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FM 225 Fashion Merchandising flashcards |

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  • Business Trend

    Takes a while to change

    Fashion Trend

    Fast pace

    Two tracks in Fashion Industry

    Operations & Merchandising

    Operation Track:

    Sales associate (non managerial associate) --> 3rd Key, key holder, cashier, head cashier, assistant manager--> Assistant manager, department head --> Store Manager (whats going on at the store level, hiring, firing, loss prevention)--> District Manager (not in merchandising, link between store manager and regional manager)--> Regional Manager (link between district manager and VP/ director)--> VP of stores, Director of stores

    Merchandising Track:

    Training Program/ assistant buyer (buying responsibility)--> Senior assistant buyer, associate buyer--> Buyer (apparel)--> Divisional Merchandiser manager (responsible for all branch buyers, product selection, floor sets, not really doing but over seeing like a referee)--> General Merchandise Manager (GMM)/ VP (Top management, keeper of division, know corp goals)

    one-hand buying

    when a store looks like it has been picked by the same buyer, but really is picked by multiple buyers. (ex: jean buyer, shirt buyer, jewelry buyer, shoe buyer)

    Retail Merchandising

    The Planning ,Development and Presentation of a product line created for a Target Customer. To have the right goods at the right time in the right quantities at the right price and in the right place! Retail merchandising includes all of the activities associated with Buying and Selling merchandise.

    Retailer's Challenge

    The challenge of obtaining appealing merchandise for customers requires a knowledge of the goods available and the preferences of customers. Understanding how goods reach retailers and how retailers are organized to best offer those goods are our first topics.

    Marketing Channel

    represents the flow of goods From producer to whole sales to retailer to consumer (producer-->whole sale-->retailer-->consumer)

    Vertical Integration

    Performing more than one Channel Function is called Vertical Integration. Why is this function so popular today? Increased control of the product at the retail level. (signature stores). Fiscal Advantages. Exclusive distribution of private label

    Corporate retail merchandising options

    Buyer, Planner, Distributor, Product developer


    buys and prices merchandise for resale


    projects sales and stocks based on past sales and trends.


    allocates goods to stores, based on plan.

    Product Developer

    specifies products to be developed internally

    Whole sale merchandising

    Designer, Sales executive, Merchandiser


    creates the design works with the pattern maker and product development team to create a line of merchandise .

    Sales Executive

    shows and sells the line of merchandise to the Retail Buyers


    Liaison between the designer and the sales team.

    Related Merchandising Responsibility

    Departments - groups of similar merchandising responsibilities, e.g., Diamond buyer. Divisions - made up of related departments, e.g. Fine Jewelry division. A division is headed by a Divisional Merchandise Manager (DMM). FOB- (Family of Business) made up of Multiple Divisions reporting to a corporate vice president. (GMM) e.g. Jewelry FOB

    Store- level Merchandiser

    Merchandise is shown according to standards; Selling Floors are merchandised neatly and in a manner that is easy for the customer to understand and shop. Inventory levels and assortments meet consumer and sales objectives

    corporate level Merchandiser

    Visual Merchandiser, Fashion coordinator, Fashion Director

    Visual Merchandiser

    plans store décor, display, fixtures and signs. Develops planograms to guide stores.

    Fashion Coordinator & Fashion director

    researches trends, colors and styles, and informs buyers

    Economic Role of Fashion

    Fashion is a strong force in our economy including manufacturing, retailing and promotion. Systematically introducing new product lines makes fashion highly competitive.


    A widely popular expression (in apparel, homes, art, music and so on).


    = an item's characteristics: crew or "v" neck sweater; it may be in or out of fashion.


    the movement of fashion.
    defined by: Acceptance, Direction, Duration, Relationship

    Fashion Life Cycle

    Introduction, Growth, Peak, Decline


    Fashion leaders pay high prices for new looks.


    Many knockoffs; looks adopted by fashion followers.


    The look reaches its sales potential, available many places.


    Sales diminish; retailers lower prices, replace the look for a newer trend.

    High Fashion

    High fashion looks are created by designers and exclusive stores.
    Fashion leaders buy these looks during the introduction and growth stages. The goods are expensive but exclusivity is what fashion leaders crave.

    Mass Fashion

    Mass fashion is made by manufacturers and retailers at many prices. Fashion followers (most people interested in fashion) wear mass fashion. Fashion laggards want good value;they buy late.


    A classic is a fashion look that has been around longer than expected. Retailers sell classics season after season. Ex: Pencil skirt


    A fad has a short life cycle. Savvy retailers capitalize on fads. Ex: High heeled sneakers

    Theories of fashion acceptance

    Trickle down, Trickle across, and Trickle up
    The point is that these three theories are all at work at once in the market place and the challenge to the retailer is to identify what is happening in time to have the goods that customers want just before the come into the store or on to the web site.

    Trickle down theory

    Fashions move from higher social levels to lower. how?

    Trickle across theory

    Fashion looks are similar at Saks and Target. Why?

    Trickle up theory

    Fashions originate on the street and move up. When?

    Basic Goods

    Basic goods are necessities that rarely change, ex., pots and pans.
    Customers buy them for rational reasons, ex., replacing windshield wipers.

    Fashion Goods

    Fashion goods often are not necessities; they change frequently, ex., junior sportswear. Customers buy them for emotional reasons, "I've got to have that wristwatch."

    Transforming Basics into Fashion

    Marketers change customers' attitudes by transforming rational buying motives reasons into emotional ones.
    They offer new features and benefits such as color and texture, styling, and details. How was this done with hosiery, men's underwear, and kitchen appliances?

    Influencing fashion change

    Technology, Economic Conditions, Social Conditions, celebrities, Hollywood, and Globalization

    Retailers and Fashion

    Fashion goods can increase sales. Fashion goods are riskier for retailers to offer. The fashion buyer must select appropriate looks or sales and profits will tumble.

    Fashion Industry

    Today fashion is an integral part of our economy and our culture.
    It is hard to find a product that does not contain some element of fashion! Retailers promote fashion through advertising, sales promotion, product presentation and direct selling. Fashion drives sales but makes the retailer's job more complex.

    why are prices vital?

    Retail prices are the chief source of sales revenue and profits for a retail organization. Price times units sold = total sales revenue.
    It is the job of the Retailer to create retail prices . Today most manufacturers work with retailers to create retail prices.

    Total Sales Revenue=

    Price X Units sold

    Pricing challenge

    Determining the right price is the retailer's challenge, to always keep in mind the target customer and the store's objectives and image.
    To Create the perfect Price Point to entice the customer to BUY while still meeting profit objectives.
    To establish a Promotional Policy that generates business and liquidates markdowns while still meeting profit objectives

    Price Points

    are incredibly important to all retailers businesses and are often determined FIRST in the Markup formula. Today MSRP's are often used.(manufacturers suggested retail price). Retailers and manufacturers have gross margin goals and will establish a IMU (initial Mkup) based on those goals.

    Retail Mark Up% =

    Retail price - cost price (divided by).
    Retail price (x 100 )
    Cost = what the retailer pays ($6).
    Markup = what the retailer adds ($4).
    When two elements are known, the third may be found. $10 - $6 Markup may be expressed in $ or %. ($4 or 40%).
    Retailers generally express Markup as a %

    Retail Price

    When the Markup% is given and the cost is known it is easy to figure out how to determine retail.
    Formula = 100-Mkup% = cost complement
    Cost divided by CC % = retail
    Example a sweater cost is $40 and the retailer has a 54% markup goal.
    100-54%=46% ( CC ) $40 divided by 46%= $ 86.96
    $86.96 would be the retail price of the sweater.

    Determining the Price Point

    Determining the retail price point is up to the buyer and the type of store the retailer is.... Department, Specialty, or discount store.


    100 -Mkup% = cost complement %
    Retail x CC% = cost
    Example: A retailer wants to price point as sweater for $88. The departmental mkup that the buyer must achieve is 54%
    100-54%=46%. $88 x 46% = $40.48

    Types of Markup

    Initial Markup, Cumulative Markup,

    Initial Markup

    the first markup or original price.

    Cumulative Markup

    The sum of all goods at cost and retail divided by the total retail


    Markdowns are a reduction in price. They may be expressed in dollars—now $30 off—or in percentages—lower by 20%.
    The formula: Markdown % = MD$ divided by original price x 100.
    A jacket marked down $25, originally $125 would be
    $25 / $125 x100 = 20%. An additional $20 markdown reducing the jacket to $80 can be stated according to the current price of $100 or it may be combined with the first markdown and shown as apercent off the original price. Formula:
    Md% = total $md / original price x 100 = 36%.
    Markdown $ may be computed when a markdown % and retail price are known. Example: a 30% MD on a dress now priced at $80 uses this formula: MD$ = $80 x .30 (or 30%) = $24.
    The new (marked down) retail price is found by subtracting the $md from the $retail. $80 -$24 = $56.
    Or 100-MD% =CC% retail x MD%=new retail price. 100-30% =70%. $80 x 70% = $56

    markdown totals

    The total markdowns for a period can be shown as a percentage of net sales for that period.
    MD$ for a period = Total MD$ / net sales x 100 = MD%.
    Junior dresses total MD$$50,000 / sales $500,000 = 10% period markdowns.

    Types of Markdowns

    Damages, Employee Discounts, Promotional Markdowns (temporary), Clearance Markdowns (permanent)

    Clearance Merchandise

    Certain residual (leftover) goods are marked down permanently. These include: Discontinued Goods, Seasonal Merchandise
    Broken Assortments
    Slow Sellers: Unseasonable weather, Wrong assortments,Poor presentation,Late delivery

    maintained markup

    Maintained markup is the difference between the merchandise cost and the actual selling price. (minus the markdowns) Formula:
    Maintained mu$ = initial mu$ - net mds$
    GM = maintained mu - transportation - workroom + cash discounts
    Maintained mu = Gm + transportation + workroom costs - cash discounts

    Importance of Maintained markup

    Maintained mu and initial mu are the same if there is 100% sell through—all of the goods are sold at the initial mu. Maintained mu evaluates the ability of goods to keep their original price.

    Tactical Price Changes

    Sometimes manufacturers' closeouts can offer retailers price advantages. Example: A vendor offers pants regularly costing $20 for $15. Buyer believes they could retail for $40, an inflated mu (called a markdown cancellation). Later the goods are priced at normal mu, $29.99 (called a markup cancellation). Lower price changes are called \ markdowns.

    Managing markdowns

    Like sales and inventory, markdowns are planned in advance and tracked over time by department and or category. Last year's markdowns are the basis for planning this year's; they are watched throughout the year and compared with industry figures. High markdowns may bring high sales but lower profits.

    Promotional Pricing

    All price changes require book inventory entries, markdowns at the beginning, markups at the end. Computerized price lookup (PLU) scanning each SKU, facilitates price changes.
    A discounted price offered in hopes of: Generating traffic, Stimulating sales in slow times, Competing with other retailers, Establishing a value-oriented image

    Everyday Low Pricing (EDLP)

    EDLP, a value-oriented pricing strategy using ongoing promotional pricing, no advertising. May also be called EDV ( every day value) Result: Lower GM but lower expenses. Used by Wal-Mart and Toys "R" Us, not by all discounters.

    Avoiding deceptive pricing

    To avoid deceptive pricing, retailers need to know government regulations regarding: Regular price comparisons; comparisons to the competition, Lowest price; free merchandise Going out of business Bait and switch; rainchecks; predatory pricing.

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