Retail Management Handout
I. Major Steps in Merchandise Buying and Handling
A. Merchandise management is the analysis, planning, acquisition, handling, and control of the merchandise investments of a retail operation. Exhibit 9.1 illustrates the major steps in the merchandise management process. 1. Analysis is used in the definition because retailers must be able to correctly identify their customers before they can determine the needs and wants of their consumers. 2. Planning is included because retailers must often purchase their merchandise six to 12 months in advance of the selling season. 3. The term acquisition is used because, with the exception of service retailers, merchandise needs to be bought from others, either distributors or manufacturers. 4. Handling ensures that the merchandise is where it is needed and in the proper shape to be sold. 5. Control of the large dollar investment in inventory is important to ensure an adequate financial return on the retailer’s merchandise investment. . B. Merchandising, though only a subfunction of retailing, is its heartbeat. It is the day-to-day business of all retailers. As inventory is sold, new stock needs to be purchased, displayed, and sold once again.
II. Dollar Merchandise Planning A. A high build up of inventory indicates that either the retailer has too much money tied up in inventory or is not making the sales it was expecting and is heading for trouble. Likewise, a retailer who is frequently out of stock will quickly lose customers. 1. Inventory is the largest investment that retailers make. 2. Gross margin return on inventory model is used to analyze the performance of inventory. Gross margin return on inventory (GMROI) incorporates into a single measure both inventory turnover and (gross) profit. Its formula is: (Gross margin/Net sales) x (Net sales/Average inventory at cost) = (Gross margin/Average inventory at cost) 3. Buyers, working with upper management, are responsible for the
A. Merchandise management is the analysis, planning, acquisition, handling, and control of the merchandise investments of a retail operation. Exhibit 9.1 illustrates the major steps in the merchandise management process. 1. Analysis is used in the definition because retailers must be able to correctly identify their customers before they can determine the needs and wants of their consumers. 2. Planning is included because retailers must often purchase their merchandise six to 12 months in advance of the selling season. 3. The term acquisition is used because, with the exception of service retailers, merchandise needs to be bought from others, either distributors or manufacturers. 4. Handling ensures that the merchandise is where it is needed and in the proper shape to be sold. 5. Control of the large dollar investment in inventory is important to ensure an adequate financial return on the retailer’s merchandise investment. . B. Merchandising, though only a subfunction of retailing, is its heartbeat. It is the day-to-day business of all retailers. As inventory is sold, new stock needs to be purchased, displayed, and sold once again.
II. Dollar Merchandise Planning A. A high build up of inventory indicates that either the retailer has too much money tied up in inventory or is not making the sales it was expecting and is heading for trouble. Likewise, a retailer who is frequently out of stock will quickly lose customers. 1. Inventory is the largest investment that retailers make. 2. Gross margin return on inventory model is used to analyze the performance of inventory. Gross margin return on inventory (GMROI) incorporates into a single measure both inventory turnover and (gross) profit. Its formula is: (Gross margin/Net sales) x (Net sales/Average inventory at cost) = (Gross margin/Average inventory at cost) 3. Buyers, working with upper management, are responsible for the