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RMG 200 (57)
Brent Barr (19)


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Retail Management
RMG 200
Brent Barr

ANALYZING MERCHANDISE PERFORMANCE A. ABC Analysis – Evaluating the Assortment Plan and Vendors - ABC analysis: an analysis that rank orders SKUs by a profitability measure to determine which items should never be out of stock, which should be allowed to be out of stock occasionally ad which should be deleted from the stock selection - This principle suggests that retailers should concentrate on products that provide the biggest return - This rank order reveals the general 80-20 principle (80% of a retailer’s sales or profits come from 20% of the products) A items 5% of items and represent 70% of sales - Should never be out of stock - Can be expensive to carry because they generally require high levels of backup stock to buffer against variations in demand and lead time B items 10% of the SKUs and an additional 20% - Includes some of the other better selling colours and of sales patterned shirts - Occasionally it will run out of some SKUs in the B category because its not carrying the same amount of backup stock as for A items C items 65% of SKUs but contribute only 10% - Planner may plan to carry C items in only certain odd of sales sizes, with special orders used to solve out of stock conditions D items Remaining 20% of SKUs - No sales whatsoever during past season, having become out of date or shopworn - Markdown, give away or get rid of it Step 1 – Rank order SKUs using one or more criteria - Contribution Margin = Net Sales – Cost of Goods Sold – Other variable expenses o Variable expense sales commission - Other measures commonly used in ABC analysis are: o Sales dollars o Sales in units o Gross margin o GMROI - Sales or gross margin per square meter measure are also useful in ABC analyses Step 2 – Determine how items with different levels of profit or volume should be treated differently - The planner has defined the A,B,C, and D SKUs by rank ordering each SKU by sales volume and examining the distribution of those sales B. Sell Through Analysis - A comparison of actual and planned sales to determine whether early markdowns are required or whether more merchandise is needed to satisfy demand - The decision for determining when a markdown is necessary depends on experience with the merchandise in the past o Whether the merchandise is scheduled to be featured in advertising o Whether the vendor can reduce the buyer’s risk by providing markdown money - The need to make adjustments depends on variety of factors including experience with the merchandise in the past, plans for featuring the merchandise in advertising, and the availability of markdown money for evaluating vendors from vendors C. Multiattribute Model - A method for evaluating vendors that uses a weighted average score for each vendor, which is based on the importance of various issues and the vendor’s performance on those issues - Step 1: Develop a list of issues to consider in the decision – the list should be balanced to access several issues of vendor performance - Step 2: Include a ranking for each issue in column 1 – importance ranking should be determined by the buyer/planner in conjunction with the merchandise manager - Step 3: Make judgments about each individual brand’s performance on each issue – this should also be joint decision between the category and merchandise managers - Step 4: Evaluate the overall performance score of each vendor by combining the importance ranking and performance scores of the vendor. - Step 5: Determine vendor’s overall rating, add the products for each brand for all of the issues. STRATEGIC ADVANTAGES GAINED THROUGH SUPPLY CHAIN MANAGEMENT - Supply chain management: the integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers - It is the retailer’s responsibility to guage customers’ wants and needs and work with the other members of the supply chain – wholesalers, manufacturers, transportation companies – to make sure the merchandise custoemres want is available when they want it - Manufacturers ship merchandise either to a distribution centre operated by a retailer, or they ship directly to stores Improved Product Availability - An efficient supply chain has two benefits for customers: o fewer stockouts o assortments of merchandise that customers want when and where they want them - these benefits translate into greater sales, higher inventory turns and lower markdowns for retailers THE FLOW OF INFORMATION A purchase will trigger a series of information messages throughout the system. (Eg. purchase of a pair of jeans) 1. The sales associate scans the UPX tag on the jeans. A sales receipt is created. 2. The purchase information is recorded in the POS terminal and sent to the buyer/planner. The buyer/planner uses this information to plan additional purchases and make markdown decisions. 3. The purchase information is typically aggregated by the retailer, and an order is created and sent ot the vendor using a system called electronic data interchange (EDI) 4. The buyer/planner communicates with the vendor regarding the purchase order for the merchandise. 5. The buyer/planner communicates with the distribution centre to coordinate deliveries from the vendor and to the stores, check inventory status. 6. Store managers also communicate with the distribution centre to coordinate deliveries and check inventory status. Data Warehousing - Data warehouse is the coordinated and periodic copying data from various sources, both inside and outside the enterprise, into an environment ready for analytical and informational processing - The information stored in the data warehouse is accessible on several dimensions and levels, depicted
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