MERCHANDISING.  

Consumer Shopping Decisions.

Supply vs Demand

•  Mass market fragmented.

•  Penalties for error is much steeper.

2 ISSUES

33% of all goods are sold at marked down prices.

8% of items customers come to buy are out of stock.

K-Mart wrote off $400 million in excess inventory in the first quarter of 2001. Contributed to 40% decline in net income.

Better merchandise management. Better customer satisfaction.

IDEAL ASSORTMENT Correct type of merchandise on hand & on order.

Assortment must be consistent with other elements of the marketing program.

“category killer” Committed to broadest and deepest selection of toys.

75% of sales were made over Christmas season. Erratic cash flows which undermine the success of the assortment approach.

What did they do to support their broad & deep assortment strategy?

They created a year round store.  

MANAGEMENT INCLUDED NON-TOY CATEGORIES:  

•  diapers •  baby formula •  jarred food •  clothing •  Back-to-School, Easter, Halloween

merchandise.

What do you think would happen if Woolies only stocked summer clothes in spring and winter clothes in autumn?

60% of customers refuse to switch brands in an out of stock situation. They would rather venture to another store.

Security of supply

ESSENTIAL

Use last year’s sales to determine this year’s forecast. Evaluates only what was sold.

?

Not what it could have sold if the inventory had been available.

MERCH PLANNING

     Tells when you have the wrong thing, or too much of the right thing.

It can’t tell you when you don’t have something many people want.

Rely on customers (Social Media)

MERCHANDISE OPTIMISATION SYSTEMS.

CROSS MERCHANDISING

SHELF SPACE MANAGEMENT  

Brand choice decisions are often made at POP. Final choice may be influenced by in store merchandising factors such as space.

What happens if you allocate too much space to low performing goods?

What happens if you allocate too little space to high performing goods?

SPACE ALLOCATION METHODS:

•  By profit (Assortment issues) •  By sales (High out of stocks) •  By % of sales (low volume, high

profit goods under merchandised)

RECOMMENDATIONS:

•  Product dimensions & delivery cycle

•  Differences in profitability

•  Strength of a products customer loyalty

EVALUATING MERCHANDISE  

Have to carry certain items, regardless of profit/product performance.

WHY IS THIS IMPORTANT?