Buying and

Merchandising-II UNIT 9 RANGE PLANNING AND PRODUCT

DEVELOPMENT
Structure
9.0 Objectives
9.1 Introduction
9.2 Identification of Range Needs
9.3 Range Board
9.4 Study of Competitors
9.5 Market Information
9.6 Core and Fashion Ranges
9.7 Product Development versus Product Sourcing
9.8 Product Development
9.9 Let Us Sum Up
9.10 Key Words
9.11 Answers to Check Your Progress
9.12 Terminal Questions

9.0 OBJECTIVES
After studying this unit, you should be able to:
● explain the process of identification of range needs;
● discuss the meaning of the range board;
● explain how to study competition and collect market information;
● describe the core and fashion ranges;
● discuss the steps involved in product development;
● explain the advantages and disadvantages of the product development and
product sourcing.

9.1 INTRODUCTION
In Unit-8, while discussing ‘Unit Planning’ you have learnt about how the
merchandising team needs to look at the different characteristics of the product range
while finalizing quantities for the range for a given selling season. The characteristics
of a product are the important elements in the decision making of the consumers.
The consumers decide their choice for a particular SKU (stock keeping units) or unit
based on certain characteristics that satisfy his/her needs for a given product. Thus,
the merchandising team has a great task of understanding these important
characteristics for each of the products or categories that will determine the selection
by the consumers. Hence, based on these characteristics the buying and
merchandising team will have to select the right products or develop new ones.
146
These products will fully satisfy the consumer needs as well as take care of sales
 growth and profitability needs of the retailer. In this unit, you will learn about Range Planning and
Product Development
identification of range needs and range board. You will further learn how to study
about the competitors and gather market information. You will also learn about the
core and fashion ranges and the advantages and disadvantages of the new product
development and product sourcing processes.

9.2 IDENTIFICATION OF RANGE NEEDS

As we discussed it is important that the buying and merchandising team makes a right
selection of products or develop the right ones that meets the retailing goals. The
goals are decided by the management with respect to the given product category. For
making the right selection of the products or develop new ones the buyer needs to
work with a range planning framework. This will ensure the success of the whole
process. Let us try and understand the important features of the ‘Range planning
framework’. Look at Figure 9.1 which shows the range planning framework.

Styles Market
and Informat Range
Trends ion Boards

▲
▲

Identify
Sales Range Compe-
▲
▲

History Needs tition

Product
Develop- ▲
ment

Figure 9.1: Range Planning Framework

The product range is identified from the range which is already in existence either
with the retailer himself or with competitors catering to the same target consumer
group. The retailer identifies the products from its existing collection based on their
performance during the previous season. The decision for selecting the product range
is based on certain selection criteria. To understand the concept better let us take a
look at the analysis of sales of a Kid’s wear range as shown in Table 9.1.

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Buying and Table 9.1: Identification of Products for the Kids-wear Range
Merchandising-II
Product sub- Percent Percent Percent Percent Percent Percent
groups contribution contri- contri- contri- contri- contri-
In overall bution bution bution bution bution
sales
up-to Rs 301 Rs 501 to 701 Rs 1001
Rs 300 to 500 700 1000 1500
Tee Shirt 20.63 0.59 47.15 47.32 4.93 0.00
Vest 15.35 3.41 55.24 36.50 4.81 0.04
Skirts 12.64 0.00 4.14 25.61 67.95 2.30
Dress 11.3 0.00 6.94 17.84 29.82 45.40
Capris 8.28 0.00 0.49 16.77 75.86 6.88
Shirt 7.39 1.26 16.37 56.02 26.36 0.00
Leggings 6.25 26.21 73.61 0.19 0.00 0.00
Blouse 3.57 0.00 2.12 44.63 52.93 0.33
Jacket 2.97 0.00 0.00 23.29 71.82 4.89
Jeans 2.73 0.00 0.00 0.00 51.06 48.94
Shrug 2.17 0.00 0.00 62.03 37.97 0.00
Cargos 1.44 0.00 0.00 0.00 85.89 14.11
Tunic 1.29 0.00 12.61 38.74 48.65 0.00
Shorts 1.17 0.00 100.00 0.00 0.00 0.00
Hoodie 0.75 0.00 0.00 41.86 58.14 0.00
Dungaree 0.71 0.00 0.00 0.00 98.37 1.63
Skirt Set 0.49 0.00 0.00 0.00 16.47 83.53
Pants 0.36 0.00 0.00 100.00 0.00 0.00
Trousers 0.32 0.00 0.00 7.27 60.00 32.73
Track Set 0.09 0.00 0.00 0.00 93.75 6.25
Pinny 0.05 0.00 0.00 0.00 100.00 0.00
Poncho 0.01 0.00 0.00 0.00 100.00 0.00
Pullover 0.01 0.00 0.00 100.00 0.00 0.00
Sweater 0.01 0.00 0.00 0.00 100.00 0.00
Shirt-vest 0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

In Table 9.1 the Column 1 presents different product sub groups in the kids wear
range. Column 2 represents the contribution of each of the product sub-groups in the
overall kids wear range. Hence, from the above chart it will be clear for
understanding which products or sub-groups need to be taken into consideration for
identification of the range. First the buyer must put all the sales figures achieved in
the previous season and then convert these figures in to percentages as shown in
column 2. From column2 we can see that T-Shirt is the best-selling product group.
Hence, naturally this product sub group should be definitely included in the range. The
other product sub-groups that could be included in the range would be Vest, Skirts,
Dresses, capris, Shirt, and Leggings. All these products or sub-groups together
contribute 81.84 per cent to the total sales . So these are the sure-shot type of
products or sub-groups that must be there in the collection or range to be put on
display to the target consumers. Now, naturally there will be question about the
balance 18 per cent of the product range. The retailer or the buying and
merchandising team has the choice to either select the products from the rest of the
range shown in Table 9.1 based on certain selection criteria. For example if we
decide to take the products/sub- groups which have sales contribution of 2 per cent
and above. Then we can further select Blouse, Jacket, Jeans and Shrug in the range,
148 which would further add 11.44 per cent to the earlier product range selected. Thus,
with new additions the product range selected will represent 93.28 per cent of the Range Planning and
Product Development
total sales. The balance 7 per cent can be further distributed among the existing
range. This can be based on the importance the team would like to give to some
products/sub-groups. These products can be from the existing range depending on
the current fashion or buying trends or the strategic needs decided by the
management. The buying and merchandising team may decide to use this 7 per cent
for introducing totally different collection. This collection may not be part of the
earlier product range, say a ‘party wear’. So, we have seen how on the basis of past
sales trend the team could decide the product range it needs to present to the
customers/consumers.
Identifying Range based on Important Characteristics:
Suppose the team finds that besides the products or product sub-groups it needs to
take decision on another factor which is of vital importance. For example, on the
price range factor or material or design or colours or fits. Then the team would have
to organize their sales data based on the factors which are important in consumers’
choice making of the product. Say in the example we are discussing, if the buying and
merchandising team decides that price-range is an important factor in the decision
making of the consumer for final selection of the product. Within a given sub-group
then, the data will have to be organized in the manner it is done in Table 9.1 under
columns 3 to 7. For example, if we take Tee- shirt then we find that the price ranges
that contribute majorly to the sales of this product sub-group are Rs 301 to 500, Rs
501 to 700 and Rs 701 to 1000; which contribute 47.15%, 47.32% and 4.93%. Thus
we can see that these three price ranges contribute to about 99.4% of the overall sale
of Tee-shirt. The price ranges of up-to Rs 300 contribute only 0.57% to the total sales
of Tee-shirt. This could be because in the previous season the team were not able to
put in much range or collection in this price range. Hence, could not get any desirable
response; or the collection that it put in this price range did not suit the target
consumers or not in tune with the collection the team has put in other price range
brackets. The team has the option of either dropping this price bracket for Tee-shirt
collection totally for the current season. If the team thinks its target consumer group
will not be interested in this price bracket; or if it thinks this price bracket could be
revived. This can be due to strategic needs and its importance as a price entry point
attraction. The team may put better collection through in-house product development
or through better sourcing of the material.
Let us develop the above concept through some real life example generally happens
for large format stores or for major brands sold through shop-in-shop concept.
Suppose the top management decides to invest say Rs 1 crore in the stock for the
season to achieve a turnover ratio of 3. This means the retailer is expecting a total
sales turnover of Rs 3 crores for the concerned season. Now how is this investment
to be divided among different products or sub product groups?
So, for example if we take Tee-shirt then the share of investment on buying initial
stocks of tee-shirt would be= Rs 1 crore × 20.63% = Rs 20,63000.
Thus the buying and merchandising team has Rs 2063000 available for procurement
of the stocks at retail value. We can find the cost value by using the mark-up to be
used for pricing of these products as explained in the earlier section. So, for deciding
how much amount to be spent on different price ranges, which the team has identified
as the important criteria for sub-division of the product range in a given sub-group.
We shall use the percentage sale break-up as the basis for dividing the amount. Thus,
for Tee-shirt if the team decides that the percentage break-up to be taken for price-
ranges which contribute majorly to Tee-shirt sales as follows:
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Buying and
Merchandising-II Price range Percentage share
Rs 301 to 500 47
Rs 501 to 700 47
Rs 701 to 1000 6

Then the distribution of amount of Rs 2063000 to be invested on stocks would be

as follows:
Price range Amount invested in stocks
Rs 301 to 500 Rs 2063000 × 47% = 969610
Rs 501 to 700 Rs 2063000 × 47% = 969610
Rs 701 to 1000 Rs 2063000 × 6% = 123780

Now if we take the average value as the basis for finding out the number of units to
be bought against each of the price range then we can develop the working as
follows:
So, to find the average value for price range Rs 301 to 500 we shall use the following
method.
Average for a price range is the mid-point of the range or using the following
calculation:
Average price for a price range = (Lowest price point of the range + highest price
point of the range) ÷ 2
Average for price range Rs 301 to 500 = (Rs 301 + Rs 500) ÷ 2 = Rs 400.5 ~ Rs 400
Similarly the average prices for price ranges Rs 501 to 700 and Rs 701to 1000 are Rs
600 and Rs 850 respectively.
From the average price we can now calculate the quantities to be procured per price
range by using the following working:
Quantities to be procured = Amount allotted to the given price range ÷ Average price
for the range = Rs 969610 ÷ Rs 400
= 2424 pieces
Similarly, the quantities to be procured based on the respective average price against
the other price ranges would be as follows:
Price range Quantities to be bought
Rs 501 to 700 1616
Rs 701 to 1000 146

Now, for buying the above quantities the team has to decide the number of sets
needs to be bought against each price range. The set represent the ratio or the
number of pieces to be bought per size in a set. Say based on the experience the
team decides that 8 pieces need to be bought per set then the number of sets to be
bought in each of the price ranges would be as follows:
Price range Quantities to be bought Number of sets
Rs 301 to 500 2424 303 (2424 ÷ 8)
Rs 501 to 700 1616 202
Rs 701 to 1000 146 18.25 ~ 18
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In case of Kids wear the team also need to decide on the number of options or styles Range Planning and
Product Development
to be bought against each of the price range. For doing this, the team will have to
decide on the number of sets to be bought, under each style. Again for doing this the
team will have to go back to their past experience and find the optimum number of
sets against each price range. Suppose the team decides on the number of sets
against different price ranges as follows, then the number of options would be as
shown below:
Price range Number of sets per option Number of sets Number of options
Rs 301 to 500 10 303 30
Rs 501 to 700 8 202 25
Rs 701 to 1000 3 18 6

The extra sets can be adjusted against some options to make up for the budgeted
amount.
So you can see how one can go about finalizing number of options against each of the
price range. Thereby against each of the product sub-group, in a similar manner we
can decide the quantities and number of options against each product sub-group.
In the above collection there could be some other important features like styling and
colour then the merchandising team will have to make necessary planning for the
bifurcation of stocks on these two features also. Again the merchandising team will
have to decide based on the sales analysis of last year’s sales trend on these two
features. Now the trend will have to be decided at the price range level. This means
that the trend will have to be bifurcated under each of the price range as shown here
below:
For the sake of example we shall take only one price range of Rs 301 to 500 for the
bifurcation analysis on style and colours. Further we assume there are only two styles
– round neck and with collar; and two colours dark and medium. Now, if we take the
sales during previous season as the base then we get the following bifurcations on
style and colours as shown here below:
Tee-shirt Price range Rs 301 to 500
Style Round neck – 45% With collar – 55% Total
Colour Dark Medium Dark Medium 100%
45% 55% 45% 55%

From the above table we get to know that in the last season total contribution of
round neck Tee-shirt in overall sales of Tee-shirt was 45% and that of with collar
Tee-shirt was 55%. The dark colour’s contribution in the sale of round neck Tee-shirt
was 20% and that of medium colour was 25%. Now if we decide to bi-furcate
options among these variants of style and colour for the price range Rs 301 to 500 we
get the following details.
Tee-shirt Price Rs 301 to 500 Total
Style % Round neck – 45% With Collar – 55% 100%
Style -options 30 × 45% = 13.5 ~ 14 30 × 55% = 16.5 ~ 16 30
Colour Dark Medium Dark Medium
Colour % 45 55 45 55 100%
Colour-options 14 × 45% 14 × 55% 7 9 30
= 6.3 ~6 = 7.7 ~8 151
Buying and So we can see from the above working that 30 options to be bought in price range Rs
Merchandising-II
301 to 500 will be divided in the ratio of 45:55 between round neck and with collar
styles. Further the options under each of these styles will be further divided between
dark and medium colours in the ratio of 45:55.
The above working gives us clear understanding on the bi-furcation of the range
among various features depending upon their primacy. Thus, in the above example the
merchandising team felt that price is the most important feature for Tee-shirt
category. Therefore we first divided the options on the price factor. Then the team
felt that the next important feature is style. Therefore the options on each of the
price range were divided on the styling feature. Finally the options under each of the
styles were divided on colours. Thus, we got a complete planning of collection done.

9.3 RANGE BOARD

In order to get a grip with the kind of range being presented to consumers the buyer
or the merchandising team has to prepare a range. The range is prepared to show to
senior management and to their other team members before it is presented to the
distributors or retailers for direct booking of the collection. The range board is a
method by which the buyer will put colour photographs or computer aided design
drawings (CADs) on a board for different months of the season. This is done to give
a complete idea to the merchandising team how the goods within the range will look
like, when received and presented to the consumers during each of the months in a
season. The range board concept evolved because it is not possible always to display
complete actual range in a collection. This may be due to space constraint or
practicality of displaying the real products in a small space. The range board serves
very important purpose of telling the team whether the given range represent the
proposed theme or perspective of the concerned season. If any tweaking is required
in any of the styles in the collection, so as to go well with the overall theme planned.
The concerned range board is made to present the complete collection planned for
the month of the season. This covers different price ranges, colours, fittings/styling
features. This gives complete idea to the merchandising team if the collection
planned for the given month matches with the given theme. Do the colours represent
the complete gamut of the colour range planned for the season represented through
the different styles. Does the collection cover all the different features planned for
the season. Does the collection cover all the fittings planned for the given season.
Whether the range represents the price ranges decided for the season. All the
questions raised needs to be carefully analysed by the team along with their seniors in
order to come to conclusion on all important aspect. Based on above analysis the
decision is taken for the collection at the start of the sampling or product planning
process for the season, may be six months back. The tweaking of the collection for
each of the months of the season is very important in order to ensure all the actions
thereafter moves in tandem with the plan for the season.
Many brands and companies miss out on this vital aspect due to over confidence of
their merchandising team. Thereby, they may miss out the important and could be the
last opportunity before the product range is presented in the store. Once the product
range is finalised and produced as per the orders placed by the buyer of a store then
it becomes very difficult for the buyer to refuse the orders. He has to store the
material in the ware-house even if the sales are lower than expected. The chances of
a range going wrong after following the due process of range selection is very low
because the team has probably gone through every aspect of the range. The range
152 has repercussions on the buyer or the store that finally has to store the products/items
in the range. The buyer or the store has given consideration to every objections and Range Planning and
Product Development
issues raised during the range presentation on the range board.
Range board concept is prevalent mostly among the fashion apparels for ladies, kids
and men. It is also prevalent among all lifestyle brands and product categories like
jewellery, hand bags, purses, fashion accessories, ball-pens, watches, furnishing
fabrics, sarees, fabrics, and all such items that have features of colour, style, patterns,
price etc.

9.4 STUDY OF COMPETITORS

Competition plays very important role while finalizing range. Any retailer or brand
will not like to be called copy-cat and would like to have its own identity in the market
in order to survive in the cut throat competitive world of business. The study of
competitors range helps the buyer to know what strategy is being followed by the
competition in the development of the range with regard to following aspects:
● Target consumers
● Price range – starting price point or entry price point to the highest price point
● Number of product categories and sub-categories, if any
● Styles/ significant features
● Trends/patterns in the collection
● Colours
Thus, the buyer through a well thought of study of the previous and the current
season in an on-going manner can predict how the competition is expected to come
out with its collection for the new season. He/she can give important inputs to its
R&D/designing department about the points on which differentiation in the range
could be created for the coming season so as to attract the general and loyal
consumers to its stores.
A format for collecting competitor information could be developed as follows:
Table 9.2: Competitor Feedback Form

Competition Name of the competitor: Ginny Date of review: 6th july’11

Review Product category: Kids dresses No. of product sub-
groups: 3
Product sub- Entry price- Highest price Special Colour range
groups point point features
Regular 500 700 Normal dress Dark and medium
Fashion 750 1000 Use of prints Pastel and medium
and embroidery
for badges
Party-wear 1100 1500 Special laces Dark and Pastels
and frills
Response: Response to fashion in price range 750 to 900 very good and party wear
in price range 1200 to 1400 very good. Medium is preferred in fashion
and Dark is preferred in party-wear collection
Strong points Better styling features in the fashion and party wear collection. Fashion
and party-wear display done very well with the use of mannequins and
browsers
Weak points In the regular collection styling is poor, also medium colours could have
been better. Collection in price range 900 to 1200 needs improvement. 153
Buying and
Merchandising-II
Key changes Introduction of party-wear collection. Use of laces and frills in the
from previous fashion wear range. Also check fabric is used for fashion collection,
collection which is preferred by consumers.
Promotions Special offer of 10% rebate on purchases of Rs 2000 and above. Also
special combination of regular and fashion-wear in the price bracket of
Rs 1400.

The format given in Table 9.2 gives us very clear idea on how the feedback should
be. Such feedback has to be received from the field staff and the designing team/
R&D team to get better perspective on competitor activity vis-à-vis range
presentation for the season.

9.5 MARKET INFORMATION

Besides studying competition, it is also necessary to get feedback on market related
activities by the buying and merchandising team. The feedback facilitates in
developing the new collection for the season and also ensures all the important trends
and features are covered in the said collection. The market information to be studied
should cover features as follows:
● Special trends noticed in a particular product category for certain designs and
patterns. For example in the men’s wear collection if there is a discernible trend
for checks design in the current season. Then the designing/R&D team will
have to take special notice of such trends and develop a special collection in
checks design.
● Preference for certain colours. For example in men’s shirts in solids there could
be a trend for usage of more pastel shades for plain solid shirts. Again this trend
needs to be properly captured in the new collection.
● Preference for certain styles or features. For example in men’s trousers a clear
preference is noticed for tight fits. Then the trend need has to be captured by
the designing team, as well as by the buying team if they are outsourcing the
product.
● Packaging preferences needs to be studied for identifying any preferences. For
example in the past there was a trend for buying shirts in a box packing.
Nowadays we see preference for carry-bags for shirt packing.
● Market information related to international trends also needs to be understood by
the design development team. For certain product categories like ladies wear,
the buying and merchandising team needs to keep tab on the fashion trends.
The team may like to collect information through websites or internet or foreign
fashion magazines or trade-shows or exhibitions or fashion shows both at
national and international levels. The team may also visit to stores selling
designer items in the given category.
● Economic trends also need to be understood. Due to the recessionary trends,
experienced in the years 2008-09, there could be effect of the trends on the
national economy. Thereby may affect the sales of certain items or items in
certain price ranges.
Some companies also take help of fashion consultants or advisors to identify the
trends to come in the future. Many designer brands make use of such fashion
consultants to identify the trends and evolve the collection that meets the aspiration of
their target audiences. As we all know these designer brands are available at
154 premium price ranges. Hence, the general consumers have to wait till the designing
teams of other brands operating in the medium to high price range adopt these trends Range Planning and
Product Development
and features through their innovative methods.

Check Your Progress A

1. What do you mean by ‘Range’?
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2. How is range need identified?
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3. Explain the method of ‘Range Board’.
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4. Enumerate various aspects covered in the study of the competition.
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5. What are the advantages of studying market competition?
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9.6 CORE AND FASHION RANGES

You have already learnt about identification of range needs, range board, study of
competitors and market information. Let us now learn about the core and fashion
ranges, product development versus product sourcing product development.
Every product category and brand which deals with life-style or fashion operates
generally in the core and fashion range. The core range is the range which as the
name suggests is the ‘bread and butter’ of the category or the store. Core range is
generally not much affected by the changes in fashion trend. It sells consistently over
a long period of time. As against the core range the fashion range needs to change
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Buying and more frequently to suit the needs of the buyer and changes in trend, design, styles or
Merchandising-II
colours.
Product Orientation: Generally in large format chain stores the product category has
many sub product groups with different features and price-lines. Many a times the
buyers for each of the sub-groupings may be different. Hence, to keep the different
buyers tuned with the main theme for the season, the head of the merchandising
division makes the common themes clear to the group of buyers under the same
product category. The theme is made clear so that every buyer works with a
common orientation about the main theme, the design orientation, the colour themes,
style features etc. Thus, the collection organised by each buying team is in tandem
with the main theme. This is called product orientation for sourcing and product
development. The buyers of the core range as well as the fashion range ensure that
finally the collection presented to the customers in alignment with the main theme of
the season. Generally, the large format stores divide their collection into a pyramid
structure. Look at Figure 9.3 which shows the pyramid structure.

Premium Range
Fashion
Core

Figure 9.3: Pyramid representing the collection for the season

The pyramid represents the way large format store generally divide their collection
into different ranges. The starting collection is the core range which is the bread and
butter for the store. For example store chain like Lifestyle makes it a point to keep
certain collection of products in each of their category as the entry point collection.
This does not only take care of the minimum price point but also tries to cover other
fashion elements as far as possible. Thus, ensures that a large section of the
consumers are able to pick their favourite choice without going dissatisfied. Generally
this forms a substantial percentage of overall quantities and sometime even value.
Normally it is seen that quantity wise core constitute large segment, but value wise it
may not be so. The fashion segment though sells lesser quantities makes up by
selling same value of merchandise as core’s, due to comparatively its higher prices
than that of core range. Hence, the core range is shown at the bottom of the pyramid
as it covers major part of the consumer segment.
The next segment is that of fashion collection which changes every season based on
the new trends noticed as per market information and trends. Fashion collection
carries certain risk due to newer collection being presented to consumers and it
depends on how consumers respond to such collection. Thus, it will be observed that
the products in this collection carry higher mark-ups than those for the core range.
This is necessary to take care of mark-downs if the product movement slows down
during the season.
The topmost collection is the premium collection which is targeted to the select group
of consumers who have special taste for special products which suit to their levels.
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Generally the consumers of premium range belong to high socio-economic group. Range Planning and
Product Development
Hence, in order to distinguish themselves from the masses these group of consumers
generally select products in the premium range. The products like Cartier pens, or
Hide-skin bags or Versace suits or La-perla lingerie are the kind of designer
products preferred by these select groups of consumers. These products meet their
special designer product needs. Retailers create a special designer labels section in
their store to attract these premium groups of consumers. The turnover ratio for these
groups of products is low. Hence, to make up for the return on inventory, the mark-
up is on higher level than the fashion products.
The retailer makes profit on the base products that is the core segment of its
collection. This is followed by the fashion collection which attracts the next level of
target consumers and then followed by the icing on the cake i.e. the premium group
of customers preferring the premium collection.
Many a times the large format departmental stores have to maintain the premium
collection. The collection is maintained to make sure that the consumers belonging to
this product segment are not lost to other retail formats.

9.7 PRODUCT DEVELOPMENT VERSUS PRODUCT

SOURCING
Product development is generally possible for original brands or retail chains, as the
effort involved in product development is a long drawn process. Product development
starts with basic drawings of product design. It further proceeds to the whole design
development process including design changes and approvals necessary to match the
final finished product with the final goal of the department or the company. As against
the product development one can source the product from vendors of this product.
You should note that the same products may also be available to other retailers.
Hence, there is no distinction between the products sold by the two retailers.
The advantages and disadvantages of product development and sourcing can be listed
as follows:
Table 9.3: Advantages and Disadvantages of Product Development

Advantages
a. The most important advantage of
product development is to have an
exclusive collection for the retail store.
Since, the range is not available with
other store it helps the retailer to
advertise about the exclusivity of its
collection.
b. The exclusive collection creates a
clear differentiation of the range from
the other stores. The customers who
are on the lookout for different
products from masses become their
loyal customers.
c. The exclusivity of the collection helps
the store to create a brand identity for
itself. For example Sheetal or Roopam
stores are known to offer very
Disadvantages
a. The biggest disadvantage of
developing new product is the cost of
resources required for the new product
development. The foremost cost is that
of creating a design and development
(R&D) team. They are also provided
with special facilities and material
necessary for their experimentation
work.
b. The time required for developing new
collection is between three to 12
months. For example the design
development team for ladies collection
takes about minimum six months for
creating a collection for the season.
c. For exclusive designs the retailer has to
make certain minimum number of pieces
of the same design or style in order to
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make up for the batch size. Otherwise
Buying and
Merchandising-II different and exclusive range to its
ladies customers.
d. The exclusivity of the range with
product differentiation helps the
retailer to charge prices that cannot be
compared with other products in the
same category. This helps the retailer
to cover up their margins on account
of longer stock turnaround time due to
exclusivity of the collection
Table 9.4 Advantages and Disadvantages of Product Sourcing
Advantages
a. The greatest advantage of sourcing is
the speed. The buying team is able to
source the collection very fast from
existing suppliers or manufacturers.
b. The product is sourced from existing
vendors with their existing facilities
for manufacturing the required
product/items. There is no cost for
creating new processes or designs.
Thus, the cost of supply is in line with
market cost.
c. The product selected is already there
in the market. Hence, the buying team
do not have to get into the process of
finalising or approving the items/
products from their seniors. This is
necessary in case of new product
design.
d. No separate design development team
is necessary for product sourcing as
is the case in product development.
Thus the cost on design development
is saved.
e) For products/items that are in running
there is no need to place orders very
much in advance as is the case for
designer or exclusive fashion
158 collection items.
the processes involved cannot be
executed. The cost of using the said
process could become very exorbitant.
Thereby making the product pricing
beyond the reach of its target
consumers.
For creating special design or
collection, the retailer may have to use
its own facility of manufacturing. This
facilitates to keep the processes secret
from other manufacturers or suppliers.
Thus, increasing the cost of
manufacturing the exclusive range.
Disadvantages
a. The biggest disadvantage of product
sourcing is there is no differentiation in
the collection ordered by the buying
team from that ordered by the buying
team of another retail chain. Thus, many
a times it will be seen that the products
or brands on display in many of the
large format stores are same. These are
the same products because these are
sourced from the same suppliers or
manufacturers.
b. As explained in the earlier point
because the items/products are sourced
from the same supplier, there is hardly
any exclusivity about the collection. In
this respect many of the retailers have
started sourcing their supplies from
exclusive vendors. These vendors
generally do not supply the products
bought by one retail chain to any other
retailer.
c. When the products/items are from same
or similar sources the prices of such
items can be easily compared. Thereby
the retailer loses the chance of
exclusive pricing for the products/items.
d) The products/items do not offer any
exclusivity to the collection. Therefore,
the retailer is not able to induce any
loyalty among its customers.
Many large format stores have got into their own private labels for many of the Range Planning and
Product Development
products sold in their department store. The easiest route adopted by these retail
chains is to monitor the sales of the brands sold in their retail chains. Over a period
of time once their buying and merchandising team develops confidence about the
products sold by these brands - identify exclusive supplier. The supplier can make the
identified products as per their requirement and cost. Thus, the buying and
merchandising team is able to create a new brand or label owned by the retail chain.
Thereby offers price advantage and other exclusive features otherwise would have
been difficult for the team. The buying and merchandising team is able to derive the
cost advantage because of the quantity. Thereby makes up for the additional
investment/expenses the team had to incur in the product development process.

9.8 PRODUCT DEVELOPMENT

As you have learnt in the above section that there are certain advantages and
disadvantages of product development. Let us now learn the steps involved in product
development.
Sales analysis: This is the most important step before one decides on the product to
be developed. The merchandising team will have to undertake both research and
study of the data pertaining to a product. The team can take the following steps to
identify the products which need to be introduced by them in their store.
● Study of research data, from the trade associations and other sources to know
the sales trend expected in the product categories in terms of sales growth
percentage and volume.
● Study the sales trend of brands in their stores, which sell the concerned
products/items as part of their brand collection. The study of sales trend will
provide the team with growth of different products on yearly basis. The trend
will also provide the volume of different sub-products within each of the brands.
These data are related with different price-ranges under which the sub-products
are sold. The data provide a clear indication to the merchandising team on the
products which can be taken up for product development. The study will also
throw up the trends for the new products that carry potential for growth in the
future.
● Study of products sold by other competing retail stores or chains, that have good
sales and growth potential.
● Visit to trade exhibitions, foreign markets and shows will also throw up ideas on
new products for development purpose.
Briefing Design Development Team: This is the next important step the
merchandising team will have to take in order to give effect to its identification of
new products. For the designing team to come up with a meaningful product design
drawings, the team should provide following details to the design development team:
● The kind or type of product, in terms of its material, or other important
constituents. For example in case of apparel the merchandising team will have to
specify whether made from cotton or blended material etc.
● How many different products and sub-products required in terms of special
features if any. For example in Skirt whether it should be tight or regular and
with what different features like with laces or embroidery or prints etc.
● What are the price points at which each of the products required?
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Buying and ● In what size specifications the product is required. For example for Soaps or
Merchandising-II
tooth paste in 100 grams or 200 grams or for apparels in small or medium or
large sizes.
● How the product will fit into the existing range so as to give strategic advantage
in selling and creating niche for itself.
● What specific function the product should be able to meet or salient features it
should have. Like whether the soap should serve as a face-wash or beauty or
skin toner function etc.
● The product’s co-ordination with the other products. For example skirt to co-
ordinate with T-shirt or blouse; or belt to co-ordinate with the trousers or shoes.
● How the product will be displayed in the store. The type of fixtures/browsers to
be used for display purpose.
● The packaging requirement or any packaging conditions that the designer team
should know. For example toys needs to be packaged in non-plastic material and
so on.
● Manufacturing conditions to be kept in mind like minimum quantities, or the
produce-ability of the design at the mass level of production. For example
certain kind of print design may not suit for producing very small quantities or
the kind of print required may not suit to the price target need for the finished
product.
● What types of drawings are required to be given to the manufacturer? Whether,
technical drawings or detailed sketches, showing different graphics separately.
Briefing to manufacturer or Supplier: In case of briefing it will depend if the
briefing is to be done to the supplier’s designing team first or directly to its
manufacturing team. Many suppliers employ their own designing team for taking care
of product development request from their big clients. In such a case the points
covered earlier will have to be conveyed to the supplier’s designing team.
As regards to briefing to the manufacturing team, the first stage for manufacturing
team is to do a feasibility study. The feasibility study will include the time required for
completing manufacturing of the order; the cost of development (production set-up
and machinery requirement), the production processes and material use; minimum
quantities required as part of the batch size for achieving cost efficiency.
After the initial feasibility study, the design development team should explain to the
manufacturing team about the core elements of the product design. The team may
also suggest any changes for making the product economical without losing on the
core elements of the product design.
Study of Supplier’s Capability: This is an important assessment study of the
suppliers before deciding on who will be the right one to produce the desired product.
Knowing and assessing supplier’s capability with respect to various aspects of the
product design gives a clear idea to the buying and merchandising team about the
products to be supplied. The team has to be clear about the assessment factors as
any wrong choice of supplier will not only cause delay in the manufacturing but may
finally compromise with the finished product quality. Sometime if the product design is
amenable for trial sample, the buying team can identify select suppliers for making a
trial sample before finalising on the supplier.
Time Factor: Availability of time for introduction of the product can also influence
the choice of supplier. Whether to import from China or Bangladesh at a cheaper cost
160
but with a longer lead time or make it locally even if it is costlier to do so, will
certainly depend on the time availability for launch of the product. Many retail chains Range Planning and
Product Development
and brands start the product development process atleast six months to one year in
advance.
Cost effectiveness: It is necessary to assess the product development cost vis-à-vis
sales plan for the concerned product. Does the product have a longer or shorter life-
span from the product life-cycle point? If the product development cost is going to
account for a substantial percentage of the overall sales of the product, then, it will be
better to source such products due to short life cycle of the product. But if the
product has a longer life-cycle and has potential to grow over a period of time then
one can amortize the development cost over a period of time. Thus, keeping the
overall cost per piece lower, by dividing the development cost over the total expected
quantity to be sold during its life span. Look at Example 9.1 to understand the
working.
Example 9.1: Amortization of the cost of development
Suppose the merchandising team of a department store finds that the cost of product
development is Rs 200000, while the product’s cost works out to be Rs 20. Based on
the future sales plan over the life-cycle of the product, it is expected that the overall
sales will be 100000 pieces. So what will be the total cost of the product if the
development cost is to be amortized over the total sales of the product?
Amortised cost per piece = Total development cost ÷ Total sales quantity
= Rs 200000 ÷ 100000 = Rs 2 per piece
Therefore, the total cost of the product per piece = Product cost + Amortised cost
= Rs 20 + Rs 2 = Rs 22 per piece
Product Sampling: Many a times it is advisable to do sampling before starting on the
production of the ordered quantity. Sometime due to certain processes involved it may
not be possible to do sampling. In such cases the buying team should ask for
production sample before the merchandise is finally produced and packed. By making
a check at the sampling stage on all the specifications necessary will make the life
easier. Many a times after the first sample, particularly in apparels the appearance of
the sample may not be as desired, which may necessitate last minute changes in
some aspect of the design.
Market Test or Trial Run: The market test may involve cost of doing a trial run in
some select stores to test if the sales response to the product is as estimated. This
facilitates taking the product to its full run and to its full potential. The trial run have
both the advantages and disadvantages. The advantages are:
i) lowers the investment risk as committing to higher quantities is avoided;
ii) decision about discontinuing the products in the existing brand.
The disadvantages are:
i) High cost of production due to lower quantity production;
ii) risk of competition taking cues and over reaching customers thereby the retailer
losing on the first introducer advantages;
iii) due to limited trial the store may not go whole hog in market promotion of the
new product. Thus, while doing test run all the above factors need to be well
considered.
Specifications: In order to ensure that the product quality is maintained consistently
throughout its life span, it will be useful to maintain written and mutually confirmed
and signed product specification both with the supplier and the retail merchandising 161
Buying and team. Many retailers follow a practice of doing a third party confirmation of
Merchandising-II
specification by undertaking proper quality check by a qualified and certifying body.
Ensuring regular quality check ensures that the consumer gets the product as
promised by the retailer, thereby instilling consumer confidence and brand loyalty.
Type of Packaging: The merchandising team must give proper thought to the
product packaging and ensure all the important product features are well highlighted
with all the necessary information provided to the consumers. Sometime innovative
packaging gives boost to product sales and to its positioning in the minds of the
consumer. The packaging development cost can also be amortised if it is of
substantial nature. The designing team will have to keep the packaging in its
perspective while doing product development so as to ensure the product presentation
is at its best when displayed in the store. The retailer will also have to keep in mind
legal requirement, if any, so as to avoid any legal complications later.
Thus, for a retailer it makes sense to give thought to all the above aspects while
undertaking product development as part of its own label development exercise. A
right decision making approach for product development will give higher returns to the
store due to many inherent advantages of the effort.

Check Your Progress B

1. What do you mean by ‘Market Information’?
...................................................................................................................
...................................................................................................................
...................................................................................................................
2. How is market information helpful in retail?
...................................................................................................................
...................................................................................................................
...................................................................................................................
3. Explain the meaning of core range.
...................................................................................................................
...................................................................................................................
...................................................................................................................
4. Why is it important to study fashion range?
...................................................................................................................
...................................................................................................................
...................................................................................................................
5. Which of the following statements are True or False?
i) Product development is always helpful in the retail business.
ii) Product range does not change with time.
iii) Range board method is more suitable for the fashion apparel.
iv) Study of world economy is helpful in planning buying of the merchandise.
v) Product sourcing speeds up the collection.
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 Range Planning and
9.9 LET US SUM UP Product Development

In the retail business, it is very important to make a right selection of the products or
develop the right products to meet the needs of the consumers. ‘Range planning
framework’ helps in identifying the needs of the consumers. The characteristics of a
product play an important role in the decision making by the customer. The
merchandising team has a great task of understanding these characteristics.
The retailer identifies the products from its existing collection based on their
performance during the previous season. The important factors that must be taken
into account are the price range, material, design, colours and fits, etc.
The range board is the method by which the buyer displays colour photographs or
computer aided design drawings (CADs) on a board for different months of the
season. It provides to complete idea to the merchandising team how the goods within
a range will look like when received and presented to the customer.
The study of the strategy being followed by the competitors helps the retailer in
evolving his own strategy to compete successfully. Besides, it is very important to
collect the market information, such as special trends, preference for certain colours,
styles or features, packaging preferences, international trends, and world economy,
etc. before making a decision for buying the new collection.
The core range, which is the basic category of the store, normally does not change
much. It sells consistently over a long period of time. But the fashion range changes
frequently and therefore while making a collection in this range, the merchandising
team has to be more careful in selecting the designs, styles, colours, etc.
Product development has many advantages and disadvantages. It is generally done in
the original brands and retail chains. It is, however, a long drawn process and
requires much resources. The product sourcing on the other hand is comparatively a
fast process. The various steps involved in product development are: sales analysis,
briefing design development team, briefing to manufacturer or supplier, study of
supplier’s capability, time factor, cost effectiveness, product sampling, market test or
trial run, specifications and type of packaging.

9.10 KEY WORDS

Existing Collection : A line of products produced for one season, as those
developed by a designer.
Framework : A structure for supporting or enclosing something else,
especially a skeletal support used as the basis for
something being constructed.
Price Range : The lowest and highest prices that a given security
reaches over a specified period.
Product Orientation : A business approach or philosophy in which whatever a
company makes or supplies is the focus of the
management’s attention.
Product Range : A set of variations of the same product platform that
appeal to different market segments.
Trend : A general direction in which something tends to move.

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Buying and
Merchandising-II 9.11 ANSWERS TO CHECK YOUR PROGRESS
B5. i) False ii) False iii) True iv) True v) True

9.12 TERMINAL QUESTIONS

1. Describe the process of range need identification. How is it helpful in managing
the buying of the merchandise?
2. What do you mean by range board? Explain its utility in the merchandising.
3. Why is it necessary for the retailer to study market competition before planning
his collection for the season? Describe various factors that are taken into
account for this purpose.
4. Describe various aspects of the market information. How do they affect the
retail business?
5. Explain the steps involved in the development of new products.
6. Describe advantages and disadvantages of the product development.
7. Explain the merits and demerits of the product outsourcing.

Activity
Study the process of range needs identification of a nearby Departmental Store.
Can you give suggestions to improve it further?

164