PGA Merchandising Study Guide PDF

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PGA MERCHANDISING STUDY GUIDE Lesson 1: The PGA Business Planning Model in the Retail Environment  The PGA business planning model revisited o PGA business planning model consists of 5 major concepts that can be expanded to guide an entire facility. 1. Define the business (strategic planning considerations) 1. Define the Business (annual business planning considerations) 2. Assess the current state of the business 3. Develop business objectives and related strategies 4. Prepare financial forecasts and budgets 5. Monitor performance o Before the planning process can be effectively implemented, the facility must establish a systematic approach.  Defining the merchandising business and trends o The vision and core values are considered separately from the facility profile and mission statement in the planning stages, even though they are linked  Defining the Competition o Direct Competition- is any organization that meets the same customer need with the same, or similar, products and services. o Indirect competition- any organization that meets the same customer needs with a different product or service. o Cooperative facility- one that is in competition (either direct or indirect) with a golf facility but collaborates with the facility to improve business at both facilities.  PGA annual operations survey reports o The PGA annual operations survey tool allows PGA professionals to sort a number of financial and operational indicators by facility type, region, and major market. It is based on an annual survey of PGA members and can be used to track trends and evaluate facility performance related to retail. Lesson 2: Retail Planning and Creating an Open -To-Buy Plan  Create a merchandising buying plan o How much of a particular product to purchase or the planned purchase dollar amount is referred to as the open-to-buy (OTB). o OTB is the amount of dollars to be spent to purchase or replace inventory in a particular merchandising category in order to meet the set sales goals. o OTB helps avoid over and under investing. o Good merchandisers will use the plan to determine how much to spend with each vendor in a specific merchandise classification. o OTB plan is an indispensable inventory management tool that identifies how much money must be committed to purchasing inventory for each merchandise category at specific times in order to meet the sales projections established during the business planning process.

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o To correct a cyclical downward spiral is to properly plan for the correct amount of inventory through a proper OTB plan. o A typical OTB plan covers one year, and is broken down into 12 one-month segments for each merchandise category. o OTB plans help merchandisers do the following:  Identify how much money must be spent each month to purchase or restock inventory  Avoid over-under investing in inventory  Maintain inventory at levels that support forecasted sales  Avoid running out of individual products or merchandise categories OTB Plan Development Overview o Steps for OTB Plan Development: (see page 15)  Forecasting sales  Forecasting the cost of goods sold  Projecting turnover  Establishing beginning-of-month inventory levels  Calculating open-to-buy budgets Step 1: forecasting sales o 3 areas to be examined further when developing the sales forecast are previous sales volume, general internal, and external factors. o To create this set of goals, planners must perform the following tasks:  Classify the operations merchandise in a logical manner  Use the revenue forecasts in the business plan to estimate the sales for each classification  Distribute the estimated sales over a twelve- month period Classify Merchandise o Merchandise classification is a category of products that can be grouped together logically. o Merchandise classifications are not set in stone and can be customized to each golf professional’s desires o Small golf shops may use fewer than 10 classifications, while large golf shops could use 25 or more. Estimate Annual Sales for Each Classification o The next task is to estimate the retail sales for each classification. o It is imperative that the total of the classifications sales forecast are equal to the shops annual sales forecast Distribute Annual Sales by Month o The final task involved in creating a sales forecast is to distribute annual sales into individual months by classification. o It is important to consider the following when forecasting monthly sales:  Trends in rounds played: an increase in the number of rounds played typically translates to an increase in retail sales, and vice versa

Seasonal patterns: Some classifications generate higher revenues during specific seasons. for example, sales of hats, sunglasses and sunscreen are higher in the summer  Market trends: planners must do their best to sniff out any new items that will become available in the next year and affect sales. For example, if a specific clothing trend is generating buzz or a new club line is coming onto the market, it should be accounted for in the forecast  Promotional campaigns: major events or one-time promotions typically generate higher sales, and should be accounted for in the forecast  Projections should account for major holidays, when customers usual purchasing habits are altered. For example, sales or gift items increase in the two months leading up to Christmas.  Special events and tournaments: retail sales generally spike during times that overlap with a tournament or special event (such as a wedding, concert, or trade show) at the facility. Step 2: Forecasting the Cost of Goods Sold o (COGS) Is the value at cost of the merchandise sold to customers, stolen, lost, or destroyed during a particular period of time. o Beginning of month inventory at cost + new inventory purchased – end of month inventory at cost = cost of goods sold in dollars o COGS is often expressed as a percentage of sales o Merchandisers work to keep COGS as a percentage of sales between 50-60% for soft goods and 65-75% for hard goods. o COGS as a percentage of sales: Cost of goods sold/ total merchandise sales= cost of goods sold as a percentage of sales. Step 3: Projecting turnover o The turn rate (also known as turnover) is the number of times the average inventory is sold through and replaced during a given period of time (a year or season). It is a gauge of the speed of which merchandise moves in and out of the shop. o Soft goods typically have a higher turnover rate than hard goods o Typical turnover rate for golf shops is somewhere between 1.5 and 2.5. o Having a turn rate that is too high may cause the shop to run out of a product, but one that is too low means markdowns may be needed to move product out of the shop. Step 4: Establishing Beginning-of-month Inventory Levels o One of the most important factors is how much inventory is physically present and ready to be sold at the facility. o This information is generally planned and tracked on a monthly basis by forecasting the inventory level at the beginning of each month Forecast Average Inventory Levels o Average inventory value- is the average amount of merchandise the facility must have on hand throughout the year to meet annual sales goals. 

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o COGS/ Projected turn rate = Average inventory level o Remember that a higher turn rate means the facility needs lower inventory level on hand to reach the same sales targets.  Adjust average inventory to account for sales fluctuations o The average inventory levels is just an average, and not an absolute value. o Seasonal Adjustments:  The inventory levels should be high enough to support initial sales for the upcoming season, but low enough to make room for the upcoming season o Monthly adjustments:  The BOMI cannot decrease more than the COGS in any one month  Step 5: Calculating Open-to-buy budgets o Facilities keep between 10%- 25% of the actual OTB amount in reserve Lesson 3: Merchandise Assortment plan , price point, and vendor selection  Merchandise assortment plan (MAP) o establishes the desired merchandise mix in the golf shop and lists the specific brands, sizes, colors, materials, models, styles, and price points of the products that the facility will sell. o Creating a MAP involves the following steps:  Review customer needs, product preferences, and price points  Research prior years sales trends for each merchandise classification and item.  Research current market trends  Select an appropriate merchandise mix  Choosing the merchandise mix o Core merchandise stock fits all the criteria  Developing a list of approved vendors o Frist, a merchandiser must determine the type of vendors they are looking for and what best meets the needs of their business.  Concentrating vendor business o More and more leading golf shops are concentrating their buying power with a small set of carefully selected vendors, which improves the retail operation’s market efficiency and effectiveness, increase product variety, and lower retail prices.  Advanced Dating o Advanced dating gets inventory into the shop more quickly while delaying payment to a later quarter. o Advanced dating is generally offered for products with low turn rates, such as shoes and golf bag o Seasonal dating or spring dating- merchandise is received in the fall, but payment is not generally due until the following April or May.

o Anticipation or Incentive dating- the organization and the vendor agree on a future due date for payment, but the organization receives a discount for early payment. o Only useful if you are extremely confident the product will sale Lesson 4: Purchasing and Managing Inventory  Purchasing and ordering merchandise o It is important that the merchandiser control of the meeting and the amount of inventory purchased based on the pre-determined OTB plan.  Purchase orders o Purchase order- the P.O. is a key inventory control tool that helps identify which merchandise is on order, the date it was ordered, who ordered it, and when it is due to the store. o Many seasoned retail managers consider the P.O. to be the single most important piece of information in the backroom operation, if not the entire merchandising operation. o Establishing and enforcing a tight P.O. system is arguably the most Important step to ensure accuracy and adherence to OTB, MAP, and business planning. o Purchase orders work on concert with the OTB plan to track spending on inventory against the budget. Think of a P.O. as a debit card receipt and the OTB budget as a bank account. o Complete date- this is the last possible date that the vendor can fill the order and have it delivered to and accepted by the purchaser; the facility can refuse to receive orders that arrive after this date  Inventory Tracking o Perpetual Book Inventory- should be kept using a point-of -sale system that tracks real-time receipt and sale of merchandise; this type of system tracks changes to inventory in both dollars and units. o Physical inventory counts- should be conducted on a regularly scheduled basis. o Shrinkage- the amount of inventory that is actually on hand at a facility is always less than the inventory that retailers expect to have available. Shrinkage occurs for a variety of reasons, such as internal or external theft, human error, damage, loss, inadequate receiving or sales procedures, and insufficient accounting and tracking preferences.  Benefits of high turnover o Increased sales o Fewer Markdowns o The ability to capitalize on new trends o Lower expenses o Higher employee morale o Higher return on investment Lesson 5: Pricing strategies  Gross margin- is the difference between the final sales price and the cost of goods sold.  Key stoning: doubling the items cost

MSRP: Manufactures suggested retail Cost plus markup: applies a target markup percentage to each product in order to determine the retail price  The Mill River Plan: People can buy into a membership and receive a modest percentage above cost.  Competitive factors: o Supply and demand: Lesson 6: Floor and layout displays:  Planogram: an overhead map of the facility’s layout and merchandise arrangement.  Destination area: Towards the rear of the store that contains value-added services, such as club fitting or repair, or products that customers intend to purchase before they walk in the store.  Items with higher turnover or a high margin should receive a greater amount of floor space  Other considerations: o Buying patterns o Complementary products o Seasonality o Space  Changing elevations: Elevations are the key to dynamic and eye-catching displays.  Whenever possible the display should move the customer’s gaze from the top down.  Using accepted display standards o Items should be hung from left to right o Items should be grouped by color then size o Hangers and rods should face inwards for easy removal o Sizes should increase from left to right o All sizes should be displayed on a single fixture  To generate excitement and maintain strong displays must be changed and moved regularly  All retailers change displays when the seasons change, and again around the holidays  Arranging products in a light-to-dark and left-to-right display can make a strong visual statement. For vertical displays, colors should be laid out from top to bottom  When spacing products on a wall, leave between four and five inches between garments  Floor fixtures should be separated by at least three feet of space Lesson 7: Promoting and Selling  A common range is 3-5% of gross sales  Master calendar: Which outlines the dates and times of every planned event for the year, along with its relevant merchandising objectives  Features are descriptions of the product. Benefits are the advantages that a customer receives from using a product or service. Customers tend to buy benefits, not features.  COGS is the value at cost of merchandise sold to customers, stolen, lost, or destroyed, during a specified period of time  Good number for gross margin is 30% and some resorts can achieve 50%  

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110%-160% GMROI A general rule of thumb is that merchandise that has not sold within 90 days of receipt should be marked down and sold to make room for the arrival of new inventory...