Chapter 12

Planning Merchandise
Assortments

McGraw-Hill/Irwin
PPT
12-1
Levy/Weitz: Retailing Management, 5/e

Copyright 2004 by The McGraw-Hill Companies, Inc. All rights

The Category
A category is an _________ of items (or SKUs)
that the customer sees as reasonable
substitutes for each other.
Barnes and Noble
Louisiana Music Factory
Merchandise Categories

Books

T-Shirts

Videos/DVDs

Books
Audiobooks
Business & Money
Children
Computing & Internet
Cooking, Food & Wine

PPT 12-2

Category Management
Category management is the process of managing
product categories of a retail business and
customizing them to best satisfy customer needs
while at the same time maximizing the _____ and
______ of a category.
Objective is to maximize the sales and profits of the
______ category, not just a particular brand.
Breakfast cereal category vs. Kelloggs Corn Flakes
Mens knitted shirts vs. Polo shirts

PPT 12-3

One person managing the entire category and

responsible for its success or failure.

ROI and GMROI

Asset Productivity Measures
Strategic Corporate Level
Return on Assets = Net Profit
Total Assets

Merchandise Management Level

GMROI

PPT 12-4

= Gross Margin
Avg Inventory

Calculating Inventory Turnover

Inventory turnover =

Average inventory =

PPT 12-5

Net Sales
Average inventory at cost

Month1 + Month2 + Month 3 +

Number of months

Gross Margin %, Inventory Turnover,& GMROI for

Selected Departments in a Discount Store

Used to plan and evaluate inventory decisions

to maximize profitability.
PPT 12-6

Merchandise Planning
Variety is the number of different
merchandising __________ within a store or
department
Assortment is the number of SKUs within a
_________.
Product availability defines the percentage of
demand for a particular SKU that is satisfied.

PPT 12-7

Determining Variety
and Assortment
Profitability of Merchandise Mix
Corporate ________ Toward Assortment
Physical Characteristics of _____
Complementary Merchandise

PPT 12-8

Developing a Sales Forecast

Understanding the nature of the ______ ____
_____
Collecting data on sales of product and
comparable products
Using ___________ techniques to project sales
Work with vendors to coordinate manufacturing
and merchandise delivery with forecasted
demand (CPFR)
PPT 12-9

Variations of the
Category Life Cycle
Fad

Fashion

Staple

Seasonal

Sales over many seasons

No

Yes

Yes

Yes

Sales of a specific style

over many seasons

No

No

Yes

Yes

Sales vary dramatically

from one season to the
next

No

Yes

No

Yes

Illustration
(Sales against Time)

PPT 12-10

Data Sources for

Developing Sales Forecasts
Previous Sales History
Published Sources - Buying Power Index
(BPI), Monthly Retail Trade Report, InfoScan,
Claritas, general retail trade publications like
Stores, WWD and Chain Store Age
Customer Information
Vendors and Resident Buying Offices

PPT 12-11

Factors Affecting Sales Projections

Controllable

Uncontrollable

Promotions

Seasonality

Store Locations

Weather

Merchandise Placement

Competitive Activity

Cannabalization

Product Availability
Economic Conditions

PPT 12-12