HED 460

Direct Store Delivery

Back door traffic at store 25% of grocery products never see a warehouse

HED 460

DSD Product Characteristics

Shelf life Bread/pastry/salty snacks/beer 30-70 days DSD vs 390 days for warehoused category

Higher SKU velocity 12 units/store/week vs 9 units

HED 460

DSD Product Characteristics

Demand variability Frequent promotions Frequent service

Lower value density Fragility - chips Weight – beer, soft drinks

HED 460

DSD Product Characteristics

Lower value density (cont.) $27/cu. Ft. (dsd) vs $100/cu. Ft. Price divided by space High cost as a % sales

Merchandising difficulty Special equipment

HED 460

Problem

How can you have a low GM but high profit and sales? COGS must be high Expenses must be minimized Emphasis on contribution margin

HED 460

Direct Store Delivery Results

More cash flow 8 days of inventory held with 30 day payment

Turns Contribution Dollars GMROI High % of in-stock

Product Development

HED 460

Market Share Growth Strategies

Acquire other businesses Enter into joint ventures Private label/product development

HED 460

Private Label

Merchandise bearing a retailer’s own name brand retailer’s own name another copyrighted name designer with whom the retailer has

an exclusive license

HED 460

Why Private Label?

Many Retailers today, see the value in having their own private label brand.

o Product Differentiationo Control over design/color

assortmento Increase in profits

HED 460

Risks involved in Private Labelo No one to ask for markdown $, if

the item is not sellingo Image of store can suffero Quality and appearance of the

product is a direct reflection upon the store

HED 460

Importance of Private Label

From 0-100% of merchandise assortments

Grew 5x from 1995-2002 Sears (Craftsman, Kenmore,

Canyon River, Covington) J.C. Penney (Arizona, Hunt Club,

St.John’s Bay)

HED 460

Importance of Private Label

Higher profits than national brands differentiation

Private brands, now premium brands Master Choice (A&P) SFA Collection (Saks Fifth Avenue) Faconnable (Nordstrom)

HED 460

History of product development

Foreign competition in early 1980s Firm restructuring Focus on improving existing products Workforces cut drastically Sites closed Innovate or die

HED 460

Product development - Defined

Design and engineering required to create products that are serviceable, producible, salable and profitable

Development of private label merchandise for the exclusive sale by one company

HED 460

Product Development Defined

o Taking a 2-D idea and transforming it into a 3-D product to be sold to a consumer

And the consumer wants…

• The “right” color• The “right” fit• The “right” price• The “right” quality• The “right” time (in season)

HED 460

Types of Product Development

Original design more processes and lead time more costly and time consuming

Modification reduced development time and

costs

HED 460

Types of Product Development

Knock off eliminates many development processes saves time and money

Joint product development Manufacturer and retailer speeds design and decreases wholesaling

time Combination

HED 460

The Product Development Team

o MERCHANDISING

• Front End

• Design• Trend Analysis• Merchandising

(Retail Buyer)

o PRODUCTION• Back End

• Product Mgt. (in/out)• Technical• Patternmaking• Sourcing• Vendor Relations• QA/QC

HED 460

Process of Product Development

1. Merchandising (Buyer) works with Design/Trend Dept. on WHAT to offer

• What color the assortment will include• What price the item will sold for• What styling details are necessary• What holes in the branded retail mix need to

be filled• What will give the store a competitive edge

HED 460

Process of Product Development

2. The Production Team brings the product to “life”

• Patternmaking/Design/Technical: the “right” fit

• Design/Merchandising/Product Mgr. Ensure the “right” quality

• Product Mgr negotiates w/factory to get the “right” price and lead-time

HED 460

How it is doneo Tools: BOM/spec sheets/artwork/fit

sessions/anaylsiso Communication inside retail team and

outside with vendor/suppliers/factorieso Details: • “all the small things”

• Washcare Instructions• Woven label, Hangtags, UPC codes• Strength and color of sewing thread• Type of plastic bag, how many pcs per carton box• Strength of the carton box• How important is TIME, and quick replenishment• Trade laws/new agreements, NAFTA

HED 460

Why are details so important?

Did you ever play that game: draw a circle and a box and at the top of the page, write the words…

HED 460

Phase I: Pre-Adoption

Creativity Materials development and selection Style development Pattern making Sample making Product testing Sample review

HED 460

Phase II: Post-Adoption

Preparing for production perfecting fit making production patterns writing production specifications sourcing production estimating final costs

HED 460

Software - PDM

Creates and maintains product specifications Front and back detailed sketch Garment construction Graded specifications Fabric trim and details Packaging and labeling

HED 460

Software - PDM

Used extensively in industry The Gap JCrew Kmart Osh Kosh B’ Gosh J.C. Penney Talbot’s Abercrombie & Fitch