Chapter 12 Merchandise Management the process by which a retailer attempts to offer the right quantity of the right merchandise in the right place at the right time to meet the company s financial goals WHO activities are undertaken primarily by buyers and their superiors divisional merchandise managers and general managers WHAT retail buyers manage a portfolio of merchandise inventory they buy merchandise they think will be popular with their customers when the merchandise is not good they get rid of it by putting it on sale HOW be in touch with and anticipate what customers will want to buy needs to be able to sense market trends and be able to analyze sales data continually making appropriate adjustments in price and inventory level the buying organization is how the retailers group categories of merchandise the highest classification level is the merchandise group which consists of 4 groups women s apparel men s children s and intimate apparel cosmetics shoes jewelry and accessories home and kitchen the second level is departments the third level is classification such as age groups the merchandise category is the basic unit of analysis for making merchandising management decisions brands colors sizes category management many supermarkets organize their merchandise management around brands or vendors can lead to inefficiencies managing by category can help ensure that the store s assortment includes the best combination of sizes and vendors Category Captain a vendor who works with the retailer to develop a better understanding of shopping behavior create assortments that satisfy consumer needs and improve the profitability of the merchandise category Advantages makes merchandise tasks easier and can increase profits they have superior information because of their focus on a specific category they have acquired insights from managing the category for other retailers Disadvantages the vendor could take advantage of its position the vendor category captain could collude with the retailer to fix prices it could also block other brands particularly smaller ones from accessing shelf space Chapter 13 National Brands also known as manufactured brands are products designed produced and marketed by a vendor and sold to many different retailers in some cases vendors use an umbrella or family name associated with the product such as Dabur family brand Amla Hair Oil sub brand Maruti family brand Alto sub brand in other cases vendors use individual brand names for different product categories and don t associate the brands with their companies Marico makes Parachute coconut oil Saffola cooking oil Hair and Care shampoo Niva hair oil Mediker anti lice treatment Copycat Brands imitate the manufacturer s brand in appearance and packaging generally are perceived as lower quality and are offered at lower prices flourish in drugstores and grocery stores CVS and Walgreens brands are placed next to the manufactures brands and often look like them Advantages of Private Label Merchandise for a Retailer Private label brands can fill assortment voids that are not being met by national brands store loyalty store image traffic flow restrictions differential advantages Trade Shows provide another opportunity for buyers to see the latest products and styles and interact with vendors vendors display their merchandise in designated areas Costs Associated with Global Sourcing Decisions low cost of labor in developing economy countries tariffs also known as duties are taxes collected by a government on imports import tariffs have been used to shield domestic manufacturers from foreign competition inventory turnover is likely to be lower when purchasing from foreign suppliers transportation costs are higher Managerial Issues Associated with Global Sourcing Decisions it is harder to maintain consistent quality standards than it is when sourcing domestically quality control problems can cause delays in shipment and adversely affect a retailer s image the collaborative supply chain management approaches are more difficult to implement problem of policing potential violations of human rights and child labor laws Exclusivity retailers often negotiate with vendors for an exclusive arrangement so that no other retailer can sell the same item or brand through this exclusive arrangement the retailer can differentiate itself from competitors and realize higher margins due to reduced price competition in some cases vendors also benefit by making sure that image of retailers selling their merchandise is consistent with their brand image example Prada might want to give exclusive rights for its apparel to one store in a major market like Neiman Marcus and this offers a monopoly to the retailer Legal and Ethical Issues of Counterfeit Merchandise Counterfeit merchandise includes goods made and sold without the permission of the owner of a trademark or copyright selling counterfeit merchandise can negatively affect a retailer s image and its relationship with the vendor of the legitimate brand Chapter 15 Brand Equity the value that a brand image offers retailers strong brand names affect the customer s decision making process motivates repeat visits and purchase build loyalty enable retailers to charge higher prices and lower their marketing costs customer loyalty arises from heightened awareness of the brand and emotional ties to it high brand awareness and strong emotional connections reduce the incentives of customers to switch to competing retailers retailers with a strong brand names can leverage their brands to introduce new retail concepts with only a limited amount of marketing effort in order to build up the brand equity of their private label merchandise a retailer needs to create a high level of brand awareness Building Brand Equity for its private label merchandise 1 Create a high level of brand awareness 2 Develop favorable associations with the brand name 3 Consistently reinforce the image of the brand Top of Mind Awareness the highest level of awareness that occurs when consumers mention a specific brand name first when they are asked about the type of retailer a merchandise category or a type of service example Best Buy has a top of mind awareness if most consumers respond best buy when asked about retailers that sell consumer electronics means that a retailer will probably be in the consideration set when customers decide to shop for a type of product or service HOW TO BUILD TOP OF MIND AWARENESS having