LaSalle College: Purchasing Plan for Chic Marie's Winter Collection

This report presents a comprehensive purchasing plan for Chic Marie, a high-end store, focusing on its winter fashion merchandise. It begins by outlining the essential steps in the budget process, including market demand evaluation, supplier identification, and cost considerations. The report then delves into factors crucial for fashion merchandise assortment planning, such as stock-keeping unit management and space allocation. It proposes assortment strategies based on vendor, cost, and customer age, catering to the 35-55 age group. The analysis also highlights key sales periods during the winter season and their impact on planning. Furthermore, the report provides a detailed calculation of profit margins and presents a purchasing plan for the winter/fall season, incorporating figures for sales, cost of goods sold, and stock levels. The report concludes by defining critical terms and conditions for fashion merchandise transactions between buyers and sellers. The report is designed to assist the purchasing manager in making informed decisions for the upcoming winter collection.

RUNNING HEAD: PURCHASE PLANNING 0
Business
Retail
August 1
2019

PURCHASE PLANNING 1
Table of Contents
Introduction................................................................................................................................2
Key Steps in the Budget Process................................................................................................2
Factors to be considered while planning assortment of fashion merchandise...........................3
Assortment strategies for Chic Marie........................................................................................4
Important sales period during winter season and effect on planning.........................................4
Calculation of profit margin.......................................................................................................5
Purchasing plan for the winter/ fall season................................................................................5
Five terms and conditions which requires agreement for the transaction in fashion
merchandise................................................................................................................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................8

PURCHASE PLANNING 2
Introduction
The report has been prepared for providing the purchasing manager of Chic Marie a high-end
store to plan for the purchase of their upcoming winter collection's fashion merchandise. The
company's targeted customer is the women of age 35 to 55 and the planning is to be made
according to the particular age group. For the purpose, research is being carried out to
evaluate the processes of planning for forming significant planning for the purchased
merchandise of the winter collection. It discusses the steps to be performed for creating the
merchandise budget planning. It identifies the factors of the assortment and the strategies of
an assortment of merchandise. The important sale period for the season is examined and their
impact is realized. Also, the calculation of margin and purchase plan is performed. The report
also defines the terms and conditions between buyer and seller for fashion merchandise
purchases.
Key Steps in the Budget Process
 To properly plan fashion merchandise purchase there are some key steps which
should be performed by the purchase manager of Chic Marie. These are as follows:
 Evaluation of market demand (Customer needs): The demand of the market should be
precisely forecasted before planning the purchase so that purchase can be designed
according to the demand in the market (Cook, and Yurchisin, 2017). This helps in
determining the correct quantity of purchase.
 Identification of the suppliers (cost evaluation): All the suppliers of the demanded
products should be identified to appropriately select the supplier who provides the
items at the minimum cost. The cost-benefit should be paid due to importance while
planning the purchase.

PURCHASE PLANNING 3
 Business needs: In the purchasing for fashion merchandise, the overstocking of the
goods should not be done as it results in loss of trend or obsolesces of the item. This
not only loses the profits and suffers losses but also the relationship and faith of the
customer with the business (Petersen, and Riisberg, 2017).
 Other costs (Storage and carrying cost): The purchasing plan should be such which
minimizes the carrying cost as well the ordering cost of the item. The costs are ideal
when are equal in amount.
Factors to be considered while planning assortment of fashion merchandise
 The factors considered in the assortment planning of fashion merchandise assortment
are as follows:
 Conduct the seasonal process of stock-keeping unit realization (keep/ drop/ add)
where the items are identified to maintain them in the inventory or throw it out from
the inventory (Banerjee, Karlan, and Zinman, 2015). It also includes the new addition
of items as per market demand.
 Calculate the mentioned number of options as per location cluster in which the profits
derived from each the cluster is similar to another.
 Estimate for the average per store units for sales and receipt based on historical results
so that the storage cost can be maintained. Also, the space for storage in the
warehouse can be examined (Reilly, Souder, and Ranucci, 2016).
 Preparation of the assortment wedge – the process in which the proposer narrows its
selection options using the location cluster.
 Planning of cash inflow from sales over time so that the revenues can be estimated
and the profits could be predicted.

PURCHASE PLANNING 4
Assortment strategies for Chic Marie
 On the basis of vendor: The Chic Marie can use this attribute for the assortment of its
items as it will divide the merchandise according to the fashion merchandise labels.
 On the basis of the cost of items: The assortment can be made based on the cost of the
purchase for the items to classify them according to revenue to be generated by them
in the future (Bonetti, and Perry, 2017).
 On the basis of age of the customer: The Chic Marie targets the age group of 35 to 55
years. In between the 20 years gap, the choices of the women are different and the
assortment should be done to serve the customers according to their preferences.
Important sales period during winter season and effect on planning
The two important sales period in the winter season are the beginning of the winters and at
the end of the winters. The reason of the increased sales in the two periods in the season is
that the new collection for the season arrives at the beginning of the winters and at that time
purchases are made according to the trend in the market (Lang, and Liu, 2019). As the
winters pass by the retailer need the space for the new spring collection and thus prices of the
items are reduced this boosts the sale. However, the good trendy collection is lost at the end
of the season.
The effect of the important sale period on the planning is that in case the expectation of the
important sale period is exceeded or reduced the whole planning has to change according.
However, the average sale of the season may have a certain trend but the monthly data
planning is affected with the sale period.

PURCHASE PLANNING 5
Calculation of profit margin
The profit margin is the percentage reflection of the difference between the selling price and
cost price on the selling price of the item. It is calculated by dividing the difference between
selling and cost price that is profit by the selling price of the item (Ho, 2018).
In the absence of cost price for the item, it is calculated by subtracting the profit margin
percentage from the selling price of the item.
The selling price in the table has been calculated by dividing the cost price of the item by the
remaining percentage of the sales apart from the profit margin. This is because it defines the
percentage of cost and dividing of cost by its percentage results in the full amount of the item
which is the selling price in this scenario.
Merchandise Cost Price Selling Price Profit Margin (%)
Item 1 48.7 95 48.74%
Item 2 23.75 49.99 52.49%
Item 3 62.81 125 49.75%
Item 4 52.25 100 47.75%
Item 5 11.38 29 60.78%

PURCHASE PLANNING 6
Purchasing plan for the winter/ fall season
P.Y. C.Y.
% initial margin 53% 54%
Average
Stock 56737
% gross margin 47% 49% Average sales 54167
% reduction 12% 11% Base stock 10000
% cash discount 2% 2%
% alteration cost 2% 2% Sales CP 325000
% maintenance cost 47% 49% Sales PY 295455
% operating margin 44% 44%
% net profit 4% 5%
GMORI 2.82 3.08
Stock rotation 2.8 2.95

PURCHASE PLANNING 7
Aug. Sep. Oct. Nov. Dec. Jan. Total
Sales
% 16% 15% 14% 15% 26% 14% 100%
C
P
$
52,000.0
0
$
48,750.0
0
$
45,500.0
0
$
48,750.0
0
$
84,500.0
0
$
45,500.0
0
$
325,000.0
0
Closing
stock C
P
$
9,664.07
$
9,060.06
$
8,456.06
$
9,060.06
$
15,704.1
1
$
56,770.0
0
$
108,714.3
6
Reduction
% 15.3% 15.7% 17.4% 17.8% 19.8% 14.0% 100.0%
C
P
$
44,044.0
0
$
41,096.2
5
$
37,583.0
0
$
40,072.5
0
$
67,769.0
0
$
39,130.0
0
$
269,694.7
5
Opening
stock C
P
$
27,820.0
0
$
26,081.2
5
$
24,342.5
0
$
26,081.2
5
$
45,207.5
0
$
50,625.0
0
$
200,157.5
0
Purchases
(retail)
C
P
$
43,375.9
3
$
40,664.9
4
$
37,953.9
4
$
40,664.9
4
$
70,485.8
9
$
55,880.0
0
$
289,025.6
4
Purchases
(cost)
C
P
$
41,674.9
2
$
39,070.2
3
$
36,465.5
5
$
39,070.2
3
$
67,721.7
4
$
53,688.6
3
$
277,691.3
0
COGS
C
P
$
26,780.0
0
$
25,106.2
5
$
23,432.5
0
$
25,106.2
5
$
43,517.5
0
$
23,432.5
0
$
167,375.0
0
Average
Stock
C
P
$
9,077.97
$
8,510.59
$
7,943.22
$
8,510.59
$
14,751.6
9
$
7,943.22
$
56,737.29

PURCHASE PLANNING 8
Stock rotation = COGS/ average stock
COGS = Sales - gross margin
The preparation of the purchase plan has been done without the availability of data for
opening stock, closing stock and purchase for the current and previous year (Anderson, and
Yotov, 2016). So an assumption has been taken that all the data are based on the sales figure.
Figures in the table are mentioned as per the conventional approach as per the theory of Carld
Herzberg.
Five terms and conditions which requires agreement for the transaction in fashion
merchandise
 The selected merchandise should be provided by the sellers which are according to
preference and selection attributes of the customer.
 The price is the factor which should be agreed by both the parties to the transaction
before purchasing in the fall season (Montaguti, Neslin, and Valentini, 2015).
 Availability of the item on a particular time is the factors which require meeting by
the seller as it impacts the decision of the buyer.
 Availability of the item at the defined place is another factor which should be
considered as it also impacts the decision of the buyer to purchase from the particular
seller.
 The required quantity of items should be supplied by the seller while making the
fashion merchandise in the season because the unavailability of the trendy items takes
place in the season (Singh, Gupta, Jha, and Rajan, 2019).

PURCHASE PLANNING 9
These five terms should be agreed by the parties for the undisputed and healthy business
relations.
Conclusion
The analysis has been executed for the fashion merchandise purchase planning of the Chic
Marie store. The research has been performed in identifying the steps before planning the
purchase budget for merchandise. The assortment strategies suitable for the business of Chic
Maries have been examined and the factors to be considered have been learned. The report
has discussed the higher sale period in the season and has analyzed the effect of the important
period in the planning done by the manager. The profit margin for the items has been
calculated and the missing information has been derived using the costing calculation. The
purchase plan has been filled based on assumptions of the market. The important terms
between the seller and purchaser have also been discussed in this report.

PURCHASE PLANNING 10
References
Anderson, J.E. and Yotov, Y.V. (2016) Terms of trade and global efficiency effects of free
trade agreements, 1990–2002. Journal of International Economics, 99, pp.279-298.
Banerjee, A., Karlan, D. and Zinman, J. (2015) Six randomized evaluations of microcredit:
Introduction and further steps. American Economic Journal: Applied Economics, 7(1), pp.1-
21.
Bonetti, F. and Perry, P. (2017) A review of consumer-facing digital technologies across
different types of fashion store formats. In Advanced fashion technology and operations
management (pp. 137-163). IGI Global.
Cook, S.C. and Yurchisin, J. (2017) Fast fashion environments: consumer’s heaven or
retailer’s nightmare?. International Journal of Retail & Distribution Management, 45(2),
pp.143-157.
Ho, A.T.K. (2018) From performance budgeting to performance budget management: theory
and practice. Public Administration Review, 78(5), pp.748-758.
Lang, C. and Liu, C. (2019) The entrepreneurial motivations, cognitive factors, and barriers
to become a fashion entrepreneur: A direction to curriculum development for fashion
entrepreneurship education. International Journal of Fashion Design, Technology and
Education, 12(2), pp.235-246.
Montaguti, E., Neslin, S.A. and Valentini, S. (2015) Can marketing campaigns induce
multichannel buying and more profitable customers? A field experiment. Marketing
Science, 35(2), pp.201-217.

PURCHASE PLANNING 11
Petersen, T.B. and Riisberg, V. (2017) Cultivating user-ship? Developing a circular system
for the acquisition and use of baby clothing. Fashion Practice, 9(2), pp.214-234.
Reilly, G., Souder, D. and Ranucci, R. (2016) Time horizon of investments in the resource
allocation process: Review and framework for next steps. Journal of Management, 42(5),
pp.1169-1194.
Singh, P.K., Gupta, Y., Jha, N. and Rajan, A. (2019) Fashion Retail: Forecasting Demand for
New Items. arXiv preprint arXiv:1907.01960.