Retail Marketing Notes
Budgeting
Operating a Retail Business
-
Operations Blueprint
-
Store Format, Size, and Space Allocation
-
Personnel Utilization
-
Store Maintenance, Energy Management, and Renovations
-
Inventory Management
-
Store Security
-
Insurance
-
Credit Management
-
Computerization
-
Outsourcing
-
Crisis Management
An Operations Blueprint
Inventory Management Decisions
-
How can handling of merchandise from different suppliers be coordinated?
-
How much inventory should be on the sales floor versus in a warehouse or
storeroom?
-
How often should inventory be moved from nonselling to selling areas of
a store?
-
What inventory functions can be done during nonstore hours?
-
What are the trade-offs between faster supplier delivery and higher shipping
costs?
-
What supplier support is expected in storing merchandise or setting up
displays?
-
What level of in-store merchandise breakage is acceptable?
-
Which items require customer delivery? When? By whom?
Figure 15.1 The Process for Implementing Merchandise Plans
Figure 15.2 A Competition Shopping Report
Logistics
-
Planning, implementing, and coordinating the physical movement of merchandise
from manufacturer (wholesaler) to retailer to customer in the most timely,
effective, and cost-efficient manner possible
-
Place and receive orders as easily, accurately, and satisfactorily as possible
-
Minimize the time between ordering and receiving merchandise
-
Coordinate shipments from various suppliers
-
Have enough merchandise on hand to satisfy customer demand, without having
so much inventory that heavy markdowns will be necessary
Supply Chain Management
-
The supply chain is the logistics aspect of a value delivery chain
-
Parties involved
-
Manufacturers
-
Wholesalers
-
Third-party specialists
-
Retailer
Transportation and Warehousing
-
How often will merchandise be shipped to the retailer?
-
How will small order quantities be handled?
-
What shipper will be used?
-
What transportation form will be used? Are multiple forms required?
-
What are the special considerations for perishables and expensive merchandise?
-
How often will special shipping arrangements be necessary?
-
How are shipping terms negotiated with suppliers?
-
What delivery options will be available for the retailer’s customers?
Problems Balancing Inventory Levels
-
The retailer wants to be appealing and never lose a sale by being out of
stock; it does not want to be “stuck” with excess merchandise
-
What fad merchandise and how much should be carried?
-
Customer demand is never completely predictable
-
Shelf space allocation should be linked to current revenues
Benefits of Financial Merchandise Plans
-
The value and amount of inventory in each department and/or store unit
during a given period are delineated
-
The amount of merchandise a buyer can purchase during a given period is
stipulated
-
The inventory investment in relation to planned and actual revenues is
studied
-
The retailer’s space requirements are partly determined by estimating beginning-of-month
and end-of-month inventory levels
Retail Budgeting Decisions
-
How much to spend on lines of merchandise
-
What is an appropriate time frame for analysis
-
While your text looks at months over the year's time horizon, the
nature of your business should determine what time frame really fits your
business.
-
Seasonal businesses for instance, have to build their realities into their
analysis, in order to minimize bias.
Table 16.8 Handy Hardware Store, 2003 Sales by Month
Table 16.9 Handy Hardware Store, 2004 Sales Forecast by Month
How much Stock do I need to be in Business?
-
A critical question centers on how much merchandise (and how much variety)
do I need to stay in business, provide the variety wanted by my customers,
and not have stale inventory?
-
How much depth and width? Do shoppers want to make comparisons?
-
eg Beginning of the month stock
-
We will use the retail method of accounting
Table 16.1 Handy Hardware Store Profit-and-Loss Statement
Benefits of Financial Merchandise Plans
-
A buyer’s performance is rated. Measures may be used to set standards
-
Stock shortages are determined and bookkeeping errors and pilferage are
uncovered
-
Slow-moving items are classified – leading to increased sales efforts or
markdowns
-
A proper balance between inventory and out-of-stock conditions is maintained
Table 16.2 Handy Hardware Store Perpetual Inventory System
Planning Computations
-
Basic stock method: Carry more stock than you expect to sell, cushion
– additional demand, delays, etc.
-
Planned reductions: anticipated discounts, employee and other discounts,
stock shortages, theft, breakage, errors
Formulas
-
Planned Purchases = Planned End of Month Stock
+ Planned Sales for that period
-
+ Planned Reductions - Beginning of Month Stock
-
Open To Buy =
Planned Purchases - Merchandise on Order - Merchandise received
-
Stock to Sales Ratio = mdse in stock/planned sales
What is Open to Buy?
-
Open to Buy indicates what the buyers have left to make purchases during
the planning period.
-
This can be a good indicator of buyer overpurchasing or underpurchasing
when analyzed over several periods.
Planned Profit Margins
-
Required initial markup percentage = Pl Ret expenses + Pl profit + Pl
Reductions
-
Pl net sales + Pl Reductions
-
How much initial markup is required across the board in order to achieve
a specific net dollar margin profit goal?
Consideration of Stockouts and EOQ
-
Determining your "never outs”
-
Planning for stock turn
-
Consider Wal-Mart
-
How to minimize cost of carrying inventory
-
Extend to Global Markets
Stock Turnover
-
Stock turn represents the number of times during a specific period that
the average inventory on hand is sold.
-
Annual stockturn in units = no of units sold during the
year
-
avg. inventory on hand (in units)
-
Annual stockturn in dollars =
net yearly sales
-
Avg inventory on hand ( in retail dollars)
-
Figure 16.6a How Stockouts May Occur
Figure 16.7 Economic Order Quantity
Tracking Stock Turnover
-
Number of times during a chosen period that the average inventory is sold
-
What is the usage rate?
-
Any patterns, seasonal variations which need to be taken into account?
-
How much safety stock should we have on hand?
-
How increase stock turn? eliminate slow sellers, sales, quick response
inventory planning, etc.
-
Determining when and how much to reorder
Table 16.7 Handy Hardware Store, A Simple Sales Forecast Using Product
Control Units
Shopper Expectations Also have an Impact
-
The retailer must also determine when shoppers expect sales to be held
-
E.g. January "White" sales
-
When are competitors likely to introduce price reductions.
How Much Stock Should We have on Hand?
-
The stock to sales ratio
-
How much stock you need to carry for the consumer to be able to make comparisons?
Ways That Retailers Can Deter Employee and Shopper Theft
-
Employee Theft
-
Use honesty tests as employee screen-in devices
-
Lock up trash to prevent merchandise from being thrown out and then retrieved
-
Verify through cameras and undercover personnel whether all sales are rung
up
-
Centrally control all exterior doors to monitor opening/ closing
-
Divide responsibilities – have one employee record sales and another
make deposits
-
Give rewards for spotting thefts
-
Have training programs
-
Vigorously investigate all known losses and fire offenders immediately
Ways That Retailers Can Deter Employee and Shopper Theft
-
Shopper Theft While Store is Open
-
Use uniformed guards
-
Set up cameras and mirrors to increase visibility – especially in low-traffic
areas
-
Use electronic article surveillance for high-value and theft-prone goods
-
Develop comprehensive employee training programs
-
Offer employee bonuses based on an overall reduction in shortages
-
Inspect all packages brought into store
-
Use self-locking showcases for high-value items such as jewelry
-
Attach expensive clothing together
-
Alternate the direction of hangers on clothing near doors
-
Limit the number of entrances and exits to the store, and the dollar value
and quantity of merchandise displayed near exits
-
Prosecute all individuals charged with theft
Ways That Retailers Can Deter Employee and Shopper Theft
-
Employee/ Shopper Theft While Store is Closed
-
Conduct a thorough building check at night to make sure no one is left
in store
-
Lock all exits, even fire exits
-
Utilize ultrasonic/infrared detectors, burglar alarm traps, or guards with
dogs
-
Place valuables in a safe
-
Install shatterproof glass and/or iron gates on windows and doors to prevent
break-ins
-
Make sure exterior lighting is adequate
-
Periodically test burglar alarms
Store Security
-
Uniformed security guards
-
Undercover personnel
-
Brighter lighting
-
TV cameras and other devices
-
Curfews
-
Limited access to backroom facilities
-
Frequent bank deposits