Unit Planning and Merchandise Lists

Unit planning is an operational management tool to plan the merchandise assortment and support. It is directed at determining the amount of inventory the retailer should carry by items and by units and answers the inventory questions of how many product items or assortment and how many units of each items or support to stock. The process of unit planning involves the use of several merchandise lists which constitute a set of operational plans for  managing the total selection of merchandise. Based on the type of merchandise, the retailer carries, one or more of the following three merchandise lists namely, Basic Stock list, Model stock list and Never-out list. These merchandise lists represent essentially the ‘ideal’ stock for meeting the consumer’s merchandise needs in terms of assortment and support.

1. Basic Stock List

The “basic stock list” is a planning instrument retailers use to determine the assortment and support for staple merchandise. ‘Staples’ are product items for which sales are either very stable or highly variable but predictable. In either case, estimates of the required assortment of merchandise items and the number of support units for each item can be made with a relatively high degree of accuracy. Thus, in planning for staple merchandise, the retailer can develop a very specific stocking plan. The basic stock list is a schedule or listing of “stock keeping units” (SKU) for staple merchandise. A “stock­ keeping unit” is a merchandise category for which separate records (both sales and stock) are maintained. A ‘SKU’ can consist of a single merchandise item or group of items.… Read the rest

Planning Reductions in Merchandise Budgeting

This is a very significant stage in developing the merchandise budget namely planning of reductions. “Retail reductions” are the difference between the merchandise item’s original retail value and its actual final sales value. This difference is the result of three major factors namely, mark-downs, discounts and shortages. “Mark downs” are the reductions in the original retail price for the purpose of stimulating the sale of merchandise. The amount of markdown can vary considerably depending on the type of merchandise and the condition under which it is sold. “Discounts” are reduction in the original retail price that are granted to store employees as special fringe benefits and to special customers in recognition of their special status say senior citizens, disadvantaged customers and religious personalities like clergy, priests, and so on. “Shortages” are the reductions in the total value of the retailer’s inventory as a result of shoplifting, pilferage and merchandise being damaged and misplaced. 

There are several reasons as to why the retailer is to plan for reductions. The major one are : (1) The major purpose of the merchandise budget is to outline the retailer’s total rupee investment in the form of inventory. Therefore, any occurrences that might reduce the value of that inventory should be accounted for to give the retailer an accurate inventory investment picture (2) The merchandise budget calls for an estimate of stock levels in rupee amounts. Without reductions planning the retailer’s proposed stock levels might be inadequate to meet expected sales levels (3) Reductions planning is necessary if the retailer is to plan future operations or purchases accurately.… Read the rest

Sales Planning in Retail Merchandising

Majority of retailers use a form that summarizes the basic budgetary information for a given merchandise grouping during a specified period normally for a period of six months. The retailer must select the control unit for which projections will be made, before making sales estimates. The “control unit” is the merchandising grouping that serves as the basic reporting unit for various types of information namely, past, present and future. The retailer has the choice to estimate future sales for an entire store, for a merchandise division or department, or for an individual product-line or item. The most three acceptable control units can be merchandise groups, merchandise classes and merchandise categories of all these three, experts recommend merchandise categories as the basic control unit as it is generally much easier to aggregate the information than it is to disaggregate information, i.e., breaking down merchandise groups into classes and categories. This attempt increases the accuracy in estimating future sales and to get greater degree of control throughout the entire budgetary process. Sales planning involves two types of estimates namely annual and monthly.

1. Annual Sales Estimates

A thorough examination of retailer’s past sales records is the alpha point for making sales forecasts for each merchandise category-better known as control unit. By plotting the actual sales forecasts for each control unit over the last few years, the retailer can identify part sales patterns and gain some insight into possible future sales trends. This approach to sales estimates is generally referred to as time series forecasting .… Read the rest

Concepts of Merchandising and Merchandise Planning in Retail

Retail Merchandising

Merchandising is a process involving developing, securing and managing the merchandise mix to meet the firm’s marketing objectives. The merchandise ­mix stands for the retailer’s total offering, be it goods or services or both. The merchandising process is a three tier structural set of activities. The following configuration gives the idea of merchandising process.

The first stage or tier is to do with developing the merchandise-mix which is composed of two elements namely product and service-mix. The second stage or tier is securing the merchandise-mix which involves two highly skillful and specialized activities namely the buying process and the procurement process. Here, the retailer determines “from where”, “when” and “how” to get products into the stores. The third and the final stage or tier in the merchandising process is managing the merchandising-mix which is to do with planning and controlling the merchandise to ensure efficient, profitable operations.

Retail Merchandise Planning

Merchandise planning consists of establishing objectives and devising plans for obtaining those objectives. The planning process normally includes both rupee planning in terms of merchandise budgets and unit planning in terms of merchandise lists. The overall objective of merchandise planning is to satisfy both the customer’s merchandise needs and the retailer’s financial requirements. To attain that objective, the retailer must devise merchandise plans that create an acceptable balance between the merchandise inventories and sales. This inventory to sales balance requires the retailer to plan each merchandise category carefully regarding (1) Inventory investment (2) Inventory assortment and (3) Inventory support.… Read the rest

The Concept of Retail Sites and it’s Classification

A “retail site” is the actual physical location from which a retail business operates. According to retail specialists, retailer’s site is one of the principal tools obtaining and maintaining a competitive advantage through spatial monopoly. A given site is unique when its “positional qualities” serve a particular trading area consumer in way that no other site can match. That is why, retailer’s site problem has solution in its identification evaluation and final decision of perfectly matching site.

The first step in appraising retail site locations is to identify all potential site alternatives. The number of site alternatives in any given trading area can range from an extremely limited to a very large selection. Therefore, before a retailer attempts to have any formal evaluation, he should scan and screen the alternatives by asking three crucial questions. These are :

  1. Availability. Is the site available for rent or out-right purchase?
  2. Suitability. Are the site and the facilities of a suitable size and structure?
  3. Acceptability. Is the asking rental rate within the retailer’s operating budget? 

To be considered for further evaluation, a site alternative must meet all the three screening criteria. That is a selectable site is available, suitable and acceptable.

Retail sites can be classified as either Isolated or Clustered.

Isolated Retail Sites

Isolated sites are retail locations that are geographically separated from other retail sites. However, they can be next to other forms of economic and social activity. One site alternative is to “go it alone” by selecting an absolute location isolated from other retailers.… Read the rest

Growth Potential of Retail Trading Areas

Every retailer must answer one more question before completing the trading area evaluation process. That is what holds for the future for the retail trading area ? In other words he is to foresee the growth potentials of trading areas. It is because, the marketing opportunities can change quickly or dynamically growing trading areas might turn either static or decline. The retailer either must fight to maintain present market share or be willing to survive on a smaller share without future growth. However, with the growth, the retailer has an opportunity to expand sales and market share at a reasonable amount of cost and effort. Therefore, the final step in evaluating a retail trading area is to determine the areas future growth.

The retailer can very often learn what to expect by examining future conditions because, the future of a retail trading area is an outgrowth of past and present conditions. Visual observation of an area is a simple method of looking into the future. Though it lacks scientific methodology, visual inspection of current activities can produce a useful picture of future. While projecting the future picture, the retailer should give due weightage to the following factors:

  1. New and expanding residential areas combined with older, stable neighborhoods provide a solid base for future growth.
  2. An expanding commercial or industrial base signals growth opportunities.
  3. A good balance between item number one and two cited above reflects a stable growth rate that avoids over-dependence on limited economic activity.
  4. A well developed transpiration network as well as proposed future transportation networks in the trading area contribute to a trading area’s growth.
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