Retail Merchandising

About the Author
Swapna Pradhan is with Welingkar Institute of Management Development & Research, Mumbai where she teaches PG students of~A and Retailing. Ms Pradhan has seven years of teaching experience and nine years of experience in retailing and merchandising ineluding stints with Pantaloon Retail (India) Limited and Mayfair Knitting Industries Limited (Zodiac). In September 2008, Ms Pradhan was awarded the Best Teacher Man.agemen.t award by the Dewang Mehta Foundation.

in Retail

R,etail Merchandising

Swapna Pradhan
Associate Professor-Retail Welingkar Institute of Management Development & Research Matunga, Mumbai

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The aim here is to provide a foundation of knowledge which will be in keeping with the industry practice in India. The world of buying and merchandising is a fascinating component of this world of retai1. The text has been presented in eight chapters and an appendix. Swapna Pradhan . The appendix is a compilation of insights from the actual world of retail merchandising. A unique feature of the book is the Merchandising Insights which bring horne real life examples from the world of retail merchandising to enhance the theory being presented. viz. Itrust that the book will be relevant and serve as an essential learning tool to the students of retailing. Chapter Four covers the concepts of assortment planning and the next chapter focuses on the process of merchandiseprocurernent. The elements of pricing and performance evaluation are then covered. The first chapter introduces the student to the fundamentals ofrnerchandising. private labels and category management are then covered in two separate chapters. who wishes to study buying and merchandising. Two extremely important constructs within the function of merchandising in many retail organisations. This book is aimed at the student of retailing management.Preface An increasing number of students today view retail as a career option. The next two chapters focus on the elements of and the process by which the function of merchandise planning takes place. The language ofthe book has been kept simple to aid easy comprehension of the underlying theory and concepts.

During the course of writing this book I have met and talked to many outstanding professionals in the field of merchandising in India all ofwhom have helped me put together this piece of work.heir support to this project The list of acknowledgements would be incomplete without a mention of all my students who have contributed to the text. Swapna Pradhan . for t. Chairman and Managing Director. for sharing valuable information on the process of merchandising at his chain of restaurants. Customer Care Associate and CEO Shopper's Stop Limited and Mr Ajit Joshi. Rukhshana Balsara and Janvi Parekh. Infinity Retail Limited. Welingkar Institute of Management Development & Research. have made valuable additions to the content. Managing Director and Chief Executive Officer. Mr Govind Shrikhande. I am also grateful to Mr Umesh Mehta. In particular I would like to thank two professionals from the world of Indian retail. Two in particular. both from PGDM Retail Management batch of 2006-09. for their time and contribution to this text. Mnmbai. I would also like to thank my publisher and the editorial team in particular. Little Italy.

Contents Preface Acknowledgements Chapter 1 The Fundamentals of Merchandising v vii 1 2 The Principles of Merchandising The Concept of Merchandising Factors Affecting the Function of Buying Merchandising Summary Key Terms Philosophy Methods of Buying 2 7 13 15 Review Questions Chapter-end Activity Suggested Reading 22 22 23 23 Chapter 2 The Proces Summary Key Terms The Elements of Merchandise Strategy Planning: An Overview of Merchandise Planning 25 26 30 32 A Merchandising Key Concepts in Merchandising Review Questions Chapter-end Activity Suggested Reading 41 42 42 43 43 Chapter 3 The Process of Merchandise Planning Process Plan Planning 45 46 52 53 The Merchandise The Range Plan The Six-month Merchandise Summary 63 .

tion of Retail Price to Retail Price of Markups and Markdowns Allocation Performance 109 110 1]2 The Concept of Price Retail Pricing Policies/Strategies Uo 121 l22 Merchandise 122 123 The Concept of Gross Margin Return On Investment (GMROf) 126 128 Key Terms 129 . Contents Key Terms Review Questions Chapter-end Suggested Activity Reading 64 64 65 66 Chapter 4 Developing Assortment Plans The Merchandise Assortment Technology Summary Key Terms Review Questions Suggested Reading Assortment and Merchandise Compatibility Planning Tools and Merchandise Planning 67 68 70 Micro Merchandising 74 75 78 79 79 80 Chapter5 Sources of Supply 81 82 83 The Concept of Sourcing Sources of Supply The Resident Buying Office The Phases in Sourcing Global Sourcing Summary Key Terms Review Questions Suggested Reading 86 88 101 106 106 107 107 Chapter 6 Components Adjustments A Comparison Merchandise Evaluating Summary Priciing Merchandise and Performance Evalua.x.

Contents xii Review Questions Suggested Reading 130 130 Chapter 7 Private Labels 131 132 139 143 The Private Label The Market for Private Labels The Process of Private Label Creation Summary Key Terms Review Questions Chapter-end Activity Suggested Reading 149 150 150 150 151 Chapter 8 Category Management of the Category Management Framework 153 154 158 The concept of Category Management Key Components The Category Captain Illustrative Case: Market Structure Summary Key Terms Review Questions Suggested Reading 181 184 194 195 195 196 Appendix: Industry Insights in Merchandising 197 219 221 Corapany Index Subject Index .

you shoul'd be able to understand: • The concept of merchandising • The need for the function of merchandising • The different roles in merchandising • Merohandising in different retail formats • The methods of buying r .~--~ Chapter Objective ) on8 The Fundamentals of M.erchandiising By the end of this chapter.

pg 48 2 http://encarta. 'merchandise' refers to goods and conunodities sold at the retail level. • customer service strategy. It originates from the French word 'merchant' which led to merchandise-s-meaning 'goods' derived from the old French marchat". While the preliminary chapter dwells upon the basics of merchandise management-defining the concept of merchandising and explaining the roles of both the buyer and the merchandiser.msn.2 Retail Merchandising I THE PRINCIPLES OF MERCHANDISING The past decade has witnessed sea change in the world of retail. display. •. I'Backgrollnd to Strategy: A Review of Recent and Current Applications'. Among all the elements of retail strategy. From an era when manufacturers decided what the consumers needed to buy. THE CONCEPT OF MERCHANDISING The word 'merchandise'. and • format and environment strategy.comJdietionary_1861629328/mercbandise. New and emerging technologies and customer fragmentation has made it even more difficult for retailers to retain consumers who. 'Merchandising' is the buying. are loyal to their stores. of which increasing competition is just one aspect. This includes all related activities such as advertising. eventually determining the loyalty that a customer may have for a retail store. David Waiters and Jack Hanraban. they are : • merchandisestrategy. Over the years. and selling of merchandise. According to Business Dicitonary. and promotion of merchandise involving the retail customer(s). that of merchandising is becoming increasingly important. This book focuses mainly on the key elements of the science of merchandise management. Walters and Hanrahan 1 have identified four key elements of the strategic direction that a retailer may take.html . Retail Strategy.to a time when consumers are the decision-rnakers-e-the change in the world of merchandising has been phenomenal. presenting. communications strategy. the chapters that follow discuss the differences in the buying needs of various types of organisations. means goods bought and sold for a profit. Planning & Control. the concept of merchandising has also evolved.

Baily. Farmer. Merchandise Management. planning. Planning and Evaluating the Merchandise Mix.5. Grace. Grace Kunz has defined merchandising as the 'planning.16/02/08) Redefining Excellence in Retailing. styling and timing'.org (as 00. • Planniag-ebecause the merchandise that is to be sold in the future must be bought 'now!' • Acquisition=because or manufacturers. many a times. 6th edition. Retail merchandising has been defined by Lewison6 as the process of developing. pricing. These aspects can be individually explained as follows: Merchandise management includes analysis. handling control of the merchandise investments of a retail operation. www. at the right time and at the right price becomes increasingly difficult as more selling and fulfilling locations are added to a distributed retail model.ama. Many a times both these situations typically occur simultaneously. Summer 1986. Purchasing Principles and Management. Merchandising: Theory.3 The merchandising quantity. developing. Joseph Barry Mason. Retailing. Ed. the merchandise needs to be procured. On the other hand.The Fundamentats of Merchal1dising 3 The American Marketing Association defines merchandising as 'the planning involved in marketing the right merchandise at the right place at the right time in the right quantities at the right price. profitability suffers owing to excessive markdowns (temporary reduction in the selling price of an item to stimulate its demand). assorting. obtaining. Lewison. L Kunz. and presenting of product lines for identified target markets with regard to pricing. be it from distributors 3 4 American Marketing Association. et al. available at the challenge of consistently having the right product in the right right place. Journal of Retailing. acquisition. when an inventory is enhanced with a view to improve service levels and decrease stockouts (when the demand or requirement for an item cannot be fulfilled from the inventory on hand). 5 6 . 7th. On the one hand. and • Analysis-because retailers must be able to correctly identify their customers before they can ascertain consumer desires and needs/requirements so as to make good buying decisiorus). pg 391. when inventory is reduced profitability suffers due to lost sales. supporting and communicating the retailer's merchandise offering. Principles and Practice. remains an elusive goal for most retailers." Achieving these 'five rights' is the key to successful merchandising and. .

9 'Retail Buyer'sSaleability Judgements: A Comparison of Information Use Across Three Levels of Experience' .986. Spring. J. • Then. and selects merchandise for resale to the consumer. in the process of merchandising. the merchandise condition to be sold. Therefore. Taking this definition into consideration. it is an integrated. to allocation ofthe goods to the stores. to distribution.4 Ret<. Richard Etten sou and Janet Wagner. Ettenson and Wagner~ define retail buying as the decision making process through which the retail buyer identifies. they are often referred to as the customers' advocates. if one were to specify the role of a buyer. to promoting and selling the assortment to the customers and finally to replenishing inventory as necessary. Nurnber 3 'Retail Buyer's Saleability 1udgements: A Comparison of Information Use Across Three Leve Is of'Experience'. to allocation of the goods to the stores. Number 1 .' Different Roles in Merchandising The concept and functioning of the merchandising department not only varies from retailer to retailer hubs also influenced by the business model that theretailer choo~es to adopt. The McKinsey 1993. Volume 62. The concept of merchandising can be summarised in the words of Aufreiter'. the Tole of the buyer and the merchandiser became more defined. Nanacy Karch and. Volume 62. to promoting and distribution. and 7 8 The Engine oj Success in Retailing. However with the spread of business beyond regional and then nationa boundaries.lil Merchandising • Handling-because.Christiana Smith Shi.Ioumal a/Retailing. In an era when the retailer's domain of business WaS dose. evaluates. to his area of operation. • Putting' forth an offer of products requires pI ann ing and selecting merchandise which will form a part of the merchandise assortment. . Number 1 Quarterly. Nora Aufreiter. the specific • The buyer interacts with vendors and suppliers and works towards determining who is best suited for providing the required range of merchandise. etw as 'merchandising is not a synonym for the buying function. it would comprise: • Understanding the consumer segment for whom the merchandise isbeing. en~·to. the demarcation between the role of the buyer and the merchandiser was limited. has to reach where it is -needed in propel • Control-because it is necessary to check the arnount( s) spent on buying/acquiring products. Richard Ettenson and Janet Wagner.the buyer creates the basket that is offered to the customers. Journal of Retailing.created. Spring 1986. Retail buyers represent both the refail firms and those consumers who are in the market for merchandise". . end business process that runs from planning the assortment. to sourcing.

such as steel. children's wear. Planning Though merchandisers may not be directly involved in the actual purchase of merchandise. but at the same time coordinates with the Head Buyer.The Fundamentals of Merchandising 5 • The buyer also negotiates favorable manufacturing and supply terms with the vendor(s). The structure of the merchandising department largely depends on the organisational structure adopted by that particular retail organisation. or petroleum products. Many a times. where the buyer influences the buying behaviour of consumers by offering new products and services and assortments. where the buyer is responsible for the goods right from the suppliers to the end consumers. 2. grains. as follows: 1. which further involves estimating consumer demand and the impact of changes in the retail environment. International Retail Marketing. Margaret Bruce. For example. The Merchandiser. there may be merchandisers for menswear. buyers have to be guided to take 10 The anatomy of retail buying. Last. at the same time. . or futures markets. Purchase Agents usually track market conditions. they formulate the policies for areas in which they are responsible. a retail buyer has to perform three primary functions. Christopher Moore. the buyer plays the role of an opinion leader. on the other hand. The basic duties of the merchandiser can be divided into four areas: planning. the required margins. often specialising in a commodity or a group of related commodities. These sales forecasts are then translated into budgets to help the buyers work within the financial guidelines. Purchase Agents and Buyers commonly focus on routine purchasing tasks.lo Associate or Junior Buyers usually buy specific items for a department or division of a firm which is too large to be served by one Buyer. According to them. so as to enable the achievement of the required pricing policy to be adopted by the company and. Many organisations may also have a position known as a Purchase Agent. in conjunction with the role of the change agent and influences consumer opinion. Assistant Buyers are responsible for routine aspects of the work. women swear. These include forecasting sales for the forthcoming budget period. is responsible for particular line of merchandise. in a departmental store. Hirschman and Stampfl have categorised the role of a retail buyer extremely well. Second is the role of a gate keeper. cotton. price trends. but does not necessarily induce a buying decision. co-ordinating and controlling. namely: First in line is the role of a change agent. A case study approach. directing. Directing Guiding and training buyers as and when the need arises is also a function of the merchandiser. fabricated metal products. etc. Christopher Moore.

and girls. This is necessary to provide maintain high performance results. They negotiate a price. For example. and clothes plus related accessories for newborns. Typically. Ce-ordinatlng Usually. control and Assessing not only merchandise performance but also the buyer'l is a part of the merchandise manager's job. and keep in touch with suppliers to ensure timely arrival of goods. Merchandisers work closely with the visual display staff and department managers to decide how goods should be displayed to best attract customers' attention. a DMM's role. An ability to work in merchandiser would have a team of buyers reporting to actually check the response to as a merchandiser it is essential out budgets and understand sal~ customer wants and translate the a team is also essential. maintained mark-up percentages. the job of the merchandiser also involves visits to suppliers« manufacturers to select' goods . This involves estimating consumer demand and the impact of changes in the retail environment. This may involve planning and initiating sales promotions and advertising campaigns.. hence. merchandise managers supervise the work of more th one buyer. order the goods. agree on. they need to co-ordinate the buying effort in terms of how we it fits in with the store image and with the other products being bought by oth~ buyers. This is likely to involve working closely with l1etail buyers. as the to him/her. the DMM for children's wear would supervise those buyers who purchase merchandise such as baby clothes. Many retail organisations also have a Divisional Merchandise Manager (DMM) or a similar position. . boys. this is a separate role carried out by a visual merchandiser. he/she is responsible for merchandising activities for particular lines of merchandise. In some organisations. Merchandisers may also travel to different stores various items in the merchandise. a del ivery date. would L Forecasting sales for the forthcoming budget period. He/she should be able to understand what the same into specific products.6 Retajl Merchandislng additional markdowns for products that may not be doing too well in the 5tO Inspiring comminnenr and performance on the part of the buyers is also neces 3. To enjoy working thatthe individual has a mathematical ability to work figures. Controlling performance be evaluated percentages. notwithstanding involve the following functions: the size of the retail organisation. complete the necessary paperwork. As a key aspect of merchandising involves section of merchandise or products 10 be sold in the retail store. 4. markdown gross margin percentages and stock tum. Buying performance may on the basis of net sales.

The quantities to be ret. budgeting and controlling of merchandising activities. . and future trends . 2. or annual planning. 3.ailed As in the case of every retail endeavour. • Making decisions regarding merchandise returns: • Re merchandising the store. It is therefore necessary for himlher to have a thorough understanding of the buying process. • Handling special orders as and when they arise. To do this effectively. Inspiring commitment and performance on the part of both. • Writing of orders. it is believed that they can guide the merchandisers in terms of vendor selection. The role of a buyer in such an organisation • Co-ordinating would typically involve: the purchasing for various products required by the store. Translating the sales forecast into inventory levels in terms of rupees. seasonal. and 3. the DMM needs to understand and provide for the inventory levels that would be needed to achieve a particular level of sales. as DMM are at a senior level within the organisation. As the owner has direct access to the end consumers. no matter what the size. and the function of buying would be as per the same requirements. one person is typically the owner and manger: He/she is responsible for all the business operations of the store. FACTORS AFFECTING THE FUNCTION OF BUYING The function of buying+-while integral to the functioning of the retail organisation-is influenced by a number of elements within the environment. The same can be listed as: The type of retail organisation. Typically. including all the buying and merchandising duties. In small independent stores.. The type of merchandise to be retailed. the most fundamental activities comprise buying of merchandise and reselling to the end consumers. Assessing not only the merchandise performance but also the buyer's performance in order to provide control and maintain high performance results. 4.he/she would have a better understanding of their needs and wants.The Fundamentals of Merchandising 7 2. the merchandisers and the buyers. merchandise lines that can be developed. The DMM may not get involved in most day-to-day merchandise management problems and is more likely to be involved with quarterly.

Considering that these needs and wants may be different . To better understand the peculiarities of merchandising in the case of a small retail store. Continued growth may encourage departmenralisation.1 Structure in a small independent retailer The product mix offered would perhaps be a combination of cakes. a small independent store would have a limited number of employees ranging between 5-8 persons depending on the scale of operation.. • Planning and coordinating various promotional presentation of the merchandise. and • Central Merchandising Plan. Merchandising in chain stores I characterised by: • Central Buying Plan. etc. the buyer in such an organisation needs to be a specialist. 1. Taking into consideration the fact that the store is a bakery most of its products would have limited shelf-life. cookies. activities and events and in stare Owner Baker/Chef Delivery Boysl Helpers! Peons Sales Staff + Manager IFig. The organisation structure (Figure] . As it is an independent store. let us consider the example of a small bakery. Buying for a Chain Store Generally. chocolates. and would therefore have to cater to a diverse consumer market.8 Retail Merchandising • Taking decisions with respect to the pricing of the product. desserts. the owner may Dot be able to handle all the duties efficiently. That the off-take could increase during festive times would need to be taken into consideration. As the independent store grows. Typically. pricing would have to be competitive and arrived at after taking into consideration other retailers such as Birdy's Croissants etc.1) would be very simple. It is wrong to believe that all independent retailers are small. as the operation of a chain store is larger than that of an independent store. and • Customer contact and selling. A retail chain operates in more than one region. The process of merchandising would have to take this into consideration and perhaps work on day-to-day forecasts and procurement of the raw material.

For years. Metro Group is one of the world's international retailing companies. employees from more than 150 2. one of the largest retailing companies in the world. the large variety of merchandise needs a fair amount of market work... Very often in direct marketing ore-tail ventures it is the uniqueness of product{s) and the competitive pricing which make all the difference .rtd's market leader in. MGBI was established in. Whilst the regional companies pool the buying potential of several countries wfth comparable assortment According to the 2007 company Annual report. on the other hand. The sales division's department stores enrich shopping areas and downtown centre with a hlgh-quality assortmentemotionally presented. Its assortment is aimed exclusively at commercial and wholesale customers. etc..Jt is also necessary that the buyer completely understands the type of products that the market heeds and which the retailer caters to. therefore. Russia and Turkey. Metro Cash a Carry is the wo. as the production of the catalogue takes a long time.The Fundamentals of Merchandising 9 the buyer has to be aware of such peculiarities in the market before he gets on with buying the merchandise. Turkey and Hang Kong. Online Purchase. Merchandising ill Action 1. is a wholly owned subsidiary of the METRO Group. In addition. Romania.1 focuses on how the functions of merchandising. coordination with the sales lines. Italy. etc . Real is the market leader for Irypermarkets ill Germany and Poland.are integrated at Metro AG. Real employs a largescale hypeunarket concept. bath havebeen generating dynamic growth and rigorously extending their leadership across Eurcpe. need to have a clear understanding of the type of products that consumers would buy online (internet). The mail order buyer needs to plan well in advance. The report mentions that ME1RO Group Buying International (MGBI).000 nations work at in Europe. Gsleris . cash ft carry. powerful and large-scale sales 'and marketing concepts. Poland. Russia. Asia Kaufhof is the concept and system leader in Germany's department store segment and the market leader in Belgium. of the retailer. 2006 as a new umbrella organization of METRO Group Buying {MGB] as a result of its internationalization strategy . Home Shopping. Buying for Non-Store Retailers (Mail Order Catalogue. Other formats operating under-the group include.) The process of buying and merchandising for a non-store retailer varies from that of a store retailer. ] in consumer electronics centers: the sales brands of Media Markt and Saturn succeed with innovativ~. Romania. the nature of the organisation is an important factor influencing merchandising. with its headquarters in Dusseldorf. it could result in overbuying or under-buying both ofwbicb affect the profitability of the product and. Europe's No. As the central purchasing organization of the group. largest and most Around 280. the sales' estimate would have to be as accurate as possible. If not. Buyers for an e-tail venture.It runs national and regional subsidiaries in Germany.Thus. Poland. With chain stores in Germany. Given the diversity of the market. it is responsible for the entire merchandise procurement in dose. logistics.22] locations in 3] countries and Africa.

The successful bundling of merchandise flows is based on the procurement logistics concept. MGB is responsible for supplier and article management. The broad merchandise assortment and related specific logistics challenges mean that MGL must handle heterogeneous and complex: demands from the sales brands. the full exploitation of the procurement jlbteDtilli ()f .000 employees. MGL METRO Group Logistics is 'responsible for providing the sales divisions with the right product to the right place at the right time and in the right quantity and quality. At the same time. Aside from cost efficiency and quality assurance. East. Freshness. MGB bears responsibility for their consistent planning and marketing. speed and flexibility play a key role in the processes. As early as 2006. Its buyers negotiate with thousands of suppliers in order to attain the most favorable prices and conditions. the number of deliveries at the stores' loading ramps declines- and demand structures. More than 140 employees worldwide ensure that the high quality standards of the company are met. On a worldwide scale. This is why the competitiveness and profitability of retailing companies depend to a great extent on the professional usage of synergies in procurement. MOB pools and controls the purchasing volumes of the MErnO Group for all sales lines and thus achieves a sustainable improvement of the buying tenus and conditions for the group companies-both nationally and internationally. Low procurement costs allows the company to offer to its customers low retail prices. the company has a workforce of around 2. Given their close regional proximity to customers and suppliers they can gain substantial market intelligence and respond even more flexibly to local customer needs. The objective is to create a fair balance between the satisfaction of needs. MGL relies on the bundling of merchandise volumes. and optimal use of ground. The service portfolio ofMGBI also includes the trend scouting and identification of new articles. MGB strives for the best possible buying conditions. the local companies of MGB take care of the specific requirements of the sales divisions of one individual country. MOB METRO Group Buying Hong Kong is responsfble for import and export trade with Asia. In addition.10 Retail Merchandising and sales promoting campaigns. standardised logistics solutions. The company believes that buying of merchandise is an essentialelement of competence in wholesaling and retailing. This system offers such benefits as cost savings and lower transport-related environmental damage thanks to the reduction of tonne-kilometres. which differ from country to country. it provides samples and lists of the merchandise items and supports advertising o . In its work. MGB is able to leverage group-wide synergies and thus take account of the needs of each sales line in each respective country. Through its services and structures. high quality and reliability of the products are safeguarded by MGB through stringent inspection and testing systems for the entire supply chain.'the METRO Group. As the logistics service provider of METRO Group. These organisations bundle the procurement activities for up to eight countries at a time. enables efficiency. At the same time the buyers are responsible for the impeccable quality of the merchandise. MGB optimised its organisational structure in order to better exploit cross-country and cross-divisional potential: as an umbrella organisation. air and sea transport. MGB METRO Group Buying International sets the strategie direction of four regional organisations-South. These quality standards apply in particular to the private labels of the METRO Group. West and Central. MGB Hong Kong Limited is responsible for the worldwide procurement of direct imports of the sales lines. and the' harmonization of procurement-relevant processes and systems.

The inter-organisational 11 12 'Food Retail Buying Processes=A Study of'the UK.e. .2002. Jagdish Sheth has presented a common conceptual framework (Figure 1.s.:rhe. Italy and Sweden'.e. and • Vertical involvement the purchase.gFation of local s~pp'liers is a key component of Mefro Cash a Cany's international Source: Company Annual report"2007. J agdish N Sheth. Theory in Retailing. Apart from the above mentioned factors. employees in Dusseldorf. and more like a producer in how he buys his merchandise' . Prof Sheth further states that the function of merchandise buying in a retail organisation is a function of inter and intra organisational factors . 1987 and Shaw et al. ' cost 'advantages andhelps .·~h.90 percent of the products sold in its index .Primary among the inter organisation factors are the merchandise requirements.No. • Lateral involvement i. 12. the number of functional areas or departments firm represented in the buying centre. the number of participants in the buying centre.html • Over the years. www. In addition.~Ilcer!tr. MGL manages '. httpu/ success SEOZY.metr0-ag. Intemational Journal of Retail & Distribution Management. . Nilsson and Host.ulC. research has shown that grocery buying is generally carried out by a buying committee (Nilsson 1977.2) to understand these factorsl2. also in managerial positions.The Fundamentals I... Moscow and Shanghai are trained" for specialist and managerial positions in wholesale. :alSO pwuutes G.t:ves '.the managemenrof 11 ewn nonfood and food w~reh.' aeditio:uaJ sqrpergies and! efficiency .e. Johnston and Bonoma 1J have described the structure of the buying centre on the basis of three key variables: Extensivity i. In addition.~u.a Carry.gains from .. He notes that 'a retailer is more like a consumer in what he buys. caUed "House of Training". 1982). Metro Cash. Mljlal~Qaclii. inte. Jagdish Sheth suggested that the function of merchandising. Wholesale stores frorn local producers and suppliers..com/servlet/PB/menu/l000765/ than . U1fJohansson. is influenced not only by inter organsiational factors but also intra organsiational factors. Prof. Paris.ermaJJY:. Prof. In the group's own regional training centres. the en*~pmerit In the context afits warehousing and"" ~tiibuti{m 'logistic~. the number of hierarchical within the levels of tile firm involved in Therefore._'l" l! >I W. i. The sales division also relies on local employees. the locations profit from targeted international know-how transfers. in all nations.il warehousing activities outside of Merchandising 11 li:.. American Marketing Association. 'A Theory of Merchandise Buying Behaviour'. it emerges that the function of buying is influenced by the kind of merchandise that is stocked by the retailer and may vary according to the type of merchandise. VoL 30.acquires more -.es in (jerffi\lny.

the corporate image of the supplier and the marketing effort that the supplier is willing to undertake for a retailer influences the decision on the choice of the supplier. Prof Sheth mentions that the actual and the ideal supplier choice do not always correspond due to some intervening factors: the business climate.Fig. choice ___ t Cornpetlti . Jagdish I Sheth.. Retailer size' Retailer type Retailer location Mgmt mentality intra-organ isational factors Type of merchandising Product positioning Regulatory Merchandise requirements Choice calculus Supplier sel. . business negotiations market disturbance and company s financial position .. Theory TIle decision-Lpertaining to the supplier eventually selected for a range of products -then becomes a function of the supplier and the product choice available.1..ection Business climate T Actual supplier! Product choice Company's financial + t Ideal supplierl product.12 Retail Merchandising factors are retailer size.2 Theory of merchandise buying behaviour Source: A Theory of Merchandise Buying Behaviour'. lnter-orqanlestlonal factors.. The supp! iers that the retai let won Id consider in a gi ven buying situation are a combination of the competitive structure. TYlie of merchandise product positioning regulatory constraints and type of decision are the factors that the Sheth model tenus as Intra organisational factors . e structure Corporate.. in Retailing American Marketing Association.Both these factors together determine the merchandise requirements of the retailer: The choice calculus and supplier accessibility are constructs that capture the retailers' decision rules.He has separated these factors from other determinants 'because their influence on buying decisions cannot be anticipated or modelled'. retailer type. This construct captures the supplier/product choice that would be the outcome of a rational and formal decision-making process given the merchandise requirements and the accessible suppliers. image 1 Business negotiations Markel disturbance Relative mafkeH ngeffort . retailer location and management mentality.

it is a reflection of the retailer's target market. The role that technology with the retailer and level of technology adaptability with the supplier are also factors to be considered. image and advertising to lure customers..n the procuring-the-merchandising function. while others may be price driven. or tbe customer segment that the retailer wishes to cater to. Donna Karan. etc. Similarly. Some of these factors could be the stage of the lifecycle that the product and the retailer is in. the negotiations between the manufacturer and the retailer are important in establishing the terms of trade and whether there is any trading. By helping define-their duties and responsibilities this enables in the smooth functioning of the merchandising department The merchandising philosophy varies form retailer to retailer. force majeure. like strikes. Thus the Sheth model suggests that different factors influence merchandise buying requirements.The Fundamentals of Merchandising 13 in the model business negotiations. which is generally composed of fashion innovators. it is the company's financial position that influences the buying decision .e. A design driven company may depend upon innovative designs to attract its target market. If'negotiations break down. and the business climate i. disasters. Anna Sui. economic sanctions. at the right price and . MERCHANDISING PHILOSOPHY The philosophy a retailer chooses to adopt also influences his choice of merchandise. In the apparel industry some companies may be design driven. As the target market represents a vel)' small number of customers competition among de ign driven companies is intense and the odds of a company succeeding are slim. And. It is keeping this target market in mind that the retailer has to evolve a. In the real world a retailer may have other considerations influencing his buying decision. i. the retailer has to settle for a less-than-ideal supplier.strategy for store location. retailers with limited liquidity tend to be more interested in good credit terms. After determining the sales target the person responsible {or procuring the merchandise needs to ensure that he/she is able to procure this merchandise in the right quantities. which includes unexpected events. factors like market disturbance. reputation. Designers for design driven companies rely on their skill. ere. usually one year. The type of purchase that the buyer is making for example is it a new product being launched. The procurement of merchandise requires a basic understanding of the consumer and the retail-buying environment The starting point of the buying function is the sales forecast which is an estimate of the pieces and the lines which need to be sold in the retail store during a specific period oftime. pricing and the product assortment that he is going to offer to the customer. macroeconomic trends also playa role in the buying decision.. Examples of design driven companies include Calvin Klein.For example. finally. is it a repeat purchase or a private label that is being created.. The merchandising philosophy also helps the retailer in detennining the roles ofthe various persons involved i. e.

11 its . and positively impacting the communities that the suppliers operate in. It ca n hence be said that the company understands . We grow our business profitably .. limiting the spread of agriculiu:ral diseases..2 illustrates how the vision of a company influences its philosophy in. the GAC. TIle company strives to ensure that every step of the supply chain contributes positively to the safety. environmental and economic outcomes. it necessitates that the ingredients and materials that go into the products to be produced in waysthat contribute positively to the development of sustainable agricultural and food manufacturing practices. in 2004. engaging in equitable trade practices. We give bad to our communities '.114 Retail Memhandising at the right time. ami health and nutrition experts.that there is increasing concern about obesity rates and related risks to well-being among consumers. continuously evolve its thinking and approach in these areas. We strive continually to improve From. ·of the products.to provide the company with expert guidance . an intemational team of independent experts . The Mclionald's website lists its values as: • WI:'place the customer experience at the core of all we do • We are committed to our people • We believe in the Mclronald's System that ensure the health and safety of their employees and the welfare and humane treatment of animals in the supply chain. Knowing thatthe company cannot address these issues alone. Economic It envisions delivering affordable food. The company envisions a supply chain that profitably yields high-quality. Environmental It envisions influencing the sourcing of our materials and ensuring the design .. it established the Global Advisory Council. Members provide valuable insights. direction and recommendations about how to eorninue delivering a more beneficial experience to children and families. Just as importantly.0. quality. Since 2004. The Council plays a vital role in helping the company to . governments and NGOs.merchandisingproducts and the eventual products that it puts across to its customers. safe products without supply interruption while leveraging the leadership position to create a net benefit by improving ethical. distribution and use minimize lifecycle impacts on the environment. Being in the business of fast food the supply chain is critical to its success. the GAC has provided McDonald's guidance on. In being ethical the company envisions purchasing from suppliers that follow practices . and availability of the final products. Merchandising in Action Box 1. approach to nutrition and well-being. The buyer and merchandiser usually handle the function of procuring the merchandise. these values emerges the ethos of the products that they launch and the method of actually sourcing the products. their manufacture.key areas such as: • We operate our business ethically .

Such units may be voluntary or co-operative chains. to keep current with trends . The objective. (b) Co-operative chains are organised by the retailers themselves. Co-operative Buying Small. is the same-to obtain a buying advantage through aggregated purchases that will pennirthe rerailers to offer lowerprices to the consumer. (a) vomunta..cnncdonalds. what i do' children's wen-being platform • Potential risks and issues in the marketplace Source: http://www. however. Decentra. centralised.15 • Global nutrition labeling • Future trends • McDonald's 'what i eat. typically form an alliance for co-operative buying.The Fundamentals of Merchandising . independent retailers. each store or group of stores makes its own purchase decisions. Retailers usually adopt this buying strategy when they feel that important local needs would be overlooked under a centralised buying arrangement.htm I METHODS OF BUYING The method of buying in a retail organisation depends 011 the organisation structure and the products retailed. decentralised. Methods of buying may be classified as cooperative. . and resident office. TIle primary benefit gained by centralised buying is the quantity discount obtained from high-volume purchases. As with voluntary chains the participants often utilize the same store fronts. committee. and are often non-competing.lised Buying Buying in large multi-store retailers may be centralised or decentralised. and the consulting services of the wholesaler. The retailers buying from the wholesaler often use similar store fronts and promotional aids.ry chains are organised by wholesalers with a view to combat large integrated retailers. in a decentralised buying arrangement.Decentralised buying occurs when each store makes its own decisions regarding purchases: whereas centralised buying is when a central buying office makes tbe same decisions.com/publishj csr/bome/aboutlvalues. who by coming together are able to enjoy economies of scale.as well as to help ensure that the store buys the best merchandise available at the lowest prices. On the other hand. Centralisedvs. Another advantage of centralised buying is that a full-time buying specialist can be employed to monitor narrow product groups.

fj:ir<:j.mesti:£'lu3:fk.five'slrrce2003.J'\te~entamang and are the 'traders' \n'th~Tdatians'htp.[31 make quick decisions to ensure profi. TeslC'O pic is a Erittsh-. the chain carries the same products.ying:teaUl. a merchandise manager.!tis t\1edentalplan.geu:crq_L ete1i"''i. The.. This control procedure helps prevent the store from stocking more alternative product lines than it can profitably handle.baseGl. the chain can not only purchase the same in large quantities and at lower prices but can also have the products distributed to individual stores. the:first~m{.tab'ility.d. I Resident Buying Offices Many retailers also use the services of resident buying offices when sourcing from international markets. ".1:u2'ial·seroces.er: in food and drink. In 2001:\. the buyer is also. since eachstore in. will be discussed in detail in the chapter on 'Sourcing'. billion. such as hardware store and supermarket chains . They will also develop the sales p"l.nics)c6nsu~f sales.[2} OTlginaiW~l!eci'alisln:g company believes that a gaoa M.s•.ldisfng retaH 1:11am.reas Planner win be-on top of all fue informatioIl about $l!.wikipedia. consume(elecfro. The American Marketing Associationl3 has defined the.com (as on 10!03/M) http://en. Buying committees are often used by retailers selling staple goods.marketingpower. 'an.Britiihrdtai1~bP Mtli'flJqb'jal sales'!nd . The buyer then makes-recommendations to the committee aboutthe merits of those products that the retailer offers to its customers.3) and Debenhams (Box '1.required to suggest product(s) that oughtto be dropped from the product line in order to make room for new ones. Illustrated here are the functions of merchandising with the help of two examples. stock levels and product avaH'abilhyand wHl .a partnership with"thebu. Internet service.arna. it has .Cllas tlptj1i\m.ltse. The functionsof a resident buying office..org/wikilTesco .i:u 13 l4 www.Tesco (Merchandising in Action Box 1. consl. The primary function of this office is to provide retailers with enough information so that they can make intelligent purchase decisions. consum~r al}fl. and a store manager. ts e:D.. a sales promotion manager.' functiou is cmcial j» the success of th'e do.16 Retail Merchandising Buying Committee This usually comprises a buyer or purchasing executive. Many atimes. The merchandislag l~ges:t.rp.entingDVDs.erchandis.consumer maxin.Lmerhealth insurance.com ••vww. Moreover. 'I'esC"O heeame the world's third teanisw9rk in.4). the ttferCilallifistug 'plaillliug.music·cfbwnJoads.' theti. office that represents many retailers in the same line of business in the central wholesale market providing information about market developments and guidance in purchasing and actual placing of some orders for their clients'.s ih and seftware". .S'": largesfgl'Qi:e.retarling and' r. resident buying office as.international grocery telecoms.et share with proIitSeXCtied~ng £2 organisatiohand.:rlyTefailer.dJvefSJ£tMi it!l6a.

the role of an Assistant Merchandise Planner within the Boyswear department Is to help deliver and implement departmental strategy. period and annual budgets for clothing goods in. particularly successful in the UK.Hungary. Based at offices in Hertfordshire. • Assisting in the trading of the department and identifying kEYopportunities for customers and the business. The Assistant responsible for: Merchandise Planner is • Managing the WSSI and re-forecasting. be achieved. The Assistant responsible for: H The company's Merchandise PI anner is Assistant Merchandise Planner (Boyswear. The Merchandise responsible for: Planning with stores and levels and store running regular administrative Administrator is Merchandise (International) Planner-Mens • Analysing daily and weekly volume trends through the Clothing national distribution sites. and • Range build and attend sign-offs. maximise sales and profitability across all of the clothing ranges. to.The Fundamentals of Merchandising 17 for the forthcoming year and work closely with the Buying Manager or Buyer to ensure that the products bought will enable the sales and profit plan to. • Aid the planning and development of weekly. • Sending all forecast line flows. Poland. • Collating business analysis for senior teams. The role supports the Merchandise Planner/Manager by completing analysis. are now gaining popularity with the European customers. • Ensuring weekly forecasts are issued accurately and on time. Tesco is continuing to invest in trading space to ensure that it showcases the products within the hypermarket and departmental store formats. Slovakia and Czech Republic. Florence and Fred (FaF) and Cherokee. The role involves reports and providing general support to the team. • Managing a Trainee Merchandiser working with suppliers and driving solutions around potential problems that may occur. UK Clothing) Porinstance. The MP A works closely with other merchandising • Highlighting concerns and proposing actions arising from the sales and stock reports. • Ensuring daily reports are sent out on time. Due to. choice and value across all of the ranges. managing critical paths and line projections. and • Ensuring depot capacity is fully utilised. the European team trade in four countries namely . • Inputting all system data accurately and on time. Some of the profiles that Tesco considers are as follows: Assistant teams while also liaising closely group managers to discuss stock stock packages. ensuring that the customers have choice and availability. Merchandise Planning Administrator-Supply Chain (UK Clothing) Tesco Clothing presents an exciting opportunity for a Merchandise Planning Administrator (MPAJ to work as part of the head office operations team. goods out and stock holding. successful international clothing business offers customers fashion. every time. • Running daily reports for the Merchandise Planning Manager. . • Reviewing to ensure that the right stock is delivered to distribution centres and they feel fully communicated to. the success.

International) Ladieswear. • Ensuring country and departmental stock levels are in line with forecast. Poland. and a range of WIG]G Of Coaching and developing the team to ensure interaction With external agencies is effective. work in partne(shJ. of both the UK and International businesses.. for instance.' Ensuring all lines are launched on time. Czech Republic and Hungary. to a. of the • Developing and delivering the eperarional ways of worldng to support new initiatives within International Clothing Strategy: • Actively manage the area of responsibility by using initiative and suggesting ways of improving systems for greater effieieney. The Trainee Merchandiser working alongside the merchandising team to 'enstrr€' delivery of these fantastic offers. Retail Merchand.' working c. The VVIarG team will be based in the UK delivering a number of 'one off non-food products at .ollaboratively with the sourcing hubs. the company's European team trades in four countries namely Hungary. Tesco's fashioriBffiniis such as FaF and Cherokee have met with cmisiderable success and the buying teams arefnstrumental in developing and implementing the buying plan. and maintaining administration sales Mercbandise Planner (Store Stock Planning) The Merchandise Planner is responsible for: • Analysi ng performance data. identifying trends and making decisions that support the commercial plans and meet department KPIs [Key Performam. • Implementing achievable plans to support and deliver commercial decisions.Based at the offices in Hertfordshire. Trainee MerchandiserWIGIG (Inte:d1a1ional) Buying Manager (Ladieswear.p with the merchandising planning te'lJIls and are the commercial product developers-amfnegotiators of the relationship.18. The buyers ensure that their ranges meet or exceed the sales and profit targets set and deliver exceptional style choicl!' and value for the customers. • Liaising with others to resolve operational issues and queries. stores. and • Helping the customers get what they want. delivering the solution' It • Managing current sales and forecasting figures. . • Deputise in the absence Merchandiser. • Assessing risks to either the Commercial Supply Chain plan. As the international business continues to go from strength to strength. Slovakia and Czech Republic. and in some E'as1'Sdirectly with the supplier base.ising • Effectively deliver bad news and always act wirh integrity: and • Supporting the department the critical path. • Ensuring all promotions and events are delivered without any unforeseen availability concerns.€' Indicators). to support the growth the company is creating a new dedicated WIGIG/ Special Buy team for the Central Europe. is one of the developing departments at Tesco and hence presents an exciting opportunity for the ri~wF!:andidate who wants to build on the company'S success . goods out-meet the supply chain Buying The buying teams. • Ensuring that everyone can trust hisfher judgement and support commercial decisions. • Ensuring forecast.lways achieve unbeatable prices for customers in Slovakia • Poland. is responsible for: • Developing systems. • Helping to ensure the ttm~~ launch of the department's products and p:tomotions.

promotions • Managing the pricing plan for the product range within Tesco guidelines. For the year ending 1 September 2007. that each • Managmgthe pricing plan for the product range within. with a better performance achieved in many areas including health and beauty. health and beauty" accessories.7 million to £2. Tesco guidelines. 01/11/08.6 million.efm] content/Merchandising -jobs/.000 sq ft in new space being added to the store portfolio. The primary driver of sales growth was a total of 792. . The Trainee Buyer works alongside the merchandising team to ensure delivery. • Developing products to ensure countries' unique needs are met.Buying. • Deputising in the absence of the VVIGiGBuyer. tescc-careers. be it ranges of home products O'T designer clothing. the company's gross transaction value grew by £112. and that each Buyer.The Fundamentals of Merchandising 19 in the Ladieswear department. Deciding . and accessories.of fantastic offers. • Developing products to ensure countries' unique needs are met. the Buyer is responsible for: promotions • Developing and implementing tb. menswear. lingerie and childrenswear.WIGIG (International) At Tesco. during his/her first year is responsible for: • Ensuring all product data and files are accurate and up-to-date at all times. • Managing me product set up for new and repeat products: • Implementing the corporate calendar and policies.yer- WIGIG (International) The WlGlG team based in the UK delivers a number of ' one off non-food products at unbeatable prices for Teste's European customers. Merchandising and Design Dehenhams is a leaning department store group with a strong presence in women's wear.e Buying Pl an: • Constructing and implementing Supplier and Range Plans to meet customer needs and exceed sales and profit targets. accessed. • Developing and implementing the Buying Plan for the category. The Buying Manager. Trainee Bu. homeware. and • Actively managing the area of responsibility by using initiative and suggesting ways of Improvlng systems for greater efficiency. • Implementing the corporate calendar and policies. The Trainee Buyer is responsible for: • Managing all samples.cornt page. and • Working with other Tesco buying teams selecting the right products for our customers Source: http:f jdothing. Merchandise sales growth by pro duct category was varied. The aim of the buying team at Debenhams is to source future best-selling lines. • Constructing and implementing supplier and range plans to meet customer needs and exceed sales and profit targets.305.

Liaising with suppliers and the distribution teams. by managing the department s critical path effectively. developing ranges suitable for the company's overseas franchise partners. the former working alongside the latter to ensure that key trends prevalent on the high streets are picked up. They are prepared to take control of their own range when they become a Buyer and given the opportunity to start testing the people management and negotiation skills. in some instances.20 Retail Merchandising what goes into the stores is a vital task and has a direct impact on sales-which is why all the Buyers have an ability to spot not only trends but also commercially attractive products and lines. suppliers and distribution teams ensure that the company gets the best sales results. Designers and QA teams so that all elements of the product make them irresistible to customers. taking into consideration inputs from the Buying team and the Merchandiser Merchandisers have a business to run with a portfolio that extends across an entire range and. Backed by superb data systems and central support. Designers comprise teams that are an integral part of the buying and merchandising function. ability to interpret data. along with an instinctive sense of fashion. Trainee Assistant Buyer This is the starting point in a buying career at Debenhams. even influence designer products such as Jasper Conran or 'Betty Jackson Black'. and close interaction with stores. as these teams use their commercial acumen to select the product and ranges with the biggest selling potential. As a key member of the team. they also have roles working in the Direct Division. Merchandisers achieve the desired bottom-line results through crucial and tactical decisions about positioning and quantities. Assistant Buyers people management and negotiating skills. Their financial expertise.in sourcing the ranges on offer and gradually take on extra responsibility for buying their own elements of the range (under their Buyer's supervision). the Trainee Assistant Buyer (TAB) supports both the Assistant Buyer and the Buyer in their day-today function. Buyers They take charge of the overall style and direction of their respective departments and work closely with Merchandisers. maximising sales and margin potential. Apart from operations based at the UK. sourcing stock for Internet customers and in International. Merchandising works closely with the buying team. Assistant· Merchandisers play a big role in supporting the Merchandiser by undertaking specific analyses so as to enable the most profitable product decisions and also involving themselves more in the financial side of range planning. an Assistant Merchandtser. Ideally he/ she should have 6-12 months' experience working within a buying team or a relevant degree in fashion. they are free to make businesstransforming decisions.fs responsible for ensuring that the right products are in stock at the right price for the company's customers. among others. store. The TAB is typicaUy offered on-the-job development through structured behavi aural and technical competencies along with a range of internal courses. with the aim of'reaching the level ofan Assistant Buyer within 12-18 months. He/she works closely with the quality assurance (QA) and supplier teams to provide a perfect product for the company's customers while also ensuring that the ranges arrive on time. They work closely with high profile They work closely with the Buyer . They must be numerate-as it is all about making money for Debenhams-and also possess outstanding .

can be listed as follows: Principles of Merchandising Drawing upon the basic five rights of merchandising. This follows from the principle that a retailer cannot be everything for everybody . the customers visiting each store are different. 6. and it is necessary to remember that the choice and taste of target consumers may be very different from his/her. right kind brand and right assortment In the case of most products that are bought! the consumer is always looking for choice.com/deb_rec/ with. around which the function of merchandising needs to revolve" are: 1.Keeping in view the target market.ttheW" jobs{headoffke/ldndon/bllyingm~'1Phdesign (as on Williamson. . Increasingly. Buy what your customers want.. Low price may not always be a factor favouring SIdes. Beconsisteae When building a range of products for the consumers.. Offer value The consumer's decision to buy a product is not always governed by price alone. Conclusion The basic principles which govern the function of good merchandising. 2. be/she is seeking value in the purchase made. Build the consumed. While the merchandise plan is built for the company as a whole. 3 . Consistency is required not only in the choice of products offered but also in terms of their quality. The first step towards this would be the ability to understand who the consumer actually is. and the perception of value that the product provides eventually influences the consumer's decision. Build tbe merchandise plan.uct ranges..d!ebe:nhams-jobs. in the minds of the consumers. stich as Jasper Glonran and Ma. 5. Understand the ta:rget market The retailer exists for the customer. not what you want The buyer is the representative of the consumers. products and brands offered should be consistent with the image that the retailer seeks to create for itself. The buyer therefore needs to offer what the consumer will want rather than what he/she likes. the basic principles.1 designers that Dehenhams works in partnership Source: www. it is necessary to ensure consistency across all product offerings. to put together creative y~t' 18/01/09 1) commerdefly successful pmtl. 4. Hence they have to be understood as separate entities. Thus products retailed in the store should be a reflection of consumers' needs and wants.The Fundamentals of Merchandising 2. and the type of products that he/she actually requires. A wide assortment of the of goods goes a long way in building consumer loyalty towards the or the store as the case may be. one store at a time Each store is different. there has to be an element wherein peculiarities of each store and region are taken into account.

Achieving these 'five rights' is the key to successful merchandising and. some companies rrS:}4bedesign driv'en.. SUM MARY Merchandise management is an essential element of retail. at the right time and at the right price appears to becoming increasingly difficult with the growth in number of stores and distribution centres. for instance..22 Retail Merchandising 7. If the goals of the organisation are consistent with what the vendor seeks to achieve. Crucial information that is shared on a timely basis may even effect the long term success or failure of a product or a range of products. KEy T. Wben a buyer is informed that some particular merchandise has not met with the success that was anticipated. it is necessary that a buyer understand the strengths and weaknesses of each vendor and also the factors that motivates them. To improve: service levels and decrease stock-outs. The merchandising philosophy a retailer adopts finally influencesbis choke of merchandise. inventory is increased and profitability suffers due to excessive markdowns. 9. The merchandising philosophy varies form retailer to retafler. merchandiser" and a purchase agent among others. the customer will have reason to keep coming back to the store. Share mformation Sharing information with the vendors often goes a long way in creating a sense of responsibility and involvement among them.win-win While vendors playa key role in the entire buying process.In the apparel industry. 8. while others may be price driven. If the merchandise in the store excites the customer and exceeds his expectations time and again. a better and long-term working relationship is envisaged. Understand theneeds of the 'vendor and negotiate a. many a times. Seek to serprise the customer The merchandise is what draws the consumer to the retail store . it is essential to liquidate/move the goods and open up the selling splice to other inventory. The concept and functioning of the merchandising departrrrentnot only varies from retailer to retailer but is also influenced by the business model that the retailer chooses to adopt. Accept tbat mistakes happen A product or a range launched may not always meet with the expected success. 10. It is a reflection of the retailer's target market-the customer segment -that it wishes to cater to. The merchandising challenge of consistently having the right product in the right quantity. available at the right place. remains an elusive goal for most retailers. Various roles maybe performed within an o?g:anisation and may include a buyer.ERMS • Merchandise • Merchandising .

t. o. Journal of Retailing Vol. 2. How is the function of merchandise retailer? 5. 1985 . What is the significance management 3. Spring 1986.Vol. o. What is merchandise and what is merchandise of merchandise management? to a retailer? QUESTIONS 2. 'Retail Buyer's Saleability Judgements: AComparison oflnformation Use Across READ. Dr David Roger. How does the function of merchandising 4. 1993. Summer 1986. Joseph Barry Mason..3.Merchandise -Buyer . 4. Edward McFadyen.ING Three Levels of Eexperience'. 'The Engine of Success in Retailing.. How Good Merchandising has Transformed the Retail Scene: New Directions in Merchandising'. <Research Tools for Better Merchandising'. Winter 1983.Merchandiser strategy philosophy management REVIEW 1. Journal of Retailing.Five rights .The Fundamentals of Merchandising 23 . How is it an element CHAPTERw END ACTIVITY 1. Richard Ettenson and Janet Wagner. Wayne Talarzyk. SUGGES I ED 1. Roger Blackwell and W. Nancy Karch and Chistiana Smith S~ The Mckinsey Quarterly. 'Lifestyle Retailing: Competitive Strategies for the 1980's'. 1985 Joumal 6. 1.No. 4. International Journal of Retail & Distribution Management. 6. Explain the concept retailer's strategy? of merchandise vary from retailer to retailer? structured for an independent of the management philosophy. 3. 62.Merchandise . 'Redefining Excellence in Retailing'. No. International of Retail & Distribution Managemen.Merchandise . 5. VIsit the localldrana store and understand how the retailer performs the function of merchandising for various products that he/ she stocks and sells. Journal of Retailing.13. Vo113. Nora Aufreiter.

Testing a Portion of Sheth's Theory of Merchandise Buying Behaviour with Small Apparel Retail Firms' Susan Fiorito. UJf Johansson. No. European journal of Marketing. Francis Buttle.14 0.4. Vol. 1984 8. 18.No. 6/ 7. Iagdish N Sheth 10.24 Retail Merchandising 7. 3D. Vol. 'Food Retail Buying Processes-A Study of the UK. 12. Italy and Sweden 6. Entrepreneurship: Thenry and Practice. International Journal of Retail & Distribution Management.2002 9. A Theory of Merchandise Buying Behaviour. Merchandising'. Vol. Summer 1990 I .

you should be able to understand: • The basic elements involved iinthe merchandise planning process • The concept of merchandising strategy • The merchandise buy.ing cycle • Key concepts of merchandise The Elemen.ts' dfi: Merchandise Planning .Chapter Objective By the end of this chapter.

Merchandise planning enables both the merchandiser and the buyer to focus. and reducing stockouts andlor markdowns. focus separately on the words 'merchandising' and 'strategy'. The merchandising strategy (Figure 2. on the numbers and types of products to be bought This process begins with the merchandising strategy that the company chooses to adopt. The products to be sourced. achieving target sales and margins. Fundamentally. The termsand conditions agreed with the vendors and suppliers. in turn. the function of buying and the various retail formats of merchandising. its mission and the very reason for its existence. dictates the position that a particular buyer/merchandiser adopts with respect to the following criteria : 1.1). a merchandising strategy is defined as a company's position with respect ill a given product -mix=-aimed at ensuring optimization of resources.26 Retail Merchandising I n The first chapter was an orientation on the concept of merchandising. Fig. The merchandise strategy. and 4. The pricing strategy to be adopted. The method of packaging and presentation to the end consumer. 2. merchandising on the other hand refers to the basic product-mix that the retailer offers to the end consumer. 2. 3. I A MERCHANDISING STRATEGY To start with the very definition. It is now necessary to focus on how the process of merchandising actually takes place. in tum. Thus.1 Areas influenced by the merchandise strategy . a strategy defines a company's position. draws from the overall business strategy that the company has charted out for itself on the basis of its vision.

Wal"-Mart development Simon reports to Eduardo Castro-Wright. it is specific only to the company's buying department. the buying strategy is more specific. as well as to decide the time-frame for specific actions to be accomplished. The buying policy not only ascertains a buyer's duties and responsibilities.. executive vice Soaree: Chief MarKeting Officer John Fleming president IQf professional.. in tile sernnd customer experience and the.ting and merchandislng areas that will align its merchants with key product areas. other on planning.1ementeda field te executi9\ 'zational . this is . we take into consideration the concept of the BuyingCycle.e. The company began by conducting extensive research last year to I. The fifth division--'pharmacy and optical-will continue reporting to Bill Simen. each vrltfi clearly identified custsmer segments. .Boots. . For the organisation. 'alives will he' Much of that plan focused on becoming more relevant to the company s diverse customer segments.S. The method of supplier selection and the tenus and conditions that apply to them are also similarly determined.ee-.art Stores U.'oC. Announces Merchandising and Marketing president and CEO of Wal-M. . Whi:le the corporate strategy serves as a guiding framework for each and every department within the organisation.9'e<lt:{lfabto increase thex:hmpany's sales and eSe-grocery) . Thus. or restricts its buying to/from a few suppliers.lietennine. Leadership as It Moves into Second Phase of IhreeLast year Castro-Wright outlined to investors a Year Strategy.focused on the . \/111 report tgli ~tfl. further explains the essence of a merchandising strategy. while the buying strategy is a reflection of the corporate strategy. assortment and marketing execution on the findings identified in the customer research.~ves.The Elements of Merchandise Planning 27 The corporate strategy of a retail organisation influences the buying strategy. The buying cycle starts with determining the requirements of the product that needs to be stocked in the retail stores. services and new business Returns to Merchandising . marke.1. According to compafly sources. Wal-Mart: Stores Inc. S. tt:l. it serves as a guide for the function of buying.html thr.'"'Whatmattered most W its customers profitability. An article on the US retailing giant Wal-Mart's Merchandising in Action 2. ''ihility for twti newly . announced a reorganization of its U. but also enables the suppliers and vendors to dearly understand whether the company allows many suppliers to be a part of its sourcing base. Buying Cycle Before moving on to the concept of the merchandising process. year the focus will extend to merchandise pricing: and replenishment. ilri:p. organizations.

2. Otherproducts. cookware.. . Retail. one such successful retailer being Mcfronald's. Volume 59. Number 4 Winter 1983. Determine product . which have been successful in terms of lifestyle merchandising.211. Monitor response & take ·oorrecttVa\action .rch.. Merchandising followed by the process of selecting suppliers and vendor negotiations .~le Me.. Journal of Retailing. include: furniture.2.re~ uirem. When a retailer provides merchandise or knowingly adopts a merchandise strategy.andising Lifestyle retailing can be defined as thepolicy of tailoring a retail offering to suit the lifestyles of specific target market segments.' Further.oots Allocating product 10 the store Se. the basic lifestyle in a region is a reflection of the standard of living or occupation of the majority ofthe population of that particular region.lecl suppliers Follow up Vendor negatiatkms Prlcing the product Fig. Roger Blackwell and Wayne Talarzyk. The entire process is illustrated in Figure 2. One segment that has witnessed the successful application of the concept of lifestyle retailing is that of restaurants. Having determined the quantity that needs to be purchased and the supplier to source it from the merchandiser then needs to move forward to actually placing the order and once the goods are actually received then it needs to be allocated to the various stores. accessories like 1 'Lifestyle Retailing: Competitive Strategies for The 1980's'. which will serve the needs of a specific target audience in keeping with the lifestyles they lead it is called lifestyle merchandising.2 The buying cycle The Concept of Lifest.

lifestyle merchandising bas emerged in the form of chef-themed product lines. Online shopping was fulfilment activities introduced in 1999 and the entire book is available to shop from on the internet.. and thereby not having to' directly compete with other retailers. Next trades from more than 480 stores in the UK and Ein~ and over 140 franchise stores overseas. Such advantages take on a new dimension in a world that is fiercely competitive. The Other businesses in the Next group include: groundbreaki::ng mail order operation Next Directory • Next Sourdng. It is more advantageous for the retailer t-o first analyze the lifestyle of a particular chosen set of customers and then create products.ling. Next clothes are main channels: Next Retail. Kong. skincare body-care/hair-care products etc.200 pages in the • Ventura. bags. footwear. Next is a UK based retailer offering stylish.wb:ich designs. where certain restaurants may cater to the requirements of people from a certain class of the society. aired on a particular television channel.and the !tome quickly followed. quality products in clothing. Next d:istribu. in the eyes of the end-consumer. a eonststency of style. accessorieS. a chain of more thai' . Hong.ntem:porary fashion edge. when it comes to cookware.l1ywebsite. Collections for men. It is interesting to note that.The Elements of Merchandise Planning 29 watches. with more than 140 stores overseas. with a collection of cookware. where products are developed to satisfy the priorities ofa target group. Retailers have also been known to successfully combine shows/programs on cooking.:m 2 million active customers: and Next Intemational. According to the compa. quality and value fur money direct mail catalogue and transactional website with with a co. which provides customer services Autumn Winter 2007 beck offering extensive management to clients wishing to outsource collections for men. services and environments which cater to the same . the Next Directory. An element of lifestyle merchandising is solutions merchandising. creating the blueprint for .. gaod coordinated collection of stylish clothes. l1i&-e are more than 1.styled by fire in-house design team offer 480 stores in the UK and Eire..1 catalogue t:Jext branded products: and ·retai. Next Sourcing The Next retail chain was launched in Pebmary 1982 and the first stere opened with an exclusive has operations in mainland China. children and everything their customer contact administration and for the well dressed home . to .tes ilirougb ttmf}~L . Lifestyle merchandising allows the retailer to carve an exclusive niche for themselves. accessories for women.2 focuses or some retailer who have actively considered the concept of Life style Nerchandising. Lifestyle merchandising is also common in the food and beverage business.exclusivecosmetics. where it is difficult to gain any competitive edge. more th. sources and buys launched in 1988 with a hardback book containing 350 pages. women. page by page-another first in home shoppmg in the UI{.£:hildren and horne products. Merchandising in Action Box 2.. shoes and.

The process of merchandise planning entails the determination of goals to be achieved and the development of a plan to achieve the same goals.t . Even: 6~~'y t 'p. We now move to the basics management.t. given its targets and the external environment that it is operating in merchandising. Forecast The entire process of planning starts with the forecast.30 Retai! Merchandising Romania. forecasts are influenced by past sales' data and the company's plans and projections for the future.nd the Direct Marketing' Direct. The overall company-wide planning and forecasting is derived from the company's overall business strategy (which also takes into account factors like the then economic conditions and the competition).uy market.merchandise planning and is Tooted in the overall strategy that the company has adopted. Accordingto tlzll. the Neiman Marcus DrOOl Specialty Retail ston~s il"!:t 'a§ the Neilnan Marcus StQ:r~ . M merChandising and qua:1f . Sri Lanka. These R!lowned~l' assortments of apparel. aspects involving the function of merchandise THE PROCESS OF MERCHANDISE PlANNING: AN OVERVIEW As has been stated earlier. The sales forecast serves as a tool not only in understanding . the senior management of the company is responsible for determining the direction that the company takes. In most cases. (Customers with distinctive .lhciples of its foun~e~ premier luxury re . influenced by the then economic conditions and the competition.service. This involves determining the target sales and turnover. ae&. Motiler retailer E'pgaged in the d who llf'estyle is the Neiman M stayedfocu:sed O'I'Lserv:mgiji lUXi.. In' . and the margins to be achieved.ct' . Typically. a. the process of merchandise management starts with .

.lctget j '1 . Business strategy l Merdl. new merchandise lines.y Overall economic conditions j 'Business forecast / t Rangeplan . new stores. also serves as a guide to determine wherefrom sales should be achieved i. Merchandise assortment refers to the number of different product items that the retailer stocks within the particular product lines.. etc. the amount that is required to be invested in the merchandise is arrived at.. Merchandise bl. existing stores. and forms is a bask financial tool used for planning and controlling the retailers' merchandise inventory investments... This amount is termed as the merchandise budget. Space plan "~.3 The merchand:ise planning process the sales which need to be achieved.. Assortment Strategy What follows is the development of a detailed merchandise-mix. Merchandise Strategy As the next stage merchandise strategy is evolved .. The assortment strategy can vary . space planning in terms of the space available for the display of various products. but.e...After the volume of tum over --or:. This is followed by range planning and outlet! space planning. the amount ofsales+-that needs to be achieved is clear.The Elements of Merchandise Planning 31 . at the same time. called assortment strategy.. in terms of space and the range plan.. from a retail standpoint.AssCirtmegt ptan Fig. 2.iandise strateg..___ - Merd~ndise rnix:pian t t ~ . The former involves decision-making pertaining to categories and/or departments and. Space in terms of existing as well as new outlets is budgeted for.

the merchandise mix may change in keeping with the market conditions. fads and seasonal preferences. Often. and may vary even during the course of the same year. have higher demand but for a relatively shorter period of time. socks. it is also referred to as the product assortment. Merchandise Line It comprises of a group of closely related products intended for the same end use. Merchandise These products. buying the right quantities at the right time is of great . In many cases. The entire process of merchandise management is a combination of merchandise variety and merchandise assortment. salt. Over a period of time. the merchandise mix offered during Di wah is different from that offered in summer time . classic or basic. etc. let us first understand some key terms in the context of merchandising.. For example. combined after taking into consideration fashion. which can be classified as staples are: white shirts for men. daI. Staple/classic merchandise lines include those products that are always in demand. and sold to the same customer group. handkerchiefs. It is necessary that the numbers in merchandise support are determined at an earlier stage. Fashion. In other words.. or are those products for which there is always a steady demand. Often. Before progressing further. and the required merchandise support numbers. A given merchandise line also falls within the same price range. they make for the basic necessities ofhfe such as sugar. the retailer has to ascertain the staple product(s) for its store(s). on the other hand. merchandise mix covers the breadth and depth of products sold by the retailer.3c2 Retaill Merchandising from retailer to retailer and from shallow to deep to narrow to a combination of all three. it refers to the complete range of products that the retailer chooses to offer to its customers. these products can also be termed as classics. The merchandise mix comprises of products which the retailer terms as staple. KEY CONCEPTS IN MERCHANDISING Merchandise Mix First in the context of merchandising (already defined in Chapter 1). etc. stationery. Depending on the type of the retail model. Therefore. Thus we can say that a combination of merchandise lines makes up the merchandise mix. as this determines the quantities eventually bought by the retailer. This is the basic level at which the process of merchandise management takes place. Example of products.

ankle-length. excess buying may result in beavy markdowns at the end of the season or when the product goes out of style. The concept of basic. Seasonal Merchandise This includes products that sell well over nonconsecutive time periods. The Iifecycle of a fad is the shortest (Please refer to Figure 2.4) Fashion products witness a sharp decline on reaching their highest stages.include jeans (boot cut.2. raincoats.). Pads In contrast to fashion. and winter-wear (thermal clothing. etc. mittens. of sales for a short time. whereas basic products have a more staple Iifecycle. etc.). through the Fad product Fashion product Fig. stone washed. which may bern style for a season. Sourcing of a product.4). etc. which is termed as fad is difficult as it requires a.).The ElemenIs of Merchandise Planning 33 importance for this category of products. As the demand for the product is for a limited time. merchandiser to understand=-even preempt-s-rapidly changing consumer behavior and create products or product-mixes that would satisfy such demand. fashion and fad products is better illustrated product life cycle (Figure 2. fads enjoy popularity for a limited period of time and usually generate a high level.4 The lifecyde for basic and fashion products . Examples of such products.). and skirts (knee-Length. Examples of such products include monsoon-wear (umbrellas. etc.

staple/classic merchandise could be basic black and brown pumps shoeswhich sell as formal shoes at all times of the year.5) through the example of a footwear retailer. size quantity-per-size and the total quantity would then comprise the depth of each style. and so on. ethnic blouses. accessories t-shirts formal trousers and casual bottom wear. A range of women's wear. again. in another example. Even within boots. This is also the very last level of classification.) are followed by different oolours and varying sizes that a customer would shop for. pumps and high tops. preferences in clothing and accessories.. a retailer stocking various brands of men's shirts or a food store offering different brands of pickles etc . western blouses. are further (Figure 2 . For instance. Taking forward the example of the footwear retailer. mix-a-match suits. of merchandise. etc.34 Retail Merchandising. Fads however may be seen in shoes targeted at the younger generation. discussed thus far. Style This refers to a unique shape or form of any product. Fashion may perhaps refer to the styling. can be further broken down into salwaar kameez. It refers to the average number of SKUs (stock-keeping units) within each brand of the merchandise line. Like. in terms of closed shoes the styles include boots. step-ins. in terms of different types of sandals. The concepts. When it comes to footwear retail. and formal evening wear. knee-length. Depth of Assortment This is the variety in anyone category of goods and/or services (product line) with which a retailer is involved. referred to as the stock-keeping unit. Indian-wear. For example. It may also refer to specialized types of expression-such as taste in music and food. The fabric colour.~ case of men's formal wear. or casual shoes .5):. different style options (ankle-length.o stock 10 designs of shirts in 5 different sizes and 4 different colors it makes for the depth of assortment. the merchandise line comprises different types of footwear offered. can be broken down into the following categories: Indian-wear. Width-or breadtb-vof merchandise is also referred to as the number of merchandise brands in the given merchandise line. illustrated Note (refer to Figure 2. shoes fad's may not really be visible . for example.. . Width of Assortment This is the number of distinct goods and/or service categories (product lines) a retailer carries. or in the case of children's shoes. Taking forward the example of women's footwear.. merchandise mix comprises the entire gamut of product offerings that the retailer offers to the endconsumers.. if a retailer decides t.

The Elements of Merchandise Planning 35 Merchandise mix .. Consistency.. can be defined as the degree.ccessories Merchandise line Boots Step in Oxford High top . The two dimensions of breadth and depth describe the si..5 Merchandise hierarchy for a footwear retailer Seasonal merchandise. R. colors and sizes offered to the customers. Bal Blucher Option Black Brown Colour L Size .. Style School Sports A. The depth of merchandise would include different styles. would refer to gum boots or different types of rubber shoes worn in the rain or as the case may be in winter. to which different type of products-that comprise the merchandise assortment-are related. pg 254 . on the other hand. 2. Consistency This is an important element of the assortment dimension of a retailer. Gist.i 1 Retailing: Concepts and Decisions R. Footwear retailer Men's Women's Children Casual Sandals! chappals shoes . SKU Fig.. If the retailer stocks different brands of shoes then the different brands stocked would add up to the width or breadth of merchandise.. Closed shoes Saddle .ze of the assortment... in turn... Brogue.

6). Company Style! price point Fig . The next level of classification is the department. An early definition. interpreting consistency as width at the store assortment level. it is necessary to understand that the hierarchy of merchandise is not standardized and varies from retailer to retailer. Then come in the sub-categories. L968 p. the styles. 254)' thus. the Merchandising in Action feature (Box 2.. refers to consistency as 'the degree to which the different types of products that comprise the merchandise assortment are related' (Gist. In the case ofa food retailer.2 . Merchandise Hierarchy This is an indicator of the manner in which product classification is done at the level of the retailer . 6 The merchandise hierarchy The first level of classification is the company or the retail store itself. the price-points and finally the SKU itself. while the concept of style may be substituted with the application of the concept of pack-size. a popular retailstore(s) in India. based on the way in which customers are likely to buy the products. To elaborate upon the nuances of various elements of merchandising detailed in Chapters 1 and 2. .It is a logical classification (Figure 2. it is potentially one of the most important assortment dimensions from the viewpoint of retail strategy.. At this stage.3) also includes a detailed note on the function of buying and merchandising at Shopper's Stop Limited. followed by the various categories of products that the retailer offers in every department.36 Retail Merchandisingi The dimension of consistency enj oys the least mention in retail literature. derived from the texts on marketing and retail buying. The next stage of merchandise management deals with the actual units that are required to be purchased and the control mechanisms that are employed by a retailer (discussed in the next chapter).. however.

such as bookstores. For example..~ .and E if- . 2. the structure of buying and merchandising at SSL has ~ .The Eternents of Merchandise PI!anning 37 "FouuaeAin :l991i ShQPper's Stop Umited ~Ll". provide and manage pricing. • Motive Jar buyiIlg or the thought .hi> 0-.co~prr!res fWa basIe: categanzatibns'that... . colour.""A t!. SSL is a member of the Inter Continental Group of Department Stores (IGDS}the*On!y Indiancmember alon~ with 29.ese. Over the years. SSL's wellestablished systems and processes in buying and mer. cafes and high-end "Jife~tyt mlqrchapdise for the grpwiI1g aQ1uent middle classin India.merchandising j at different types of understandings.7). it has metamorphosed frombeing a #~ham of"'tetaH stl1)res.fashi!)n and lifestyle destination. having evolved Over the years. • stra"tegY. . which now includes retail concepts. Shopper's Stop Limited The structure.s.andlYalue proposition are.l'1t on its shelves a '"'" the correct merchandise 'asSQrtments in the right mix. colourand fashion is one of its. While the basic dassification· occurs 'at the apparel and non-apparel levels [Figure.cbandismg and logistics enable it to efficiently prompt replenishments .... style.of fJuyers apd merchandisers contimaously ensure' thai::the'pricing • p<. u . evolved on the basis ef the following: .:in tune with customer expecta'tion. completely . weave. t.e basic classification . other experienced retailers from all over the worm .' criJical success factors. '. Fig. it manage the flow of'Invehtory to stores.1 TlJ. 2.0 • Distinct buying moments for various products. ~r what is !1iYPiea:llr bOllghtt with another product. require or tile fu nc~ol1 oJ b uyjng and . . texture . an understanding of fashion.to emer!fng as a . l'he COIlIp@lly's ability to p. most .process for buYtng."'is today a leading player in India's business Of retail. ~ • ~. . ~.

• Occasion wear: Formal snits/jackets. home and beauty . • Casual and Denim: Jeans and tees-brands such as Levi's. and. Pepe. customers seek 1ess of casual! day wear an'd more of dally evening wear. khakhis. whe81t comes to infant wear. apparel includes: • The non-apparel category for kids' wear comprises largely of toys. Kids' apparel mcludes: • Appard. but this segment also b as a subset of the + 18 yrs girls. typically. etc . • Lingerie: though treated as a separate category. etc. Apparel Men's KId's Nan Apparel largely Toys Ethnic Westemwear & lingerie Apperel Fig. the team that handles westetfi wear handles this category as well. washed shirts. • Fashion wear: Shirts and trousers in party wear-brands like Zod!.. • Semi-Formals: 'Friday Dressing'. etc. Predominantly customers from 21-35 yrs opt for westpn formrus and + 18 yrs choose to buy casual and fashion wear. groups. rmdergarments. etc. leather. while non-apparel includes jewellery. Wran:gl:er.s apparel comPrises: • C]assics: Daily fermal wear. 2.. Price have a range of toys available across age. non-apparel. Provogue. sods. manufacturers typically have the technical personal accessories. These divisions are furfher' prdducts. . when it comes to kids apparel there is very little differential in brands. shirts trousers. etc. . On the. etc. calls for an understanding . Women's • Western wear: western formal as well as western casual and fashion. categorized (Figure 2. Mothercare.8 and Z. M':ttel and Fisher • Ethnic wear: salwaar kameez. for apparel comprises men's. chinos. Mufti.38 Retail Merchandising and fashion trends is necessary for apparel. is handled as a completely separate brand and entity by the store.8 The classlflcatlon of apparel Men'. Generally the customer's age is +35 yrs. women's and kids' of fashion and style whilst the vendors or categories.~J: sub-classification other hand. kurtis. knowledge for the same. Indian formals-ethnic Wear as well as handkerchiefs.

personal accessories. • Adornmentwbich frames. includes caTIc:Ue stands. mostly in gold and diamond. Personal . While the starting prices are low. growth here is Home: The key driver for this category is the real .fact that it is a good gifting item . photo " . • Writing instruments: This category includes the brands like Sheaffer.'The Elements of Merohandise PI!anning 39 Non apparel IFig.hes: ¢fbiS'!'-tategbryincludes almosr20 brands across price points. The home market is classified as follows: w largely owin:g to fashion-value and the.'ii • .m: the past three years. Bags: Bags today are largely seen as a fashion statement and are driwn by factors such as fabric. Soft includes bed. and mainly managed by brands. size. Leather wear • Fine jewellery. . colours. the accessories. It is nota focus area for the company because mobile phones always sell at a discount in India. •ss ". etc. The store has illtrodu~ed brands like D'damas and Damas . materials and the styling.etc. style. The classification is detailed as follows: Jewellery " • Mobiles: Introduced 5 years ago. the market for this category is growing. the population and the need fo'. '.ai1d m~W. Pootwear too is driven by fashion and dictates the colours. • Watt. consumers ofwmch seek continuous replacement.t::edifferential. and the category is driven by both price movements and brands.(-omfiltt and optical protection.accessorilf is largely of bikers '. • Artificial jewellb'y . leather" borne and beauty products.:hing jewellery. Ferrari and Cross. • Sunglasses: The growth in this category due to an. . batli:!and linen. increase in.9 The classification of non-apparel Non-apparel comprises jewellery. and sales are largely driven by the pii. people are gradually upgrading to higher-priced brands.e~tate and housing \loom that generates high demand for furniture as well as other related products. 2. which is low priced.

women and unisex. The bead of buying and merchandising focuses .nt apparel ...~asnow changed 60:40 and is envi~aged to be . the ratio . His/her key responsibilities include.'. Aramis. • Analyzing the brand performance under each category and the category performance under each brand. .~tityandbrnnd. Trading teams for brands Trading Manager . in 1991...Ferragamo. enjoy the consumers need fOT upgradation: and~~~tica • Furniture. Trading teams for private labels Category Manager kids ~ Fig . on the other haud. like to like growth. store [evel transfers. Over the years the corrtribution-of-epparel and 1iL9n-apparel to sales has undergone a::'i\if1>tchange.50:50 in the corning years.40 Retail Merchandising • Kitchen appliances which. thesJore carried 75 per~j. and the margins bemg delivered.by Chamber. Brands retailed at SSL include Adida. B & M for apparel & non apparel Bvlgari. Christian Dior and Loreal Make up Includes product brands like Chamber and Maybellme Fragrances are classified separately for men. thtt. across categories. etc. again. Beauty ~ Skin care includes products offered . and Ralph Lauren.the Home Store format.10 The. ooe dealing with. to The function of merchandising is structured (Fig 2. allocations to stores. a . etc. . Davidoff. and-orders on . . which SSL offers In.e.' The Categoij-Manager looks atter the overall ~performanceM the category. DKNY. He/she needs'lto. looks to "$'(:. • Determining which brands need an additional input.has no separate buyer-the merchandiser's I1Qleis similar to tnebuyer's.su~ as sales.2. The merchandiser. future and the past. perhaps that of a promotion.structure for merchandising There are two trading teams. The buyer focuses on daily action such as daily transfers..10) aroundtrading teams for brands and private leabels. . "*H ~ . brands and the other for private labels.consider . challenges at band and the categgnes that are seiling. Calvin Klein.25 percent no-apparel merchandise. is roapaged as aseparafe. and considers the store's aspects . the store bystore intake. or in terms of clubbing products together through category promotions. The brand tra ding team .

(inventtny. When a retailer provides merchandise or knowingly adopts a merchandise strategy. After attaining clarity about what turnover is to be achieved in terms of sales.anon.position for delivering CaSfl'to the company. Thus.i·~llidto optih'l. Once tfie goods <l. Shopper's Stop Limited The next stage of merchandise employed by a retailer. .AF. What follows is range and outlet! space planning. .rchandise':assorhlfte'Ui'U. the or~~fs.· . the entjre process is the merchandising strategy that the company ~l. Customer Care Associate and CEO. . of $oals an_9:" the dei~Iopmendjf a plantbachieve'..se the stoqt. a~er which'~ detailed merchandise mix an assoiftt. . . it is termed as lifestyle merchandising.refets tClflfle numh~tof diffe~t prodQc~~ . corporate strategy of a retail organisation affects the buying strategy. Having determined the quantity to be purchased andihe supplier to source. It is a basic financial tool used for plaruting and controlling the retailers merchandise inventory investments. ' M The buying cycle starts with determining therequirements of the products that need to be stocked in the retail stores. The m~.ys .ooses to adopt. The starting point ot. •.iJ:).received. • '.rocess .. with the actual units that need to be purchased.nent plan ·. which win serv'€ the needs of a specific target audience in keeping with their lifestyles. He takes into consideration a period offour weeks to come and.kswithin fheparticulaiproduct lihe. ThEi. the metchandisestrategy is evolved. followed..t. .it from/the merchandiser then moves forward to actually place .~ Source: Compiled on the basis of a personal interview with Mr Govind Shrikhande.: items'iliat the retailer stoc. The p.. ~. process aIl9- -. deals that are SUMMARY Merchandise plamringenables the merchandiser and the buyer to focus on the numbers and the tzyes of products to be bought. and the control mechanisms to be discussed in Chapter 3. the amount required to be invested in the merehandise=-the merchandise budget=ss determined. they then~¢d to be allocated te~.The Elements of Merchandise Planning 41 hand. by the process of selecting suppliers and vendor negotiatrons. the merchandiser weekly action..are tnape.ifhe stari:lirigpoi:h{Q~Jhe ent:ft~: of planning is the forecast.tltte same:. the next stage. determines what needs to he dQn~e: maintgin margins. the detern1.of merchandise planrting entails. . the buyer would consider a platform of daily action.cash flow to category manager a monthly-or seasonal action to V~r~arginsJ.the varrous stores. . " . management...!~ actual1y. the the head of buying who would have a comprehensive lon~-term view aCT0SS c~tegories and bran~~~:.

3.42 Retail Merchandising KEY TERMS • Merchandismg strategy • Buying-cycle • Lifestyle merchandising • Merchandise planning • Forecast • Merchandise budget • Assortment plan• Range plan • Space plan • Merchandise line • Staple / classic merchandise • Fashion merchandise • Fads • Seasonal Merchandise • Style • Width 'of assortment • Depth ofassortment • Consistency REVIEW QUESTIONS 1. Assume that you have recommended the use of the merchandise budget to a buyer in a small retail store who has not used this method prevjeusly Yfhat words of caution would you give this buyer? 'What results might he or she expect from using the merchandise budget? 5. List the steps to be followed while planning merchandise purchases. Briefly explain or discuss each of the following trade te:rms: (a) Buying cycle (b) Merchandise strategy . Explain why sales forecasting is the first step in the entire process. 4. \Vhy is it important for buyers to know what motivates consumers to purchase particular items? 2. What is the difference between a fashion and a fad? Cite an example of each.

i:l Llle Cycle'. 25(3). . Baumel. (1956) Management 63-101. Variehj in Retailing. 'The Seven Principles of Sales-Forecasting Systems'. 7. 89-96. International/ournal ofReta. 54 (November-December). S. 5. W (1983). Decision Sciences. and Bienstock. Fp. 6. pp. D.P W. pp. 'Lifestyle Retailing: Competitive Strategies for the 1980s~. A. SUGGESTED 1. and Ide. 2. Parris. pp. Science. J. J. M. J. (1998). 166-:176.. (199B). W. pp. W. L. and Freeland.The Elements of Merchandise Planning 43 (e) Merchandise (d) Fashion budget (e) Basic/ Classic products (f) Assortment (g) Range plan plan (h) Space plan (i) Width of merchandise (D Depth of merchandise (k) Consistency (1) Lifestyle merchandising CHAPTERR END ACTIVITY 1. Blackwell. and Talarzyk. J. 59(4). A. (1994). 3. R. S. 76-83. and Bass.. Bates. Broniarczyk. M. in a Grocery Category: The Impact of Hem Reduction' . Fall. Borin. VVhyhave you selected these particular patronage motives? 2. 7-27. Mentzer. 25(6). 3-4. 4. R. Davidson. W.T. pp. D. 'A Oeser Look at the Interface between the Product lines of Manufacturers and !:heAssortments of Retailers' r Cadeaux.. R.c. Journal of Retailing. READING c. 'The Reta. J. (1976). (1997). W. N. 359-384. Hoyer. D. and McAlister. E. 35 (May).il and Distribution Management. Supply Chain Management Review. 197-203. Harvard Business REview. 'Consumers' Perceptions of the Aassortment Offered. •A Model for Determining Retail Product Category Assortment and Shelf Space Allocation'. Fo~mUll of Marketing Research. List 10' current fads. Develop a list of ten patronage motives that may Influence consumers to shop at one store instead of another.

E T. I.. Distribution. D. pp. and Wansink. (1989). 18(4). 'Dimensions of Product Planning in Retail Marketing'. (1999). 111-126.44 Retail Merchandising 8. Hart C. Bradlow. Greenley. Marketing Science. The International RevwIJofRetail. pp..9 (April). (1999). 5. B. Irish Marketing Review. and Shipley. 527-546. 9. and Consumer Researdt. 'The Variety ofan Assortment' ( Hoch. . G. 10. 'The Retail Accordion and Assortment Strategies: An Exploratory Study'. 4(1): 53-62.

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