Range Planning PDF

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Range Planning...

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Range Planning

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Up to this point the merchandiser has been firmly focused on the financial aspects of planning. Now the merchandiser has more links to the buyer in deciding how the budget is spent & on what product Aim of range planning is a balanced product range to avoid errors, such as:  Not too many blouses & not enough dresses  Too many of one size & not enough of another  Stock shortages Key Terms & Functions Range Planning  The range plan checks that the right number of lines, in the right quantity, at the right price is delivered at the right time Category Management  Grouping of products into categories, making planning total store allocation easier & efficiency in store performance Assortment Planning  The process of distributing stock to store stock is allocated to according to certain criteria, including store size & sales targets Category Management  Where to place products, how much space to give each product line & the location of each line in store are important decisions  Satisfying customer needs, maximising profits, category = strategically managed product group, allocation i.e. what & how many - this week, space & location i.e. where to put the product - next week     

Once you have identified your category, only then can you consider the assortment of stock required within it In other industries this can be a straight forward process, however due to the sheer volume & range expected of a fashion retailer it is essential to further divide the stock into categories Categories will be selected differently by each company, however some standard categories would include; Sweaters, Shirts, Underwear, Sleepwear etc. Categories will often be further segmented depending on the size of particular etc. Menswear - Tops - T-shirts - V-necks

Category Management - What to do…  Define the category - which sub/categories, individual Stock Keeping Units (SKU) should you have  Set Key Performance Indicators (KPIs) i.e. targets  Constantly Review actual sales vs planned - this will ensure minimal stock outs, etc.  Effective Category Management will encourage groups of items to sell, not just individual SKUs  Category Management is as much what not to sell as what to sell

This Role of Product - Individual SKUs can be:  Category captain - brand leader within category - Levis (jeans) - generally considered a must in terms of stock  Retail brand re-enforcer - new categories, creates excitement in store  Cash-flow contributor - established categories, consistent value provision  Profit generators - growing, fashion, symbolic categories  Service providers - stagnant or declining, staple products, well established brands  Traffic builders - creates interest within the store & directs 'traffic'

E.g. Adidas

The Importance of Lead SKUs  A successful merchandiser will aim for as many 'stars' & 'cash cows' as possible, whilst accepting 'problem children' as a necessity

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Although a particular item may be this seasons 'must have' does it create (enough) profit? Lost leaders are not uncommon in retail (although) less so in fashion retail

Assortment Plan  Ensures that a balanced assortment of merchandise is available to meet the needs of as many customers as possible  The assortment plan is a detailed plan showing specific quantities & characteristics of each product to be purchased  This will consider factors such as colours, sizes, materials & brands  An understanding of your target market is essential Key Factors Influencing Assortment 1. Firms' retail strategy 2. GMORI of the merchandise mix 3. Physical characteristics of the store 4. Complementing categories Firm's Retail Strategy  What type of retailer are you?  Not just as simple as low-cost/ premium…  Low-cost could be: everything, including clothes… ASDA, just clothes… Primark  Despite similar price points, which do you think would have a greater selection of clothes?

GMROI = Gross Margin Return on Inventory  The targeted profit for the entire range/ category  Profit margins are set as goals at: SKU level, category level, department level, store level, etc.  In an ideal scenario the same 'lift' or profit margin would be applied to all SKUs, however this is impractical in the competitive environment. Some items may require a lower RRP due to competitors pricing & thus the profit margin drops  The converse of this is that other items can sell for far more than the standard profit margin. It is the job of the merchandiser to ensure that their assortment maintains the required average mark-up across the range Physical Characteristics of the Store Space  Merchandisers must consider the space within the store they are filling  Although it would be nice to stock 30 different types of jeans, the advantage gained by having selection may be lost if it means your customers can find what they are looking for as you have too much in too small a space Complementing Categories  Branded jeans may have lower GMROI than other merchandised, however they bring people to the store  Therefore during the purchase of these, if other higher GMROI items can be sold in addition, this begins to balance the average store mark-up…  i.e. Belts & accessories tend to have higher GMROI. These could be located in an entirely different section of the store, however if they are right next to the jeans it may encourage sales

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Fashion Merchandise: High demand for a short period of time (generally a season) The job of a merchandiser is to identify the best sellers quickly a place reorders immediately. Customer demand is difficult to predict. Basic (staple) merchandise: Consumers will expect to see this at all times of the year, i.e. plain t-shirts, underwear etc. Sales forecasting of these items is far easier & can be based on prior sales figures & trends. This also includes seasonal staples which are only required at certain times of the year: hats, scarfs, gloves etc. Customer demand remain fairly consistent. Convenience merchandise: items that the consumer expects to be available at all times usually inexpensive (plain white t-shirt). A large assortment is not required. Generally will be purchased regardless of brand. Speciality merchandise: items that are only accepted in well known brands. A merchandiser must therefore: Identify the levels of brand loyalty of the customer, establish which brand(s) is/ as required, determine whether acceptable brand substitutes exist.

Key Value Items (KVIs)  Key Value Items (KVIs): a best-selling continuity style, which is core to retailer's product sales. Usually priced to represent value & reflect high-volume sales.  It is not uncommon for retailers to have 50% of their sales coming from 10% of their options - these KVIs & are stocked in depth.  Think how important 501s are to Levis or the original UGGs

Assortment Plan Example  First you must identify the factors that are most critical to your customers - brand, pric e, size, colour, materials  Decide the general classifications of the products the store or department will carry - men's, woman's, children's etc.  Divide these classifications into sub classifications - you have then determined the breadth of your product assortment  Determine the brands & price lines  Decide upon the proportion of one classification to another e.g. brand A - 20%, brand B 30%  Calculate the specific number of units to purchase...