Retail Buying & Merchandising Notes PDF

Preview

Summary

Retail Buying & Merchandising Notes...

Description

Retail Buying & Merchandising Week 1 (Introduction) 

‘Buying’ & ‘Merchandising’ almost indefinable in retail context



Roles, tasks & duties assigned to these terms vary significantly



Questions o How does a company buy? o What does a ‘merchandiser’ do? o What behaviours are acceptable?



‘Buying is a business of choosing: retail buying focuses on choosing products to satisfy the subsequent demands of ultimate consumers’ [Wingate & Friedlander, 1978]



‘To acquire the right quality of material, at the right time, in the right quantity from the right source, at the right price’ [Baily et al. 2005]



‘Successful retail buying depends on the ability of the buying team to co-ordinate relationships both inside the organisation and between the retailer, the supplier base and the customer’



Buyer’s Role o To translate the Marketing and Positioning strategy into reality o To be market driven- buyers are not selling agents for vendors, but purchasing agents for customers o Has become more complex- space, expansion of assortment competition



Merchandising (merchandise management) o The process by which a retailer attempts to offer the right quantity of the right merchandise in the right place at the right time while meeting the company’s financial goal [Levy & Weitz, 2004]



Visual merchandising o Aspects of product management that is concerned with presenting the product within a retail outlet to its best advantage. o Helps to achieve operational product management objectives o Maximising the effort of the buying teams by giving the product the best opportunity to sell

o Blends with the store design to create an environment that sends out strategic messages to consumers in order to reinforce the retailer’s brand values [Varley, 2006] 

Merchandising o The allocation of space to products in stores o The display of products- visual merchandising



Buying o Obviously inter-related o Buyers need to understand merchandise plans and possibilities o Merchandisers can only user what buyers buy



Retail product management o Incorporated at various levels within a retail organisation o Cross functional (buying & merchandising) o Strategic vs operational perspective o The supplier’s vs retailer’s view vs collaborative view o Effects the core business of retailers substantially o Product- A physical good, service, idea, person or place that is capable of offering tangible and intangible attributes that individuals/organisations regard as so necessary, worthwhile or satisfying that they are prepared to exchange money, patronage or some other unit of value in order to acquire it



Conclusions o Retail is more than buying cheap and selling dear

o Buying and Merchandising are ‘catch all’ terms o Roles, tasks and responsibilities will vary significantly o Multitude of factors influence our understanding of these functions o Retail product management as an integration of the buying and merchandising function

Week 2 (Ranging & Merchandising) 

Merchandise selection not a routine matter



Before buyer can focus on what to buy, must understand merchandising plan



Merchandise plan needs to relate back to the corporate objectives of the organisation



Objective is not to confuse the consumer by offering products that do not reinforce the company’s market position



‘Ranging and Merchandising aims to optimise the use through selection, presentation and promotion of product range, so as to satisfy consumer demand and consequently meet company commercial targets.’ (IGD)



Product Range o Decisions upon  Variety, depth, price level, availability o Product range:  The total product offering expressed in terms of:  Width (variety/different types of product categories)  Depth (amount of choice offered in terms of products/brand variation within a category; SKUs)



o Subdivision of product ranges:  End use  Price  Brand  Core vs non-core Product Range Profiles o Product Specialist

   

Specialist image; Good customer choice in category: Trained staff (Tie Rack)

o Market Specialist  Broad market  Full range of items  High customer footfall  High inventory cost  (DIY (choice, quality, price)) o Full Line Variety Store  Limited choice within wide assortment  High level of customer footfall  Emphasis on convenience customers  Weak image  Many items with low volumes  (Wilkinsons) o Product Specialist with Core Range  (Food multiple with core product groups) 

Evolution Of Product Range



Product Range o The more choice, the better

o Psychology and marketing literature argue that having more choices:  Increases well-being, satisfy diverse consumer needs (Dworkin, 1982)  Increases purchase and consumption (Koelemeijer & Oppewal, 1999)  Reduces search costs (Hutchinson, 2005)  Enhances personal freedom of choice (Schwertz, 2004) o Choice overload effect (COE): when facing too many options, decision-makers experience cognitive overload that leads to negative perceptions (Schwartz 2004);  Cognitive dissonance (Anderson, Taylor & Halloway, 1996)  Dissatisfaction (Lyengar & Lepper, 2000; Reutskaja & Hogarth, 2009)  Post-decision regret (Carmon, Wertenbroch & Zeelenberg, 2003)  Demotivation to purchase (Shag & Wolford, 2007)  Choice withdrawl (Dhar, 1997; Lyengar & Jiang, 2003; Park & Jang, 2013) o “The fact that some choice is good doesn’t necessarily mean that more choice is better. There is a cost to having an overload of choice. Clinging tenaciously to all the choices available to us contributes to bad decisions, anxiety, stress and dissatisfaction- even to clinical depression” (Professor Barry Schwarz) 

Merchandise o Planning process  Merchandise Statement  Merchandise Budget & Plan  Merchandise Acquisition o Example  Waitrose aims to combine the convenience of a supermarket with the expertise and service of a specialist shop  An extensive range of produce from home and abroad, top quality meat and fish, British & Continental cheeses, ready meals and wide variety of household goods make it easy to buy for all the family, particularly as quality and value are guaranteed



Merchandise Plan

o Objective- To translate figures from plan into a merchandise mix- the breadth and depth of the products carried by a retailer o It is the ratio of the types, styles, sizes, materials, colours, prices, brands etc to the quantities of the merchandise kept in a store to satisfy its target market. o Provides projection of required sales over a specific time period- aims to meet commercial performance targets; 



Buyer know amount of inventory required to meet projection

Merchandise Budget o Is concerned with the financial planning of merchandise ranges based upon the sales forecast for the forthcoming year o It will state when and how much merchandise requires to be purchased, projected levels of profitability and price reductions



Ranging Decisions o Adjusting the merchandise mix allows retailers to appeal to specific customer groups and segment with market whilst reinforcing their market position.  Variety (width)  Assortment (depth)  Exclusiveness of goods  Price strategy  Price lines  Branding  Availability

Week 3 (Category Management) 

Value Creation o Balancing benefits & costs

Figure 1-Prospect Theory (Kahneman & Tversky, 1979)



Category- A distinct, manageable group of products/services that consumers perceive to be interrelated and/or which can serve as substitutes to meet a particular consumer need. o A category consists of a specific set of products put together on the basis of various criteria such as:  Logistical requirements (frozen food)  Target groups (Students, working singles)  Substitutional relations between products (dairy products)  Intended purpose to use (breakfast, party, Halloween)  Marketing strategy



Shopping missions (Sarantopoulos et al. 2015)

o Mindset theory of action phases (Gollwitzer 1990): particular sets of activated cognitive procedures, which result in particular ways of processing information o Shoppers engaged in abstract shopping trips seek to make the majority of their product category decisions as early as possible in the shopping process (before entering the store) o Shoppers acknowledge the product-related reasons for a store visit by making explicit referenced to their intended purchases as distinct product entities, often summarized at the product category level in a shopping list for reference and guidance. This tactic is particularly common for shopping trips under an implemental shopping mindset, in which shoppers explicitly acknowledge their purchases prior to entering the store o In contrast, shoppers under deliberative mindsets construe their purchases implicitly and make their category choices in the store.

o These results reveal that trips of relatively concrete abstractness constitute a large portion of store visits. o However, even if the proportion of relatively concrete shopping trips decreases for larger store formats, their importance in terms of total share of baskets and revenue generated remains high (50% for hypermarkets) o Six predominant shopping missions emerge for the stores under considerations: ‘breakfast’, ‘meal’, ‘snack’, ‘cleaning’, ‘coffee’ and ‘light meal & hors d’oeuvres’



Category Management (Characterisation) o A category is a strategically managed product group o Category management relies on trade partnerships o Category management aims to maximise sales and profits (growth!) o Category management satisfies consumer needs. o Category management requires a different view towards the supplier and the customer.



Category Management (Definition)- The strategic management of product groups through trade partnerships which aim to maximise sales and profit by satisfying consumer and shopper needs o Is underpinned by a structured process which provides a framework for retailers and suppliers to work together strategically o Is a long term business philosophy, often approached through a series of short term projects o Involves a close working relationship and sharing of information by retailers and suppliers; o Promotes cross functional working between retailers and suppliers and will generally involve people from buying, finance, supply chain, trade marketing, space planning, store operations, sales, product development, marketing and category management



Benefits Of Category Management o Increased Sales  Better shelf sets  More effective promotions  Better product mix  Better in stock levels  Better price image o Improved profit margins  More effective pricing  More effective promotional pricing  Better shelf sets  Better product mix  Lower replenishment costs o Better vendor relations  More sharing of information  Improved alignment of marketing programs o Improved competitive position  Increased share of market  Improved positioning versus alternative or nontraditional formats



Costs o Human resources  Training and development  Personnel turnover  Additional headcount  Higher pay  Internal organizational communication

o Information & accounting systems  Hardware  Software  Accounting systems  Additional staff o Work area  May reorganize headquarters’ space 

Is retail category management worth the effort? o More intensive CM improves results o Use of CatCaptain increases CM efforts and results o Retails with more resources rely less on CatCaptains o “Go alone retailers” miss out on performance benefits



Category Management Process o Category management is a formal 8 step category management process, developed just over a decade ago by the Partnering Group o It involves strategically managing ‘product groups’ or ‘categories’ to ensure the shopper and consumer needs are fully met or exceeded at point of purchase

o Category definition- Determine the products that make up the category and its segmentation. Products are grouped together into categories to reflect customers’ needs based on how the products is used, consumer or purchased. Can be made up of similar products (fresh produce, ready meals) or occasion based (Mother’s Day, Food on the move) o Category role- Determining the purpose of the category in the retailer’s portfolio. Should align to the retailers corporate goals with the overall look and feel in-store, mirroring the image of the retailer  The role of the product category  Retail brand reinforcer o New categories o High fashion or symbolic categories o High technology product categories o Includes strong brands o Create excitement and theatre in store 



Cash-flow contributor o Established categories o Non-symbolic categories o Consistent value provision Profit generator o Growing, fashion or symbolic categories

o High profit margin 

Service provider o Stagnant or declining categories o Staple product categories o Well established market leading brands o Competitive with other category providerslow profit margins



Destination o Growing or well-established category o Contains leading brands o Deep and wide assortment o Considered the best retail offer by target customers

o Category assessment- Analysis of the category performance  Understanding the market  Category trends  Political, economic, social, technological, environmental issues 

Understanding the stores  Sales area profiles, numbers  Similar in layout or different  Range carried  Sales profiles

o Category performance measurement- Category performance measures determine the category targets and objectives set for the successful implementation of the category business plan.  Requires measurable targets in terms of sales, margins, ROI o Category strategies-The retailer and supplier should develop strategies that capitalise on category opportunities through creative and efficient use of resources available to category.  Typical marketing and in-store service strategies include  Traffic building, transaction building, turf defending, profit and cash generating, excitement creating and image enhancing o Category tactics- Determining the optimal products, shelf management, placement, promotions, pricing and supply tactics that will achieve role, scorecard and strategy  Validates the specific actions that will be taken to implement category strategy

o Plan implementation- A written plan to ensure tactics achieve category role, strategies and meet scorecard  How a planned activity is put into practice or executedto ensure plans are put into practice in-store.  Implementation is “the effective planning and delivery of category activity”

Figure 2-Implementation Barriers

Figure 3-Improvement Areas

o Category review- Final step. Review of the progress and actual achievement of targets set for the category.  Measure, monitor and modify the category’s progress in line with outcomes 

Category Captain

o The entire process of category management resolves around the partnership between the supplier and the retailer. Many retailers follow the method of appointing “category captains” to develop a category and further the partnership. o Typically, a category captain is a supplier and aids the retailer in developing the category. Very often, he is the leading manufacturer for products in the category, who is required to take an overall view of the category and create a plan for the category, including national brands and private labels.

Week 4 (Store Design & Merchandising) 

Dark side of Shopping



Store Design o Explore the scope of retail design and its use in building an identity and image that supports buying objectives;  Store planning & productivity  Layout and allocation of space (category & SKUs); o Understand the role that retail design plays in reinforcing a retailer’s market position;  Understand the importance of ambience and atmospherics in retailing

o Communicated to the customer who retailer is and what they stand for o Creating a positive relationship between products and the environment in which they are sold  Includes all types of retail outlet, but store-based retailers have best opportunity to design ‘real space’ o A retail outlet is essentially a collection of materials, colours & space, subject to trends and themes o Unique features in a store can provide the opportunity for creativity o Outlet design and design of fixtures and fittings are interrelated 

Environmental Psychology



Store Layout o “Nothing is worse than to get into a store and become frustrated at the layout even before you understand what the merchandise is” (Brian G.Thornton, vice president of communications. International Interior Design Association

o Customer Circulation (Free Flow)  Customers encouraged to flow freely through all the fixtures- no defined traffic patterns  Typically, small stores, where merchandise is of the same type (Fashion)  Can be confusing if greater variety of merchandisewhere do departments start and end

o Customer Circulation (Grid)  Customers circulate up and down the aisles  Typically, supermarkets, larger pharmacies (Boots, Superdrug)  Can be frustrating for customers with limited requirements- has resulted in more conveniencefocused products merchandised close to store entrance

o Customer Circulation (Spine)  Variation of previous circulation patterns  Single main aisle running from front to back of store  Merchandise depts. Branch off towards side and back walls using free-flow or grid layout depending on merchandise & fixtures  Typically, medium sized stores such as fashion

o Characteristics  Influenced by product range (depth & width)  Constrained by size and structure of store  Objective: to move customer to every area of store  Determined by fixturing  Trend towards more spacious and airy layouts 

Fashion/Homeware Store o Outlet plan- close competitor

o Single shopper pathway map

o Shopper pathway map

o Footfall density thermal image map

o Store sector- average times (%)



Store Layout, Displays and Space Allocation o Must provide customer logic o Visual merchandising can encourage;  Trading up  Multiple complementary purchases  Impulse purchase o Concerns product adjacencies and flow; o Manipulation of the customer or providing a retail service



Space Allocation (Shelf-Level)



Space Management

o Physical retail space= at a premium, constrained by planning restrictions and rising costs o Productive use of space is a key indicator of buying and merchandising success  Offering the right range  In a logical layout  With products available  Easy for customers to find o Space Management objectives  Optimise both short-term and long-term returns on the investment cost of retail space  Provide a logical, convenient and inspiring interface between the product range and the customer o Characteristics  Definition- The process of planning, executing & controlling space allocation in retail outlets based on POS-data (space & shelf management) 

Goal- Improve shelf/outlet space productivity; increasing sales/profits without enlarging space