MS 612 IGNOU MBA Solved Assignment - What constitute Retail Mix? Discuss various considerations to be kept in mind which planning for store merchandise

What constitute Retail Mix? Discuss various considerations to be kept in mind which

           planning for store merchandise 

Ans

Merchandise plans are typically viewed as a cube of three dimensions: Product, location, and time. When the on-line world came along, the eCommerce channel was generally viewed as a separate location, so it got tucked in there. All planning systems worth their salt have always allowed alternate hierarchies in each of these three dimensions. So:

• Products could be rolled up either to class, department and category, or to buyer

• Time could be rolled up to months and seasons or, in the case of retailers who also sold through catalogs, to catalog “lifecycles”

• Locations could be rolled up geographically or by regional management

But even with this attribute level planning, retail brick and mortar Merchandise planning does not capture many of the specialized planning elements needed to effectively plan an E-Commerce business.  Planning sales, inventory, receipts, sell-thru % and profit at the category or attribute level will not accurately determine the performance of a category on a website.

 What About Catalog?

Even catalog planning, though similar in many ways, falls short of truly capturing the opportunities eCommerce presents to a retailer. In the traditional catalog arena, profitability analysis is pretty straightforward: Merchandising contribution margin is composed of demand, returns, net sales, cost of goods sold and advertising expense. Traditional catalog merchants also rely on location planning, or square-inch reporting (squinch) to determine the profitable placement of products. This type of data information has proven to be invaluable for the catalog business to determine how products will perform and more importantly, how consumers will react to product placement.

Many of the planning characteristics of eCommerce are similar to the catalog planning process, but even here differences are present. In eCommerce, merchants have a different kind of profit analysis and planning process, due to the dynamic nature of the web. eCommerce profit planning focuses on sales and gross margin, while advertising expense is rarely attributed to product-level marketing. Many online merchants maximize use of drop-ship SKUs, which require different profit performance standards. eCommerce has a different cadence than catalog as well, with the ability to react to consumer demand quicker than a catalog can.

Catalog and eCommerce profit planning processes aren’t interchangeable, but they’re evolving into a hybrid process. Catalog merchants are marketing more actively on the web and increasing investments in pay-per-click campaigns, online advertising and search engine optimization (SEO). eCommerce merchants increasingly recognize print’s value in driving web traffic and purchasing decisions. As the models converge, product profit analysis is becoming more complex.

In our future posts on this very topic of merchandise planning for eCommerce, we are going to further discuss the kind of planning considerations to keep in mind given some of the characteristics that are unique to eCommerce.

What are some of your planning challenges and thoughts on stocking your online store?  Please share in the comments below  or give us a ring.