IGNOU Study Notes BRL-006 | ASSIGNMENT-1 (Part-1) [ BUYING AND MERCHANDISING ]

BRL-6 Assignment-1
PART-1
Buying and Merchandising:-I

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Course Code :	BRL-006
Course Title :	Buying and Merchandisining-I
Assignment Code :	BRL-06/TMA/2021-22
Coverage :	All Blocks

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Attempt all the questions

(A) Short Type Questins

1. What is meant by merchandising strategy? Explain its different components

2. "Category Management meets customer needs better than standard brand management". Elaborate.

3. Explain the importance of the sales forecasting in tl1e retail business. Describe different factors that are taken into account while making it.

4. Explain the process of setting sales objectives.

5. What is meant by Break Even Analysis? Explain the "Mark-up" method of pricing.

6. Djstinguish between:

(a) Stock turn and stock to sale.s ratio
(b) Premium pricing and economy pricing

7. Why is assortment planning necessary for a successful business? Discuss the main guidelines for tbis purpose.

(B) Essay Type Queslious

8. Describe the important fa.ctors that should be considered while making the selction of a vendor.

9. Describe briefly different retail price strategies.

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A) Short Type Questions

1. What is meant by merchandising strategy? Explain its different components (2+8)

ANS: Focus on the words'merchandising' and'strategy' independently to begin with the definition. A strategy, on the other hand, establishes a company's stance, whereas merchandising refers to the basic product mix that a retailer gives to the end consumer.

Products to be sourced: Retailers may buy product from a variety of sources, which depend on the nature of the business and the product, as well as the capacity for the inventory. There are different types of sources, e.g. drop shipping, local sourcing, low volume: wholesalers, mid volume: importers and distributors and high volume: manufacturers and liquidation sales.
Vendor's terms and conditions: Vendor's terms and conditions is an important step in the product merchandising strategy. These depend on the nature of product. The buyer and the Vendor negotiate and set the terms and conditions. Some examples are: Dispatch /Transit time, Posting and Packaging, Payment Options, Exchanges, Defects, Returns, Lost items, etc.
Pricing strategy: One of the four major elements of the marketing mix is price. Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion.
Packaging and presentation: The packaging and presentation of the product plays an important role in merchandising. No matter how well is it made, a product will not attract a buyer unless it is presented in an attractive manner. It cannot be expected that a car of a new model in a showroom will be presented in a dirty state or having scratches on the body. Similarly, the packaging of a produce displayed on the shelves of a supermarket is equally important; it should be attractive in appearance, easy to handle, showing the brand name prominently, and providing all the information, such as nutrition value, ingredients, weight, price, manufacturing date, expiry date, discount, if any, etc. clearly.

2. "Category Management meets customer needs better than standard brand management". Elaborate. (10)

ANS: Category Management (CM) is the process of manufacturers and Retailers working together to maximize profits and enhance customer value in any given product category.
1. Opportunities for Cost saving
Expertise application of categorization leads to considerable opportunities for cost-saving. The chances of outsourcing and control relationships with the stakeholder show the cheaper costs of procurmg.
2. Better vendor risk management
It helps to gain an in-depth understanding of each consumer for better catering and services.
3. Streamlined business strategy
Specific optimized goals and strategies help any company to achieve strategic purposes - identification of the capital unit and the suppliers in advance help the company to strategize better.
4. Centralizing spend data.
Centralized data helps in easier logging, tracking, and reporting.
Category managements reduce the supply chain risk and also drives an innovative outlook on the supply chain categories. I hope this article has helped every interested reader in achieving the essential knowledge about category management. Follow the mentioned process for a successful venture in business and organizations. In category management, individual businesses can doubt that the quality would be affected because of cost control, they can resist against any change in a more general way, or they are stressed over the effects the progressions may have on their present providers. It may be causing trouble.
To shift the flow from doubters to adopters, the association must utilize strategies that address worries from businesses and partners. The category supervisor can lighten worries through open correspondence, making a characterized incentive and interfacing with (and tuning in) to partners over the association.
Embracing a method to manage category with sourcing will have improved agreement results as the procedure is overseen from beginning to end. Analytical tools and talent to utilize those tools will need to be acquired.
By globalizing spend categories; the category manager furnishes a chance to team up with providers to be progressively coordinated, imaginative, and receptive to the organization's objectives.
By incorporating the right Category Management will empower your business in reducing the risks associated with the supply chain, plus it will ensure the adept channelization of collaborative processes of organizing category, so different units of business work in synchronization to offer the value to the customer and provide profits.
Category Management is one of the most critical factors for ensuring that customers get their preferred products and services as per their preferences.
All in all, category management offers a categorization of products and services based upon how they can be purchased, used and consumed.

3. Explain the importance of the sales forecasting in the retail business. Describe different factors that are taken into account while making it. (2+8)

ANS: Why Sales Forecasting is ofGreat Im portance to Each Business
1. Help Sales Representatives to Meet their Targets
To boost sales and revenue, the enterprises must help and motivate sales representatives to accomplish their objectives or targets. The businesses can make it easier for the sales professional to plan and carry out sales activities by defining his quota or target early and ambiguously. Sales forecasting help businesses to estimate demand for a product and create a business plan for individual sales representatives. There are even a number of sales forecasting methods that help businesses to harness the information provided by sales representatives.
2. Improve and Speed up Product Delivery
While comparing products or brands, customers check the amount of time required by the business to deliver the product. No business can speed up product delivery without manufacturing sufficient products. Sales forecasting helps businesses to manufacture sufficient products by estimating customer demand in advance. Hence, businesses must make sales forecasting to improve customer experience and reduce complaints. Also, they can drive sales by processing just-in-time orders efficiently.
3. Stabilize Inventory Management
In addition to manufacturing sufficient products, businesses also need to monitor and manage In addition to manufacturing sufficient products, businesses also need to monitor and manage inventory proactively. Often enterprises fail to manage inventory efficiently due to lack of information regarding future demand for a product. Inadequate inventory management further makes many businesses to have overstock and stock-out situations. Sales forecasting helps businesses to avoid overstock and stock-out situations by predicting demand for a product accurately and managing inventory proactively.
4. Streamline Supply Chain management
Both online and local retailers must control all aspects of supply chain to process just-in-time orders and accelerate product delivery. The businesses cannot control supply chain fully without predicting demand for a product and managing the production of the specific product in advance. The sales forecasting methods help decision makers to estimate demand for a product accurately over a specific period of time. Hence, it becomes easier for businesses to manage and control all aspects of the supply chain.
5. Simply Financial Planning
No entrepreneur can run and expand his business in the long run without funding working capital needs and maintaining a positive cash flow position. Often businesses find it difficult to balance cost and revenue due to a lack of accurate financial data. Sales forecasting helps businesses to estimate cost and revenue accurately and early. The businesses can further leverage the financial data to boost marketing activities and drive sales during a specific period.
6. Leverage Real-Time Data
The businesses nowadays collect real-time customer data from various sources. The sales forecasting models help businesses to predict future demand for a product based on real-time customer data. Some models enable decision makers to estimate future sales based on information collected from sales representatives. At the same time, the businesses can use specific techniques to forecast demand by initiating market tests and conducting surveys. There are even a number of sales forecasting solutions that help businesses to integrate the real-time customer data and sales forecasting models seamlessly.
7. Eliminate Chances of Panic Sales
The choices and preferences of customers keep changing continuously. Sometimes the changes in customer preferences reduce the demand for specific products. In such scenarios, enterprises get rid of additional merchandise through panic sales. The panic sales always bring down the prices of products and make businesses incur huge losses. Sales forecasting helps businesses to prevent panic sales by manufachlfing products according to future customer demand. Also, businesses can boost sales by planning promotional activities and scheduling mega sales according to the current demand for the products.
• Factors to Keep in Mind for Accurate Sales forecasting
Since sales forecasting plays such a critical role in a company's growth, here are a couple of pointers that can help improve the accuracy of your forecasts.
• Look at Historic Data and Reports
Past sales performance is a good leading indicator of future sales performance. Historical conversion rates tell you how many prospects, teams, or individuals were able to convert over a given period of time. Understanding your conversion rates at each stage of your sales funnel will give you a better understanding of what kind of future sales your team can achieve and the pipeline coverage you will need to hit those targets.
• Define the Sales Process
You need to start with a clearly defined sales process accounting for each opportunity stage in the sales funnel. These stages need to be defined by the buying process and clearly documented so everyone knows when and how to count the leads when they enter or drop-off the funnel. Document the steps in the sales process that can be used when converting a lead to a customer, clearly defining how to qualify a lead, an opportunity, a prospect, and a close. If these standards are not communicated, each member will come up with their own interpretation of each stage in the sales process. This will lead to inconsistent data and impact your ability to predict the likelihood of an opportunity closing.
• Invest in a CRM
A sales forecasting CRM helps sales teams predict future revenue growth more accurately as you can adjust your pipeline estimates based on lead confidence. It also helps you streamline the sales process as it offers a lot of insights into the team's productivity, success rate, and bottlenecks in the sales process. CRM solutions such as Salesforce, Freshsales, or Hubspot will help your sales reps track opportunities and help you identify top lead sources. This helps you optimize your resources by allocating more funds toward your more profitable sales activities. To improve the efficiency of your sales reps, ensure that your CRM is integrated with your finance system. The two systems in sync will ensure sales reps have access to more contextualized information about their customers leading to smoother workflows and better client relationships. We have integrated with Salesforce to let your sales team manage their entire cycle from quotes to orders to billing and renewals without leaving the comfort of your CRM.
• Pick a Sales Forecasting Method
After establishing your sales process and having a CRM in place, you need to choose a sales forecasting method. The forecasting model you choose needs to factor in the maturity of your business, the size of your sales team and pipeline, the quality of your sales data, and how meticulously you track it. You can learn more about the various sales forecasting methods here
• Consider Both External and Internal Factors
When drawing up your annual forecast, you need to factor in several external factors such as changing economic conditions, market competition, and the seasonality of the business. So sales forecasting is never a one-time activity that you are done and dusted with at the beginning of the year. Unpredictable events such as global pandemics, economic crises can turn your forecast on its head, so in a volatile environment, it's better to re-forecast at the end of every quarter and monitor the progress on a day- to- day basis. Apart from external factors, internal factors such as beefing up your sales teams, change in pricing, promotional strategy, new product launches also need to be worked into your forecasts.

4. Explain the process of setting sales obiectives. (10)

ANS: Sales Objectives" are the outcomes a sales force strives for, the goals toward which selling effort is directed. And since they are the outcomes of Sales Activities, we cannot manage Sales Objectives with the same degree of control as the Activities themselves. We can only achieve the Objectives we desire indirectly by managing our sales force's Activities.
The planning of this figure is the most significant, and should be calculated first, because it is the basis for establishing the stock markdown and purchase figures. It is one figure that requires greatest skills and judgment. It requires following :
a) Reviewing and analyzing past sales performance for the same time period
b) Considering factors that may cause change in sales. These factors are : • Current Sales trends • Previous rate of growth patterns • Economic conditions • Local business conditions • Fashion factors • Influencing conditions within and from outside the store or departments ( e.g. change in store concept, market directions, competitions, etc.)
b) Considering factors that may cause change in sales. These factors are : • Current Sales trends • Previous rate of growth patterns • Economic conditions • Local business conditions • Fashion factors • Influencing conditions within and from outside the store or departments ( e.g. change in store concept, market directions, competitions, etc.)
c) Establishing, for a season, a percentage of estimated sales change. This would be done after past sales perfonnance and the current conditions have been reviewed and analyzed. Thus, the total Rupee sales volume for the entire period can be calculated as below -

    
        Seasonal Planned ales = Last year (LY) sales + (LY sa.les x planned increase%,) 
                              = L .. Y. Sales + Rupee i.ocrease
    

Sales planning takes place at the distribution chain, segment, and season levels. The planner can drill down to the category, sub-category, rollout, month and week levels. When planning sales, Retailers should identify the stage of the lifecycle of the specific category, and should also determine whether the merchandise category offered is a fad, a fashion, a staple or a seasonal item, so as to plan merchandising accordingly.

5. What is meant by Break Even Analysis? Explain the "Mark-up" method of pricing. (5+5)

ANS: Break-even analysis entails calculating and examining the margin of safety for an entity based on the revenues collected and associated costs. In other words, the analysis shows how many sales it takes to pay for the cost of doing business. Analyzing different price levels relating to various levels of demand, the break-even analysis determines what level of sales are necessary to cover the company's total fixed costs. A demand-side analysis would give a seller significant insight into selling capabilities. Break-even analysis is useful in determining the level of production or a targeted desired sales mix. The study is for a company's management's use only, as the metric and calculations are not used by external parties, such as investors, regulators, or financial institutions. This type of analysis in volves a calculation of the break-even point (BEP). The break-even point is calculated by dividing the total fixed costs of production by the price per individual unit less the variable costs of production.
MARKUP METHOD OF PRCING
Markup is defined as the difference between the retail price of the commodity and its cost. It is mostly used to apply to the amount added to the cost to determine the retail prices of individual items. If there is a rise in the price of a particular item for sale, we add the amount to a cost price in calculating the selling price.
Profit: If the sale price of the product is more than the cost of the product, then the seller here get profit on the product. Suppose, the sale price of a shirt is 2000 and its actual cost is 1700, then;
Profit = sale price - cost
Profit = 2000 -1700 = INR 300.
Markup Percentage
To calculate the percentage of markup we have to use the following formula;
Sale Price = Cost x (1 + Markup)
or
Markup = (sale price/cost) - 1
Markup = (Sale Price-Cost)/Cost
The benefit of using the mark-up pricing is that it is very simple to calculate and understand. Also the same type of pricing used by all the firms in the industry, the price tends to be similar and hence, the price competition reduces in the market.
But however, it also suffers from limitations, while computing the mark-up price the actual demand for the product is ignored. Also, the perceived value of the customer and the amount of competition prevailing in the market is overlooked.

BRL-6 Assignment-1 Buying and Merchandisin:-I Other Questins in Part-2

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