MRB_8+Assortment+plan.ppt for retail business

MRB_8+Assortment+plan

1. The Assortment Planning Process
Assortment Plan :-describes in general terms what should
be carried in a particular Merchandise category .
A Good Assortment plan requires
-a good forecast for sales ,
-GMROI
-Inventory Turnover
-Mix of subjective & experienced judgment

2. Dimensions of Assortment Planning :-
1.Variety
2.Assortment
3.Product Availability
VARIETY:-is the number of different merchandising categories
within a store or department . Stores with a large variety are said to
have good breadth .
Variety = Breadth
ASSORTMENT :-is the number of SKUs within a category .
Stores with largeassortment are said to have good depth.
Assortment = Depth
PRODUCT AVAILABILITY :-defines the percentage of demand
for a particular SKU that is satisfied . Product availability is also
referred to as the level of supportor service level.

3. Determining Variety & Assortment
Following Factors :-
1. Profitability of Merchandise Mix
2. The Corporate Strategy & Positioning toward the Assortment
3.Physical Characteristics of the Store & Layout of the Internet
4.Balance between too much versus too little assortment
5.Complementary Merchandise
Determining Product Availability
The higher the product availability , the higher the amount of backup
Stock necessary .

4. Cycle Stock:-also known as base stock :-inventory that result from the
Replenishment proces & is required to meet demand when the retailer can
predict demand & replenishment times (lead times) perfectly .
Backup Stock:-also known as safety stock or buffer stock , as a cushion
for the Cycle stock so they wont run out before the next order arrives
Units Available
Weeks
Backup
Stock
Cycle Stock

5. Level of Backup Stock Depends on :-
1.Safety Stock Requirements
2.Product availability the retailer wishes to provide
3.Higher the fluctuations in demand
4.Lead time from the vendor
Lead time:-is the amount of time between recognition that an
order needs to be placed & the point at which the merchandise
arrives in the store &
is ready for sale .
5.Fluctuations in lead time :-uncertainty in lead time
6.Vendor’s product availability

6. Branding Strategies
1.Manufacturer Brands
2.Licensed Brands
3.Private-Label Brands
Manufacturer Brands:-also known as national brands are products
designed , produced and marketed by a vendor .
Licensed Brands:-Special manufacturer brand is a Licensed brand ,
in which the owner of a well-known brand name (licensor) enters a
contract with a licensee to develop , produce and sell the branded
merchandise .
Licensee may be
1.Retailer that contracts to have the manufacturer to produce
the licensed product
2. Third party that contracts to have the merchandise produced &
then sell it to the retailer

7. Private-label Brands
Also called store brands , are products developed by a retailer &
available for sale only from that retailer .
Reasons for relatively small growth in past :-
1.National brands are heavily advertised , creating a strong consumer
franchise .
2. Hard for retailers o gain economies of scale
3.No sophisticated enough to aggressively compete against
manufacturer brands
4.Had a reputation of being inferior to manufacturer brands
5.Requires significant investments to design merchandise
6.Need to create customer awareness , develop favorable image for
their private-label brands .

8. Benefits of Private labels to retailers :-
1.Strong private labels boosts store loyalty
2.Enhance store image if the brands are of high quality & fashionable
3.Successful private-label brands can draw customers to the store .
4.More control over manufacturing , quality control & distribution
of the merchandise .
5. Gross margin opportunities may be greater .
Categories of Private-labels
1.Bargain Branding:-price sensitive segment
2.Premium Branding
3.Copycat Branding:-imitates the manufacturer brand-appearance,
packaging
4. Parallel Branding:-“ invitation to compare”

9. INTERNATIONAL SOURCING DECISIONS
Reason for sourcing globally rather than domestically is to save money .
COST ISSUES WHEN MAKING INTERNATIONAL SOURCING DECISIONS
1.Country-of –origin Effects
2.Foreign Currency Fluctuations
3.Tariffs
4.Free Trade Zones
5.Inventory carrying cost
Cost of carrying inventory =
Average inventory value (at cost) * Opportunity cost of capital
6. Transportation Cost

10. CONNECTING WITH VENDORS
1.Internet exchanges
2.Wholesale Market Centers
3.Trade Shows
4.Buying on their own Turf
5.Resident Buying Offices
Internet Exchanges:-Retail exchanges :-are electronic marketplace
operated by organizations that felicitate the buying & selling of
merchandise using the Internet .
Functions of Exchanges:-
1.Directory
2.Selection
3.Pricing (reverse auction)
4.Collaboration
5.Content

11. NEGOTIATING WITH VENDORS
Guidelines for Planning Negotiations with Vendors :-
PRICING STRATEGIES
1.EDLP :-Every Day Low Pricing :-
Benefits :-
1.Reduced price wars
2.Reduced advertising
3.Reduced stock outs & improved inventory management
2. High/Low Pricing :-
Benefits :-
1.The same merchandise appeals to multiple markets
2.Sales create excitement
3.Sales move merchandise
4.Emphasis is on quality