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Retail Management
RMG 200
Brent Barr

CH 9: PLANNING MERCHANDISE ASSORTMENTS - Merchandise management: the process by which a retailer attempts to offer the right quantity of the right merchandise in the right place at the right time while meeting the companys financial goals - Assortment plan: list of merchandise that indicates in general terms what the retailer wants to carry in a particular merchandise category ORGANIZING THE BUYING PROCESS BY CATEGORIES The Buying Organization Merchandise Group: (aka general merchandise managers, GMM) a group within an organization managed by the senior vice preseidendepartmentsandise and resposible for several represents a group of classifications the consumer views as being complmentary. They are managed by divisional merchandise managers who report to the vice presidents Classification: A group of items or SKUs for the same type of merchandissupplied by different vendorsto jackets or suits), Category: An assortment of items (SKUs) the customer sees as reasonable substitutes for each other Merchandise Category The Planning Unit - Merchandise category: an assortment of items that customers see as substitutes for one another - Eg. girls apparel, boys apparel, infants apparel - Priced and promoted to appeal to similar target market Category Management - Category management: the process of managing retail business ith the objective of maximizing the sales and profits of a category - Two reasons for adopting category management: o It is ultimately responsible for the success or failure of a category because it is harder to identify the source of a problem and solve it without category management o It is easier to manage to maximize profit using category management. It can help ensure that the stores assortment is represented by the best combination of sizes and vendors, that is, the one that will get the most profit from the allocated space The Category Captain - Category captain: a supplier that forms an alliance with a retailer to help gain consumer insight, satisfy consumer needs, and improve the performance and profit potential across the entire category - Eg. Kraft has a lot of influence on grocery industry - A potential problem with establishing a category captain, is that vendors could take advantage of tier position - Appointing category captain makes the category managers job easier and brings the promise of higher profit SALES FORECASTING Category Life Cycle - Forecast: to estimate or calculate in advance; predict the future (short term sales) - Category life cycle: a merchandise categorys sales pattern over time 1. Introduction 2. Growth 3. Maturity 4. Decline Variations on the Category Life Cycle - Fad: a merchandise category that generates a lot of sales for a relatively short time often less than a month o Illogical and unpredictable - Fashion is a category of merchandise that typically lasts several seasons and sales can vary dramatically from one season to the next - Questions that help buyers distinguish between fads and more enduring fashions are: o Is it compatible with a change in consumer? Innovations that are consistent with lifestyles will endure o Does the innovation provide real benefits? o Is the innovation compatible with other changes in the marketplace? o Who adopted the trend? - Staple merchandise: (aka basic merchandise) inventory that has continuous demand by customers over an extended period of time - Seasonal merchandise: inventory whose sales fluctuate dramatically according to the time of the year Developing a Sales Forecast Forecasting Staple Merchandise - Sales are relatively constant from year to year - Statistical techniques can be used to forecast future sales for each - Factors beyond the retailers control are the weather, general economic conditions, special promotions or new product introductions by competitors Forecasting Fashion Merchandise Categories - Challenging because some or all of the items in the category are new and different than units offered in previous years Previous Sales Volume - Even though fashion merchandise might be new each season, the basic merchandise in many categories is the same, so projecting past sales data can be generated Published Sources - Adjustments to sales trends are based on economic trends in the geographic area for which the forecast is developed - Eg. gross national product (GNP), interest rates, employment rates Customer Information - Obtained by measuring customer relations to merchandise through sales, by asking customers about the merchandise, or by observing customers and trend setters - Eg. customer chat rooms and blogs, look in their closets, attend sporting events and rock concerts, and visit hot spots around town like restaurant and night clubs To help buyers keep abreast of what Gen Y customers will want to buy are: A. Shop the retail stores, Web sites, and catalogues of competitors as customer would B. Converse with customers, sales clerks, and neighbours (ask them what their favourite brands are and why they are buying a shirt instead of a suit) C. Act like your customer. D. Notice, notice, notice. Become a cultural sleuth by noticing the things that make you uncomfortable or seem strange and different Fashion and Trend - Services such as Trendzine, Doneger Creative Services and Fashion Snoops that buyers Services particularly buyers of apparel categories can subscribe to that forecast the latest fashions, colours, and styles Vendors and Resident - Resident buying offices: an organization located in a major buying centre that provides Buying Offices services to help retailers buy merchandise - Information from vendors about their plans and market research about merchandise categories is very useful to buyers as they develop category sales forecasts Market Research - Information on how customers will react to customers about the merchandise and measuring customer reactions to merchandise through sales tests - Retailers need to have systematic way to collect information and relay it to the appropriate buyers - Want books: information collected by retail salespeople to record out of stock or requested merchandise (similar to want slip) - Depth interview: an unstructured personal interview in which the interviewer uses extensive probing to get individual respondents to talk in detail about a subject - Focus group: a marketing research technique in which a small group of respondents is interviewed by a moderator using a loosely structured format Sales Forecasting for Service Retailers - Service retailers face a more extreme problem than fashion retailers because their offering perishes at the end of the day, not at the end of the season - Service retailers attempt to match supply and demand by: o Taking reservations or appointments o Selling advanced tickets Store Level Forecasting To predict store level demand, forecasting systems need to be able to measure simultaneously the impacts of any factors on unit sales, which includes: Price The amount of unit sales of an item obviously depends on the price at which it is offered Promotion The degree and type of promotion are also critical in determining the unit sales of an item Store Location can be large variations in demand depending on store location Product The amount of shelf space afforded an item, as well as its location on the shelf, can have a large Placement impact on sales Seasonality Some categories eg. apparel are highly seasonal in nature Other Factors - Product life cycle knowledge of whether product demand is growing, stable, or in decline is important - Product availability the degree to which the merchandise is, or is not, on the shelves ready for sale impact sales - Competitor price and promotional activity these also affect a retailers sales - Business cycles sales may be higher at the beginning of the month due to payroll cycles; also, sales are higher on weekends than weekdays - Weather late or early arrival of hot or cold weather can have a significant impact on sales of seasonal items - Unusual events a new highways, unexpected store, natural disasters - Cannibalization decreasing price of Apple Jacks would increase sales but perhaps deteriment
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