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RMG 200 Study Guide - Final Guide: Category Management, Sales Promotion, Customer Service

Retail Management
Course Code
RMG 200
Brent Barr
Study Guide

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- 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 company’s financial goals
- Assortment plan: list of merchandise that indicates in general terms what the retailer wants to carry in a particular
merchandise category
The Buying Organization
Merchandise Category The Planning Unit
- Merchandise category: an assortment of items that customers see as substitutes for one another
- Eg. girl’s apparel, boy’s apparel, infant’s 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 store’s
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 manager’s job easier and brings the promise of higher profit
Category Life Cycle
- Forecast: to estimate or calculate in advance; predict the future (short term sales)
Merchandise Group: (aka general merchandise managers,
GMM) a group within an organization managed by the senior
vice preseidents of merchandise and resposible for several
Department: A segment of a store with merchandise hat
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
merchandise, such as pants (as opposed to jackets or suits),
supplied by different vendors
Category: An assortment of items (SKUs) the customer sees as
reasonable substitutes for each other

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- Category life cycle: a merchandise category’s 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 retailer’s 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
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
particularly buyers of apparel categories can subscribe to that forecast the latest fashions,
colours, and styles
Vendors and Resident
Buying Offices
- Resident buying offices: an organization located in a major buying centre that provides
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

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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:
The amount of unit sales of an item obviously depends on the price at which it is offered
The degree and type of promotion are also critical in determining the unit sales of an item
Location can be large variations in demand depending on store location
The amount of shelf space afforded an item, as well as its location on the shelf, can have a large
impact on sales
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
- 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 retailer’s 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
of sales of Froot Loops
- Complementary products putting dogs on sales will also cause an increase in sales of hot dog
- Defining target market
- Establishing performance goals
- Deciding, on the basis of general trends in the marketplace, which merchandise classifications deserve more or less
- Merchandise plan: a plan used by buyers to determine how much money to spend in each month on a particular
fashion merchandise category, given the firm’s sales forecast, inventory turnover, and profit goals
- A list of SKUs that a retailer will offer in a merchandise category
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