Assignment 2 ____________________________________________________________
Discuss the benefits of developing an assortment plan and range plans to maximise retail space productivity measured in sales per square metre.
In retailing it is important to make as much gross profit as possible while delivering a good level of return from the investment they originally make in stock. The retailer needs to do this through making as much money as possible through making as many sales of their products as possible. It is this attitude, of making as much money as possible, that makes retailers get into the business in the first place so they can use the money they bring in to secure the future of the business by using part of the profit they make to reinvest back into the business to hopefully further their success. If retailers do not attempt to make the most sales out of their products it is likely they will be operating at a loss both in terms of revenue and profit and will therefore quickly go out of business.
In order to make the most sales, and in turn profit, from their products retailers must take full advantage of the space they occupy.
Since space is either owned or rented, retailers will likely have to pay either rate or mortgage repayments in addition to operating costs, the cost incurred by running and maintaining the business Fernie et al. (2003), such as heating, electricity, insurance and staff salaries.
In order to generate the most revenue in order to maximise the gross profit, retailers must make certain that the correct stock is purchased. In order to make sure that the right stock is procured the retailer needs to set up a rational method by which products are purchased to make certain that the right collections and choices are made.
In order to determine exactly what products to buy and subsequently sell a retailer needs to make sure that it has allocated various sections and departments so that an assortment plan can be prepared.
‘An assortment plan, in general terms, describes what should be carried in a particular merchandise category’ Levy and Weitz(2004 pg. 397). If, for example, a retailer was selling men’s fashion then their assortment plan would consist of what type of products they intend to sell such as jeans, t-shirts, suits or shoes.
An assortment plan can vary depending on the type of product a retailer is selling. For most fashion merchandise, for example, there will be less detail within the assortment plan because the merchandise planner requires more flexibility to adjust to fashion changes. When beginning to develop an assortment historical precedence is usually what a retailer looks at first in order to develop a plan for the current season. The merchandise planner will normally use the sales, gross margin return on investment,’ the relationship between total operating profits and the average inventory investment’ Berman and Evans (2001 pg. A22), and turnover forecast in conjunction with the assortment plan from the previous season to develop the plan for the current season. Other factors can also be considered in order gain as much insight as possible so that a much more comprehensive assortment plan can be assembled. Other factors include what the competition is up to as a retailer may either spot products that they themselves may want to duplicate or they may look at what they are doing to purchase completely different products in order to differentiate themselves from their competition and offer something unique to their consumers.
Another factor the retailer may want to look at is market research from companies such as Mintel and KeyNote in order to see how the products they want to sell have sold previously elsewhere and how the market that the products are in are forecasted to sell in the future. An additional aspect a retailer may want to look into when compiling an assortment plan is feedback from...