Chapter 14

Developing
Merchandise
Plans

RETAIL
MANAGEMENT:
A STRATEGIC
APPROACH,
10th Edition
BERMAN

EVANS

Chapter Objectives
To demonstrate the importance of a sound
merchandising philosophy
To study various buying organization
formats and the processes they use
To outline the considerations in devising
merchandise plans: forecasts,
innovativeness, assortment, brands,
timing, and allocation
To discuss category management and
merchandising software
14-2

Merchandising
Activities involved in acquiring
particular goods and/or services
and making them available at the
places, times, and prices and in
the quantity that enable a retailer
to reach its goals

14-3

Merchandising Philosophy
Sets the guiding principles for all the
merchandise decisions that a retailer makes
Should reflect
* Target market desires
* Retailers institutional type
* Market-place positioning
* Defined value chain
* Supplier capabilities
* Costs
* Competitors
* Product trends
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Scope of Merchandising
Responsibility
Full array of merchandising functions
* Buying and selling
* Selection, pricing, display, customer
transactions
OR
Focus on buying function only
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Figure 14-1: Nikes Own Store

Merchandising Philosophy

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Micromerchandising

Retailer adjusts shelf-space

allocations to respond to customer
and other differences among
local markets

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Cross-Merchandising
Retailers carry complementary
goods and services to encourage
shoppers to buy more

14-8

Figure 14-2:
Attributes and
Functions
of
Buying
Organizations

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Functions Performed
Merchandising view
* All buying and selling functions
Assortments
Advertising pricing
Point-of-sale displays
Employee utilization
Personal selling approaches
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Functions Performed (cont.)

Buying view
* Buyers manage buying functions
Buying
Advertising
Pricing

* In-store personnel manage other tasks

14-11

Assortments
Point-of-sale displays
Employee utilization
Personal selling approaches

Figure 14-4:
Merchandising
Versus Store
Management
Career Tracks

14-12

Figure 14-5: Devising

Merchandise Plans

14-13

Forecasts
These are projections of expected retail
sales for given periods
* Components:
Overall company projections
Product category projections
Item-by-item projections
Store-by-store projections (if a chain)

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Types of Merchandise

14-15

Staple merchandise
Assortment merchandise
Fashion merchandise
Seasonal merchandise
Fad merchandise

Staple Merchandise
Regular products carried by a retailer
* Grocery store examples: milk,
bread, canned soup
Basic stock lists specify inventory
level, color, brand, style, category,
size, package, etc.

14-16

Assortment Merchandise
Apparel, furniture, auto, and other
categories for which the retailer must
carry a variety of products in order to
give customers a proper selection
Decisions on Assortment
* Product lines, styles, designs, and
colors are projected
* Model stock plan
14-17

Fashion and Seasonal

Merchandise
Fashion Merchandise: Products that may
have cyclical sales due to changing tastes
and life-styles
Seasonal Merchandise: Products that sell
well over nonconsecutive time periods

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Table 14-1a: Factors in Planning

Merchandise Innovativeness
FACTOR

RELEVANCE for PLANNING

Target market(s)

Evaluate whether the target market is

conservative or innovative

Goods/service
growth potential

Consider each new offering on the basis of

rapidity of initial sales, maximum sales
potential per time period, and length of
sales life

Fashion trends

Understand vertical and horizontal fashion

trends, if appropriate

Retailer image

Carry goods/services that reinforce the

firms image

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Table 14-1b: Factors in Planning

Merchandise Innovativeness
FACTOR

RELEVANCE for PLANNING

Competition

Lead or follow competition in the selection

of new goods/services

Customer segments Segment customers by dividing

merchandise into established-product
displays and new-product displays
Responsiveness to
consumers

Carry new offerings when requested by the

target market

Amount of
investment

Consider all possible investments for each

new good/service: product costs, new
fixtures, and additional personnel

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Table 14-1c: Factors in Planning

Merchandise Innovativeness
FACTOR

RELEVANCE for PLANNING

Profitability

Assess each new offering for potential

profits

Risk

Be aware of the possible tarnishing of the

retailers image, investment costs, and
opportunity costs

Constrained
decision making

Restrict franchisees and chain branches

from buying certain items

Declining goods/
services

Delete older goods/services if sales and/or

profits are too low

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Figure 14-6: R&D at Wendys

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Figure 14-7: Traditional Product

Life Cycle

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Structured Guidelines for

Pruning Products
Select items for possible elimination on the
basis of declining sales, prices, and profits,
appearance of substitutes
Gather and analyze detailed financial and other
data about these items
Consider nondeletion strategies such as cutting
costs, revising promotion efforts, adjusting
prices, and cooperating with other retailers
After making a deletion decision, do not
overlook timing, parts and servicing, inventory,
and holdover demand

14-24

Figure 14-8: Predicting

Fashion Adoption

14-25

Table 14-2a: Factors in Planning

Merchandise Quality
FACTOR

RELEVANCE for PLANNING

Target market(s)

Match merchandise quality to the wishes of

the desired target market(s)

Competition

Sell similar quality or different quality

Retailers image

Relate merchandise quality directly to the

perception that customers have of retailer

Store location

Consider the impact of location on the

retailers image and the number of
competitors, which, in turn, relate to quality

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Table 14-2b: Factors in Planning

Merchandise Quality
FACTOR

RELEVANCE for PLANNING

Profitability

Recognize that high quality goods generally

bring greater profit per unit than lesserquality goods; turnover may cause total
profits to be greater for the latter

Manufacturer
versus private
brands

Understand that, for many, manufacturer

brands connote higher quality than private
brands

Customer services Know that high-quality goods require

offered
personal selling, alterations, delivery, and so
on
Personnel
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Employ skilled, knowledgeable personnel for

high-quality merchandise

Table 14-2c: Factors in Planning

Merchandise Quality
FACTOR

RELEVANCE for PLANNING

Perceived goods/
service benefits

Analyze consumers. Lesser quality goods

attract customers who desire functional
product benefits; High-quality goods attract
customers who desire extended product
benefits

Constrained
decision making

Face reality. Franchises or chain store

managers have limited or no control over
products; Independent retailers that buy from
a few large wholesalers are limited to the
range of quality offered by those wholesalers

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Retail Assortment
Strategies
Width of assortment refers to the number
of distinct goods/service categories
(product lines) a retailer carries
Depth of assortment refers to the variety
in any one goods/service category
(product line) a retailer carries
An assortment can range from wide and
deep (department store) to narrow and
shallow (box store)
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Figure 14-10: Sephoras Very Deep

Assortment of Cosmetics

14-30

Brands

Manufacturer
(national)
Private
(dealer or store)

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Generic

Table 14-3: Private Brand Test

Match the Retailer with the Brand Name

Retailer

Brand

Bloomingdales

Arizona Jeans

Costco

Ol Roy

Kmart

Michael Graves

J.C. Penney

Martha Stewart

Sears

Joseph & Lyman

Wal-Mart

Kenmore

Target

Kirkland

Macys

Alfani

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Figure 14-11: Wal-Marts New

Approach to Private Brands

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Figure 14-12: Daffys Distinctive

Branding Strategy

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Figure 14-13:
Applying
Category
Management

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Merchandising Software

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General Merchandise Planning Software

Forecasting Software
Innovativeness Software
Assortment Software
Allocation Software
Category Management Software

Figure 14-4a: Shelf Logic Software for

Category Management Planning

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Figure 14-4b: Shelf Logic Software for

Category Management Planning

14-38