black belt in retail

ROCKETING RETAIL PROFITS

......................................................

PRAKASH MENON ANDREW CAVANAGH&

With Excellence in Merchandise Planning

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TABLE OF CONTENTS

TABLE OF CONTENTSINTRODUCTION TO THE PLANNER ROLE 2

ASSORTMENT AND RANGE PLANNING 16

THE MERCHANDISE FINANCIAL PLAN 46

Part 1. The Buying and Merchandising Seasonal Cycle 3

Part 2. The Role of the Merchandise Planner 7

Workshop Activity 1 (Individual) 11

Part 3. Financial Control and the Assortment Plan 12

Part 1. Before the Plan 17

Part 2. The Business Structure 19


Part 3. The Assortment Plan 23

Part 4. Creating a Location Plan 26

Part 5. Create a Merchandise Mix Plan 29

Part 6. Determine Width vs Depth Strategy 30

Part 7. The Range Plan 33

Workshop Activity 3 (Groups) 39

Part 8. Product Life Cycles 41


Part 1. Financial Plans 47

Part 2. Setting the Sales Budget: Bottom-up Planning 50

Part 3. Setting Stock Levels 52

Part 4. Setting Levels of Markdowns 55

Part 5. Establishing Open-To-Buy 58


................................................................................................................................................................................................................................................TABLE OF CONTENTS

TABLE OF CONTENTS

QUANTIFICATION 64

INVENTORY MANAGEMENT 82

MERCHANDISE ANALYSIS 96

Part 1. Forecasting 65


Part 2. Ordering 72

Part 3. Allocation 74


Part 1. The Need to Manage Inventory 83

Part 2. Taking Action 87


Part 3. Identifying Markdown Opportunities 93


Part 1. What is Analysis? 97



Part 2. Directional analysis 102


Part 3. Trend Analysis 107


Part 4. Tracking Analysis 109



Part 5. Quantitative Analysis 113

Part 6. Qualitative Analysis 115

Part 7. Post Seasonal Analysis 117

Part 8. Contextualising the Data 126


Workshop Activity 1

Workshop Activity 2

Workshop Activity 3

Workshop Activity 4

Workshop Activity 5

Workshop Activity 6

Workshop Activity 7

Workshop Activity 8

Workshop Activity 9

Workshop Activity 10







APPENDICES

(Individual)

(Individual).

(Groups)

(Individual)

(Individual)

(Groups)

(Groups)

(Groups)

(Individual)

(Groups).

(Groups)

(Groups)

(Groups).

(Groups)

(Individual)

(Individual)

+.............. ...................... .................................

INTRODUCTIONIf you were to ask several retailers to defne ‘merchandise planning’,

chances are you would get many different responses. Because of

this ambiguity, the role of merchandise planner in the buying cycle

is often undervalued. Buyers on the other hand have always

enjoyed the spotlight. They are very good at developing ranges,

negotiating the purchase terms and setting retail prices, all

important aspects of the Buying Cycle. But history tells us this is

often done without the beneft of insightful analysis based on last

season’s performance and industry trends (the Merchandise

Planner’s forte).

Together, the Buyer and the Merchandise Planner make the perfect

team. Much like the relationship between the navigator and driver

in a car rally, the Buyer ‘drives’ the range development and ft to the

customers’ needs while the Planner monitors the ‘road’, advising

the Buyer when to turn left or right, to slow down, speed up or

STOP!

At the end of the day, as retailers we’re all here to make money.

This book is a practical guide to optimising inventory and retail

profts through the merchandise planning function. It includes a

series of workshop activities (with solutions at the back), making it

more than just an easy to read book, but also an effective learning

and consolidation tool that could easily be shared with the team.

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INTRODUCTION TO THE PLANNER ROLE

3 4

Part. 1+

The activities of a Merchandise Planner are linked to the Buying and

Merchandising Seasonal Cycle.

Planners have input at various stages of the Cycle, particularly when it comes to

formulating the financial plan for their area. This financial plan is also known as a

Merchandise Plan.

The Merchandise Plan is influenced by:

The business model and financial objectives of the Brand

The market position of the Brand

The departmental assortment strategy in supporting that position

The Brand and departmental business plans

Financial KPI's

Product life cycles within the assortment mix

wSupply Chain dynamics

Brand policies relating to risk management and markdowns

w

w

w

w

w

w

w

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THE BUYING AND MERCHANDISING SEASONAL CYCLE

INTRODUCTION TO THE PLANNER ROLEINTRODUCTION TO THE PLANNER ROLE

THE BUYING CYCLE

Retail Strategy and

Range Development

?w Corporate Strategy

?w Business Model

& Objectives

?w Department Strategy

Developing the

Seasonal Range Planw Develop Range Framework

w Build Rangew Review Range

Implementing the

Seasonal Range Planw Progress Rangew Preparation for

On-Sale

Managing the

Range In-Season?w Merchandise Analysis

?w Taking action?w Post-Seasonal Analysis

Merchandise Planning

Retail Metrics

Supply Chain

Loss Prevention

Supplier Management

THE BUYING AND MERCHANDISING SEASONAL CYCLE

5 6

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INTRODUCTION TO THE PLANNER ROLEINTRODUCTION TO THE PLANNER ROLE

THE BUYING AND MERCHANDISING SEASONAL CYCLETHE BUYING AND MERCHANDISING SEASONAL CYCLE

1. RETAIL STRATEGY AND RANGE DEVELOPMENT

2. DEVELOPING THE SEASONAL RANGE PLAN

Corporate Strategy

Financial objectives

Marketing objectives

Business position and

competitive situation

Core customer

segments

Develop the Range Framework

Family tree (hierarchy

and breaks)

Price map

Brand map

Detailed sales, proft,

markdown and stock

targets

Business Model and

Objectives

Sales, proft and

expenses

Detailed customer

profles

Manageable blocks of

2 days a month

Build Range

Breadth and depth

Fashion level

Item detail

Negotiate costs

Develop intake and exit

plan

Liaise with supply chain

Department Strategy

Customer groups

Competitive situation

within department

Product mix guidelines

Review Range

Review against sales

and proft budgets

Review against

customer profles

3. IMPLEMENTING THE SEASONAL RANGE PLAN

4. MANAGING THE RANGE IN-SEASON

Progress Range

Sign-off product

specifcations

Analyse Sales

Monitor sales and proft

Check new line

performance

Identify trends

Place Orders

Monitor and action

critical-path dates

React to Sales

Take markdowns

Adjust Open-to-Buy

Replan merchandise

Negotiate with

suppliers for contribu-

tions to markdowns

and cancellations

Preparation for

On-sale

Produce lay-out

guidelines

Follow-up suppliers

Brief stores on

product range features

and benefts

Product Clearance

Implement markdowns

Monitor sales response

to markdowns

Document implications

for next season and

same season next year

Conduct review of

season

PLAIN SHIRTS

Budget STD sales are the same for lines 1 and 2, which implies that they were

meant to arrive at the same time and didn't. Line 1's sales for last week, last

month and season are all the same, indicating it has only just arrived. The arrival

of the line 1 stock has also lifted sales for the week of line 2, which implies that

line 2 may have been starting to get fragmented. Line 3 is clearly underperforming

and needs to be marked down in order to be cleared. Line 4 is over-performing

and, if lead-times were suitable, it would be wise to reorder and perhaps range to

all 160 stores. If reordering is not viable, a size analysis will need to be done and, if

it is a reasonable size mix, the product will need to be consolidated into a smaller

number of stores. If the size range consists of oddments only, then mark it down

and clear it in all stores.

STRIPED SHIRTS

Line 8 is the only one of the striped shirts that has performed above expectations.

Why that has happened needs to be investigated. The other 3 lines are all sub-

standard and need to be marked down.

PRINT SHIRTS

All are tracking at planned levels or above. The question that needs to be

addressed is “Why were so many of the print shirts only ranged to a limited

number of stores?” Again if lead times were suitable, it would be wise to reorder to

a wider distribution of stores. If not, then stock will need to be consolidated and/or

cleared out.

................................................................................................................................................................................................................................................

Work through the following Alderman Books mini-case study and answer the

questions below:

* What are your recommendations?

* Should the catalogue format be adopted for future promotions?

Background

In early 2005 the retail book sector in Australia was going through major

transformation. The arrival of international book retailer Borders, the growth of on-

line seller Amazon (amongst others) and rationalisation in both the publishing and

retailing side of the business set the scene for change. Two authors were

dominating the market at the time. J.K. Rowling and her 'Harry Potter' series of

books had ignited the interest of an entire generation to start reading again. As a

result, new releases were assured of fast sell through of massive volumes of

stock amidst worldwide hype regarding the plot.And Dan Brown rocketed to

notoriety with the release of his somewhat controversial book 'The Da Vinci Code',

meaning subsequent releases and re-releases were also assured of success.

To complicate the market at the time, one of eastern Australia's largest book

chains had fallen into some liquidity issues and publishers were refusing to supply

them with new books until they had paid for the stock already received. As a

result, they did not release a Mother's Day Catalogue in 2005. Failure to go to

market with a strong current offering further exacerbated their problems, as

Mother's Day is traditionally the second largest sale period in books for the entire

year.

Franchise chain, Alderman Books, had been performing strongly over this time and

was trending up on both a 'like for like' stores and total sales basis. They were also

opening new stores on a regular basis. In fact 10 new stores had been opened in

the last 12 months bringing the total number of stores to 50.

ALDERMAN BOOKS – MINI CASE STUDY

Part. 16+

WORKSHOP ACTIVITY 16(INDIVIDUAL)

165 166APPENDICESAPPENDICES

WORKSHOP ACTIVITY 16(INDIVIDUAL)

The Scenario

The Mother's Day catalogue for Alderman in 2005 was an outstanding success

with sales of catalogue lines up by over 30% on the previous year. The new Harry

Potter and Dan Brown titles both worked exceptionally well as 'hero' lines within

the catalogue. The Marketing department was understandably delighted and

wanted to adopt the format used as a template for future promotions.

1. What factors should be considered before doing this?

Sales results have been distorted by the following factors:

i. The two blockbuster books, which would have sold regardless of if they

had catalogue exposure or not. There is no guarantee that books with

similar 'pulling power' will be available for future catalogues. They should

therefore be classified as data noise.

ii. The absence from the competitive landscape of a competitor from the

eastern states has created a distorted market share for this event. At the

time of review, there was no indication of whether or not that retailer

would survive. As a result, eastern state sales were distorted by this

situation. Western Australian results would not have been impacted, as

the retailer in question did not have a presence there.

iii. Like for like' sales were trending up. It can therefore be safely assumed

that catalogue results would have been similarly trending up, regardless

of the catalogue.

iv. More stores were involved in the catalogue this year. There are now 50

stores compared with 40 stores earlier. Nominally you would expect

around a 25% increase in sales as a result of there now being 25% more

stores (assuming that no 'sales cannibalisation' between existing and

new stores had taken place).

v. Increased competition from Amazon and Borders is not really relevant in

this case, as the overall trending figures will take that into account.

SOLUTION

................................................................................................................................................................................................................................................

vi. You must also look at a longer data line rather than just compare the

results with last year. This year's results may look good simply because

last year's results were bad. If last year was 20% down on the year

before, this year's 30% increase may only be correcting an aberration

from the previous year.

2. What can be done to eliminate any data 'noise' from the analysis?

i. Sales results can be calculated EXCLUDING the two blockbusters.

ii. Results could be compared with just the Western Australian stores.

iii. The results can be de-trended to strip out the impact of general growth.

Remember, the point of this analysis is to see if the format works for the

catalogues.

iv. Only examine results in stores that have been open for 12 months or

more.

If the longer data line shows that this year was not a correction, then this much

smaller data sample will give you a more accurate picture than examining the total

result.

When all of these factors are taken into consideration, it appears that the new

catalogue format was at best neutral and at worst led to a decreased result once

all the data noise was removed.

Decision – Do not adopt the new format as a template for future promotional

activity.

167 168APPENDICESAPPENDICES

WORKSHOP ACTIVITY 16(INDIVIDUAL) WORKSHOP ACTIVITY 16(INDIVIDUAL)

PRAKASH ‘PK’ MENON

ANDREW CAVANAGH

AUTHOR BIOGRAPHIES

Prakash ‘PK’ Menon is a globally renowned Retail,

Supply Chain & Logistics & Leadership authority. A

regular contributor to several UAE and international

retail publications, PK is also the author of three other

books - Driven - accelerate your career with smart

transitioning; Supply Chain is Sexy - Harnessing the

Retail Revolution; and Fail Smart - The Undeniable

Link Between Failure and Success. As Executive

Director of Thought Leaders Middle East, PK’s passion

and expertise is to help retailers transform their

organisations into global powerhouses and add

signifcant dollars to their proft lines.

Andrew Cavanagh brings more than 20 year’s retail

buying, merchandise planning and IT experience with

Myer and Coles Myer and more than 6 year’s national

and international teaching experience at the

Australian Centre for Retail Studies to the table. Today

he focuses on his true passion, which is to develop the

skills and competencies of Buyers and Planners

around the world as an international facilitator.

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Driven...whatever it takes!

A memoir highlighting PK

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even more humble yet

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