Direct Store Delivery
Back door traffic at store
 25% of grocery products never
see a warehouse

HED 460
DSD Product Characteristics

Shelf life
Bread/pastry/salty snacks/beer
 30-70 days DSD vs 390 days for
warehoused category


Higher SKU velocity

12 units/store/week vs 9 units
HED 460
DSD Product Characteristics

Demand variability
Frequent promotions
 Frequent service


Lower value density
Fragility - chips
 Weight – beer, soft drinks

HED 460
DSD Product Characteristics

Lower value density (cont.)
$27/cu. Ft. (dsd) vs $100/cu. Ft.
 Price divided by space
 High cost as a % sales


Merchandising difficulty

Special equipment
HED 460
Problem

How can you have a low GM but
high profit and sales?
COGS must be high
 Expenses must be minimized
 Emphasis on contribution margin

HED 460
Direct Store Delivery Results

More cash flow

8 days of inventory held with 30 day
payment
Turns
 Contribution Dollars
 GMROI
 High % of in-stock

HED 460
Product Development
Market Share Growth Strategies



Acquire other businesses
Enter into joint ventures
Private label/product development
HED 460
Private Label

Merchandise bearing a retailer’s own
name brand
retailer’s own name
 another copyrighted name
 designer with whom the retailer has an
exclusive license

HED 460
Why Private Label?
Many Retailers today, see the value in
having their own private label brand.
o
o
o
Product Differentiation
Control over design/color assortment
Increase in profits
HED 460
Risks involved in Private Label
o
o
o
No one to ask for markdown $, if the
item is not selling
Image of store can suffer
Quality and appearance of the product
is a direct reflection upon the store
HED 460
Importance of Private Label




From 0-100% of merchandise
assortments
Grew 5x from 1995-2002
Sears (Craftsman, Kenmore, Canyon
River, Covington)
J.C. Penney (Arizona, Hunt Club,
St.John’s Bay)
HED 460
Importance of Private Label

Higher profits than national brands


differentiation
Private brands, now premium brands
Master Choice (A&P)
 SFA Collection (Saks Fifth Avenue)
 Faconnable (Nordstrom)

HED 460
History of product development

Foreign competition in early 1980s
Firm restructuring
 Focus on improving existing products
 Workforces cut drastically
 Sites closed
 Innovate or die

HED 460
Product development - Defined


Design and engineering required to
create products that are serviceable,
producible, salable and profitable
Development of private label
merchandise for the exclusive sale by
one company
HED 460
Product Development Defined
o
Taking a 2-D idea and transforming it into
a 3-D product to be sold to a consumer
And the consumer wants…
•
•
•
•
•
The
The
The
The
The
“right”
“right”
“right”
“right”
“right”
color
fit
price
quality
time (in season)
HED 460
Types of Product Development

Original design
more processes and lead time
 more costly and time consuming


Modification

reduced development time and costs
HED 460
Types of Product Development

Knock off
eliminates many development processes
 saves time and money


Joint product development
Manufacturer and retailer
 speeds design and decreases wholesaling
time


Combination
HED 460
The Product Development Team
o
•
•
•
•
MERCHANDISING
Front End
Design
Trend Analysis
Merchandising
(Retail Buyer)
o
•
•
•
•
•
•
•
PRODUCTION
Back End
Product Mgt. (in/out)
Technical
Patternmaking
Sourcing
Vendor Relations
QA/QC
HED 460
Process of Product Development
Merchandising (Buyer) works with
Design/Trend Dept. on WHAT to offer
1.
•
•
•
•
•
What
What
What
What
filled
What
color the assortment will include
price the item will sold for
styling details are necessary
holes in the branded retail mix need to be
will give the store a competitive edge
HED 460
Process of Product Development
The Production Team brings the
product to “life”
2.
•
•
•
Patternmaking/Design/Technical: the “right” fit
Design/Merchandising/Product Mgr. Ensure the
“right” quality
Product Mgr negotiates w/factory to get the
“right” price and lead-time
HED 460
How it is done
o
o
o
Tools: BOM/spec sheets/artwork/fit
sessions/anaylsis
Communication inside retail team and outside
with vendor/suppliers/factories
Details:
“all the small things”
•
•
•
•
•
•
•
•
Washcare Instructions
Woven label, Hangtags, UPC codes
Strength and color of sewing thread
Type of plastic bag, how many pcs per carton box
Strength of the carton box
How important is TIME, and quick replenishment
Trade laws/new agreements, NAFTA
HED 460
Why are details so important?
Did you ever play that game: draw a circle and
a box and at the top of the page, write the
words…
HED 460
Phase I: Pre-Adoption

Creativity
Materials development and selection
 Style development
 Pattern making
 Sample making
 Product testing
 Sample review

HED 460
Phase II: Post-Adoption

Preparing for production
perfecting fit
 making production patterns
 writing production specifications
 sourcing production
 estimating final costs

HED 460
Software - PDM

Creates and maintains product
specifications





Front and back detailed sketch
Garment construction
Graded specifications
Fabric trim and details
Packaging and labeling
HED 460
Software - PDM

Used extensively in industry







The Gap
JCrew
Kmart
Osh Kosh B’ Gosh
J.C. Penney
Talbot’s
Abercrombie & Fitch
HED 460