Assignment Code: BRL-006/TMA/2022-23

Course Code: BRL-006

Assignment Name: Buying and Merchandising-1

Year: 2022-2023

Verification Status: Verified by Professor

Attempt all the questions.

(A) Short Type Questions: 10x7

Q1) What do you mean by brand management? Describe various components of brand management.

Ans) The art of developing and maintaining a brand is known as brand management. It encourages customers to continue supporting your company. A good brand sets your items apart from those of your rivals and gives your company a respectable image. The control of a brand's tangible and intangible attributes is a part of brand management.

Understanding what "Brand" actually means is the first step in both brand management and brand purchase. The company's executives, who create the brand and oversee its administration, are where it all begins. When brand management is done well, the entire firm is governed from beginning to finish by the brand. Simply said, it is far too crucial to be left up to the marketing division. The following brand attributes are covered in brand management:

Creating the Promise: Establishing the brand entails creating the promise. A distinctive and appealing brand promise. It is useless if no one wants it, and it is ineffective if no one remembers it. Because emotions motivate actions, a strong brand promise stirs up emotions. The promise ought to be distinctive and associated with the brand.

Making the Promise: The second step is to somehow implant the promise in the brains of your clients, employees, and anybody else who interacts with you or has an impact on the services you provide. Here is where marketing professionals excel. A significant portion of marketing, which includes advertising and public relations, is about positioning the brand and its products in customers' minds and in comparison to your competitors.

Keeping the Promise: Keeping your word requires controlling your capacity. It denotes reliable procedures that can deliver what is needed. It refers to methods and technology that are dependable and practical. It refers to individuals who are eager and capable of carrying out their duties. The brand positioning must be appropriate regardless of the brand's national or international reach.

Q2) “The concept of category caption is helpful, but it requires watch.” Explain.

Ans) Retailers and manufacturers have different profit goals. A producer seeks to increase the revenue from its own brands. On the other hand, the Retailer aims to increase the overall profit of the product category. Despite these seemingly opposing economic goals, producers and retailers are coming to the realisation that collaboration rather than conflict can boost both parties' profit margins. Although it happens frequently, the Supplier with the highest turnover isn't necessarily the category captain.

Additionally, whereas branded Suppliers have traditionally held the position, it is increasingly typical for switched-on Private Label Suppliers to assume the position. Despite the elevated status, the category captain should not exploit or be forced to abuse his position through openly anticompetitive actions like fixing prices or obstructing rivals.

One such cooperative tactic is category management, which frequently calls for the designation of a top manufacturer as the category captain. The best ways to price, present, and advertise goods in a category, including those of rivals, are suggested by a category captain to the retailer. As a result, this model guarantees retail efficiency, but casts doubt on any potential abuse of authority by the category captain to thwart fair competition. Category management is a Retailer-Supplier approach that focuses on offering value to the consumer while managing categories as a strategic business unit to get better results.

Q3) Explain the importance of the merchandise planning in the retail business. Describe different factors that are taken into account for this purpose.

Ans) Planners must create intricate plans as part of the merchandise planning process in order to meet organisational objectives. The merchants in an organisation typically design the merchandising plan once or twice a year. Prior to the commencement of the planning season, the planner initiates the procedure by inserting data from the forecast and last year's actual results into the planned layouts. During the planning process, this information serves as a guide and a point of reference. The retailer develops a longer list of key performance indicators and a longer time frame to align with the corporate objectives using the data from the previous year and the forecast. To assist the planner, the system presents these KPIs in a progression fashion.

The plans are approved by the manager so they may be incorporated into the reconciliation process once the merchant presents them to his or her management after being satisfied with them. The following are the merchandising planning components:

1. Plans for receiving items that must be purchased before they may be sold in the business.

2. The goals of the sales process are contained in the sales plan.

3. Mark-up strategy: Increasing prices to pay costs.

4. Mark-down strategy: Lowering prices to move more goods.

5. Planning for the material to be stored is known as stock planning.

6. Gross profit margin is a financial indicator that shows how much money remains from sales after deducting the cost of items sold, and it is used to evaluate the financial health of a company. It also goes by the name "gross margin."

Q4) Describe nine laws that influence buyer’s price sensitivity.

Ans) Below are the laws or elements that are covered:

1. Reference Price Effect: The more expensive a product is in comparison to perceived alternatives; the more sensitive buyers are to price. According on the customer segment, the event, and other variables, perceived choices can change.

2. Difficult Comparison Effect: When buyers find it difficult to compare a product's price to its prospective alternatives, they become less sensitive to price.

3. Switching Costs Effect: When deciding between alternatives, a buyer is less price sensitive the higher the product-specific investment they must make.

4. Price-Quality Effect: The more that higher prices denote superior quality, the less price-sensitive consumers become. Products with few indicators for quality and those with an image focus are among those for which this impact is most pertinent.

5. Expenditure Effect: When the cost represents a sizable portion of the buyer's available income or budget, they are more price sensitive.

6. End-Benefit Effect: The association between a specific purchase and a greater overall benefit is referred to as the effect and is broken down into two parts:

7. Shared-Cost Effect: Buyers will be less price sensitive the less of the total cost of the purchase they are responsible for.

8. Fairness Effect: When a product's price is outside the range that they consider to be "fair" or "appropriate" given the purchase context, consumers become more sensitive to it.

9. The Framing Effect: When buyers see the price as a loss rather than a gain given up, they are more sensitive to it. They are also more sensitive when the price is paid separately rather than as part of a bundle.

Q5) “Selecting an appropriate vendor is the key step in the success of an enterprise.” Elaborate.

Ans) If you don't know how to approach the vendor selection process from the beginning, it can be a very difficult and emotional task. The following five steps will assist you in choosing the best vendor for your company. This manual will teach you how to assess your company's needs, look for potential vendors, lead the team in choosing the best vendor, and conduct contract negotiations while avoiding common pitfalls.

Analyze the Business Requirements: A team of individuals with a stake in this specific Vendor selection process should be assembled before you start collecting data or conducting interviews. Defining the product, material, or service for which you are looking for a vendor in writing is the first thing the vendor selection team needs to undertake. The technical and business requirements should then be defined. Specify the vendor requirements as well.

Vendor Search: The team must now begin looking for potential vendors who can provide the material, product, or service now that the business and vendor needs have been agreed upon. You should bring in more vendors as the breadth of the vendor selection process expands. Naturally, not every Vendor will satisfy your basic standards, therefore the team will have to choose which Vendors you will contact for more information.

Request for Proposal (RFP) and Request for Quotation (RFQ): The business requirements are established, and you have a limited number of vendors to consider. Writing a request for proposals or a request for quotes is now necessary.

Proposal Evaluation and Vendor Selection: The major goal of this stage is to reduce political positions and human emotion in order to make a choice that is optimal for the business.

Contract Negotiation Strategies: Creating a plan for contract negotiations is the last step in the vendor selection process. You want to "partner" with your vendor, not "take them to the cleaners," keep that in mind.

Contract Negotiation Mistakes: The slightest error might ruin a business discussion that would otherwise be successful. Avoid making these ten contract negotiation blunders to protect a process that may otherwise be fruitful.

Q6) Distinguish between:

(a) Fad Category and Fashion Category.

Ans)

Fad Category

Fad is a fashion trend that arrived on the market very rapidly, peaked in popularity, and then swiftly vanished. The fashion cycle lasts longer than a year. It lasts for two to three years. The Fad, however, is far more fleeting. No fashion designer can predict whether a given design will be in or out of style. Fads are recognised for their tendency to come and go quickly in terms of fashion. Young individuals enjoy using new stuff constantly. The most typical of them is FAD.

Fashion Category

Fashion is a recognised fad. Style is widely used, and this leads to fashion, which quickly gains popularity. It is distinct from style even if it is a mirror of style. When a person's individual traits are shared by numerous people, it becomes fashion.

(b) Mark-Up Pricing and Mark-Down Pricing

Ans)

Mark-Down Pricing

These are routine pricing adjustments made in response to shifting retail conditions. Usually, these involve changing the price tags. This is a reaction to a weak sales season or unsold product sizes, etc. a price cut for a product that is being sold.

Mark-Up Pricing

In the realm of retailing, this method is most frequently employed. Mark-up is the phrase used to describe the difference between the selling price to the consumer and the cost of the goods. Calculations for markups can be done using percentages or rupees. Additionally, it might be indexed on the selling price or cost price. Margin is another name for mark-up when it is indexed on the selling price.

Q7) Explain the concept of open-to-buy. How is it helpful in increasing profits of a retail store?

Ans) Serving the consumer properly by keeping the appealing goods is the essence of good retailing. To ensure that there is a suitable amount of stock on hand for the volume of sales being generated, effective inventory management is essential. high inventory levels occasionally. Additionally, a low inventory level could make the retailer lose out on sales opportunities, which would cost them potential profits. Use of the Open-To-Buy strategy is helpful in assisting the Retailer in resolving this conundrum and in stocking the appropriate quantity of the appropriate products at the appropriate time.

Rupees or units can be used to compute Open-To-Buy. The balance between the required and available inventory is ultimately what makes up OTB. This includes any inventory that is on hand, in transit, or waiting to be delivered. Some of the OTB budget should be set aside to take advantage of special buys, seasonal discounts, volume discounts from the Vendors, or to add new products. Additionally, it enables the retailer to swiftly replace the shelves with popular items. A summary of the OTB plan and budget can be kept for the entire store or per department. The Retailer will benefit from having good control over the stock and the investments made therefrom thanks to this step.

(B) Essay Type Questions

Q8) Explain different ratios that measure the performance of the store operations.

Ans) Retail store profitability, financial effectiveness, inventory management, pricing strategy, control over income and expenditure, and eventually the ability to create a profit margin all contribute to the performance of a retail store. In order to understand the performance of a store, it is crucial to research and comprehend several aspects of inventory management, cost of inventory, margin gained against the inventory supplied, selling, and profits earned.

To measure each component and determine the financial performance of the store operations, basic formulas and mathematical tools are used.

Formulas to Measure the Performance of the Store

Net Sales: Net sales are calculated by subtracting all returns, shortages, and allowances from the gross sales made within a specific time period.

Net Sales = Gross Sales – Returns and Allowances

Sales per Square Foot: This analysis is crucial for evaluating the Store's performance. Numerous judgments are typically made based on this computation and its outcome.

Following is the formula to calculate the Sales per Sq. Ft:

Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space

Sell-Through Rate in %: The percentage of units (goods) sold out of the units (goods) purchased within a specific time period or season is determined by a retailer using this metric.

Sell-Through % = Units Sold ÷ Units Received x 100

Stock to Sales Ratio: It is the proportion of the overall sales revenue for the same month to the stock held at the start of the month. We can use this formula to determine and plan for future inventory supplies.

The following formula is used to get the stock-to-sales ratio:

Stock to Sales ratio = Beginning of Month Stock ÷ Sales for the Month

Quick Ratio or Current Ratio: This gauges how well a company can satisfy its immediate financial responsibilities without selling any merchandise. It describes how to calculate the ratio of the store's total liquid assets, less its inventory, divided by the current liabilities.

Current Assets: The total of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that might be converted to cash in less than a year is referred to as this financial term or balance sheet item.

Current Liabilities: It is a phrase used in accounting to refer to financial liabilities or current debts that must be paid off throughout a firm' regular operational cycle. The operating cycle is typically thought to be no longer than a year. A Retailer's debts or liabilities often have a one-year maximum payback period.

Short-term debt, accounts payable, accrued obligations, and other debts are all examples of current liabilities that can be seen on the retailer's balance sheet. It is the total amount of money that a retailer owes his vendors and service providers that is due within a calendar year.

The following formula can be used to determine the quick ratio or current ratio:

Current Ratio = Current Assets - Inventory ÷ Current Liabilities

Average Inventory: It is equal to the total of the beginning and ending month's inventories divided by two.

The following is the formula:

Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) ÷ 2

By combining the beginning cost of inventory for each month and the ending cost inventory for the final month of the period, the average inventory cost can be calculated. Divide by 7 when calculating for a season. Divide by 13 when calculating for a year.

Q9) What is a private label? What are the major challenges faced by it?

Ans) Private label brands, often known as own brands or Store brands, also became a significant influence in the market with the advent of strong Retailers. This "own brand" may be able to compete with even the strongest brand leaders and may outperform those products that are not otherwise heavily branded in cases when the retailer has a particularly strong identity.

Individual and Organizational Brands: There are certain branding strategies that view people and businesses as products to be branded. Persons and their careers are treated as brands through personal branding. Tom Peters' paper from 1997 is regarded to have been the first to use the phrase. Religious leaders and organisations are treated as brands in faith branding. Phil Cooke, a specialist in religious media, has said that religion branding addresses the issue of how to represent faith in a culture that values media. The impression and reputation of nations as brands are manipulated through nation branding.

Crowdsource Branding: In contrast to the conventional approach, in which the business produces a brand, these are brands that are produced by the people for the business. Since those who would reject the brand in the traditional technique are also those who are involved in the branding process, this type of approach reduces the danger of brand failure.

Challenges faced by Private Labels

Many hinges on how effectively each chain can obtain and design Private Label products. Each category's profitability and sell-through are painstakingly analysed as part of the decision-making process for all chains.

The following are a few difficulties experienced by private labels:

1. Brands receive widespread advertising and have a reputation for quality and flair that takes Private Labels years to match.

2. The majority of the time, retailers do not advertise their Private Labels externally, making it difficult to position the brand and increase brand awareness.

3. Retailers hire a third party to manufacture these goods, and a lot depends on the suppliers' capacity to deliver the ideal product of the correct quality at the ideal time and price.

4. Simply keeping the products affordable would not make private labels successful. Retailers need to think about creating high-quality products with added value.

5. Because the Private Labels are only produced for consumption inside the Retailers' Stores and are not disseminated outside of those locations, it can be difficult for the Retailers to reach the necessary volumes to take advantage of economies of scale, which are essential for cost effectiveness.

6. Given that the retailer is exclusively accountable for the product, it is imperative that they get both the product, and the purchases correct; otherwise, a serious issue may arise. Due to large markdown liability and write offs, line failures or excess inventory could prove to be highly expensive.

7. The risks are considerably greater for fashion products because of their short shelf lives. Chains of department stores lack the ability to quickly alter the assortment like specialty chains do.