Chapter 2 : Retail Merchandising

Learning Objectives
Understand concept of Merchandising and
various factors that affect merchandising
decisions
The importance of a sound philosophy of
merchandising
The technology and systems used in
merchandising
Learn the importance of merchandising
function
Chapter 2 : Retail Merchandising

What is Merchandising?
Term Merchandising literally means buying
and selling.
It is planning, development and presentation
of product lines for identified target markets.
Merchandising is the planning, buying and
selling of merchandise.
It is an integral part of retailing.

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The Rights of Merchandising

The Rights of Merchandising are :
The right merchandise
The right quantity
The right price
The right time
The right place
The right quality

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Right Merchandise
Selecting and presenting the right
merchandise is critical as product is the focal
point of customers buying
Each market segment and geographical region
demands a different merchandise mix
Seasonal and trend changes effect the
merchandise mix
The product assortment must have all types of
merchandise -basic, trendy, seasonal
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Right Merchandise Assortment

Assortment is the number of pieces per size
per color for each style or product variety.
The right colors/ sizes/product features to
fulfill needs and desires of customer have to
be offered by retailer
Enough stock must be available to meet
planned sales and give customer wide
assortment for selection
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Right Quantity
Quantity is all about demand and supply.
Enough stock must be available in the right
assortment of color and sizes.
Deciding the correct quantity of each style is
critical.

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Right Price
Price is a function of profit and cost.
Price should be high enough to make the
desired profit, at the same time low enough
to get business and meet target sales.
Price should make production feasible and
product saleable at a profit accepted by the
target customer.

Chapter 2 : Retail Merchandising

Right Time
Timing is critical so that the merchandise
does not get wasted.
In seasonal products like apparel, umbrellas,
woolens, if the planned delivery date is not
adhered to the selling season will be missed
and the entire merchandise becomes a dead
stock.

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Right Quality
Quality is a standard acceptable to customer
and satisfies the need of the product.
It includes reliability, responsiveness,
compliance and compatibility.
Quality has to be appropriate for the product
and that target customer.
Quality has to be compatible with the product
price also.
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Right Place
The importance of location for a retailer
cannot be emphasized enough.
The right store location is the first step
towards retail success.
The location should have enough footfall of
the target segment to achieve sales.
Even within the store the placement of various
sections or departments is critical to achieving
the desired sales.
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The Concept of Retail Merchandising

Retail industry is dynamic , the retailer has to
adapt to changes in order to be competitive.
The product is the most important aspect of the
marketing mix.
Thus, merchandise assortment available at a
store is extremely crucial and a key driver of
success.
Effective merchandising will push improvements
by increasing sales revenues, gross margins and
drastically reduce inventories.
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Factors affecting Merchandising

Merchandising team cannot function in
isolation.
It is affected by factors :
Size of the retail organization : single store or chain
store
Type of retail format : online, mail order or brick and
mortar store
Merchandise to be carried : basic or fashion product
Organization structure

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Factors affecting Merchandising

The size of the retail organization
Function of retailing varies depending on the
size of retail business
Needs of an independent retailer varies
considerably from those of large chain
operation
In case of a single store the owner or manager
assisted by the sales person may perform he
buying function
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Factors affecting Merchandising

The type of store
The nature of the organization affects the
function of merchandising. The retail store
format affects every aspect of the marketing
mix and merchandising decisions.
Buying for a mail order catalogue or for direct
marketing or for an e-tail venture would be
completely different .
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Factors affecting Merchandising

The merchandise to be carried
It determines the responsibilities of the
retailer. The buying for basic merchandise is
different from that of fashion merchandise
because basic products are always in demand.
Fashion products are those that may sell very
well in one season or year and may not be in
demand in the next season.
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Factors affecting Merchandising

The organization structure
The organization structure that the retail
organization adopts, also affects the
merchandising function. It is usually
dependent on the size of the organization.

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Merchandising Philosophy
It sets the guiding principles for the decisions
a retailer makes.
The merchandising philosophy influences
retailers choice of merchandise.
It helps retailer in differentiating its offerings
from the competitor.

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Merchandising Philosophy
The merchandising philosophy being followed by a
retailer should reflect :
Retailers institutional type
Target market desires
Costs
Market positioning
Value chain
Supplier capabilities
Competitors
Product trends
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Merchandising Philosophy
Zaras Merchandising Philosophy - It has a
flexible structure and a strong customer focus
in all its business areas. Time is the main
factor to be considered, above and beyond
production costs.
Merchandising philosophy of McDonalds
exceptional customer experience, operate the
business ethically and help customers build
better communities.
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Merchandising Technology
Merchandising technology is the use of
information technology in merchandising
Objective of using Merchandising technology
is to use time effectively, increase accuracy
and optimise benefits for both retailers and
customers.

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Merchandising Technology
POS point-of-sales system
RFID Radio frequency identification tags or
smart labels
UPC Universal Product Code
EDI Electronic data interchange
New integrated supply chain software are
being increasingly used.

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Merchandising Technology
New integrated supply chain software are being
increasingly used. They include :
PLM product life cycle management software
SCE supply chain execution software
PCE product life cycle execution

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Merchandising Technology
CPFR collaborative planning, forecasting and
replenishment systems
This is a supply chain management system that helps
retailers and suppliers to work in partnership on stock
management.
Data on market demand and factors that influence
demand is shared between retailers and their suppliers
to forecast final product demand.
It moves retailers beyond continuous replenishment
models by reducing excess inventory, reducing out of
stock and efficiently meeting consumer demands.
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Merchandising Technology
Direct store delivery (DSD) is an alternative
distribution model to centralized distribution.
It is used effectively where bypassing
distribution centers makes economic sense.
It is a key method for perishables.
Goods go directly to point of sales (POS) or
point of consumption (POC).

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Merchandising Technology
Some drawbacks of these various technologies
are :
They are planned to the style level and not
SKU level. Thus color and size ratios are not
given attention.
Inadequate training of people using these
technologies reduces effectiveness.
Human judgement, insight and creativity
cannot be easily replaced.
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Merchandising Systems
Components of merchandising process are :
Line planning
Line development
Line presentation
Planning merchandise budgets

SKU = Number of Styles x Number of Sizes x

Number of Colors
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Merchandising Systems
Line Development includes processes required to translate a
line plan into real merchandise.
Product development: The design and engineering required
to make products saleable and producible. It is carried out in 2
phases:
1) Creative design- focus on creativity
2) Technical design- style, fit, patterns, specs and costing.
Line Presentation involves evaluation of the product line to
make it more attractive and appealing to consumer.
Line preview is the presentation to the sales team who see
the line and becomes inspired with its sales potential.
Line release is the first time the public views the new line.
Line release must coincide with market dates for showing to
buyers.
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Steps of Line Planning

Forecasting

Budgets

Planning
merchandise
assortments
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Importance of Merchandising
Merchandising is a global occupation today
and encompasses the day-to-day business of
all retailers.
Merchandising function generates profit.
It is the core of retail management.

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Importance of Merchandising
Merchandising constitutes the manner in
which retail outlets and marketers present
products for sale to the consumer, both in
form and content.
Merchandising impacts a business and
employees.
Poor merchandising means poor sales.

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