FINANCIAL MERCHANDISING MANAGEMENT

1. To describe the major aspects of financial merchandise planning and management 

The purpose of financial merchandise management is to stipulate which products are bought by the retailer, when, and in what quantity. Dollar control monitors inventory investment, while unit control relates to the amount of merchandise handled. Financial merchandise management encompasses accounting methods, merchandise forecasts and budgets, unit control, and integrated dollar and unit controls.

2. To explain the cost and retail methods of accounting  

Two accounting techniques for retailers are the cost and retail methods of inventory valuation. Physical and book (perpetual) procedures are possible with each. Physical inventory valuation requires counting merchandise at prescribed times. Book inventory valuation relies on accurate bookkeeping and a smooth flow of data.

The cost method obligates a retailer to have careful records for each item bought or code costs on packages. This must be done to find the exact value of ending inventory at cost. Many firms use LIFO accounting to project that value, which lets them reduce taxes by having a low ending inventory value. In the retail method, closing inventory value is tied to the average relationship between the cost and retail value of merchandise. This more accurately reflects market conditions, but is more complex.

3. To study the merchandise forecasting and budgeting process  

This is a form of dollar control with six stages: designating control units, sales forecasting, inventory-level planning, reduction planning, planning purchases, and planning profit margins. Adjustments require all later stages to be modified.

Control units -- merchandise categories for which data are gathered -- must be narrow enough to isolate problems and opportunities with specific product lines. Sales forecasting may be the key stage in the merchandising and budgeting process. Through inventory-level planning, a firm sets merchandise quantities for specified periods through the basic stock, percentage variation, weeks’ supply, and stock-to-sales methods. Reduction planning estimates expected markdowns, discounts, and stock shortages. Planned purchases are linked to planned sales, reductions, ending inventory, and beginning inventory. Profit margins are related to a retailer’s planned net sales, operating expenses, profit, and reductions.

4. To examine alternative methods of inventory unit control  

A unit control system involves physical units of merchandise. It monitors best-sellers and poor sellers, the quantity of goods on hand, inventory age, reorder time, and so on. A physical inventory unit control system may use visual inspection or a stock counting procedure. A perpetual inventory unit control system keeps a running total of the units handled through recordkeeping entries that adjust for sales, returns, transfers, and so on. A perpetual system can be applied manually, by merchandise tags processed by computers, or by point-of-sale devices. Virtually all larger retailers conduct regular physical inventories, two-thirds use a perpetual inventory system.

5. To integrate dollar and unit merchandising control concepts  

Three aspects of financial inventory control integrate dollar and unit control concepts: stock turnover and gross margin return on investment, when to reorder, and how much to reorder. Stock turnover is the number of times during a period that the average inventory on hand is sold. Gross margin return on investment shows the relationship between the gross margin in dollars (total dollar operating profits) and average inventory investment (at cost). A reorder point calculation – when to reorder – includes the retailer’s usage rate, order lead time, and safety stock. The economic order quantity – how much to reorder – aids a retailer in choosing how big an order to place, based on both ordering and inventory costs.

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RETAIL BRANDING

Def : Brand is the product’s essence, its meaning and its direction. It defines its identity in time and space.

Successful Retail Branding starts with:

• 1.      A clear definition of what the retailer stands for
• 2.      An identification of what the customers associate it with
• 3.      When customers think the brand is a reflection of them
• 4.      When the retailer is in the minds of the customer when he think of brand.

Brand

True branding effort

• 1.      Communication that inspires emotional reaction
• 2.      Customer Service
• 3.      How salespersons greet customers
• 4.      How fast product is shipped and delivered
• 5.      Involves every single contact occurring between any product and a human

• Role of Brand
• 1.      Successful Retail Branding ensures Stable long term demands
• 2.      Better margins
• 3.      Differentiation by way of creating long term association
• 4.      Adds value to the product
• 5.      Trust of fulfillment of service expectations
• 6.      Protection from growing competition
• 7.      Image as a company attractive enough to work for
• 8.      Negotiation with suppliers from a position of improved strength

Brand Loyalty

Brand or store loyalty will ensure

• ·         Positive disposal to the brand based on brand loyalty
• ·         Brand preference : Frequent utilization of the store over other stores
• ·         Brand allegiance: Continuous utilization of the store overtime 

Brand loyalty may be expressed for one or more brands

• 1.      Hard core loyalty : Buying one brand all the time
• 2.      Soft core loyalty : Buying a combination of two competing brands
• 3.      Shifting loyalty : Buying preference shifting from one brand to another
• 4.      Switchers: No loyalty to any one brand based on the deal given.

Positioning of brands Determined on the basis of

·         Product usage

·         Price

·         Price

For successful brand positioning Brand Managers should

• ·         Regularly assess the customer’s opinions
• ·         Clearly identify the target
• ·         Plan the brand
• ·         Differentiate the brand from others in the sub group

Differentiate the brand from others in the sub group

Personality of the brand

• ·         It is created by way of adding psychological values through
• ·         Packaging
• ·         Advertising
•     Other aspects of the marketing mix

Importance

• ·         Encourages customers to build a relationship with a brand
• ·         Gives strength to the brand
• ·         Ensures the staying power of the brand

Concept has two non-functional aspects of brands

• 1.      Brand image
• 2.      Brand identity

Brand image

• ·         Customers regard brands possess human-like characteristics
• ·         Customers experience brands as bundles of association
• ·         Customers see, hear, smell, taste and get gut feelings about different brands
• ·         This profile or essence is called brand image

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Retail Promotional Strategy

Retail Promotional Strategy

•  Any communication by a retailer that informs, persuades, and/or reminds the target market about any aspect of that firm

Elements of the Promotional Mix

Advertising Sales promotion Store atmosphere Web site SEM	Personal selling E-mail marketing
Publicity SEM	Word of mouth

Planning a Retail Promotional Strategy

Promotional Objectives

•          Increase sales

•          Stimulate impulse and reminder buying

•          Raise customer traffic

•          Get leads for sales personnel

•          Present and reinforce the retailer image

•          Inform customers about goods and services

•          Popularize new stores and Web sites

•          Capitalize on manufacturer support

•          Enhance customer relations

•          Maintain customer loyalty

•          Have consumers pass along positive information to friends and others

Public Relations

•          Public Relations - Any communication that fosters a favorable image for the retailer among its publics

–        Nonpersonal or personal

–        Paid or nonpaid

–        Sponsor-controlled or not

–        Publicity – Any nonpersonal form of public relations whereby messages are transmitted through mass media, the time or space provided by the media is not paid for, and there is no identified commercial sponsor

Advantages

•          Image can be presented or enhanced

•          More credible source

•          No costs for message’s time or space

•          Mass audience addressed

•          Carryover effects possible

•          People pay more attention than to clearly identified ads

Disadvantages

•          Some retailers do not believe in spending on image-related communication

•          Little control over publicity message

•          More suitable for short run

•          Costs for PR staff, planning activities, and events

Advertising

•          Paid, nonpersonal communication transmitted through out-of-store mass media by an identified sponsor

•          Key aspects

–        Paid form

–        Nonpersonal presentation

–        Out-of-store mass media

–        Identified sponsor

        Advantages

•          Attracts a large audience

•          Gains pass along readership (for print)

•          Low cost per contact

•          Many alternatives available

•          Control over message content; message can be standardized

•          Message study possible

•          Editorial content surrounds ad

•          Self-service operations possible

Disadvantages

•          Standardized messages lack flexibility

•          Some media require large investments

•          Geographic flexibility limited

•          Some media require long lead time

•          Some media have high throwaway rate

•          Some media limit the ability to provide detailed information

Personal Selling

Oral communication with one or more prospective customers for the purpose of making a sale

Advantages

•          Message can be adapted

•          Many ways to meet customer needs

•          High attention span

•          Less waste

•          Better response

•          Immediate feedback

Disadvantages

•          Limited number of customers handled at one time

•          High costs

•          Doesn’t get customer in store

•          Self-service discouraged

•          Negative attitudes toward salespeople (aggressive, unhelpful)

Sales Promotion

Encompasses the paid communication activities other than advertising, public relations, and personal selling that stimulate consumer purchases and dealer effectiveness

Advantages

•          Eye-catching appeal

•          Distinctive themes and tools

•          Additional value for customer

•          Draws customer traffic

•          Maintains customer loyalty

•          Increases impulse purchases

Fun for customers

Disadvantages

•          Difficult to terminate

•          Possible damage to retailer’s image

•          More stress on frivolous selling points

•          Short-term effects only

•          Used as a supplement

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