FM 225 Midterm

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hayleyjo2
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146472
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FM 225 Midterm
Updated:
2012-04-09 01:46:55
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Fashion merchandising
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Fashion merchandising at FIT
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  1. Marketing channel
    • The flow of goods from point of production to point of consumption
    • Producer > Wholesaler > Retailer > Consumer

    *members are sometimes bypassed in the distribution process in teh interest of time or cost
  2. Vertical integration
    • Performing more than one channel function
    • Everything is done internally; no middle men
    • Feature of private labels
  3. Which type of store facilitates direct contact between producers and consumers?
    Specialty stores
  4. Table of organization
    • Aka organizational chart or pyramid
    • Depicts a company's corporate structure and defines an organization's lines of communication and responsibility
  5. Paul Mazur's retail store organizational structure
    • Headed by President
    • Four major functions include: Merchandising, Publicity, Control ($), and Store management
  6. The separation of buying & selling
    As single-unit retail operations have evolved into multi-unit chains, buying is now a centralized corporate-level function perfored independently from the operation of stores
  7. Contemporary store operations function
    Includes merchandising responsibilities such as (1) assortment planning, (2) merchandise presentation, (3) inventory management
  8. Line function
    Performs mainstream activities fundamental to an organization's mission
  9. Staff function
    Supports or advises line functions but is not directly involved in an organization's mainstream activities
  10. Authority
    Clearly defined through a chain fo command ina line function
  11. Retail merchandising
    Includes all of the activities associated with buying, pricing, presenting, and promoting merchandise at both store and corporate level
  12. Buyer
    Buys and prices merchandise for resale
  13. Planner
    Projects sales and inventories based on an analysis of sales history, current market trends, and the organization's performance objectives
  14. Distributor (aka "allocator")
    • Allocates arriving shipments of merchandise to individual stores based on each store's capacity, current sales trends, and inventory levels
    • Corrects stock imbalances
  15. Product developer
    • Determines which products to develop internally witht eh store's private label
    • Establishes specifications for the design, production, and packaging of these goods
    • Contracts producers to manufacture the goods according to the specifications
  16. Merchandise procurement responsibilities
    • Buying, planning, distribution, and product development
    • INTERDEPENDENT
  17. Department
    • A group of related merchandise
    • Identified by product line
    • Ex: men's outerwear, men's suits, etc
  18. Division
    • A group of related departments
    • Identified by product line
    • Ex: Men's, women's, etc
  19. Divisional merchandise manager (DMM)
    Monitors the sales, inventories, and assortments of the departments within a specific merchandise division
  20. General merchandise manager (GMM)
    • Manages a group of related merchandise divisions
    • Often at senior management level (VP)
  21. Visual merchandising
    A corporate-level merchandising function responsible for store decor, signage, display, fixturing, and standards for presenting merchandise
  22. Fashion director
    • Responsible for researching dominant color, style, and design trends
    • Communicates this info to buyers and other departments
  23. Store-level merchandising functions ensure that...
    • (1) Merchandise is presented on the selling floor in a manner consistent with a company's visual standards
    • (2) Inventory levels and assortments are appropriate for the store's customers and sales objectives
  24. General manager (aka Store manager)
    • Respnsible for the merchandising and operations of a store
    • Sometiems assisted by an operations manager, HR manager, and/or store merchandise manager
  25. Department manager (aka Sales manager)
    • Uusally reports to a store merchandise manager
    • Responsible for an area defined by department or division
    • Usually includes both merchandising and operational responsibilities
  26. District manager
    Responsible for a group of stores located within a defined geographic area
  27. Regional manager
    Supervises a group of district managers and reports to a corporate level person (such as a VP or director of stores)
  28. Qualifications for merchandising positions (6)
    • Decision-making skills
    • Communication skills
    • Analytical skills
    • Computer skills
    • Organizational skills
    • Mobility
  29. Fashion
    • A form of expression widely accepted by a group of people over time
    • Includes manufacturing, retailing, and promotion; is a strong force in our economy
  30. Trend
    • Implies the direction or movement of fashion
    • Described in ways that imply degree of acceptance, direction, duration, or relationship to other trends
  31. Style
    An item's distinctive characteristics or design features
  32. Fashion life cycle
    • Introduction (high fashion, fashion leaders)
    • Growth (knock-offs, fashion followers)
    • Peak (mass fashion)
    • Decline (markdowns, fashion laggards)
  33. Fad
    • Short-lived fashion
    • Rise and fall in popularity quickly
  34. Classic
    • Long-enduring fashion
    • Remain popular indefinitely
  35. Trickle-across theory ("diffusion")
    • Suggests that fashion is simultaneously adopted across all socioeconomic groups
    • Accounts for the fact that similar fashions appear concurrently at stores that cater to diverse socioeconomic groups due to developments in mass communication and computerized design
  36. Basic goods
    • Functional goods that change infrequently
    • Necessities
  37. Fashion goods
    • Aesthetically appealing goods that change frequently
    • Non-necessities
  38. The "Fashion-Basic continuum"
    • Goods can overlap
    • A basic coat (necessity) can become a fashion item through color, styling, and fabrication
  39. Fashion today (as relates to our economy)
    • Fashion is an integral part of our economic system
    • So much a part of our culture that it is difficult to find a product that does not have some inherent element of fashion
  40. How do retailers communicate fashion to their customers?
    Through advertising, sales promotion, product presentation, and direct selling
  41. Downside to fashion
    • Adds complexity to the retailer's job
    • Adds risk to retail buying decisions
    • Faulty fashion predictions impact sales and profit
  42. How can fashion acceptance be described?
    • Trickle-down
    • Trickle-across
    • Trickle-up
  43. How are sales stimulated?
    By the transformation of basic goods into fashion goods (ex: American Apparel)
  44. What is fashion influenced by?
    • Technological, economic, and societal change
    • Famous people and popular entertainment figures
  45. Branded merchandise
    Identified by a name and/or symbol associated with certain product characteristics such as price, quality, value, fit, styling, and prestige
  46. Product names
    • Either associated with the product producer or the store in which the product is sold
    • Product names lead to expectations regarding price, quality, styling, and reliability
  47. Regional brands
    Distributed throughout a define geographic section of the country (ex: Midwest)
  48. National brands
    Distributed throughout the country
  49. Types of brands
    • Mass market
    • Niche
    • Designer
  50. Brand positioning
    • Designer
    • Bridge
    • Better
    • Moderate
    • Mass market / Budget
  51. Bridge lines
    • Lower-priced lines
    • Limited distribution through prestigious stores and fine specialty stores
  52. Better lines
    • Broadly distributed
    • Appear at middle-tier department stores (Macy's)
  53. Moderate lines
    • Broadly distributed
    • Appear at lower-tier department stores (J.C. Penney)
  54. Mass market / budget lines
    Carried in value-oriented stores (full-line discounters)
  55. Brand-driven purchases
    Occur when clear distinctions differentiate brands
  56. Licensing
    A form of brand extension requiring no capital investment on the part of the licensor
  57. Brand extension
    • Adding related products to an existing product line
    • Developing a new product line with the same brand identity
  58. Private label merchandise
    • Bears the name of the retail store in which it is sold, or a name used exclusively by the retailer
    • Exclusive to a retailer's product mix
    • Affords a retailer an opportunity for higher profit margins
    • Found at all prices & levels
    • Often used to lower prices and combat competition
  59. Exclusive line
    Brand-name line created by the producer of hte brand for exclusive distribution by a single retailer
  60. What is a brand?
    A name that is meaningful to consumers
  61. Manufacturer
    • Uses labor and machinery to convert raw materials into finished products
    • Use either a direct sales force or manufacturers' reps to sell their products to retailers
  62. Direct sales force
    Responsible for meeting with prospective retail buyers, explaining the features of the organization's product line, and processing orders
  63. Manufacturer's sales representative (the showroom)
    • An independent sales agent whose income is based on commissions earned by selling manufacturers' products within a defined geographic territory
    • Do not assume title of the goods that they sell
    • Advantages: already has customers & territory; payment on commission
  64. Wholesalers ("the market")
    • Buy manufacturers' products and then resell them to retailers
    • Wholesalers facilitate the distribution of goods between a producer and a retailer
    • Distributer, jobber
  65. Imports
    • Add variety and distinction to a retailer's product mix
    • Afford a retailer an opportunity for higher profit margins
    • Offer a much higher initial markup over branded goods because you don't have to pay for designer inflation
    • Costly
  66. Tariffs (duties)
    Levied by the U.S. government on imports to restrict foreign competition
  67. Customs brokers
    Agents licensed by the U.S. Treasury to represent importers in customs matters
  68. Landed cost
    The final actual cost of imports
  69. Downside of imports
    • High costs
    • Fluctuating exchange rates > uncertain landed costs
    • Longer lead time, shipping delays
    • Tie up capital
  70. Market
    • A place where buyers and sellers come together to transact business
    • Buyers get the opportunity to meet with major design and manufacturing executives and to network with buyers of the same merchandise category from other retail organizations
  71. Merchandise mart
    • Houses an entire market under one roof
    • "One-stop shopping" for buyers
  72. Market center
    A cluster of marts
  73. Trade show
    A group of temporary exhibits at which vendors of a single category (or groups of related categories) of merchandise present goods to retail buyers
  74. Market weeks
    • April (Fall I or Transition)
    • June (Fall II)
    • August (Resort/Holiday)
    • October/November (Spring)
    • January (Summer)
  75. Break date
    • Day that the vendor will give markdown money to buyers
    • Retailer must wait until this day to put items on sale
  76. Resident buying office
    A marketing and research consulting firm that serves as an adviser to a group of member, or client, stores
  77. The primary role of the present-day buying office is that of ?, ?, and ? for member stores.
    • Adviser
    • Product developer
    • Importer
  78. Types of buying offices
    • Salaried office
    • Syndicated office
    • Private office
  79. Salaried office
    • Most common type of buying office
    • Owned and operated independently of its member stores
  80. Syndicated office
    Owned and operated by a retail conglomerate
  81. Private office
    Owned and operated by a singler etail organization as an extension of its corporate merchandising function
  82. The "right" retail price
    • High enough to cover an organization's profit objectives
    • Low enough to entice customers to buy
    • Cost + markup
  83. Total revenue
    Price x units sold
  84. Markup percent
    (Markup / retail price) x 100
  85. Initial markup
    (Retail - cost) / Retail
  86. Keystoning
    Doubling the cost of an item to reach the retail price
  87. Additional markup percent
    (Markup / present retail) x 100
  88. Cumulative markup percent
    • (Total markup / total retail dollars) x 100
    • Lower than IMU because cost of items differs
  89. Markdown percent
    (Markdown dollars / current retail price) x 100
  90. Jobout
    • Sell your marked down merchandise to another (discount) retailer
    • Factored in as a markdown
  91. Markdown dollars
    (Original retail price x markdown percent) / 100
  92. Types of markdowns
    • Damage
    • Employee discount
    • Promotional (temporary)
    • Clearance (permanent)
  93. Clearance merchandise
    • Discontinued goods
    • Seasonal merchandise
    • Broken assortments
  94. Slow sellers
    • Weather
    • Poor assortment
    • Poor presentation
    • Late delivery
  95. Maintained markup
    • The difference between the cost of merchandise and the actual retail selling price
    • Takes into account the impact of markdowns on IMU
    • Indicator of how well merchandise sustains markup
    • Usually lower than IMU (except equal when goods are sold at original price)
    • *Initial markup - Net markdowns
  96. Tactical price change
    A strategic markup or markdown that falls within a retail price zone defined at one end by a retail price with a standard markup at the other end by a retail price with an inflated markup
  97. Managing markdowns
    • Last year's markdowns for the same time period are used to project this year's markdowns
    • Gross margin and net income will be negatively affected by excessive markdowns
  98. Initial markup must be high enough to cover...
    • Transportation and workroom costs (less cash discounts)
    • Expenses and net profit
    • Markdowns
  99. Factors that drive initial markup
    • Markdowns
    • Transportation costs
    • Workroom costs
    • Direct expenses

    *In general, high figures in the numerator of the initial markup formula will yield a high initial markup percentage
  100. Promotional pricing
    • Generate customer traffic
    • Stimulate sales during a slow selling period
    • Induce the sale of related nonpromotional merchandise
    • Engage in competitive pricing with other retailers
    • Establish an image as a value-oriented retailer
  101. Everyday low pricing
    A value-oriented pricing strategy involving continuous promotional pricing without the support of advertised events
  102. Deceptive pricing
    • Regular price comparisons (stated reduction from an original or regular price)
    • Comparisons to competitors' prices
    • Lowest price
    • Free merchandise (BOGO)
    • Going out of business
    • Bait and switch
    • The raincheck rule (allows customers to buy the advertised merchandise at a later date at the sale price)
    • Predatory pricing
  103. Resale price maintenance
    Producers enforce the sale of their products at a prescribed manufacturer's suggested retail price
  104. Planning
    • Involved establishing an organization's goals or objectives and strategies to achieve them
    • Includes forecasting
  105. Long-range plan ("strategic")
    • Covers a 3 to 5 year period or longer
    • Developed by top management
    • Iclude strategies for expansion, market position, and major capital expenditures
  106. Short-term plan
    • Covers periods shorter than a year
    • Developed by lower-level managers
    • Includes schedules and budgets
  107. 4-5-4 calendar
    • An accounting calendar universally adopted by retailers
    • Each month has exactly four weeks or five weeks, so months are chronologically arranged in a 4-5-4 sequence
    • Has two six-month seasons: Spring (Feb-July), and Fall (Aug-Jan)
  108. Related groups of merchandise as manageable business units
    • Divisions
    • Departments
    • Classifications
    • Subclasses
  109. Business unit hierarchies
    • Create manageable business units
    • Used as a basis for planning and tracking sales and inventory
  110. Planning sales
    • Based on history and current trends
    • Look at seasons, economy, trends, demographic shifts, competitors, etc.
  111. Planning inventory
    • Cruial to the attainment of sales objectives
    • Methods are based on plan sales and a desired turnover objective
  112. Stock-to-sales ratio
    BOM = Plan sales x Desired stock-to-sales ratio
  113. Open to buy
    • The amount of merchandise that a buyer needs to order to support plan sales for a period
    • Derived from plan purchases
    • EOM - (BOM - sales - MD - On Order)
  114. Plan purchases
    • Plan sales for month
    • + plan markdowns
    • + plan EOM
    • - plan BOM
  115. Assortment planning
    • Price (opening to ending price-point)
    • Brand
    • Size
    • Color
    • Fabrication
    • Style
  116. Computerized planning systems
    • Facilitates the planning of assortments by individual SKU and store
    • Integrates plans from various organizational levelst o ensure a match between all plans
  117. 80/20 rule
    Keep 80% of stock on floor, 20% in backstock
  118. Category management
    Involves managing a product category as if it were a separate business entity, such as a store or department
  119. Planning information
    Can be INTERNAL (past sales records, planned sales, etc) or EXTERNAL (consumer/trade publications, forecasting services, etc)

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