Merchandising: Zara & Hmv

Merchandising Report

Merchandising centres on the buying and selling of goods within a market place and a good merchandising system is essential to the success of any retail business. I intend to focus this merchandising report on Zara, a ladies fashion retailer and HMV, an entertainment megastore. These two companies have specific buying and merchandising strategies, which are tailored to the needs of their products. This report will explore the similarities and differences within each company's strategies, and identify factors that determine them.

Range Selection and Planning

When selecting merchandise it needs to be suited to the needs of the customer. This relates to a number of criteria consisting of price, quality and individual tastes. The buyers will need to select goods that have the most potential for resale and generate a high level of profit. Therefore, the purchases need to be planned carefully. The planning process centres on "determining the appropriate time for the merchandise to be available to customers, what will be bought, quantities and selecting resources".

HMV divides up their core stock under an assortment of headings: music albums, music singles, classical, video, DVD, games and books. It is important for the buyers at HMV to obtain a wide variety of the latest products to cater for different tastes. HMV will under take extensive negotiations in the buying process once they have sourced the appropriate products. In addition to their core stock, HMV will offer impulse goods, for example, blank videos, to add to promotional techniques. In the music industries early days, retailers mostly purchased products directly from the few record manufacturers. As retail volume grew in the 1940's, manufacturers began to serve retailers through regional distributors. The distributors will need to tailor their distribution strategies to reach the appropriate type of retail distribution outlet. HMV is a mass merchant. This means HMV stocks a very wide variety of products throughout a number of ranges. Distributors establish a priority of releases and develop a marketing strategy campaign that ties in with the nature of the product.

HMV's centralised buying shift began in 1996, when the chain altered its buying strategy, whereby store managers ordered for their individual store. The change was to allow HMV to take advantage of label discounts and national advertising buys. In 2002, HMV took away much of the buying flexibility enjoyed by its store managers by moving further towards centralised buying and advertising strategies. The HMV regional distributors plan in advance when the products are to reach the stores and the quantity allocation depending on the size of the outlet.

Zara's core stock, on the other hand, consists of clothing, shoes and fashion accessories, for example bags and jewellery. Zara produces around eleven thousand styles each year, which is about fives times as many as a comparable retailer would typically produce. Zara's designers work in large open spaces to the headquarters, with one design centre for each range of clothes. Many of the clothes are catwalk inspired. Zara buys in the raw materials but they design all the clothes themselves. Distribution of both outsourced and in-house manufactured garments are centralised at Zara's own distribution centres.

Similarities and differences

Both Zara and HMV need to ensure they stock the most up-to-date products to meet their customer's expectations. They have very different product ranges, but they both operate through centralised distributors when dividing up the goods for the individual stores. Strict planning and quick responses to customers needs is due to the products characteristics and the market demands.

Zara and HMV's products do not tend to have the same characteristics. HMV's customers are more likely to know what they want to purchase before they enter the store, so HMV need to encourage the customers to browse. Zara's customers, on the other hand, are more likely to enter the store to browse. Therefore, Zara needs to encourage their customers to purchase. These are down to the different product types both retailers sell.

Product Acquisition Lead Times

Lead time is the time between the initiation of a process and its completion. In planning, the lead time is usually an estimated time. Getting lead times wrong can generate a number of problems. Incorrect or over-optimistic lead times for manufacturing can lead to customer service problems, finished product shortages and excess raw materials. There may also be stock shortages in the retail stores and this can reduce the effectiveness of store systems.

In HMV stores lead times will be weekly for some products, as new releases are brought out each week. This will allow HMV to maintain the latest stock listing. Short lead times also mean that stock turnover will be quick where popular product lines are concerned. The stores will need to generate space for the product lines each week. HMV also have a wide selection of classic product lines to meet customer needs, for example Hits from the 80's and all albums released by popular artists, which could have been released over several years. These products are likely to have longer lead times and HMV will only replenish these items as they are needed. HMV could not rely solely on the classic product lines, as the new releases are also used to attract new customers to the store. HMV has a direct line to the manufacturers, so they often receive games well before the release date.

Zara has revolutionised the lead times of ladies fashion wear. They have very short lead times of five weeks. This allows them to stay at the cutting edge of fashion all year round. A lot of fashion stores keep to the seasons and rotate stock according to the time of year. Zara on the other hand is able to turn around very quickly, so that the customer always gets the best of European fashion styles.

Similarities and Differences

Both HMV and Zara have short lead times. This is due to the fact that both stores are part of fast moving industries that alters regularly and customers expect them to keep up with these changes. Both companies need to maintain a balance between time, quality and cost objectives to ensure their lead times are a success. Unlike HMV, Zara will not split their stock into categories which have short and long lead times. HMV divides their products due the nature of the merchandise.

Promotional Planning

A promotion can be part of "an offensive strategy