Retail Merchandising 1

Yogendra Bhandari
Objectives
 To demonstrate the importance of a sound
merchandising philosophy
 To outline the considerations in devising
merchandise plans: forecasts, innovativeness,
assortment, brands, timing, and allocation
 To discuss category management
• To study various buying organization formats and
the processes they use
Retail Merchandising
 Definition & the Concept of Retail
Merchandising
 Role & Responsibilities of a Merchandiser
 Fashion Merchandising
 Merchandise Characteristics
 Merchandise Management- Merchandise
Mix & Merchandise Budget
 Basics of Merchandise Accounting
 RM - DEFINITION

 Retail selling effort that is the principal task of in-store sales personnel through the
use of promotions designed by a manufacturer, such as unique displays, giveaways,
or discount and premium offers. In this case, merchandising is the act of managing
and arranging the merchandise on display in a store so as to promote its sale.
Role & Responsibility of Merchandiser

 Planning
 Directing
 Co-ordinating
 Controlling
Merchandising
Versus Store
Management
Career Tracks
Functions of Merchandisers at Shopper’s stop

 Inventory-turn Management
 Achieving Sales & Margins
 Plans Merchandise
 Availability Management, as per range plan
 Merchandising strategy & planning
 Processing of purchase orders
 Analysis of Data & Sales Budgeting
 Profitability Targets & Expense Control
 Vendor/Supplier relations for both, in-house products as
well as for brands.
ARRANGING
-MERCHANDISE
Merchandising arrangement
 MERCHANDISING ARRANGMENT………

 Why making effective use of your space is so important.

 How to position your departments and products.
 How to improve store lighting.
 The importance of atmosphere and cleanliness in your store.
 How to create great displays and signage.

 WHAT WE WILL ACHIEVE AS A BUSINESS……….

 The consistently best Display standards against Competition in India

 A great environment that will attract & satisfy Customers
 Showcase to best advantage our product offer
 Dramatically enhance Customer Service

Managing the Merchandise

 Developing a sales forecast

 Determining the merchandise requirements
 Merchandise control
 Assortment planning
Developing Sales forecast

 Reviewing Past sales

 Analyzing the changes in Economic
Conditions
 Analyzing the changes in the sales potential
 Analyzing the changes in the marketing
strategies of the retail organization and the
competition
 Creating the sales forecast
Forecasts
 These are projections of expected retail
sales for given periods
 Components:
 Overall company projections
 Product category projections

 Item-by-item projections

 Store-by-store projections (if a chain)

Determining the merchandise
requirements
 Merchandise Mix
 Retail communication Mix
Basics of Merchandise
Accounting
Merchandising Accounting

 Cash Flow
 The Balance sheet
 Financial Ratios
 Income statements
 Gross- Margin-Return on Investment
Cash Flow

 Cash In
 Cash Out
 Negative Cash flow = Cash In < Cash Out
 Positive Cash flow = Cash out > Cash In
Cash Flow Curve
The Balance Sheet

 The Balance Sheet is a statement of an

organization's Assets, Liabilities and
Owners’ Equity at a Particular Point in time.
 Assets

 Liabilities

 Owner's Equity
Assets

 Assets – Owned by an organization

a. Short term (or) Current Assets
b. Long term
Liability

 Liability: Debts owed by an organization

 Payment on Short term

Ex: Payment to supplier

 Payment on Long term

Ex: Mortgage on Land & Building

Investment on Extension,
Expansion & renovation
Owner’s Equity

 Owner’s Equity : Difference between asset

and Liability.
 Relationship:


Assets = Liabilities + Owner’s
Equity
Income statement
Income statement

 Profit performance for a specific period of time

 Income statement is otherwise called Statement of earnings
or Profit & loss statement
 Income statement:

Revenue – Expenses = Net Income
 Profit = Expenses < Revenue = positive Net Income
 Loss = Expenses > Revenue = Negative Net Income
Income statement contd…

 Income statement can be computed for an entire

organization
 Individual Store
 A Group of Store
 Department

 Profit and loss is based on the revenue & expenses directly

associated with each unit of business.
Income statement contd…

 Components : 5 major components


Revenue

Cost of goods sold

Gross margin

Expenses

Net Profit

 Relationship among the components

 Net revenue – Cost of goods sold - Expenses
Gross margin Net Profit
Income statement contd…

 Relationship among the components

 Net revenue – Cost of goods sold - Expenses
Gross margin Net Profit
 Net revenue : composed of sales, Leasing or renting
property or interest on accounts
 Net sales = Gross sales – Customer return
 Gross sales are used to determine the customer return
rates
 Customer return rate = Customer returns x100
Gross sales
Income statement contd…

 High customer return rate is often indicates of issue

related
a. Customer service
b. Quality
c. Fit of merchandise
 High sales attest to the ability of an organization
buyer to select assortments of goods that are
appealing to the store’s target customers.
Income statement contd…

 Cost of goods sold (or) Cost of Merchandise

sold (or) cost of sales
 Cost of goods sold = Billed cost of
Merchandise + work room costs +shipping
cost – cash Discount - Returns to vendors
Income statement contd…

 Shipping cost : Delivery cost for transporting

goods from supplier
 Workroom costs: activities that prepare
merchandise for sale ( steaming & pressing
apparel)
 Return to vendors : defective or slow selling
goods returned to suppliers for credit
 Cash discounts : Invoice concessions from
suppliers for prompt payment
Income statement contd…

 Expenses: Payroll, rent, Utilities, advertising

and interest on debt.
 Direct Expense: attributable to a specific unit
( store rent )
 Indirect Expense: is not attributable to a
specific unit. ( news paper advertisement )
Income statement contd…

 Gross margin : Difference between sales and cost of

goods sold.
 Net Income : Gross Margin – Expenses
 Income can be increased by Increasing sales
 Increasing Gross Margin
 Decreasing cost of goods sold
 Any combination of above
 Component Percentage :
Cost of goods sold = cost of goods X 100
Net sales
Gross Margin = Gross Margin X 100
Net Sales
Expenses = Expenses X 100
Net Sales
GMROI

Particulars Category A Category B

Sales 300000 250000
Cost of Goods Sold 180000 100000
Gross Margin 120000 150000
Gross Margin % 40% 60%
GMROI

 Gross Margin Return on Investment

 Integrates two performance

Gross Margin

Turn Over
 To create a single measure of performance

GMROI = Gross Margin X Net sales
Net Sales Average Inventory
GMROI = Gross Margin / average Inventory
Key terms
Assets Income statement
Balance sheet Liability
Cash discount Net Income
Cash Flow Net Loss
Component Percentage Net Sales
Cost of goods sold Return to Vendor
Current ratio Owner’s Equity
Expenses Time Series Comparison
Factor Workroom cost
GMROI
Gross sales