Case | HBS Case Collection | 2001 (Revised from original 1998 version)

Merchandising at Nine West Retail Stores

by Ananth Raman and Colin S Welch

Abstract

Describes the merchandising decision process (organization, structure, and incentives) at Nine West retail stores, a large footwear retailer in the United States. Also describes changes currently occurring at Nine West and thus provides a context in which students can recommend changes to the merchandising process and the structure of the merchandising organization. To explain how merchandising decisions are made at a fashion retailer and to explore how changes in the environment will impact the merchandising organization.

Keywords: Organizational Structure; Situation or Environment; Motivation and Incentives; Decision Making; Change; Budgets and Budgeting; Forecasting and Prediction; Brands and Branding; Marketing Strategy; Product Marketing; Retail Industry; Apparel and Accessories Industry; United States;

Language: English

Format: Print

17 pages

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Citation:

Raman, Ananth, and Colin S Welch. "Merchandising at Nine West Retail Stores." Harvard Business School Case 698-098, May 2001. (Revised from original May 1998 version.)

Store liquidation is the time-constrained divestment of retail outlets through an in-store sale of inventory. The retail industry depends extensively on store liquidation, not only as a means for investors to recover capital from failed ventures, but also to allow managers of going concerns to divest stores in efforts to enhance performance and to change strategy. Recent examples of entire chains being liquidated include Borders Group in 2012, Circuit City in 2009, and Linens 'n Things in 2008; the value of inventory sold during these liquidations alone is $3B. The store liquidation problem is related to but also differs substantially from the markdown optimization problem that has been studied extensively in the literature. This paper introduces the store liquidation problem to the literature and presents a technique for optimizing key decision variables, such as markdown, inventory, and store closing decisions during liquidations. We show that our approach could improve net recovery on cost (i.e., the profit obtained during liquidations stated as a percentage of the cost value of liquidated assets) by 2 to 7 percentage points in the cases we examined. The paper also identifies ways in which current practice in store liquidation differs from the optimal decisions identified in the paper and traces the consequences of these differences.

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