retail Merchndising Notes

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 2

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.


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


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


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


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.


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.


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.


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.


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.


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.


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



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



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 .



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.



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.


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.



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



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.


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.



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.



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



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.



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).



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.


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


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.


Steps of Line Planning

Forecasting

Budgets

Planning merchandise assortments


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.


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.


Documents

retail Merchndising Notes