Merchandise Planning and Management
Category Management is the concept under retail management where in it is described as being the tool for managing the operations of the retail formats. Category management is considered to be an organizational approach under which the management of the retail establishment is broken and sub divided into categories of like products. These categories are nothing but the various functions like product selection, promotion, pricing and the placement of the product is done on a category by category basis with the objective of maximizing the overall profit of all the categories.
Category management usually involves a retailer, could also be a supermarket where by a category captain is in-charge of planning the activities and operations of a particular category. The retailer needs to identify the stock requirements by maintaining a merchandise assortment plan along with the recommendations on pricing, the display catalogue and the promotional assignments there off.
Retailers also have to study the market strategies across the different groups that exist under the competing brands and the retailer also needs to consider the percentage of weight age that he would give for the retail shelf space for different manufacturers products which would be decided upon by the strategy the manufacturer has
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The success of category management is judged by the amount of changing consumer demographics where in every consumer today is becoming more and more demanding with the changing consumer lifestyles along with their choices available with wide variety of assortment of products. Thus the success is based on the consumer satisfaction level which poses an advantage in this changing competitive environment. Having a “loyal consumer base” is the key to attain an association and a relationship with the consumers who in turn help the consumers in every aspect of purchase behavior.
Meeting the needs of the consumers for a good value, quality, service and variety is what the retailer should strive towards. Efficient store assortment is one of the important focus areas under the concept of category management which helps in providing an assortment of product and services that are profitable and which meets the consumer needs. Using the space in the store format efficiently with higher profits, better clientele and maintaining less frequent out-of stock sales adds to the efficiency of a successful category management business.
Under the ambit of category management, the buying organization plays a vital role where by the buying process needs to be studied by the retailers and the buyers again needs to consider which retailer they need to opt for their purchase decisions. GMROI – Gross Margin Return on Inventory Investment involves inventory turnover and calculating average inventory. It is a tool used by retailers in the process of merchandise planning and also evaluates the performance of the merchandise and the goods.
GMROI for a particular category is based on the financial objectives of the retailer at large. The rapid inventory turnover is based on the inventory turnover where in the financial success of the retailer is dependent upon. Care needs to be taken in cases of extreme inventory turnover rates i. e. extremely rapid and extremely slow inventory turnover rates. While considering the assortment and variety of the consumer product, buyer needs to study the uniqueness of the product along with its quality which is available in the retail buyer’s product listing category.
Buyers require having a thorough knowledge and information on the consumer preferences, the shelf space, distribution allowances, advertising and consumer promotion support, market testing results in addition to the product and supplier information. Hence a supplier needs to analyze all the relevant requirements of the buyer which include changes in the prices, product shortages and its date of availability, discontinued items, and changes happening in the labeling, size, packaging and promotional activities, and product samples and provide it concisely and in a timely manner upon the request of the buyer.
Speaking broadly about the levels in a category structure for a consumer product involves series of functions between the supplier and the consumer which include inbound transport, warehousing, internal transport, distribution centres and outbound transport. Category management process for a particular product would involve understanding of the category definition, category role, and assessment of the category, preparing a category scorecard, designing a category strategy, category tactics and finally implementing the plan.
PART B: Assortment planning involves overall merchandising strategy focus which tailors the assortment of products into components which address the store level demands of the consumers. This could include the product categories, styles, colors, attributes and stock keeping units that tailor the store characteristics, demographics and the store logistics. Retailers should also consider space utilization and space planning with store clustering.
Assortment planning combines the initiatives of planning in addition to the financial merchandise planning activities and replenishment of the goods. 80% of the retailers will adopt an automated system which will help them plan their assortment of products, planning of the store, its allocation and replenishment of the operations. Focusing upon the specific market demand and satisfying the target customers ‘requirements will help the retailer in maintaining a customer centric approach which helps in an excellent shopping experience that builds on customer loyalty.
Thus retail assortment planning is the proper mix that needs to be made available by matching the right kind of customers’ profiles, the climatic considerations and the local trends. Maximizing the profitability by the product category has been the key area of merchandise management by lowering the working capital which includes increasing the inventory turns and improving capacity utilization. Merchandise planning broadly would incorporate the activities of Merchandise Analytics, Planning of sales and Margin planning, planning of inventory, Open- to- Buy planning and long term forecasting.
Under Assortment Planning: space management is the prime activity to be handled which comprises of assortment analytics, assortment definition, store clustering, space, shelf and capacity planning, assortment optimization, optimization of shelf, floor and space along with style, color and per packing planning. Store Planning would necessarily require conducting store analytics, Store Financial Planning, Sales and Margin Planning, Inventory Planning, Open-To-Buy Planning, Long-Term Forecasting. Finally the concept of assortment management encompasses the wide arena of operational assortment management and assortment controlling.
In order to succeed in assortment planning, retailers need to take the supply chain to the next higher level by maintaining proper inventory and logistics management by planning inventory and receipts on the sales been projected and managing the seasonal assortments which identify both the opportunities and the risks involved. The science of sales forecasting and managing the inventories coupled with the art of classifying the needs of the consumers by satisfying their requirements is the game all about merchandise and assortment planning.
PART C: The emerging trends and key success factors under private label store brands include information that would help every retailer and manufacturers with regards to understanding the attitudinal differences among the respondents across the different income levels and age groups. The growing revolutionary change happening in the value system and the consumer selectivity is seen happening in every grocery store today. The highlight here is, once the low cost and lesser quality substitutes the branded goods, the private label brands turn into innovative, excellent quality providing good value for its retailers.
Hence for every retailer, the gap in the quality is closing with the new changing dynamics happening under the landscape of every consumer. The selection of a private label product is no longer dependent on price alone as the necessary considerations that are now required are variety, quality, store’s reputation and packaging. The consumer values and perceptions add up to the environment of retail business where by the retailers get the opportunity to expand household business and there by increase the usage of the product.
In the context of commodity driven categories which have not been empowered by national brand, there is less dependence on innovation and still are considerably been considered favorable. These categories include staples, butter, milk, pasta, paper-ware products and creamers. Retailer Strategies: Sells only store brands ? Store brands are also known as private labels. Packaging and in-store communication has been the biggest success for retailers of premium store brands along with mass media advertising.
As studied in the case of private labels, a 30% margin on the sale of the store brand generates fewer profits as compared to the 20% margin on the sale of a manufacturer’s brand. Lower income shoppers rely solely on the store brands on the various categories of analyzed food, non-food categories and beverages. The opportunities in this segment of store brands are the ideology of micro-segmenting and cross purchase pattern understanding of the lower income shoppers. Retailer Strategies: Sells a mixture of store brands and national brands ?
a retailer selling a combination of store brands along with national brands can avail preferred shelf positions by collaborating on the packaging and the displays. When a retailer only sells off national brands, low pricing becomes the key differentiating factor where by the retailer doesn’t try to create loyalty amongst the customer but stresses upon the sales every week. The equity of a national brand is usually used to endorse a store brand which in turn helps in rising the functioning of the retailer.
Retailer Strategies: Sells only national brands ? the practical implications of these manufacturers are that those selling national brands by along side producing private labels will increasingly concentrate the retail market. With the concept of private labels or store brands coming into force, the national brands have lost their name which once they possessed. Today the market has changed from a brand driven and loyalty driven market place to a price driven market place.
But according to the research conducted, consumers don’t make a sharp distinction between the store and the national brands, rather a emotional connection between them and the brands will fetch higher returns for the retailers. Hence national brands are said to be out of their way now, as the focus currently is on the powerful and global brands being created. Thus in general store brands are charged higher to value oriented brands and lower to the national brands.
Conclusion: Retail Management is a very crucial area on which rests the visual appreciation of the customer looking at the store formats visual merchandising merged with the actual assortment of merchandise an d inventory management handled.
References: BNET, (2008). Retailers, national brands collaborate on packaging: unique packages and displays earn Avon, Pillsbury and Primo Foods preferred shelf positions, Retrieved October 30, 2008 from http://findarticles. com/p/articles/mi_m0UQX/is_2_66? pnum=3&opg=95150116&tag=artBody;col1 BNET, (2008).
IRI Report Sharpens View on Private Label Insights and Emerging Retail Growth Markets , Retrieved October 26, 2008 from http://findarticles. com/p/articles/mi_m0EIN/is_2008_Feb_26/ai_n24325279 Bohach, C. (2006). Roadmap to Assortment Planning, Retrieved October 25, 2008 from http://www. risnews. com/ME2/dirmod. asp? sid=E2F9E0FBAE98430896F0B62A8F1C95B9&nm=&type=MultiPublishing&mod=PublishingTitles&mid=2E3DABA5396D4649BABC55BEADF2F8FD&tier=4&id=E4FF3B59E30244E9874901056B019288 ECR, (2008). Category Managemen’, Retrieved October 29, 2008 from http://www.
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