Chapter 3: Buying Practices

Assortment Plan

After the six-month merchandise plan has been completed and approved by management, the next step is to determine how many styles will be required in each merchandise classification to maintain a balanced stock throughout the selling period. For example, a fashion retailer will want to formulate a plan outlining the breadth, depth and proper mix of sizes, colours and price points of merchandise to be carried, right down to the subclass level.

Breadth and Depth Analysis

The term breadth in assortment planning refers to the number of subclasses within a product classification. In the example of our family shoe store, athletic footwear is a classification of the men's shoe department.

The buyer's decision is how many different subclasses of men's athletic footwear should be purchased? The subclasses he carried last season were tennis, jogging, basketball, cross training, golf and hiking.The buying options are to carry all of the subclasses with a minimum number of styles in each one (breadth), or to drop the weaker subclasses and use those dollars to carry more styles in the remaining subclasses (depth).

Carrying too narrow a range may limit customer appeal. Conversely, when breadth is too great we risk not displaying enough depth/selection in each subclass, thus resulting in lost sales.

With a limited number of dollars to spend, the buyer can only purchase so much merchandise. A review of last season's sales results and an understanding of market trends should help with this decision-making process.

Size and Colour Analysis

In the case of our family shoe store, sizing is extremely important. Each style of shoe can come in up to 15 different sizes. If we do not have a customer's size in the requested style, there is a good chance we will lose a sale. Ordering the correct depth in each size is critical. Therefore, knowing what sizes are most and least popular will help with decisions here.

Colour decisions can be equally important. The astute buyer follows colour trends and knows which ones will appeal to his customer. This season's hot colour could be next year's dog.

Price Point Analysis

Price resistance by customers in the last few years has forced retailers to perform price point analyses with greater detail and frequency. In this process, the buyer must first determine which "magic" price in each merchandise classification will produce the maximum number of sales. This price point is where the volume of his purchases should be made.

To complete the assortment plan, additional price points will have to be considered. A common strategy is to have price points higher and lower than the estimated "volume point". This gives the classification a broader appeal, with something for customers wanting a perceived higher value product and a selection for those on a tighter budget.

Having a price point on either side of a mid-range price can enhance this middle price as the volume point by directing the majority of the sales towards it. Human nature being what it is, we usually believe that the middle-of-the-road price is the prudent purchase. Not the most expensive, yet not the cheapest.

A review of last season's sales data and an understanding of your customer's price resistance levels will help you make the right price point decisions.

The sample Merchandise Assortment Plan on the following page provides you with a basic format. It offers the simplest approach, and does not include key elements such as price point, size or colour. To include these elements, you must create a multi-layered Assortment Plan.

Merchandise Assortment Plan

Season: __F2__                            Class: __Sweaters__
Department: __Men's Wear__      Sub Class: __V-Necks __

Vendor	Style #	Units	Cost	Retail	Planned Purchases						Total
					Aug.	Sept.	Oct.	Nov.	Dec.	Jan.
ABC Co.	#1751	28	$25	$55	$1200		$1200				$2400
	#1611	12	$40	$90	$1080						$1080
	#4519	36	$32	$65				$2340			$2340
XYZ Co.	#D340	24	$45	$100			$1200	$1200			$2400
	#D424	12	$70	$150				$1800			$1800
Total		112			$2280		$2400	$5340			$10020

Monthly Open-to-Buy - Sweaters/V-necks

Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Total
$10000		$5000	$10000		$5000	$30,000

Note: In the above Assortment Plan, you can see the open-to-buy figures that were calculated before starting the process. The layout of your form will have to be altered to reflect the type of retail operation you are running and the level of detail you require (e.g. Do you want to include size & colour?).