Merchandising Significance

The goal of merchandising

 Select the right mix of products or services to sell

at the store at the right price and at the right time
What is the hallmark of a successful
retail operation?
• Merchandise is the primary means of satisfying
customers

• That meets the tastes and preferences of the

target market
• And is consistent with store positioning
 Merchandise selection effects all aspects of retail
operations

 Funds allocation to hold stock

 Amount of space, labor, and equipment required for stock
and display
 Sales and margin generated by the store/website
 Types of customers the store will attract
Store image is a function of

 Quality,
 Price,
 And
 Selection
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• ANALYSIS – identification of customers

and their needs
• PLANNING – as merchandise is
IN DETAIL IT MEANS purchased 6-12 months before
• ACQUISITION – bought from
wholesalers/vendors
• HANDLING/STOCK MANAGEMENT –
where is it needed and in proper shape
• CONTROL – of large money inventory to
ensure financial return

• SAID TO BE THE CORE OF RETAIL

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Analogy
• Merchandising decisions in retail is equivalent to
the product line decisions in marketing
• Product decisions involve optimizing the product
mix of the organization whereas merchandising
decisions involve optimizing the merchandise mix
for the retail store
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Product Line & Product Mix

• Product Mix
Product Product Product
Line 1 Line 2 Line 3

LAMPS TABLES CHAIRS

•Table •Kitchen •Dining Room
•Ceiling •Dining Room •Living Room
•Track •End •Bedroom
•Desk •Coffee •Outdoor
•Outdoor •Desk
•Conference
•Computer
Selected
Acme Furniture Co.
Products
Merchandise classification
 Variety or Merchandise lines – or e.g. dept store (appliances, shoes,
clothing, perfumes, etc.) or an apparel store (men, women, teens, kids
etc.)
 Assortment– selection of products / brands/ styles/colours etc. under
each business category

 Depth – number of each SKU to be kept. Large stock raises inventory

cost and low stock reduces customer satisfaction


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Merchandise strategy 11/08/20

• Variety + assortment
Variety Hypermarket Department stores
(categories) Carrefour Department store
• Big Bazaar Debenhams
Spencers Shoppers Stop
High
Westside

Service outlets Specialty stores

McDonald Clarks
KFC Pepperfry
Currency exchange Zara
Low Dunkin Donuts
Nykaa

Low High
assortment-( selection of products in each
category)
  The heart of merchandising is
 balancing variety, assortment and
depth

 Example – add a new department

Merchandise (variety) in the same space – reduce
strategy assortment or depth – leads to
reduced customer satisfaction and
reduced sales
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Advantages Disadvantages
• Broad Market • High Inventory
• Full Selection of Items Investment
• High Level of Customer • General Image
Traffic • Many Items with Low
• Customer Loyalty Turnover
• One-Stop Shopping • Some Obsolete
• No Disappointed Merchandise
Customers
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Advantages Disadvantages
• Broad Market • Low Variety Within
• High Level of Customer Produce Lines
Traffic • Some Disappointed
• Emphasis on Customers
Convenience • Weak Image
Customers • Many Items with Low
• Less Costly Than Wide Turnover
and Deep • Reduced Customer
• One-Stop Shopping Loyalty
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Advantages Disadvantages
• Special Image • Too Much Emphasis on
• Good Customer Choice One Category
in Category(ies) • No One-Stop Shopping
• Specialized Personnel • More Susceptible to
• Customer Loyalty Trends/Cycles
• No Disappointed • Greater Effort Needed
Customers to Enlarge the Size of
• Less Costly Than Wide the Trading Area
and Deep • Little (no) Scrambled
Merchandising
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Advantages Disadvantages
• Aimed at Convenience • Little Width and Depth
Customers • No One-Stop Shopping
• Least Costly • Some Disappointed
• High Turnover of Items Customers
• Weak Image
• Limited Customer
Loyalty
• Small Trading Area
• Little (no) Scrambled
Merchandising
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• Manufacturer (National)
• Private Label (Dealer)
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Buying Organization Formats & Processes

• A merchandising plan cannot be properly devised
and implemented unless the buying organization
and its processes are well defined
• Figure on next slide highlights the range of
attributes from which retailers may choose
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Formal
Level of Formality
Informal

Centralized
Degree of Centralization
Decentralized

General
Breadth
Specialized

Internal
Source of Personnel External
Resident Buying Office
Cooperative Buying

Merchandising
Functions performed
Buying

Staffing Buyer
Sales Manager
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Merchandise Heirarchy
Company TESCO India

Division Non Food Grocery

Department Health & Beauty

Category Personal Care BabyCare Beauty

Sub Category Hair Care Skin Care Oral Care

Product Group Shampoo Conditioner &

Colorants
Oil & Gels

Product SubGroup Anti-dandruff Regular Herbal

Product XXXXXXXX XXXXXXXX XXXXX

Standard Merchandise Classification 11/08/20
20

Scheme and Organizational Chart