Merchandise mix

The term "merchandise mix" is essentially the product assortment a retail store offers. It refers to the breadth and depth of the products a given retail store carries on a regular basis. It's not always easy to find a good balance among the products a store could choose to offer, so it's worth considering carefully.

1. Merchandise Mix By, Sameer Dhurat (83) Anand Kalambe (84) Ahire Krutica (80)

2. Term Merchandising literally means " buying and selling“ It is planning, development and presentation of product lines for identified target markets . Merchandising is the planning, buying and selling of merchandise It is integral part of retailing. What is Merchandising

3. Merchandise mix  is the total set of all products  offered for sale by a retailer, including all product lines sold to all consumer groups.

4. Why Merchandise? The retail industry covers everything from large  supercenters (Big-box stores)  to small vendors pedaling goods along the roadside. The biggest dilemma a retail store owner faces, is what to sell, or what their merchandise mix should consist of. If retailers stock too much of a variety of merchandise, they risk appearing like a jack-of-all-trades, potentially losing money in the long run . If they stock a small merchandise mix (few items) they run the risk of losing business, especially to local brick-and-mortar stores and online competitors. For retailers, deciding on their marketing mix is similar to deciding on their market segments. Retailers need to decide who they are selling to and the needs of their market segment.

5. The Rights of Merchandising 'The Rights of Merchandising' are : The right merchandise The right quantity The right price The right time The right place The right quality

6. Right Merchandise Selecting and presenting the right merchandise is critical as product is the focal point of customers buying Each market segment and geographical region demands a different merchandise mix Seasonal and trend changes effect the merchandise mix The product assortment must have all types of merchandise -basic, trendy, seasonal

7. Right Merchandise Assortment Assortment is the number of pieces per size per color for each style or product variety. The right colors / sizes /product features to fulfill needs and desires of customer have to be offered by retailer Enough stock must be available to meet planned sales and give customer wide assortment for selection

8. Right Quantity Quantity is all about demand and supply. Enough stock must be available in the right assortment of color and sizes . Deciding the correct quantity of each style is critical .

9. Right Price Price is a function of profit and cost. Price should be high enough to make the desired profit, at the same time low enough to get business and meet target sales. Price should make production feasible and product saleable at a profit accepted by the target customer.

10. Right Time Timing is critical so that the merchandise does not get wasted. In seasonal products like apparel, umbrellas, woolens , if the planned delivery date is not adhered to the selling season will be missed and the entire merchandise becomes a dead stock.

11. Right Quality Quality is a standard acceptable to customer and satisfies the need of the product. It includes reliability, responsiveness, compliance and compatibility. Quality has to be appropriate for the product and that target customer. Quality has to' be compatible with the product price also.

12. Right Place The importance of location for a retailer cannot be emphasized enough. The right store location is the first step towards retail success. The location should have enough footfall of the target segment to achieve sales. Even withhold store the placement of various sections or departments is critical to achieving the desired sales.

13. Product Assortments Breadth: The breadth of a company's products relates to the number of product lines a company produces or a retailer carries. Ex. An automobile manufacturer, may have a line of sedans, a line of SUVs, and a line of trucks. Length: This refers to the number of products in a particular product chain or line. Ex. An automobile manufacturer may have four models of sedans, three models of SUVs, and two models of trucks in each respective product line. Depth: A product line's depth relates to the different versions of the same product that may exist in each product line. Ex. An automobile manufacturer may have a basic, standard and luxury version for each of its sedans and SUVs but only a basic and standard model for its trucks.

14. Planning merchandise variety involves Planning & Controlling Product Lines Retailers use many factors to evaluate product lines

15. Factors to evaluate product lines The compatibility among product lines Product substitute Product complements Unrelated products The physical attributes of each product line Product standardization Product service level Product selling method

16. The product line potential profitability Direct and indirect contribution to profitability Calculations of gross margin percentage and money The role of branding plays in the success of the product line How brands can distinguish a retailer from competitors How brands can build store loyalty The advantages and disadvantages of offering different types of brands – no names, vendors brands, private labels and licensed merchandise Factors to evaluate product lines

17. The market appropriateness of each product line The relative advantage, affinity, observability and complexity of new product introductions Market trends- provide products the market wants How well the product matches consumption patterns and buying needs of targeted consumers The age of each product within the product lifecycle What stage a product is in to judge future sales potential The number of products offered at different stages Factors to evaluate product lines

18. The fashionable nature of each product line Use of unique fashion designers as a part of the store’s strategy Above average risk of fashion merchandise i.e. High margin items with above average profitability The competitive threat facing each product Competitive conditions under which the product line is available- intensive, selective or exclusive distribution Is the product line available to direct competitors or indirect competitors or both Factors to evaluate product lines

19. The impact of lifecycle on product line acceptance Targeted customer activities, interest and opinions Match between consumers lifestyles and retailers image Usefulness of trade to identity product lines for targeted consumer lifestyles The conditions under which each product line will be procurable Availability and reliability of various suppliers Terms and conditions under which the product will be made available Factors to evaluate product lines

20. Controlling Merchandise Variety No rules for what should be included in the merchandise mix and what should be excluded Two useful methods Category management: each product managed as a business unit at the store level ABC Analysis: each product line is rank ordered based on performance levels Involves monitoring and adjusting the types of product lines that are added and dropped from the merchandise mix

21. Controlling Merchandise Variety Two widely used methods to control assortments and support: Inventory turnover: rate at which the retailer depletes and replenishes stock Open to buy: amount of new merchandise a retailer can buy during a specific time period without exceeding planned purchases for the period

22. Planning Merchandise Goal- to ensure that the product choice must meets the targeted consumer needs Planning should be done carefully for the number of units to have on hand to meet the expected sales for the brands Must organise the merchandise mix as to the number of different product lines carried It depends on: Brands - Materials Sizes - Styles Colors - Price

23. Must develop merchandise list Basic stock list Ex. Staple items like consumer goods such as bread, milk, paper, sugar that are bought often and consumed routinely Model stock list Ex. Fashion Items consumer goods where style holds the primary importance and the price is secondary (goods include clothing, jewellery, handbags, sun shades, shoes etc) Never out list Ex. key items and best sellers items like baby care, bath soaps etc Planning Merchandise

24. Key Components of the Six Month Merchandise Plan : Planned Sales Planned Purchases Planned Reductions Planned markdowns Employee discounts Shrinkage Six month m erchandise plan

25. Six Month Merchandise Budget M1 M2 M3 M4 M5 M6 Total BOM Last Yr Plan Revised Actual Sales Last Yr Plan Revised Actual Reductions Last Yr Plan Revised Actual

26. EOM Stock Last Yr Plan Revised Actual Retail Purchases Last Yr Plan Revised Actual Purchase Cost Last Yr Plan Revised Actual Initial Mark Up Last Yr Plan Revised Actual

27. Gross Margin % Last Yr Plan Revised Actual On order EOM Last Yr Plan Revised Actual

28. RETAIL ASSORTMENT STRATEGIES

29. Wide & Deep : (many product lines & large variety in each)

30. Wide & Shallow : (many product lines & limited variety in each)

31. Narrow &Deep: (few product lines & large variety in each)

32. Narrow &Shallow: (few product lines & few variety in each)

33. 9/21/2017 Retailing Management - Swapna Pradhan 35 Model Stock Plan The model stock plan gives the precise items and quantities that should be on hand for each merchandise line. A model stock plan needs to be compiled for each line of merchandise.

34. 9/21/2017 Retailing Management - Swapna Pradhan 36 Steps involved Identify the attributes that the customer would consider in buying the product. Decide on the levels under each attribute. Allocate the total money or the units to the respective item categories.

35. 9/21/2017 Retailing Management - Swapna Pradhan 37 Creating a model stock plan A retailer has allocated Rs. 1 lakh to buying shirts. Assuming that the purchase price for the shirts is Rs.100, he will be able to stock 1,000 shirts. Create a model stock plan.

36. 9/21/2017 Retailing Management - Swapna Pradhan 38 Identify the number of levels under each attribute. Type of shirt – Dress, Casual, Formal, Sport Size – Small, Medium, Large, Extra Large Sleeve Length – Full Sleeves, Short Sleeves Collar Type – Saville , Button Down Color – White, Blue, Cream, Grey Fabric – Cotton, Cotton Blend

37. 9/21/2017 Retailing Management - Swapna Pradhan 39 Type Dress Casual Formal Sport % of Sales 10 40 20 30 Sizes Small Medium Large Extra Large % of Sales 25 40 25 10 Sleeve Length Full Sleeves Half Sleeves % of Sales 30 70 Allocate the total units to the respective item categories

38. 9/21/2017 Retailing Management - Swapna Pradhan 40 Men’s Shirts 100% (1,000) Dress 10% (100) Casual 40% (400) Formal (20%) 200 Sport 30% (300) Small 25% (100) Medium 40% (160) Large 25% (100) Extra Large 10% (40) Full Sleeves 30% (48) Half Sleeves 70% (112) Button Down 40% (45) Saville 60% (67) White 40% (18) Blue 30% (14) Cream 20% (9) Grey 10% (4) Cotton 25% (4) Cotton Blend 75% (14)

39. References https://www.thebalance.com/merchandise-mix-2890200 https://www.dotactiv.com/blog/merchandise-mix http://study.com/academy/lesson/product-assortment-definition-strategy-quiz.html http://www.mytotalretail.com/article/how-develop-profitable-merchandise-mix-15726/all/ http://vasantkothari.com/content/view_presentation/511/16-Merchandise-Mix