Merchandise Management: Buying and Handling The Merchandise Mix

Merchandise Management:
Buying and Handling the

Merchandise Mix
Chapter 9
Goals for Chapter 9
Goals for Chapter 9
 Describe a Merchandise
Logistic System
Goals for Chapter 9
Logistic System
 Discuss Merchandise
Buying Process
Goals for Chapter 9
Logistic System
Buying Process
Ordering Process
Goals for Chapter 9
Logistic System
Buying Process
Ordering Process
Handling Process
Goals for Chapter 9
Logistic System
Buying Process
Ordering Process
Handling Process
 Examine 21 Common
Buying Errors
Retail Logistics
Retail Logistics
 “The process of managing the
integrated flow of merchandise
from buying, through
distribution, into the retail
store, and ultimately into the
hands of the consumer”
Retail Logistics
 Consists of three subsystems
Retail Logistics
Merchandise Buying
Retail Logistics
Merchandise Buying
Merchandise Ordering
Retail Logistics
Merchandise Buying
Merchandise Handling
Merchandise Buying
Merchandise Buying
 Four step process
Merchandise Buying
 Identify sources of
supply
Merchandise Buying
supply
 Contact sources of
supply
Merchandise Buying
supply
supply
 Evaluate sources of
supply
Merchandise Buying
supply
supply
 Evaluate sources of
supply
 Negotiate with sources
of supply
Buying Process
Buying Process
 Some considerations:
Buying Process

Manufacturer versus
Wholesaler as vendor
Buying Process

Manufacturer versus

Determine suitability of
product - quality, colors,
durability, etc.
Buying Process

Manufacturer versus

durability, etc.

Distribution - available,
order time, consistency, etc.
Buying Process

Manufacturer versus

durability, etc.


Price
Buying Process

Manufacturer versus

durability, etc.


Price

Promotional support
Buying Process

Manufacturer versus

Determine suitability of product
- quality, colors, durability, etc.

Distribution - available, order
time, consistency, etc.

Price

Promotional support

Service support
Methods of Merchandise
Planning
Planning
 Gross margin Return on
Inventory (GMROI)
Planning
Inventory (GMROI)
 Basic Stock Method
Planning
Inventory (GMROI)
 Percentage Variation
Method
Planning
Inventory (GMROI)
Method
 Weeks’ supply Method
Planning
Inventory (GMROI)
Method
 Weeks’ supply Method
 Stock to Sales Method
Determinants of
Merchandise Mix
Determinants of
Merchandise Mix
 Variety
Determinants of
Merchandise Mix
 Variety
 Breadth
Determinants of
Merchandise Mix
 Variety
 Breadth
 Depth
Determinants of
Merchandise Mix
 Variety
 Breadth
 Depth
 Constraints
Determinants of
Merchandise Mix
 Variety
 Breadth
 Depth
 Constraints

Finances
Determinants of
Merchandise Mix
 Variety
 Breadth
 Depth
 Constraints

Finances

Space
Determinants of
Merchandise Mix
 Variety
 Breadth
 Depth
 Constraints

Finances

Space

Turnover
Determinants of
Merchandise Mix
 Variety
 Breadth
 Depth
 Constraints

Finances

Space

Turnover

Market
Exhibit 9.1
Dimensions of and Constraints on Optimal
Merchandise Mix
Dollar Merchandise
Constraints
Optimal
Merchandise Mix
Space Variety Market
Constraints Constraints
Depth
Breath
Merchandise
Turnover Constraints
Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace & Company
All rights reserved.
Pricing by Vendors
Pricing by Vendors
 List prices (remember
Robinson-Patman)
Pricing by Vendors
Robinson-Patman)
 Trade Discounts
Pricing by Vendors
Robinson-Patman)
 Trade Discounts
 Quantity Discounts
Pricing by Vendors
Robinson-Patman)
 Trade Discounts
 Seasonal Discounts
(Deals)
Pricing by Vendors
Robinson-Patman)
 Trade Discounts
(Deals)
 Cash discounts
Pricing by Vendors
Robinson-Patman)
 Trade Discounts
(Deals)
 Cash discounts
 Promotional allowances
Pricing by Vendors
Robinson-Patman)
 Trade Discounts
(Deals)
 Cash discounts
 Promotional allowances
 Who pays the freight
 Traditional Purchase Order System
(often adversarial relationship)
 Quick Response System - uses
computer technology (partnership of
vendor and retailer)
 Electronic Data Interchange -
technology connecting retailer and
vendor in a quick response system
 Electronic Data Interchange -
technology connecting retailer and
vendor in a quick response system
 Just-in-Time Delivery Systems -
Reduces inventory requirements
 Quick Response System - uses computer
technology (partnership of vendor and
retailer)
 Electronic Data Interchange - technology
connecting retailer and vendor in a quick
response system
 Just-in-Time Delivery Systems - Reduces
inventory requirements
 Direct Store Delivery (DSD) - no
warehouse; vendor delivers directly to store
 Stocking of merchandise
can be at store or at
warehouse
warehouse
 In either case, receiving
function must inspect,
verify and log in
deliveries and compare to
vendor invoice
warehouse
 In either case, receiving
function must inspect,
verify and log in deliveries
and compare to vendor
invoice
 Price marking of product
must be performed, if
required
1. Failures to analyze previous year’s
merchandise results before going to
market or making purchases.
1. Failures to analyze previous year’s
merchandise results before going to
market or making purchases.
2. Failure to have kept records
from the previous year.
3. Determining only the quantity and
leaving the merchandise selection to
the vendor, especially size and color
selections.
3. Determining only the quantity and
leaving the merchandise selection to
the vendor, especially size and color
selections.
4. Using too many vendors.
5. Merchandise whose sizes and/or
colors were wrongly bought or in too
large quantity or were
wrongly delivered and prove to be
disproportionate to customer
demand at regular prices.
5. Merchandise whose sizes and/or
colors were wrongly bought or in too
large quantity or were
wrongly delivered and prove to be
disproportionate to customer
demand at regular prices.
6. Not helping out inexperienced
buyers.
7. Failure to know the selling season
for your market.
7. Failure to know the selling season
for your market.
8. Buying too many items

rather than just a few styles.
9. Buying too many hot, new
styles.
9. Buying too many hot, new
styles.
10. Failure to make small initial

purchases, that can be
followed up by reorders.
11. Failure to determine if buyer can
deliver on time the merchandise
ordered or accepting changes by
the manufacturer.
11. Failure to determine if buyer can
deliver on time the merchandise
ordered or accepting changes by
the manufacturer.
12. Buying too broad of a
product line.
13. Failure to cancel past due
orders.
13. Failure to cancel past due
orders.
14. Making the last re-order once too
often. The last may arrive just in
time to be marked down.
15. Failure to negotiate all possible
discounts from the vendor.
15. Failure to negotiate all possible
discounts from the vendor.
16. Failure to study the market
sufficiently so as to know the
best quality merchandise and
best price.
17. Failure to ask one of the following
questions: a. “Does your company
substitute ship?” b. “Does your company
backorder often?” c. “How long has your
company been in business?”.
17. Failure to ask one of the following
questions: a. “Does your company
substitute ship?” b. “Does your company
backorder often?” c. “How long has your
company been in business?”.
18. Failure to shop the competition so as not to
buy identical items.
19. Failure to talk with the central
office (where applicable) in
order to see what other
buyers services are offered.
19. Failure to talk with the central
office (where applicable) in
order to see what other
buyers services are offered.
20. Failure to buy enough merchandise,
resulting in lost sales volume.
21. Buying your personal preferences,
instead of the market’s
preferences.
CONFLICTS IN BUILDING A MODEL STOCK PLAN
Maintain Strong In-Stock Avoid the 90 Percent of Products

Position in Genuinely New Items That Will Fall During Introduction
Have Inventory Dollars to

Stock Basic Popular Items
Capitalize on Opportunities
Maintain Higher Turnover Goals Maintain High Margin Goals
Have Selection Don’t Confuse Customer
Utilize Space Don’t Congest Store

Summary
Summary
 Merchandise Management is
extremely important aspect of
Retail Operations Many consider
it the MOST important)
Summary
 Merchandise Management is
extremely important aspect of
Retail Operations Many consider
it the MOST important)
 Good merchandise management
does not guarantee success but
bad merchandise management
almost certainly will result in
failure

Merchandise Management: Buying and Handling The Merchandise Mix

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Merchandise Management: Buying and Handling The Merchandise Mix

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Merchandise Management:

Buying and Handling the

8. Buying too many items

10. Failure to make small initial

Maintain Strong In-Stock Avoid the 90 Percent of Products

Have Inventory Dollars to

Maintain Higher Turnover Goals Maintain High Margin Goals

Have Selection Don’t Confuse Customer

Utilize Space Don’t Congest Store

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