MERCHANDISING

 Introduction to Merchandising:

Merchandising is the process and function of designing and delivering the

product to ensure customers satisfaction and meet the objective of profit making to
the organization.

 Merchandising is a marketing and sales strategy for promoting products in retail

stores and influencing consumer behavior to increase sales. For a corporation
that sells tangible goods, it may result in higher labor and material costs.

 The approach comprises displaying and selling goods using originality and
innovation to entice customers to buy, whether from a physical or digital store.

 Packaging designs, free samples,

discounts, coupons, points-of-sale,
quantity and pricing, and so on are all
part of the in-store and on-store
promotional strategy.

 Individual purchase behavior, culture,

holidays, and weather impact the merchandising business. Product, retail,
digital, visual, and Omni channel are its most popular classifications.

 Definitions of Merchandising:

AMA – American Marketing Association has defined merchandising as

“Planning involved in marketing right merchandise, at right place at right time
in the right quantities at the right price”. E.g. – Amazon(dot)com, promises to
deliver around 1 crore products within 24 hours and payment after delivery.
 Advantages of merchandising:
1. Merchandising can help in
boosting sales:
If merchandising is used properly, then it can make a positive effect on retail
sales and the revenue generation, which is the sole goal of every business. An
effective merchandising helps you make more profit from the store without
expanding your business or renovating your store.

People like to shop in a place where they feel good. Different merchandising

techniques such as place, pricing, product packaging, display, sales sign,
arrangement, and promotional marketing will not only provide an excellent
shopping experience to your customers but also help you to boost your sales.

An effective merchandising will make sure that your customers come back to you
again and again.

2. Attract passerby:
Merchandising is an effective technique to bring customers in the store who don’t
come in the market for shopping purpose. Increased traffic increases the chances of
more sales. Therefore, your merchandising begins at the entry gate of your store.

People get attracted by the display they see outside and enter the store to look
further. Your merchandising techniques can bring people in your store but Whether
they will buy something in your store or not will depend on the pricing, packaging,
and product line in your store.

3. A well-managed and well-kept space:

If you have kept the space in your store simple and easy to navigate your
customers will like to spend more, and they feel not find it difficult to find the
products they need. In this way, you can make shopping a pleasing experience
rather than a tiring experience for your customers.

A good merchandising puts a positive impression on your customers and also build
the image of your brand.
 Disadvantages of merchandising:
1. You need to keep updating your merchandising:
One of the disadvantages is that merchandising is required to be changed
constantly depending on the season, climate, and festival. You can’t be done with
merchandising by doing it once.

Otherwise, it will become boring for your customers, and they can go to your
competitors with better merchandising.

2. The unnecessary burden on your staff

An attractive merchandising can bring more foot traffic to your store, but the sales
of your products will depend on the price and quality of your products. With the
increased traffic in your store, you would need to have more staff members to
handle those customers.

Your customers have to deal with an increased number of customers on an

everyday basis. High foot traffic can make your store look crowed, which can be
the turn off for your genuine customers. Hence, you will need to have more
employees to deal with the traffic to maintain the standard of your service.

3. Increased expenses
From the above discussions, it is clear that merchandising is not a cheap process.
You will need to invest, and these investments are not one time investments you
will need to make changes in them from time to time.

Hiring expert staff, buying material used for merchandising can cost you a lot.
However, effective merchandising will ensure you more profit, but you will have
to bear all the expenses initially.
 Types of Merchandising:

1. Product Merchandising:
This consists of all promotional activities related to boosting the sales of a product.
The definition of product merchandising
will remain the same, whether you are
selling something online or in-store.

in-store promotional activities such as

product display and online activities such
as website design are examples of product
merchandising.

2. Visual Merchandising:
A visual merchandising can be defined as all
activities used to display the product to highlight its
features. The activities used in visual
merchandising can be created by making the use of
space available, lighting in the store, and using
different designing.

This can be used for selling products both online as

well as in physical store. In digital space, vibrant colors, web design, etc. used for
visual merchandising.

3. Retail Merchandising:
Retail merchandising strictly refers to selling
merchandise in a physical store or brick and
mortar store. Retailing merchandising includes
all marketing and promotional activities which are somehow used to sell products
to consumers in brick and mortar store.

However, in digital space, retail merchandising is referred to as digital

merchandising.

4. Omni channel merchandising:

Omni channel merchandising or Omni channel
retailing refers to creating unified customers
experience at all the platform where a retailer
sells his products and can reach his customers.

For example, if a retailer sells products through a

physical store, e-commerce website, and the app,
then he would try to provide seamless customer
experience to his customers. There has been
tremendous growth in the Omni channel retailing because of the emergence of the
internet.

5. Digital merchandising:
Digital merchandising is a term used at the
place of retail merchandising for selling
products at digital platforms. This includes all
types of activities used to promote products on
the internet. It is also referred to as online
merchandising or e-commerce.

It includes all activities like

website promotions, digital products display, email marketing, social media
marketing, digital marketing, etc. Digital merchandising is getting importance as
more and more retailers are taking their business online to reach a wider audience.
 Merchandising planning and process

Merchandise planning is about striving to make the right product available, at the
right time, in the right place, In the right quantities, and at the right price.
Merchandise planning is defined as “Planning and control of merchandise
inventory of the retail firm, in a manner, which balances between the expectation
of target customer and strategy of firm”.

A retailer has to plan to have in his store the product that is desired by the
customer. Success of any retail organization depends on its merchandise planning.

Components of merchandise planning :

1. Product: Product is the most important type of merchandise planning process

tool. The retailer should buy the right amount of product to fulfill the needs of
his customer and not create an unwanted inventory for himself.
2. Price: Price is another sensitive factor, especially for a price-sensitive country
like India. The retailer should have an idea about the target customers and their
range. If the products are outside the price range, the store will not see many
sales. The retailer has to price plan well in order to ensure regular sales, stock
clearance and adequate profits.
3. Range: Another important factor to consider in product merchandising planning
is the range of products offered. A store should always offer ample options to
its customers, so they do not have to go anywhere. There should be a range of
design, colors, textures, price, range, etc.
4. Assortment: Grouping products so that customers can easily find them is also
important. Placing products of similar significance and category is helpful. A
major thought for the merchandising planning process is presenting the
merchandise category wise and department wise for customer’s convenience.
5. Space: Every retailer shop should have adequate space for all the products
bought. All products should be visible to the customers for buying. All the
space available in a retail store should be utilized by hanging fixtures, putting
lights, hangers, mannequins, etc.
 The Process of Merchandising - How to Plan Merchandise

STEP 1: Analyze and Compare Previous Sales to Forecast Demand

Demand forecasting is the pillar around which the strategy is crafter because,
based on this, the stocks are stuffed up. Forecasting involves the anticipation of
how a customer would behave during a sales season. Merchandise plan or
budget is dependent on estimated sales. Forecast of sales for entire organization,
department and product wise is to be made.

1. Analyzing Past Sales Data: Reviewing the sales data of past seasons of the
same period and comparing them with the current sales trends can be very
helpful to catch the pattern of bias in the customer’s choices.

2. Analyzing the economic state of the market: Be very sure that you know the
financial condition of the market because recessions can affect the spending
pattern of the consumers.

3. Reviewing the sales potential of the product: Compare the market demand of
the product and calculate the possibility of that product.

4. Research the market for new marketing strategies of the competitors:

Marketing strategy is also critical apart from the demand forecast. Find out if
there’s a new way you can market your product, or are people looking for a new
product, or do you need to introduce a new merchandise line in the market.

5. Accumulating the data and Creating the final merchandise forecast: After
carrying out all the analysis and calculations, compile all the data and come to a
final prediction for each product. And, only then you add more inventory to
your warehouse
STEP 2 : Deciding on the Merchandise Needs
After a retailer has forecasted demands and has a rough idea of what they need to
buy and how much for this quarter, they should do everything to provide those
products at the right time, place and price to the customer.
Planning in merchandising is at two levels:
a) BUDGETING
Budgeting is the first stage of merchandise planning because, first, you need to
know how much of your money will be invested or how you can minimize it.

The budget comprises five sections.

1. The sales plan – Projecting the amount of each product that will be sold this
season from each retail outlet, online platform, or marketplaces.
2. Inventory plan– this will tell you how much inventory you need to stock to
achieve the demand.
3. The planned reductions – This is a backup. It’s the reduction in a product’s
quantity in case the product does not perform.
4. Planning the purchase levels – Planning of how much a single product will be
procured.
5. Deciding on gross margin – the difference between the selling price and the
COGS(cost of good sold)

b) ASSORTMENT PLANNING

Assortment planning means planning how much product should be bought to

ensure that every customer’s demand is met. Here, at the merchandising process
and planning, the details of the inventory, color, size, material brand, size etc. are
important. This helps the retailer determine the number and type of each product to
be bought for ensuring that demand is met. 
E.g. Food section, cosmetics, Garments etc., merchandiser has to ensure that there
is proper assortment i.e., each assortment or section must have relevant or related
items, every category must have adequate SKU (Stock keeping units) no shelf,
rack, should be empty. At the same time it should be ensured no department or
product category is overloaded.

Assorted merchandise need to be presented making optimum use of space and

positioning the products in racks, hangers etc., so that it is visible, and comfortable
for customer to select.
STEP 3: Merchandise control – The Open To Buy

Open to buy is a technique of merchandise control that fulfills two jobs. One, to
adjust the merchandise buying according to sales of the products. Second, to
maintain the flow of stock so that the sale can take place smoothly as planned.
The advantages of OTB are –
1. Saves you from overstocking, understocking, and going out of stock
2. Maintains the budget and limits overspending
3. Avoids markdowns because of the pressure to sell the excess inventory
4. Reduces the loss of opportunity of sales due to out of stock scenarios
Planning for one month, you might want to buy the entire designed stock, but OTB
will stop you from buying everything because you already have some on-hand
inventory that you might have ordered, but you might not have received it.

The Range plan

The range plan is about creating a balanced range for each SKU(stock keeping
unit) so that you have the exact amount of products available for your consumers.
The approach of the range plan is to ensure that the merchandise plan is on the
spot, and you have every product in your pocket that will be asked by the
customer.
The benefit of the range plan is –
a. It ensures that items and options for that item are available in the store online
and offline all the time.
b. This plan is beneficial as it restricts businesses from overbuying or
understocking.
c. It provides the availability of a sufficient amount of merchandise so that all the
stores, both online and offline, across different locations, are equipped with
stocks to perform business profitably.
Model Stock plan

 The model stock plan, as the name suggests, is about precisely stocking the
items in the amount required for each merchandise line.
 To execute the model stock plan, you would need a specific demand of the
customers as in what the customer would like to buy and create levels of the
amount required for each type of consumer choice. Lastly, in the plan, after the
specific demand is figured out, the money is allocated for each type of item.
 The model stock plan gives the precise items and quantities that need to be
purchased for each merchandise line. To arrive at the model stock plan, they
buyer needs to identify the attributes that the customer would consider while
buying the product, then decide on the levels under each attribute and finally,
allocate the total money available, or the units, to the respective item categories.

The merchandise planning process is a complex one and requires accuracy. The
process starts by forecasting the sales and budgeting, determining the assortment
plan, range plan and then the model stock plan follows. However, in the era of
computerization, a large number of retailers are using various types of software for
the purpose.
Factors Influencing Merchandising

1.Size of the Retail Business

How big is the questioned retailer? Is it a sizable retail conglomerate with locations all over the
world and websites in every language, or a small business with just one e-commerce website?
These two radically different companies would have very different approaches to retail
merchandising, as would be expected.
Merchants must first decide who will be in charge of merchandising tasks. In a small retail
establishment, the owner might assume control of this duty. However, as retailers diversify into
more divisions, outlets, and even brands, product management becomes more difficult and the
number of people involved in stock buying is likely to increase.
There are also other factors at play. For instance, a chain of multiple stores might decide to base
its product sourcing decisions on regional or local trends, or it might decide to have all of its
stores stock the same products. Depending on the size of the retail operation, individual
customers may have more or less influence in the stores. A crucial factor that must be taken into
account in the merchandising process is the store's size.

2. Duty segregation
The division of labor is typical in both medium-sized and large retail operations. For a variety of
reasons, ranging from security to specialization, buying, planning, and selling may frequently be
separate tasks and responsibilities.
Retailers need to take into account how it might affect overall merchandising efforts when one
person isn't in charge of all three aspects of the merchandising equation - buying, selling, and
planning. Naturally, smaller businesses are more likely to assign all these responsibilities to a
single person, so it's critical that business owners consider who is responsible for what at their
organizations.

3. An online store
The shopping channel is yet another important aspect of merchandise. Consumers now have
many options for how they want to shop, including online, through television, in-store, through
the mail, etc. While retailers should provide customers with all of these options, it is crucial that
they have a merchandising strategy in place to support this effort. For instance, it is important to
plan ahead for the production of mail order catalogues because, depending on the quantity
required, production can take weeks or even months. On the other hand, web-based initiatives
can be carried out almost instantly.
Filling a niche is significant to many business owners. It's critical that retailers consider how
channel can affect merchandising efforts, regardless of whether they are known for offering low
prices, having distinctive products, or any other trademark.
Merchandising is an important task to get right, with a study from Retail Systems Research
concluding that 70 percent of respondents believe merchandising and inventory management are
critical to the success of retailers. Managers should use all the tools at their disposal to make the
merchandising process as streamlined as possible.

3 different kinds of retail merchandising tools

There isn't a software solution that works for everyone. There wouldn't be literally tens of
thousands of programs available if there were. (For context, G2 currently lists about 85,000
products, and more are being added daily.)
There is need for variety of software applications if we want to improve your retail
merchandising skills. As of March 25, 2019, the categories in which the products featured in this
post are listed are new to our platform, and these products have fewer reviews overall. If there
are no reviews yet for a product, we picked it based on the most comprehensive information we
could find. The selection of products with reviews is based on the high user satisfaction ratings.

1. Retail operations software

Retail operations software is built to improve a brick-and-mortar business’ daily operations and
sales by providing actionable insights based on data. These data typically come from other
software tools used to run the business, such as point of sale (POS) systems and inventory
control software. Insights typically involve inventory, customer demographics and store layout.
For merchandisers, knowing the optimal way to organize inventory in a store, and which
products are most successful, can drive sales company-wide. CB4 utilizes POS data to detect
problems and potential issues with store inventory.
CB4 uses up-to-the-moment predictive analytics to recommend operational changes to improve
store performance. The tool can uncover issues such as pricing mismatches, out-of-stock items,
inventory discrepancies and poor retail merchandising.

JDA Merchandise Management System

JDA Merchandise Management System is a sizable tool to increase operational performance
through better inventory availability, price adjustments, marketing promotion creation, and
storage and delivery optimization. An essential component of retail merchandising is obtaining
the appropriate inventory and making sure it is priced correctly. JDA Merchandise Management
System can process thousands of POS transactions, allowing it to analyze daily transactions and
turn that data into useful inventory insights.

2. Retail analytics software

Retail analytics software is built to leverage a retail business’ data to improve performance,
customer experience and marketing strategies through reports and insights. These data are
collected by software the business is already using, and reports can be created either in real time
or on demand. Data holds the key to a retailer’s success, so using insights provided by retail
analytics software can help increase profit by minimizing cost and targeting the right customers
at the right time. Merchandisers can use this data to place items commonly bought together near
each other on shelves, place popular items in areas more easily seen, and target marketing efforts
to specific demographics
42 is a business intelligence software program specifically for retailers.

using data from a variety of sources, the platform provides real-time insights and reporting,
consolidated and validated data and drilled-down analysis of all this information. This data can
be used by merchandisers, buyers, planners, executives and tech teams for both digital and
physical storefronts

3. Retail assortment management applications

Retail assortment management applications help retailers optimize their merchandising process
in an Omni channel world. “Product assortment” describes the variety of products offered by a
retailer. Retail assortment management applications digest a business’ data and produce
information about how a retailer’s assortment can be improved. This information may also
include pricing information, market intelligence and inventory management insights.

BOARD
BOARD provides retailers with business intelligence, performance management and analytics all
in one platform. Together these features create an all-in-one decision-making platform to help
retailers budget, plan and forecast.

Ideal for enterprise companies, BOARD can provide a retail company’s corporate office with
high-level insights for the whole business. Using these insights, the company can make smarter
marketing, purchasing and pricing choices.
THE 5 R’S OF RETAIL MERCHANDISING

They say there’s no one right way to do something, and in fact, they’re right. There are five. The
5 R’s of merchandising are something that retailers should live by and die by if they want
success. Perhaps the most surprising thing about the effectiveness of the 5 R’s, are their
simplicity: present the right product to the right people at the right time in the right way at the
right time.
1. The Right Product
There’s no accounting for taste, so this is basically a matter of being in the know. To complete
the first “R,” you need to know what the people want before they do.

2.The Right People

Once you have your product, you have to make sure the right people are seeing it. If you’re
selling a $1,000 coat in the middle of nowhere, you’re catering to the wrong people. If you’re
selling the same coat in SoHo, you’re going to sell.

3.The Right Time

In this industry, it’s critical to strike when the iron’s hot. The right people are not looking for
stores who are riding on the coattails of others, they want to be the first people to have it and
they want it available when they want it.

4.The Right Way

Again, if you’re selling a thousand-dollar coat, and you’re trying to sell it on an outdated
mannequin in a generic scene, it will be passed by time and time again. You have to make the
people want what you have, and the only way to do that is by painting the picture for them.

5.The Right Price

Pricing is a science few have mastered, but all have attempted. The price needs to match the
perceived value created by all of the other factors: the product itself, the people who will buy it,
the timeliness of its debut and the lifestyle it represents