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.
Very informative post. Keep up the good work. I would really look forward to your other posts
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