Merchandising Planning Process

By Dr.U.Srinivasaraghavan

Steps in Merchandising Planning Process

Forcast sales

Buy Merchandise
Develop Assortment Plan Monitor & evaluate & make adjustments Develop inventory Level &Product availability

Plan for managing inventory

Allocate Merchandise For stores

Types of Merchandise planning process

Staple/Basic Merchandise consist of items that are in

continuous demand over an extended time period. Examples: paints, notebooks,

Fashion Merchandise A FAD

consists of items that are in demand for a relatively short period of time. New products are continually introduced into these categories, making the existing products obsolete. Examples: high-end womens apparel, laptops. is a merchandise category that generates a lot of sales for a relatively short time, often less than a season.Example: some electronic games

General Features of Staple Merchandise Categories

Relatively easy to forcast demand and the consequences of making mistakes in forcasting are not great Predictability of demand makes it easy to plan for continuous replenishments Generating orders for inventory replacement can be automatic when the inventory falls below a predetermined level

General Features of Fashion Merchandise Categories

Forecasting of sales is much more complex Buyers for fashion category have much less flexibility in correcting forecasting errors. The attempt is to be as close to out of stock as possible at the same time that the SKUs become out of fashion Seasonal Merchandise categories are treated more or less similar to the fashion merchandise and they consist of items whose sales fluctuate dramatically depending on the time of the year

Category Life Cycle

maturity

Total

retail
sales

growth

decline

introduction

Time

Comparison of Category life cycles -fad, fashion, staple Fad

Sales over many seasons Sales of a specific style over many seasons Dramatic variation of sales from season to next season

Fashion yes

Staple
yes

No
No

no
yes

yes
No

no

Questions that help buyers in distinguishing between a fad and a fashion

1.

Is it compatible with the life style of the consumer? Innovations that are consistent with the life style of the consumers are more enduring fashions. (Example) Denim Jeans Vs Leather Pants Does the innovation provide real benefits? (Example) Poultry and Fish based products VsMutton based specia;l dishes Is the innovation more compatible with other changes in the market place? (Example) Cell phones with more mobile , time conscious society Who is adopting?

3.

4.

Forecasting Staple Merchandise Categories

Extrapolating Historical data with necessary corrections using statistical methods like time series analysis etc

Forecasting Fashion Merchandise Categories

1.

2.

Previous sales data Personal awareness shop, converse, act,

notice

3. Fashion and trend services 4.Vendors 5. Market research

Assortment Plan

It is th list of SKUs that a merchandiser will offer in a retail category Variety is the number of different merchandising

categories offered and is often refered as the breadth

Assortment

or depth is the number of SKUs offered within a category

Determining the Variety & Assortments

1.

Firms Retail Strategy GMROI Physical characteristics of Store Complementary Merchandise

2.

3.

4.

Product Availability

It is the percentage of demand for a particular SKU that is satisfied. Also known as level of support. Higher the availability higher is the need for buffer /basic stock