Attempt all the problems.
problem1) Describe the significance of sourcing in merchandise process.
problem2) What is the difference between four methods of dollar merchandise planning used to determine the proper inventory stock levels needed to begin a merchandise selling period?
problem3) What do you mean by sales per square foot? Why do we use it in computing performance measure in merchandise category? Comment with appropriate exs.
problem4)a) What is ECR ? Describe the scope of ECR.
b) Describe the information flow in ECR system.
Marks & Spencer And Dewhirst
Partnership between Marks & Spencer and Dewhirst is perhaps one of the longest standing business partnerships of all time. It began in 1894 when Michael Marks, a stallholder in Leeds Market Hall, formed a partnership with Tom Spencer, who had previously worked as the cashier for wholesale company I.J. Dewhirst. The two companies have continued to trade, and Dewhirst is now the world-class manufacturing company in its own right, as well as being the second largest non-food Marks & Spencer supplier.
Dewhirst has its roots in supplying textile products to M&S, but product expansion into areas like toiletries has given Dewhirst the opportunity to diversify. In 1998, Marks & Spencer launched the salon-formulation hair-care range in response to the growing interest in healthy hair and consumers’ willingness to purchase upmarket hair products. The following account follows introduction of new product range, highlighting the relationship between supplier and retailer as they work together to bring a product idea to market.
Richard Fawdry, merchandiser for toiletries at Marks & Spencer, talks to his contact, Sales Director Lorraine Crosby at Dewhirst, everyday. Dewhirst is one of six suppliers to toiletries department and has the toiletries product development team who work exclusively on Marks & Spencer products. In the spring of 1997, Lorraine suggested to Richard that marks & Spencer can develop a premium priced ‘salon formulation’ hair care range. Richard was interested and asked Dewhirst to make some proposals.
The initial stage of product development was the generation of themed story boards, pulling together ideas on product ingredients and packaging designs including bottle shapes, caps, and openings, labels, colours and product textures. These were used in product brainstorming sessions involving designers, selectors and merchandisers from M&S and product designers and marketers from the Dewhirst organization.
Next stage involved intensive discussion on the size of the range and target price points. A few bottles of shampoo will not make the adequate presence, but space constraints within the store meant that the new product launch will result in less space for other products prototype began. For this, a product development representative from Dewhirst visited laboratories in California, where best hair-care formulations are made, using all the latest ingredients and technology.
Marks & Spencer didn’t get heavily involved in the formulations of the hair products, trusting Dewhirst as the product experts to come up with the product appropriate for the Marks & Spencer customer. Lorraine, in the meantime, kept Richard informed on all aspects of product’s progress. When formulation had been agreed between toiletries technologist at M&S and Dewhirst technicians, it was blind tested with consumers. Meanwhile, product features like packaging and product information were considered in detail, with the aim of producing a product with worldwide appeal at price levels considered to be value for money, especially to the largest customer group, the UK. Exchange of design information were facilitated by an EDI/CAM link up between the two companies. Every detail of the product was discussed in depth, with final selling price as a key influence in the negotiations.
Ultimately the Richard worked on a detailed sales estimate for the range. He considered how wide the gap in the market is for this range, how strong is the competition from other hair care brands and retailers, and how much market share Marks & Spencer could expect to take. Lorraine provided some information to Richard on the market structure and competing retailers to help with this task. Richard also needed to decide if all the M&S stores would take the hair-care range and, if they do, whether they will take all the different product variations. The final sales estimate was given to Dewhirst, so that they can start planning production in the factories to meet delivery schedule.
Point of sale material to support launch was generated by Marks & Spencer’s graphics department, using product prototypes supplied by Dewhirst in the photography. The finalized range planning was presented at a merchandise review and was endorsed by the Marks & Spencer board of directors. Once the product launch was successfully underway, Lorraine and Richard went for an after-work celebratory dink!
a) Why is the type and assortment of merchandise give so much of importance in retailing?
b) Why is the target price points, packing and product information key deciding factor for product selection in retail outlet like Marks & Spencer?