Quiz 12: Managing the Merchandise Planning Process


Traditional bricks and mortar store and its Internet counterpart are bound to differ in variety and assortment. This is so because while the purpose of a physical retail store would be to provide a different and positive ambience to the customers in order to be able to provide an enriching experience; the purpose of the internet store would be to become simple yet functional so that even a layman can follow it. The internet store would strive to be practical and easy to use while retail store would try to be as unique as possible. There would be a difference in variety and assortment as well. The traditional physical store would have limited variety and assortment of merchandise owing to space constraints. Thus it would try to showcase a limited number of products within each category while keeping samples of other alternatives available. An internet store would have more variety and assortment as it would not be having any kind of space restraints. It would offer more options, colours, sizes etc in similar categories and thus would provide a wide variety of choice. Most physical stores tend to keep a limited stock on display and provide the customers with the online link of their stores to provide more options. The internet store provides the option of using different images to check how the product would look in real time working conditions. It provides a visual image to satisfy customer's curiosity and show how the product such as furniture etc would look in their home setting. Thus abovementioned is the difference between variety and assortment in a traditional store as against its internet counterpart.

Inventory turnover refers to the measurement of the number of times when the firm's inventory is sold or used by the customers in a specified period of time usually in a year. This measurement allows the firm to evaluate and calculate whether it had excessive inventory to suit the demand for the products and the sales level. It is mentioned that increasing of inventory turnover is a highly important goal for a retail manager. However, if the inventory is too low, then it creates quite negative consequences for the firm. This can be described by stating that in the situation of low inventory turnover, the firm would not be able to match the demand for the products and will run out of stock. This will affect the firm's sales and its profits leading it to miss cost efficiencies. When the inventory turnover is too high, then it would the firm would have to pay for its warehouse, storage, maintenance, insurance and other carrying costs. This will add up to the cost of the product and the retailer would have to bear these expenses on his own. There is also a possibility that the high inventory will become old-fashioned and out of trend before getting sold in the market.

Every retailer strives to increase the sales of the various categories of products it offers to the customers. The retailers undertake several activities and runs loyalty programs to increase the sales of the products offered for customer buying. It is assumed that an individual is a buyer of canned fruits and vegetables in a supermarket chain. One of the manufacturers and suppliers of this product category Company DMM informed the individual and his boss that he would be responsible for making all inventory decisions for this category of products and also assures an increase of 10% in gross margin dollars in the coming year. Over this, the individual would agree to take this offer from Company DMM because if the manufacturer of the product is itself planning to increase the sales of its products in the supermarket and guarantees an increase in the gross profits, then nothing can be better than this. There is no reason for the superstore to deny this offer because every retailer wants to increase the sales of the products sold by it and if there is a guarantee in certain product category, then the individual and the boss of the supermarket should take this offer and thereby increase the sales of that category of product.