Retail $123,750 $7,200 $93,000 $63,500 $74,250 $4,320 $55,800 $38,100 40% 40% 40% 40% $49,500 $2,880 $37,200 $25,400 3 3 3 3 5% 8% 5% 5% Sales Purchases @ Cost Initial Markup Gross Margin BOM Stock-to-Sales Markdown %age 4
Quarter
Merchandise
Plan
 Planned: BOM Stock Q1 Q2 Q3 Q4 $225,000 $270,000 $180,000 $210,000 $75,000 $90,000 $60,000 $70,000 Markdowns $3,750 $7,200 $3,000 $3,500 EOM Stock $270,000 $180,000 $210,000 $200,000 Purchases @ Retail $123,750 $7,200 $93,000 $63,500 $74,250 $4,320 $55,800 $38,100 40% 40% 40% 40% $49,500 $2,880 $37,200 $25,400 3 3 3 3 5% 8% 5% 5% Sales Purchases @ Cost Initial Markup Gross Margin BOM Stock-to-Sales Markdown %age OPEN‐TO‐BUY
 Inventory
Planning
 Variety
 Breadth
 Depth
 Inventory
Planning
 Variety
 (Merch
lines)
 Breadth
 (Brands)
 Depth
 (SKUs)

 BaVle
of
the
Brands
 Occurs
when
major
 brands
and
private
 label
brands
compete
 for
limited
shelf
&
floor
 space

the
retailer
 controls
who
wins.
 Constraining
Factors 

 “ 
You
can
please
ALL
 the
people
SOME
of
 the
+me,
or
SOME
of
 the
people
ALL
of
 the
+me
–
but
you
 can’t
please
ALL
of
 the
people
All
of
the
 +me.”
 ‐Abraham
Lincoln
 Constraining
Factors 

 “ 
You
can
buy
ALL
the
 merchandise
SOME
 of
the
+me,
or
SOME
 of
the
merchandise
 ALL
of
the
+me
–
but
 you
can’t
buy
ALL
of
 the
merchandise
All
 of
the
+me.”
 ‐Paris
Hilton
 Expert
Shopper
 Constraining
Factors 

 •  Dollar
merchandise
constraints
 –  consignment
&
extra
da+ng
 •  Space
constraints
 –  sloing
fees
&
fixture
design
 •  Merchandise
turnover
constraints
 –  stock
levels
vs.
turnover
 •  Market
constraints
 –  variety
>>
breadth
>>
depth
 Managing
the
Inventory
 Inventory
Planning
for
a
Basic
Stock
Item
 Inventory
 Planning
for
a
 Seasonal
Item
 Managing
Inventory
by
Item
Files
 QuesSon
:
What
level
of
detail
and
what
method
of
 classificaSon
should
a
retailer
use
to
keep
track
of
inventory
 at
the
SKU
–
brand
–
class
–
category
–
store
level?
 Sellers:

 Winners
vs.
 Losers
 Space:

 Balance
Space
 Use
vs.
 Conges+on
 Conflicts
 in
Stock
 Planning
 Choice:
 Need
Op+mum
 Level
of
 Selec+on
 Merch
Budget:

 Keep
OTB
 Available
 GMROI:
 Manage
Hi‐ Inventory
vs.
 High
GM
 Inventory
 Stockouts
 Inventory
 Carrying
 Costs
 Selec+ng
Merchandise
Sources
 A
Checklist

 of
Points

 to
Review

 in
Choosing
 Vendors
 Vendor
NegoSaSons
 Q:
How
Do
You
Nego+ate
Price?
 A:
Nego+ate
for
Discounts
 •  •  •  •  •  •  Trade
Chain
Discount
–
“40
–
20
–
10”
 Quan+ty
Discount
–
“By
the
Gross”
 Promo+onal
Discount
–
“Finals
Week
Specials”
 Seasonal
Discount
–
Halloween
costumes
 Cash
Discount
–
“2%
EOM
Net
60”
 An+cipa+on
Discount
–
“1%
10
Net
30”
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  Reliability
 •  •  •  •  •  •  •  •  Exclusive
Distribu+on
 Vendor
Support
 Ethics
 Guarantees
 Long
Term
Rela+onship
 Markup
Poten+al
 Innova+on
 Adver+sing
Support
 Delivery
/
Freight
Terms
–
Can
Be
1%
to
4%
of
Cost!
 •  Free
on
Board
–
Factory
(most
cost
&
risk)
 •  Free
on
Board
–
Shipping
Point
 •  Free
on
Board
–
Des+na+on
(least
cost
&
risk)
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  Reliability
 •  Exclusive
or
SelecSve
DistribuSon
 •  •  •  •  •  •  •  Vendor
Support
 Ethics
 Guarantees
 Long
Term
Rela+onship
 Markup
Poten+al
 Innova+on
 Adver+sing
Support
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  Reliability
 •  Exclusive
Distribu+on
 •  Vendor
Support
 •  •  •  •  •  •  Ethics
 Guarantees
 Long
Term
Rela+onship
 Markup
Poten+al
 Innova+on
 Adver+sing
Support
 Many
Suppliers
Offer
“Jobbers”
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  Reliability
 •  Exclusive
Distribu+on
 •  Vendor
Support
 •  Ethics
 •  •  •  •  •  Guarantees
 Long
Term
Rela+onship
 Markup
Poten+al
 Innova+on
 Adver+sing
Support
 SWEATSHOPS
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  •  •  •  Reliability
 Exclusive
Distribu+on
 Vendor
Support
 Ethics
 •  Guarantees
 •  •  •  •  Long
Term
Rela+onship
 Markup
Poten+al
 Innova+on
 Adver+sing
Support
 Offering
Guarantees
 JANSPORT.
LifeSme
 guarantee.
Period.
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  •  •  •  •  Reliability
 Exclusive
Distribu+on
 Vendor
Support
 Ethics
 Guarantees
 •  Long
Term
RelaSonship
 •  Markup
Poten+al
 •  Innova+on
 •  Adver+sing
Support
 SF
State
Purple
–
10
Year
Contract
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  •  •  •  •  •  Reliability
 Exclusive
Distribu+on
 Vendor
Support
 Ethics
 Guarantees
 Long
Term
Rela+onship
 •  Markup
PotenSal
 •  Innova+on
 •  Adver+sing
Support
 The
Markups
Suck!!!
 3%
 5%
 4%
 Source:
Rob
Strong
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  •  •  •  •  •  •  Reliability
 Exclusive
Distribu+on
 Vendor
Support
 Ethics
 Guarantees
 Long
Term
Rela+onship
 Markup
Poten+al
 •  InnovaSon
 •  Adver+sing
Support
 A
Checklist
of
Criteria
on
Which
to
 Evaluate
Vendors
 •  •  •  •  •  •  •  •  Reliability
 Exclusive
Distribu+on
 Vendor
Support
 Ethics
 Guarantees
 Long
Term
Rela+onship
 Markup
Poten+al
 Innova+on
 •  AdverSsing
Support
 And,
of
Course
Merchandise
Quality!
 •  •  •  •  •  •  •  Reliability
 Exclusive
Distribu+on
 Vendor
Support
 Ethics
 Guarantees
 Long
Term
Rela+onship
 Markup
Poten+al
 •  Innova+on
 •  Adver+sing
Support
 Evalua+ng
Vendors
 What
Points
Can
a
Retailer
 Nego+ate
On?
   Price
   Billing
Terms
   Marke+ng
Coop
$$
   Freight
Terms
   Sales
Guarantee
   Consignment
   Jobbing
   Opportunis+c
buying
   Sloing
allowances
   Markdown
$$
 Price
 Quan+ty
Discount
 Trade
Discount
a.k.a.

 Func+onal
Discount
 •  “List
price
less
40%”

 •  “List
price
less
40%
‐
20%”
 •  “List
price
less
40%
‐
20%
‐
10%”
 Quan+ty
Discount
 Promo+onal
Discount
 Seasonal
 Discounts
 Cash
Discount
 Freight
Terms
 What
is
“FOB
Point”?
 “Free
on
board”
determines
where
merchandise
passes
 +tle
and
therefore
who
owns
it
where
in
the
supply
chain.
 FOB Order FOB Ship Point FOB Factory Destination or Retailer Determining
the
FOB
Point
 The
retailer
takes
Stle
either…

 …immediately
on
purchase
 …when
the
products
are
 loaded
onto
the
freight
 carrier
 …
when
a
shipment
is
 received
at
its
own
 receiving
dock
 …
at
the
end
of
a
billing
 cycle,
when
the
supplier
 is
paid
 Billing
Terms
  Net
30
(or
60
or
90
or…)
  2%
15
Net
30
  1%
10
Net
EOM
  1%
per
month
Net
November
1st
  COD
  An+cipa+on
Discount
 Guaranteed
Sales
 Consignment
 Packaging
 Opportunis+c
Buying
 Shelf‐Ready
Merchandise
&
 Jobbing
 Markdown
$$
 In‐Store
Merchandise
Handling
 Store
Security
Systems
 Store
Security
Systems
 Store
Security
Systems
 Where
Shrinkage
Comes
From:
 Shrinkage
 Employee
TheQ
 ShopliQing
 Bookkeeping
 4th
Qtr
 Most
Common
Methods
of
Employee
Theg
  Refund
fraud
  Concealment
  Personal
bags
  SweethearSng
  Credit
card
fraud
  Not
ringing
up
sale
 Methods
to
Deter
Employee
TheQ
   Zero
tolerance
policies
   Honesty
tests
in
screening
   Controls
on
trash
removal
   Camera
surveillance
   Undercover
personnel
   Minimum
entrances
/
exits
and
controlled
   SeparaSon
of
duSes
(e.g.
cashiering
&
deposits)
   Employee
rewards
(“snitch
programs”)
   Training
&
educaSon
   Swig
invesSgaSons
   Receiving
&
accounSng
separaSon
 Methods
to
Deter
Shopper
Theg
   Uniformed
guards
   Surveillance
cameras
   Electronic
arScle
surveillance
(EAS)
   Employee
training
   Staff
bonuses
for
low
shrinkage
   Inspect
all
packages
brought
into
store
   Check
bags
at
the
door
   Lockable
display
cases
   Lock
down
expensive
clothing
   Alternate
the
direcSon
of
hangers
on
clothing
near
doors
   Limit
the
number
of
entrances
and
exits
to
the
store,

   Limit
the
dollar
value
and
quanSty
of
merchandise
displayed
near
exits
   Prosecute
all
individuals
charged
with
theg
 More
Ways
To
Deter
TheQ
AQer
Hours
   Conduct
a
thorough
building
check
at
closing
 to
make
sure
no
one
is
leg
in
store
   USlize
ultrasonic/infrared
moSon
detectors,
 burglar
alarms,
or
guards
with
dogs
   Lock
down
cash
&
valuables
in
a
safe
   Install
shaVerproof
glass
and/or
iron
gates
on
 windows
and
doors
to
prevent
break‐ins
   Make
sure
exterior
lighSng
is
adequate
   Periodically
test
burglar
alarms
 ...
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This document was uploaded on 11/04/2011 for the course MKTG 436 at S.F. State.

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