Merchandise Management: Forcasting Sales for a New Nike Running Shoe - Essay Example

Merchandise Management: Method of Athletic Shoe Purchasing for Sports ity - Sales for New Nike Running Shoe Planning for sales of staple merchandise may be easier for retailers, but often dynamic, new fashion products are the ones that show impressive profits over small time periods. Nike has carved out a niche in the shoe and sports apparel market, becoming a household name by linking its products with popular sports, and the company plans to increase its revenue by forty percent over the next five years as it moves into new markets around the globe (Pope, 2010).

A budget plan for Nike Shoes in a retail environment must carefully consider the product and its unique qualities. As the planner for Sports Authority, the plan for purchasing the new Nike running shoe can be tricky, but by carefully considering the budget, inventory, promotions, and—mostly importantly—regional customer base optimal profit performance can be achieved. The merchandise budget plan should analyze the overall revenue of the retail outlet in order to determine how much money can be spent each month on merchandise to make sales and achieve inventory turnover, though it does not generally indicate the exact SKUs to be bought (Levy & Weitz, 2008).

In order to plan for the acquisition of Nike shoes in the budget plan, the merchandiser should consider the seasonal forecast for the product. The best time to buy new Nike shoes might be the beginning of a marathon or sports season. The merchandiser should forecast sales on a month by month basis factoring in necessary promotions and sales and consider the monthly budget, using this to determine how much inventory is needed. Much of the information needed to forecast sales can be seen in historical sales by looking at how successful certain product types were in previous years.

This information is usually easily available for staple products, but can be sometimes difficult to predict if a product is new because of the unpredictable demand and limited sales history. Merchandisers must also consider how aggressive sales and promotions for the new Nike shoe will be, or if other sales and promotions for other products will cause incline or decline of Nike shoes sales, in order to determine the inventory needed monthly. Sales to the customer, employee discounts, and markdowns will all reduce inventory levels.

Particularly in large retail outlets like Sports Authority, some consideration must be given to inventory shrinkage from shoplifting, damaged products, shipping errors, poor bookkeeping, and other errors. Adding all these factors together, the merchandising budget plan must consider how many new Nike shoes the retail outlet will purchase each month in order to balance the costs of keeping the inventory in stock with the cost of lost sales if stock runs out too soon (Levy & Weitz, 2008). The lead time that it takes to get the Nike shoes form the vendor and the quantities required for purchase may also affect the merchandise buying plan.

The Stock-to-Sales ratio is often used as a measure in retail dollars of the amount of inventory on hand needed to support the sales forecast (Levy & Weitz, 2008). The Stock-to-Sales ratio can be used to figure the amount of inventory needed for each month by using it to estimate inventory turnover. Inventory turnover may be increased in the case of aggressive promotions or sales, such as buy-one-get-one or discounts on the first purchase. The inventory turn rate is the number of times per year that the inventory is sold and restocked, and it can be used to help figure the Open-To-Buy for Sports Authority (Moorman 2009).

OTB essentially is how much merchandise is on hand versus how much needs to be ordered. This includes inventory in the store, in transit and any outstanding orders. Because Sports Authority is a large chain retailer with over 460 outlets in 45 states, allocation of merchandise to each store also plays into the job of designing a merchandise budget plan (Yahoo Finance 2010). Each store has a unique market, and the sales of the Nike shoe at each store may vary based on geography, climate, nearby urban centers, and many other factors.

Again, allocation of the Nike shoe line is best judged by looking at the past sales history of the stores to gauge the sales of a particular Nike shoe at that store. Nike has one of the broadest shoe lines of any athletic shoe manufacturer, making a shoe for nearly every competitive event worldwide as seen in the Nike Annual Report (2010). Because of the large variety that Nike provides, a combination of shoe styles may be ordered from the vendor, including the new Nike style, in order to achieve better price points and meet the needs of diverse outlet chains.

Large businesses with numerous outlets, like Sports Authority, have much different promotional needs than small business, and may save on costs by promoting nationally and running large runs of printed and promotional materials. The costs, development time, and distribution of coupons, displays, and other advertising materials must be factored into the merchandising budget plan. Large chains also have the benefit of significant market research that helps to position the new Nike shoes in a physical area of the store most likely to induce sales.

Normally new shoes are places at eye level on racks in the back of the store and clearly marked, where customers will walk through other merchandise to reach the new shoe—increasing product exposure and shopping time (Courtney 2008). The merchandising budget plan must accommodate both large national sales, policies such as price-matching, and leave flexibility for individual stores to design their own regional sales for events that in their region. Consideration of both the Nike brand, the exact characteristics of the new product, the needs of the Sports Authority retail chain, and the needs of the individual outlets will ensure that the merchandising budget plan is successful is producing optimal sales.

Taking advantage of both national and regional resources is the key to ensuring optimal sales a large brand, such as Sports Authority. References Levy, Michael, & Weitz, Barton A. (2008). Retailing Management. New York, NY: McGraw-Hill. Pope, Charles. (2010) Nike aims for 40% sales growth over 5 years. Associated Press. May. 2009 Nike Annual Report. Retrieved 9 August2010 from https://materials.proxyvote.com/Approved/654106/20090724/AR_44240/HTML2/nike-shareholder_letter_2009_0002.htm Moorman, Bob. (2009). Understanding Merchandising Inventory Allowance and Open to Buy: Why suffer Results, When you can Engineer Outcomes.

JRM Sales and Management. Retrieved 9 August 2010 from http://www.jrmsales-mgmt.com/Understanding%20merchandising.htm. The Sports Authority, Inc. Company Profile . Yahoo Finance. Retrieved 9 August 2010 http://biz.yahoo.com/ic/42/42370.html. Allen, Courtney R. 2008. Make it Work: Shoe Merchandisng 101. Dance Retailer News.