Transcript Retail Operations Week 2

FM10211 – Retail Operations
Week 2
Ch 2: Merchandise/Store Positioning
Ch 4: Merchandise Planning, Buying,
Control, and Profitability
Recap: Why are we here?
• Exercise: Why is a musician successful?
– Answer – there are many combinations of style, ability,
values that work!
• What makes a successful retailer?
– Any combination of
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Merchandise
Sales Promotion
Service Level
Etc.
• Retail Operations
– Choosing and implementing a successful strategy
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Concept: Operating Costs
• What costs are incurred • Which of these are
in retail?
operating costs?
– Cost of Goods Sold
(COGS)
– Rent & Utilities
– Sales Promotion
– Personnel
– Management
– Merchandising
– Etc.
– Everything except COGS!
• COGS includes
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Cost of merchandise
Transportation
Discounts
Alterations
– Anything that doesn’t
change if you sell 1 item or
10,000
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Chapter 2
Merchandise/Store Positioning
Retail Image
• The public’s perception
• A company’s fashion image is based on
– Merchandise
– Promotion
– Environment
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Mission Statement
• Includes the nature, purpose, and direction of a
company
• Helps everyone share a vision
• Decisions can be evaluated vs. the Mission
Statement
• Example: St. Clair Apparel
“Our mission is to be the Premier Supplier of Imprinted Apparel. To
achieve this we will greet every customer with warmth and
enthusiasm. We will assess the customer’s needs and expectations. We
will utilize all of our capabilities to meet those needs and exceed their
expectations. We will provide them with the highest level of service
possible, regardless of the size or scope of their needs.”
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Fashion Cycle
(Product Life Cycle)
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Fashion Cycle II
• Retailers target one or more sets of
consumers
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Innovators
Early Conformist
Mass Market Consumers
Late fashion followers
Laggards
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Changing an Image
• Implies change in shoppers
• Can be accidental or planned
– Danger of losing old market before gaining new one
– Performance must be consistent with the image
• Reasons for change
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Demographics
Economy
Competition
New ownership
• No change may be the biggest risk!
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Differentiation/Positioning
• Image must differentiate companies
• Retailers cannot be all things to all people
• Different from competition:
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Quality
Physical environment
Customer service
Price
Employee attitude
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Fashion
Level of merchandise
Uniqueness
Location
• Image Positions a company in the marketplace
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Competition
• Companies competing for the same
consumers
• Can be a good thing!
• At market saturation, only the company(ies)
that does the best job will survive!
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Niche Marketing
• Marketing to a narrowly-defined customer
segment
• One way to differentiate
• Offer deep assortments of one particular
type of merchandise
• Example: www.uniformsandscrubs.com
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Market Research
• Collect and analyze data relating to:
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Store location
Target-market profiling
Consumers’ needs and wants
Company image
Promotion
etc.
• Provides data on which to base decisions
– Reduces some risk
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Target Marketing
• Seeking to serve a specific group of customers
• Demographics
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Age
Gender
Income
Education
Marital Status
• Psychographics
– Activities
– Interests
– Opinions
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Market Trends
• Market changes
– Demographics
– Psychographics
• Existing or new retailers can benefit
– Add or change to serve changing market
• Merchandise
• Services
• Promotions
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Demographic Trends
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Slowing population growth
Aging population
An increase in teens and young adults
More working women who have children in
daycare
Increased education
Migration to the sunbelt
Increased cultural pluralism
Increased but unequal income growth
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Psychographic Trends
• Blurring of male and female roles
• Importance of time management
• Life simplification, return to traditional
values
• Generational differences in the marketplace
• Interest in the environment
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Branded Merchandise
• Brands
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Known entity
Style and image
Quality
Established fit
Price
Leads to loyal customer base
• Younger consumers
• Affluent
• Should set the product apart from its competition
• Names and logos are registered as trademarks
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What is a billion?
• Imagine:
– $1,000  interest-free checking account daily
• Not bad!
– After 1 year: $365,000
– After 3 years, about $1 million
• $1,095,000 to be exact
– 1 billion = 1,000 million
– So, to get $1,000,000,000: 3,000 years!
Bill Gates’ current net worth: over $45 billion!!
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Top Brands
2005
Rank B rand N ame B rand V alue
$ billions
1
C oc a- C ola
6 7 .5
2
M ic ros oft
5 9 .9
3
I BM
5 3 .4
4
GE
4 7 .0
5
I ntel
3 5 .6
6
N ok ia
2 6 .5
7
D is ney
2 6 .4
8
M c D onald's
2 6 .0
9
T oy ota
2 4 .8
1 0 M arlboro
2 1 .2
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Some Top Apparel Brands
Rank
18
30
40
49
65
71
77
82
93
95
96
2005
Brand N ame Brand V alue
$ billions
L ouis V uitton
1 6 .1
N ike
1 0 .1
G ap
8 .2
G uc c i
6 .6
C hanel
4 .8
adidas
4 .0
Zara
3 .7
H ermes
3 .5
P rada
2 .8
A rmani
2 .7
L evi's
2 .7
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Chapter 4: Merchandising
“Buying and selling goods and/or services in
order to make a profit.”
• Primarily about understanding what the
customer wants
• Requires planning and preparation
– Unless you are Country Junction
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Profit
• Summarized in Profit/Loss Statement (P&L)
– Also called an income statement
– Summarizes finances during a time period
Gross Sales
- (Returns, discounts, etc.)
= Net Sales (Revenue)
- (Cost of Goods Sold (COGS))
= Gross Margin (Gross Profit)
- (Operating Expenses (Overhead))
= Profit
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Stock Keeping Units
• SKU
• Smallest unit level of merchandise
• Includes
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Style
Color
Size
Etc.
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Buying
• Done by the buyer
• Can be a division (larger companies)
– Or part of operations (smaller companies)
• An art
– Aesthetic and visual principles
• And a science
– Budgeting
– Forecasting
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Purchasing
• Buying materials for manufacture
• Also called sourcing
• In some cases, buying from manufacturers
and vendors is done by same people
– E.g. The Limited
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Planning
• Provides essential information
• Leads to meeting Mazur’s 5 “rights”
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Right merchandise
Right time
Right place
Right quantities
Right price
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Forecasting
• Predicting what customers want
• Quantities
• Uses as much input as possible
– External environmental factors
– Internal environmental factors
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External environmental factors
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Economy
Society and culture
Technology
Political and legal issues
Analysis available from a variety of sources
Trend books, etc.
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Internal environmental factors
• Store records
– Sales
– Profits
• Store culture
• Vendors
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Merchandise Budget
• Dollar planning
– How much money will be spent
• Unit planning
– How many of each type of item will be purchased and kept in
inventory
– Includes the mix
– Considers assortment and qualitative aspects
• Both usually include dollar amounts and % of net sales
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Inventory Flow
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Start: beginning of month (BOM)
Stock comes in
Stock is sold
Shrinkage
Returns
End: end of month (EOM)
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