Topic:- Organizing The Buying Process by Categories

1. CATEGORY :- is an assortment of items that the customer sees as reasonable substitute for each other. Ex:- Girls apparel , boys apparel & infant apparel are categories. Topic:- Organizing The Buying Process by Categories • Retailers & Vendors might have different definition of categories :- • Ex:- VENDOR :- might assign shampoos & conditioners to different • categories on the basis of significant differences in product attributes . • CATEGORY MANAGER(RETAILER) :- might assign shampoos & • conditioners into a single category on the basis of common • consumers & buying behavior . Retailers may define categories in terms of brands ex:- Tommy Hilfiger & POLO/Ralp Lauren

2. CATEGORY MANAGEMENT :- is the process of managing a retail Business with the objective of maximizing the sales and profits of a category . • ADVANTAGES :- • Category Manager is responsible for success or failure of category • Easy to identify the source of problem & solve it . • Easy to manage & maximize profits. • As help to assure the “best” combinations of sizes , vendors & brands Category Captain :- Since retailers & their vendors share the same goals – to sell Merchandise & make profits . Therefore some retailers turn to one favored vendor to help them manage a particular category known as the CATEGORY CAPTAIN

3. Category Captain :- form an alliance with a retailer to help gain -consumer insights -Satisfy consumer needs -Improve performance -Gain Potential Profit • Disadvantage :- Vendors could take a adv of their position. • They could • Block other brands • Overshadow small brands • Acquire control on access to shelf space.

4. THE BUYING ORGANIZATION Chairman/partner Merchandise Group :- managed by sr. V.P of merchandise also called General Merchandise Manager who are responsible for several dept’s. Sr. V.P Merc Mgr Womens Ready to wear Sr. V.P Merc Mgr Children’s,mens,sportwear Ready to wear Sr. V.P Merc Mgr Cosmetics, Shoes, jewellery Sr. V.P Merc Mgr Furniture, Kithcen Department :- managed by divisional Merc Mgr responsible for a department Div Merc Mgr Mens suit,shirts etc Div Merc Mgr Mens sportwear , Polo Div Merc Mgr Children app, Classification:-each div Merc Mgr responsible for a no. of buyers or category mgrs Buyer /CM Girls 7-14 Buyer /CM Toddlers Buyer /CM Little boys Buyer /CM Preteen Categories:-each buyer purchases a no. of categories SKU:-smallest unit available for keeping inventory control Casuals Dresses Sportwear Girl’s Levi’s Jeans, Size 5, Blue color, Straight legged

5. Topic :- Setting Objectives for the Merchandise Plan MERCHANDISE PLAN :- tells the buyer & the planner how much money To spend on a particular category of merchandise in each month so that The sales forecast and other financial objectives are met . In Retail instead of Return on Asset we calculate GMROI :- Gross Margin Return on Inventory Investment Reason :- Buyers have control over gross margin but not expenses involved with -operation of store -cost of mgmt of Human Resources -Cost of Location -Cost of Systems etc. As a result , the financial ratio is a return on inventory measure called GMROI

6. GMROI :- Gross Margin percentage * Sales-to-stock ratio Gross Margin Net Sales Net sales Average Inventory * Gross margin Average Inventory = • Note:- • Average Inventory in GMROI is measured at cost, because a retailer’s investment • in inventory is the cost of the inventory , not its retail value. • - Like ROI , GMROI combines th effects of both profits and turnover. • Useful :- • - GMROI is used as a return on investment profitability measure to evaluate • Departments, merchandise classifications, vendor lines, and items . • Useful for management in evaluating buyers performance since it can be • related to the retailer’s overall return on investment.

7. Inventory Turnover :- Inventory Turnover = merchandise in motion Example :- Jeans are delivered to the store through the loading in the back door Spend some time in the store on the racks , and then are sold and go out the front door . ADVANTAGE OF HIGH INVENTORY TURNOVER • Increased Sales Volume • Less Risk of Obsolescence & Markdown • Improves Salesperson Morale • More Money for Market Opportunities • Decreased Operating Expenses • Increased Asset Turnover – inventory is the current asset

8. SALES FORECASTING Forecasts done with the help of Category Product Life Cycle :- Maturity Growth Decline Total Retail Sales Introduction Time -Knowing where a category is in its life cycle is useful for predicting sales. -Care must be that Category Life Cycle as a predictive tool does not adversely affect sales.

9. Many products have been successfully maintained at the maturity stage Because their buyers have maintained innovative strategies that are consistent with a mature product . For instance :- Kellogg’s Corn Flakes has been the best selling ready-to-eat cereal over many decades because it has innovative advertising & competitive pricing Variations on the Category Life Cycle Fad :- generates a lot of sales for relatively short time . Fashion :- lasts several seasons & vary dramatically Staple :- basic merchandise :- continues demand over a period of time . Seasonal :- sales fluctuate according to the time of the year. Sales Sales Sales Sales Time Time Time Time

10. Developing a Sales Forecast Sources of Information for Category-Level Forecasts :- - Previous Sales Volume - Published Sources - GNP – national economic indicator - monthly retail Trade report - Customer Information - Want Book :- salespeople record ot-o stock & requested merchandise - Depth interview - Focus Group - Shop Competition - Vendor & Resident Buying Office :- either are independent org or are directly associated with particular retailer that offer a number of services associated with the procurement of merchandise .

11. Store-Level Forecasting :- • To predict store – level demand , forecasting systems need to be • able to measure simultaneously the impact of many factors on unit sales. • These factors include :- • Price • Promotion • Store Location • Product Placement • Seasonality • Other Factors • - Product Life cycle • - Product Availability • - Business Cycle • - Weather • - Unusual events • - Cannibalization :- apple boxes price decrease could lead to inc in apple sale • - Complementary products:- putting hot dogs on sale will also cause an inc in • sales of hot dog .

12. CPFR :- short for collaboration , planning , forecasting , and replenishment EDI Technology :- Electronic Data Interchange – Computer to computer exchange of business documents from retailer to vendor & back. CPFR :- is a collaborative inventory management system in which a retailer shares Information with vendors. CPFR software uses the data to construct a computer- Generated replenishment forecast that is shared by the retailer & vendor before Its executed.