FM 225 Midterm

• 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

• Performing more than one channel function
• Everything is done internally; no middle men
• Feature of private labels

Specialty stores

• Aka organizational chart or pyramid
• Depicts a company's corporate structure and defines an organization's lines of communication and responsibility

• Headed by President
• Four major functions include: Merchandising, Publicity, Control ($), and Store management

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

Includes merchandising responsibilities such as (1) assortment planning, (2) merchandise presentation, (3) inventory management

Performs mainstream activities fundamental to an organization's mission

Supports or advises line functions but is not directly involved in an organization's mainstream activities

Clearly defined through a chain fo command ina line function

Includes all of the activities associated with buying, pricing, presenting, and promoting merchandise at both store and corporate level

Buys and prices merchandise for resale

Projects sales and inventories based on an analysis of sales history, current market trends, and the organization's performance objectives

• Allocates arriving shipments of merchandise to individual stores based on each store's capacity, current sales trends, and inventory levels
• Corrects stock imbalances

• 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

• Buying, planning, distribution, and product development
• INTERDEPENDENT

• A group of related merchandise
• Identified by product line
• Ex: men's outerwear, men's suits, etc

• A group of related departments
• Identified by product line
• Ex: Men's, women's, etc

Monitors the sales, inventories, and assortments of the departments within a specific merchandise division

• Manages a group of related merchandise divisions
• Often at senior management level (VP)

A corporate-level merchandising function responsible for store decor, signage, display, fixturing, and standards for presenting merchandise

• Responsible for researching dominant color, style, and design trends
• Communicates this info to buyers and other departments

• (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

• Respnsible for the merchandising and operations of a store
• Sometiems assisted by an operations manager, HR manager, and/or store merchandise manager

• Uusally reports to a store merchandise manager
• Responsible for an area defined by department or division
• Usually includes both merchandising and operational responsibilities

Responsible for a group of stores located within a defined geographic area

Supervises a group of district managers and reports to a corporate level person (such as a VP or director of stores)

• Decision-making skills
• Communication skills
• Analytical skills
• Computer skills
• Organizational skills
• Mobility

• 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

• Implies the direction or movement of fashion
• Described in ways that imply degree of acceptance, direction, duration, or relationship to other trends

An item's distinctive characteristics or design features

• Introduction (high fashion, fashion leaders)
• Growth (knock-offs, fashion followers)
• Peak (mass fashion)
• Decline (markdowns, fashion laggards)

• Short-lived fashion
• Rise and fall in popularity quickly

• Long-enduring fashion
• Remain popular indefinitely

• 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

• Functional goods that change infrequently
• Necessities

• Aesthetically appealing goods that change frequently
• Non-necessities

• Goods can overlap
• A basic coat (necessity) can become a fashion item through color, styling, and fabrication

• 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

Through advertising, sales promotion, product presentation, and direct selling

• Adds complexity to the retailer's job
• Adds risk to retail buying decisions
• Faulty fashion predictions impact sales and profit

• Trickle-down
• Trickle-across
• Trickle-up

By the transformation of basic goods into fashion goods (ex: American Apparel)

• Technological, economic, and societal change
• Famous people and popular entertainment figures

Identified by a name and/or symbol associated with certain product characteristics such as price, quality, value, fit, styling, and prestige

• 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

Distributed throughout a define geographic section of the country (ex: Midwest)

Distributed throughout the country

• Mass market
• Niche
• Designer

• Designer
• Bridge
• Better
• Moderate
• Mass market / Budget

• Lower-priced lines
• Limited distribution through prestigious stores and fine specialty stores

• Broadly distributed
• Appear at middle-tier department stores (Macy's)

• Broadly distributed
• Appear at lower-tier department stores (J.C. Penney)

Carried in value-oriented stores (full-line discounters)

Occur when clear distinctions differentiate brands

A form of brand extension requiring no capital investment on the part of the licensor

• Adding related products to an existing product line
• Developing a new product line with the same brand identity

• 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

Brand-name line created by the producer of hte brand for exclusive distribution by a single retailer

A name that is meaningful to consumers

• 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

Responsible for meeting with prospective retail buyers, explaining the features of the organization's product line, and processing orders

• 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

• Buy manufacturers' products and then resell them to retailers
• Wholesalers facilitate the distribution of goods between a producer and a retailer
• Distributer, jobber

• 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

Levied by the U.S. government on imports to restrict foreign competition

Agents licensed by the U.S. Treasury to represent importers in customs matters

The final actual cost of imports

• High costs
• Fluctuating exchange rates > uncertain landed costs
• Longer lead time, shipping delays
• Tie up capital

• 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

• Houses an entire market under one roof
• "One-stop shopping" for buyers

A cluster of marts

A group of temporary exhibits at which vendors of a single category (or groups of related categories) of merchandise present goods to retail buyers

• April (Fall I or Transition)
• June (Fall II)
• August (Resort/Holiday)
• October/November (Spring)
• January (Summer)

• Day that the vendor will give markdown money to buyers
• Retailer must wait until this day to put items on sale

A marketing and research consulting firm that serves as an adviser to a group of member, or client, stores

• Adviser
• Product developer
• Importer

• Salaried office
• Syndicated office
• Private office

• Most common type of buying office
• Owned and operated independently of its member stores

Owned and operated by a retail conglomerate

Owned and operated by a singler etail organization as an extension of its corporate merchandising function

• High enough to cover an organization's profit objectives
• Low enough to entice customers to buy
• Cost + markup

Price x units sold

(Markup / retail price) x 100

(Retail - cost) / Retail

Doubling the cost of an item to reach the retail price

(Markup / present retail) x 100

• (Total markup / total retail dollars) x 100
• Lower than IMU because cost of items differs

(Markdown dollars / current retail price) x 100

• Sell your marked down merchandise to another (discount) retailer
• Factored in as a markdown

(Original retail price x markdown percent) / 100

• Damage
• Employee discount
• Promotional (temporary)
• Clearance (permanent)

• Discontinued goods
• Seasonal merchandise
• Broken assortments

• Weather
• Poor assortment
• Poor presentation
• Late delivery

• 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

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

• 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

• Transportation and workroom costs (less cash discounts)
• Expenses and net profit
• Markdowns

• 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

• 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

A value-oriented pricing strategy involving continuous promotional pricing without the support of advertised events

• 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

Producers enforce the sale of their products at a prescribed manufacturer's suggested retail price

• Involved establishing an organization's goals or objectives and strategies to achieve them
• Includes forecasting

• Covers a 3 to 5 year period or longer
• Developed by top management
• Iclude strategies for expansion, market position, and major capital expenditures

• Covers periods shorter than a year
• Developed by lower-level managers
• Includes schedules and budgets

• 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)

• Divisions
• Departments
• Classifications
• Subclasses

• Create manageable business units
• Used as a basis for planning and tracking sales and inventory

• Based on history and current trends
• Look at seasons, economy, trends, demographic shifts, competitors, etc.

• Cruial to the attainment of sales objectives
• Methods are based on plan sales and a desired turnover objective

BOM = Plan sales x Desired stock-to-sales ratio

• 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)

• Plan sales for month
• + plan markdowns
• + plan EOM
• - plan BOM

• Price (opening to ending price-point)
• Brand
• Size
• Color
• Fabrication
• Style

• Facilitates the planning of assortments by individual SKU and store
• Integrates plans from various organizational levelst o ensure a match between all plans

Keep 80% of stock on floor, 20% in backstock

Involves managing a product category as if it were a separate business entity, such as a store or department

Can be INTERNAL (past sales records, planned sales, etc) or EXTERNAL (consumer/trade publications, forecasting services, etc)