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CHAPTER 1

Introduction
to Merchandising
1
Objectives
After completing this chapter, the student will be able to
• describe the importance of retailing
• define the basic functions of retailing
• identify the types of retail organizations
• define merchandising
• explain the rights of merchandising
• compare and contrast the functions of merchandising, retailing, and marketing
Retailing is a major business in the United States and throughout the world that em-
ploys hundreds of thousands of people and involves many activities. The most impor-
tant transaction in retailing is the one between the consumer (i.e., the final customer)
and the retailer. For this transaction, the retailer purchases goods that are then resold
to consumers for postpurchase use or final consumption. This exchange between re-
tailer and consumer can occur through a variety of media: brick-and-mortar stores,
television, catalog, computer, and telephone.
Brick-and-mortar stores are located along downtown streets, in shopping cen-
ters, and at strip centers. Some buildings are also free standing on out parcel lots near
shopping centers, at busy intersections, or in low rent locations. In addition, some re-
tail centers are located in remote areas without other nearby retail establishments or in
areas proximate to vacation destinations or resort facilities. The brick-and-mortar
stores are so called because the businesses are located in physical buildings; therefore,
some people refer to owning these stores as owning real estate. These stores represent
the aspect of the retail business to which the consumer or shopper must drive or walk
for merchandise.
Other stores are virtual stores. The transactions for a virtual store are just as real
as those exchanges in a brick-and-mortar store, but consumers visit the store via tele-
phone or other electronic mode. In catalog, television, or Internet shopping, the
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Merchandising Math: A Managerial Approach, by Doris H. Kincade, Fay Y. Gibson, and Ginger A. Woodard. Copyright ©
2004 by Pearson Education Inc., Published by Prentice Hall.
2 CHAPTER 1
consumer views the merchandise in pictures or on live models; however, the actual
merchandise is not available for the consumer to touch or feel until delivery after the
transaction.
E-commerce is the name given to the increasing number of transactions that
occur over the Internet. Business-to-business transactions have been the main portion
of e-commerce, but the number of retail e-commerce transactions between retailers
and consumers are also increasing. Some of these electronic retail ventures represent
new businesses and new brands or products, and some are expansions of the tradi-
tional brick-and-mortar stores. E-tailing is a term that is used for the retail businesses
that utilize the Internet or other electronic formats for their consumer transactions.
Retailers with brick-and-mortar stores who have expanded into electronic businesses
are now known as click-and-mortar stores. When a business is composed of several
retail types or outlets, the business is called a store group. Most store groups not only
own real estate in strategic geographic locations, but also maintain Internet sites that
reach consumers who cannot or do not wish to visit the physical store site. Through
e-commerce, retailers have redefined the target market. The target market is no longer
defined by geographic distance but is now defined by electronic access. Market share
can be increased by penetrating into geographic locations in which the retailer does
not own real estate.
E-commerce allows retailers to provide a wide range of services to their con-
sumers; these services can be combined between click stores and brick stores. For in-
stance, some click-and-mortar businesses permit consumers to buy products over the
Internet and return any unwanted purchases to their nearest or most convenient
brick-and-mortar location. This service is an added incentive that encourages the
consumer to purchase additional products and provides the retailer with a competi-
tive facet in an overstored retail environment. Clicks and bricks may also be com-
bined with catalogs to reach even more potential consumers for a retail business.
Retailers may offer a different assortment of products on the Internet or in catalogs
than the assortment offered in the physical store. These retailers have the chance to
customize the product offerings to provide a further incentive for consumers to shop
with that retailer than to shop with competitive retailers. Through these multiple
venues, a retailer can offer a variety of goods including unique or exclusive goods for
selected consumers.
The retail transaction, or the activity of the consumer making a retail purchase,
is near the end of a long pipeline of activities. With increased concern about the
global environment, reuse or the resale of used merchandise and the recycling of
used merchandise is a final segment that can be added to the pipeline. This pipeline
or chain of activities contains the segments of raw materials production, product
manufacturing, retailing, and consumer transactions. At each segment, value-added
changes are made to the incoming supplies to provide goods and services to the next
segment. The pipeline begins with the creation or production of raw materials. For
apparel or home fashion items, these raw materials include fiber, fur, leather, plastic,
and numerous other man-made materials. These materials are then made into
woven, knit, or novelty fabrications, as well as findings and trimmings. During the
product manufacturing process, these fabrications are transformed into finished
products, called goods or merchandise. Retail buyers purchase these finished prod-
ucts for sale to the consumer. The retail buyer acts as the buying agent for the con-
sumer; however, few buyers actually purchase items specifically for an individual
consumer. Rather, the buyer purchases items for the retailer’s customers (i.e., con-
sumers) as a whole; therefore, knowing the characteristics of the consumer is a vital
part of the retail buyer’s job.
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INTRODUCTION TO MERCHANDISING 3
Retail
Retail is big business! The retail sector is one of the largest single employers in the Unit-
ed States. This sector includes very large businesses with stores throughout the United
States and the world and very small businesses with one store servicing a small geo-
graphic area. The largest of the retail businesses are often studied by retail analysts and
other retailers in all tiers of distribution. The practices and merchandising techniques
of major retailers, including corporate culture, product offerings, pricing philosophies,
and consumer- or community-centered approaches, are studied to provide guidance
and other information for competitive and noncompetitive retail businesses.
The major goal of retailing is profit. To achieve this profit, the retailer must sat-
isfy consumers. Satisfaction is the result of a retail transaction that meets or exceeds a
consumer’s expectation. When the retailer can achieve consumer satisfaction, con-
sumers are more likely to (a) return to purchase more merchandise and (b) tell their
neighbors, friends, and family about their good experience with the retailer. There-
fore, satisfied consumers increase sales. Sales that are balanced with good management
of purchases and expenses will generate profit. With continued sales, money to pay
expenses, and profit, the retailer is able to stay in business.
Retailing is the distribution of goods to the final customer, or the activity of buying
at wholesale from a manufacturer, wholesaler, or jobber and selling at retail to the con-
sumer. Most manufacturers make one type of product, usually in large quantities. In
contrast, the consumer usually wants only one item from one manufacturer. For most
consumers, shopping and negotiating with many manufacturers would be too tiresome
or expensive. Therefore, retailers provide this service for the consumer by shopping from
manufacturers, wholesalers, or jobbers; pricing each individual item; and presenting an
assortment of merchandise to the consumer. This procedure is called breaking bulk.
Retail Types
Retail organizations can be classified by numerous criteria, which are interconnected.
Retail businesses can be classified by size, organizational structure, merchandise as-
sortments, numbers of stores, price orientation, style orientation, location, use of
store or nonstore methods of display, and numerous other criteria. A combination of
criteria is generally used to classify businesses more adequately. The most common
types of retail businesses are mass merchandisers, department stores, specialty
retailers or limited line retailers, mail order or catalog businesses, and discounters.
Within each classification, subclassifications exist to distinguish special attributes of a
set of businesses from other businesses within that classification. For example, some
department stores are identified as junior department stores, some as chain depart-
ment stores, and others as specialty department stores. Specialty stores are categorized
as “mom and pop” stores, chain stores, boutiques, and/or franchises. Within the dis-
counter classification, businesses can be organized according to how they achieve the
low price such as high-volume discounters, off-pricers, manufacturer’s outlets or fac-
tory stores, warehouse clubs, and variety stores. (At warehouse clubs, consumers must
pay a fee to belong to the club, and they must buy in bulk or large quantities. Variety
stores are known for the array of low end, budget goods that they carry.)
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4 CHAPTER 1
Apparel and home fashions merchandise are a major part of the retail business
and are sold by many of the top ten U.S. retail stores. These items can be found in
home improvement stores, grocery stores, drug stores, and gasoline stations; even ser-
vice businesses are involved in the selling of apparel merchandise. Restaurants, the-
aters, and other places of entertainment offer hats, shirts, and jackets that carry the
logo of the business. Apparel sales account for a large percentage of some service busi-
nesses. Apparel retailing also affects the balance of trade in the world. Many of the ap-
parel items sold in the United States are imported items. Decisions about the
importation of apparel items become pivotal issues in discussions of world trade and
political negotiations.
Retail Functions
The retailer performs four basic functions: merchandising, operations, promotions,
and control. In addition, some retailers are responsible for a fifth function, personnel.
All of these functions are necessary in facilitating the transaction between the retailer
and the consumer.
Merchandising includes the activities of planning, buying, and selling of category-
specific merchandise, including apparel and other fashion goods. The merchandising di-
vision in a store is often viewed as the “heart” or core of the retail store. With the buyer
as the principle figure in the merchandising function, the merchandising division is first
responsible for internal planning to ensure the acquisition of the appropriate merchan-
dise mix and assortments for the retailer’s consumer. The merchandise division also as-
sists in developing a coordinated in-store merchandising program and product
presentation to position the brand or image in a manner that will generate or increase
(i.e., drive) sales. To accomplish this objective, the buyer is responsible for directing the
creation of an organized visual presentation to maximize product presentation vehicles
such as fixturing, signage, point-of-sale (POS) materials, and promotional and special
events. The buyer is also responsible for inventory control and other functions for han-
dling the merchandise; however, in a traditionally organized retail business, the sales
associates assist with this function.
Operations involve the functions of store management. The physical plant of the
store is controlled by this function. The store manager is the principle employee in the
operations division. In some store groups, an operations manager, who is sometimes
titled the assistant store manager, handles many of the operations or management
functions. Store groups may increase in size of holdings until a second level of structure
is needed. The stores are then organized into regional groups, and, within these group-
ings, the assistant store manager is then titled the store merchandise manager. This
title is similar to, but not the same as, the general or divisional merchandise manager in
the merchandising division who works in the corporate operations division. This store
merchandise manager is responsible for housing of the merchandise, the in-store mer-
chandise arrangement, the total package of the visual merchandise presentation (e.g.,
display and signage), and the overall appearance of the store’s physical plant. This store
merchandise manager is also responsible for scheduling sales associates to provide ade-
quate floor coverage to optimize both sales per square foot and profit. Regardless of the
title of the management positions, store management is responsible for the staffing,
training, and compensating of store personnel; however, this set of activities is given to
the personnel function if the store has that separate function or division. (Other activ-
ities, such as employee benefits, performance appraisals, and personnel records are also
handled by personnel.) The store manager or operations manager is also responsible for
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INTRODUCTION TO MERCHANDISING 5
the purchasing of supplies and equipment to operate the store, and for supervising
store maintenance and housekeeping activities. Other operations activities include
overseeing the receiving room for receiving and marking merchandise, and for check-
ing merchandise against invoices and packing slips. Warehouse distribution and ship-
ping are also functions of store management, unless the warehouse operations are
under a separate function (usually in a separate location). Lastly, one of the most
important activities supervised by store management is that of customer service.
The promotions function includes all of the public relations, publicity, and pro-
motional activities of the store. The public relations manager or promotions manager
is responsible for the public (i.e., potential customers) view of the store. This view, or
the perceived store image, is created through promotions, advertisements, publicity,
visual merchandise presentation, and special events staged by the store. Some promo-
tional activities are designed to promote specific merchandise or to promote the store
and the store’s policies. Examples of these are sales and discounted merchandise.
Other events are designed to promote goodwill in the community and to increase the
public’s awareness of the store. Benefits for charity, sponsorship of sporting events,
and donations to underprivileged groups are examples of public relations for aware-
ness and goodwill. The promotions manager is the key director of these promotional
activities and may have assistants to work with the various aspects of this function.
These individuals may include visual merchandising managers, advertising managers
and artists, special events coordinators, public relations directors, fashion coordina-
tors, and catalog managers. In some retail businesses, the promotions manager or
publicity manager is also responsible for the activities of personal shoppers and fash-
ion trainers.
The control function is the dollar function and is commonly called financial
control or the accounting area. In addition to accounting, the record keeping tasks
and merchandising statistics are maintained by financial control. Accurate and timely
statistics, calculated by the financial control division, provide vital information for the
merchandising division. These statistics provide information for the buyers to set pa-
rameters for planning, buying, and selling activities. Credit and collections activities
are the responsibility of this function as well as inventory control and budgeting. An-
other task of financial control is paying vendor bills for both merchandise and store
supplies. The principle employee serving in this capacity in a small store would be an
accountant, and in a larger store, the function would be supervised by an account
manager or controller.
Retail Organization
Exact responsibilities of each manager or employee are determined by individual
stores or by the management of a chain of stores. The four functions (i.e., merchan-
dising, operations, promotions, and control) overlap in activities because all of these
functions have the goals of profit and consumer satisfaction. In addition, all functions
are important to the selling of merchandise. For example, the buyer must work close-
ly with the promotions manager to ensure that the right merchandise is available for a
specific sale. The buyer must also work with the store manager to ensure that ade-
quate numbers of sales associates will be on the floor for the sales promotion and that
the sales associates are knowledgeable about the merchandise. The controller must be
certain that the bills are paid for the merchandise so that the merchandise will arrive
on time for the promotion.
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6 CHAPTER 1
Store Manager
Sales Associate
Buyer
Department Manager
Sales Associate
Department Manager
Sales Associate
Department Manager
Figure 1.1
Line and Staff
Organizational Chart.
An organizational chart is a visual model of the retail functions and the employees
within each function, which provides an outline of the duties and responsibilities of the
store employees. The charts establish the lines of authority and supervision for each
employee and can be used to locate the position of any employee. As the retail organiza-
tion grows in size, the charts reflect the specialization of functions and the development
of a buying function that is separate from the selling function.
The traditional retail store was operated as a line and staff organizational chart.
(See Figure 1.1.) Each employee was the supervisor of the next employee. The store man-
ager was at the top of the chart and supervised the buyer, who in turn, supervised the de-
partment managers, who supervised the sales associates. Employees for promotions or
control were staff functions and not in the straight line of command. This organizational
structure is still used by many small, privately owned and operated retail businesses. In a
very small store, the owner is often both the store manager and the buyer who would op-
erate the store with only a few sales associates. The benefit of this organizational flow is
the direct connection between selling and buying.
As retail businesses grew in the 1950s, 1960s, and 1970s, new organizational
structures were developed for managing multiple functions of retail business. Four
functions of retail began to specialize and each function established a hierarchy of em-
ployees and responsibilities. The fifth function, personnel, is separated from opera-
tions. Organizational charts began to widen into the large store organizational chart.
(See Figure 1.2.)
The five functions of control, merchandising, promotions, personnel, and
operations are represented in the large store organizational chart. The controller, the
general merchandise manager (GMM), the promotions manager, personnel man-
ager, and store manager are key employees that report directly to general or top man-
agement. Each divisional merchandise manager (DMM) reports to the GMM and is
responsible for supervising a group of buyers. Each DMM is responsible for a group-
ing of merchandise, and each buyer is responsible for a narrower assortment of mer-
chandise or specific classification of merchandise. Most large chain stores have from
five to eight DMMs, one each for women’s wear, men’s wear, young men’s and boy’s
wear, children’s attire, women’s lingerie, shoes, and main floor merchandise, which
may include ladies’ accessories and cosmetics. For example, a DMM may be responsi-
ble for all of women’s wear, and the buyers would individually buy for dresses, bridal,
cocktail attire, coats, sportswear coordinates, or separates, which are divided into tops
(e.g., sweaters, t-shirts, shirts, and blouses), bottoms (e.g., skirts, pants, and shorts),
and swimwear. In some store groups, a large classification of merchandise such as sep-
arates may have buyers for subclassifications within separates. For example, the store
grouping may have several sportswear buyers—a separate buyer for missy, juniors,
bridge, designer, and women’s or large sizes. These buyers select all merchandise clas-
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INTRODUCTION TO MERCHANDISING 7
President
General Manager
Promotions
Manager
Personnel
Manager
Store
Manager
Controller General
Merchandise
Manager
Personnel
Officers
Operations
Manager
Sales
Associate
Sales
Associate
Department
Manager
Department
Manager
Department
Manager
Accountants Divisional
Merchandise
Manager
Assistant
Buyer
Assistant
Buyer
Associate
Buyer
Associate
Buyer
Buyer Buyer Buyer
Special
Events
Coordinator
Advertising
Manager
Visual
Merchandising
Manager
Public
Relations
Manager
sifications housed in a specific department across all the stores. In this organizational
structure, the buyer becomes an expert in a specific grouping of merchandise. The
grouping may be determined by consumer lifestyle, design category, price range, or
size. In the large store organization, a buyer selects the merchandise, but usually has
no direct access to sales associates or promotions employees.
As a retail business expands and opens new doors or stores, the organization
changes again, and a chain store organization develops with an associated chain store or-
ganizational chart. The chain store chart is similar to the large store chart except in the
operations function. In the chain store organization, the store management vice president
supervises the operations function and is responsible for the supervision of all district
managers (DM). Each district manager is responsible for the stores in a geographic dis-
trict. Each store has a store manager, department managers, and sales associates. With the
increased levels of organization, the buyer is further in organizational structure and often
in geographic distance from the sales associates and has limited contact with the stores
and the merchandise in the stores. With this separation of the buying and selling func-
tions, new methods of electronic and video communication are helping buyers stay in
contact with the stores, the sales associates, and the consumers.
Merchandising
The outcome of merchandising is a set of “rights,” which are achieved through the
merchandising process. The process includes the purchase of an appropriate assort-
ment of goods, to ensure the profitable sale of those goods to a satisfied customer.
Figure 1.2 Large Store Organizational Chart.
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8 CHAPTER 1
Simply stated, the process of merchandising is getting the right goods in the right
silhouettes, sizes, and colors; at the right price; at the right location; for the right
consumers. In addition, the right time and the right quantity of merchandise must
be right for the retailer and for the consumer. Although these rights of merchandis-
ing can be stated simply, the coordination of activities to attain these rights simulta-
neously is very difficult for a merchandise manager. To succeed in satisfying the
needs and wants of the right consumer, the activities in the merchandising function
must be conducted with one part knowledge, one part experience, one part hard
work, and even, one part good luck!
The right goods means the right merchandise for both consumer and retailers.
For example, the right merchandise identified by a merchandise manager for one re-
tailer might not be the right merchandise for another retailer in the same retail classi-
fication. For some retailers, the right merchandise may be seasonal merchandise such
as heavy wool coats and gloves due to the specific geographic location. Meanwhile, for
other retailers, basic trench coats and raincoats may sell in the store year-round. The
quality of the merchandise may be another important feature for some retailers. Their
target consumers may have specific expectations about workmanship, functional per-
formance, and design aesthetics as related to the price for a valuable product. Other
retailers may find that trendy merchandise might be part of their success in securing
the right merchandise for the right consumer.
With the advanced technology available in business-to-business transactions,
many merchandise managers are adding these product attributes to the databases they
use for shopping and purchasing. Information about silhouette, size, and color can be
identified and entered into databases for category-specific merchandise. This expand-
ed use of computer technology helps the merchandise manager reach the ultimate
goal of the right merchandise for the right customer at the right price in order to sat-
isfy the consumer and make a profit.
Several factors, external and internal, can impact the ability of the retailer to ob-
tain the merchandise at the right price. Pricing is a major factor in merchandising.
Market trends, current domestic and global economic conditions, pricing and prod-
uct offerings by the competition, and other external factors may influence the pricing
of the merchandise assortment. Within the retail environment, last year’s sales volume
and markdown patterns can also affect potential pricing for this year.
To achieve the right location for the merchandise, the retail merchandiser must
carefully organize the space within the store, in the catalog, or on the Web site for the
right merchandise presentation. This right is important for the retailer to achieve the
ultimate sales potential for the available space, be it real or virtual. Proper visual pre-
sentation as well as the combination of specific merchandise classifications must cre-
ate an inviting retail environment for maximum sales potential. Artistic displays,
appropriate usage of fixturing, proper signage, and organization and presentation of
merchandise in print advertising, catalogs, and Web sites must be considered to de-
velop the right location or place for each item and combination of items. The front of
the store or the home page on a Web site is prime selling space. The location of floor
space relative to store entrances and traffic paths, the buttons and links within a Web
site, and the positioning of merchandise in a catalog are important considerations
that are critical to the right place or location for specific types of merchandise. Re-
tailers can track sales of merchandise and note locations to determine the right place-
ment of the goods.
All of the rights of merchandising must be compatible with the right consumer.
Consumers can be classified according to their needs and wants. What is demanded
by one consumer during one purchase may not be a factor in the next purchase. In ad-
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INTRODUCTION TO MERCHANDISING 9
dition, preferences for the same type of product may vary from consumer to con-
sumer. Meeting these demands is a difficult and ever-changing process for retailers.
Because consumers have many options for obtaining their purchases, retailers must
work hard to target the right consumer with the right product.
The right time of merchandise delivery is another important factor in all aspects
and activities of the merchandising function. If goods, especially seasonal or fashion
apparel products, arrive in the store too early, the retailer may be forced to house high
inventory levels due to a lack of sales and low movement of stock. Keeping high in-
ventory levels can create larger markdowns than anticipated and can reduce cash flow.
On the other hand, if goods are received later than needed, a loss of sales resulting
from consumer disappointment from low levels of stock, lack of desired merchandise,
or unappealing merchandise assortments can occur. Late deliveries due to improper
shipping may create unbalanced assortments and cause unexpected markdowns, low
or no profits, and leftover and unwanted inventory.
The right quantity of merchandise is also important for the retailer and the con-
sumer. The retailer must achieve a balance between the amount of inventory on hand
at the beginning of a sales period and the amount of sales realized during that same
period. In other words, the right quantities of specific merchandise assortments and
classifications are necessary in meeting sales quotas for a specific period. These quan-
tities are usually planned from the units and dollar volumes from the same season of
the previous year with adjustments made for the new year. If a retailer orders too few
goods, a loss of sales from lack of inventory may result. If the same retailer orders too
much stock relative to consumer demands, excess and unsold inventories can lead to
unplanned markdowns that reduce profit margins.
In addition to the activities of the merchandising function for the retailer, mer-
chandising can also be a function of the manufacturing segment. With apparel prod-
ucts, the merchandiser working at the manufacturing segment is called the apparel
merchandiser in contrast to the retail merchandiser who works at the retail segment.
Merchandise managers at manufacturing firms can select raw materials and re-
quest production of products that will be sold to retailers for their final customers.
These merchandisers develop cohesive packages of merchandise that reflect the image
of the manufacturer, the retailer, and the target consumer. This package is coordinated
with the price structure of the related businesses, the available production facilities,
sourcing capabilities, and labor structure in order to maintain the integrity of the de-
sired design concepts as targeted to the right consumer. Throughout this text, the uti-
lization of these rights in the merchandising process will be discussed in detail.
To achieve the rights of merchandising, the retailer conducts the merchandising
process or a series of activities that can be grouped into three major steps: planning
the merchandise, buying the merchandise, and selling the merchandise. The first
step in merchandising, planning the merchandise, involves planning for future mer-
chandise selections and assortments, evaluating current market conditions, and ana-
lyzing the past sales history of the retail business. In planning the merchandise, the
buyer estimates customer demands and determines the quantity of stock needed to
generate a level of sales activity. Planning begins with identifying the right consumer
and matching the image of the business and the fashion image of the merchandise to
the needs and wants of the consumer. The buyer is responsible for understanding the
customer and uses market segmentation, consumer targeting, forecasting, and buying
plans to plan the best assortment of merchandise. The buyer must forecast trends and
adapt the information from those forecasts to meet the needs and wants of the con-
sumer. In addition, buyers estimate consumer demand and determine quantity of
stock needed to satisfy the demand for the desired level of sales activity.
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10 CHAPTER 1
Buying the merchandise requires the activities to obtain the right goods,
which include, but are not limited to, comparison shopping, sourcing, and select-
ing goods. In this part of the merchandising process, the buyer works with manu-
facturers or vendors, either individually or within the market system. Negotiations
on price, quantity, colors, styles, and delivery are part of obtaining or procuring the
merchandise. Buying includes tasks of searching for the most appropriate or right
merchandise to meet the needs and wants of the target consumer. The buyer then
selects all of the vendors that are needed to fulfill the orders and to create a balanced
merchandise mix. This assortment of vendors is called a vendor matrix or retail ma-
trix. Buying may include trips to the manufacturer, trips to a market city, and/or se-
lection from catalogs or sample merchandise in the central merchandising office.
For buyers with Internet and other e-commerce capabilities, the selection may be
from the manufacturer’s Internet site with accompanying swatch books of fabric
and color.
Selling the merchandise includes housing the merchandise, promoting the
merchandise, and finally, selling the merchandise. The technique of storing, dis-
playing, and promoting merchandise is of utmost importance to the total merchan-
dising process. This merchandising step overlaps several store functions, such as
promotions management, inventory management, store operations, and personnel
management.
Housing the merchandise involves the areas of inventory control and distribu-
tion systems. Distribution systems can include the warehouse of the inventory and
the shipping of the inventory between vendor and store, among multiple stores, and
between vendor and consumer. Housing of merchandise also includes the trip that
the merchandise takes from vendor, the presentation of the merchandise on the floor,
and the trip that the merchandise takes from retailer to consumer. For a brick-and-
mortar store, the merchandise will be received in the store, placed on the selling floor
and in display spaces, and then sold to consumers. For catalog and Internet retailers,
the merchandise is rarely housed at the site of the catalog or Web page creation; in-
stead, images of the merchandise are displayed for the consumer. From those dis-
played images, the consumer makes a selection and places an order. The actual
merchandise is then shipped directly to the consumer from a warehouse.
Promoting the merchandise is vital to achieve consumer acceptance and the
final sale of the merchandise. This step of merchandising includes the promotions,
final sale, and customer service after the sale. Promotional activities include visual pre-
sentation and displays, advertising in newspapers, banner strips on Web sites, televi-
sion and radio spots, special events, and sales personnel training.
The actual sale of the merchandise is the final activity in this step. Managing
both sales associates and the products is vital to the successful sale in order for the re-
tailer to obtain the double goal of customer satisfaction and profit. Personal selling is
important both for stores and for nonstores. Many catalog retailers have highly
trained sales associates to help consumers with their telephoned purchases. Service
after the sale is also an important aspect of promoting the merchandise and making
the sale. Retailers must ensure that the products they sell will fulfill the promise of the
promotion and will continue to satisfy the customer. Customer satisfaction may be
enhanced through a partnership with the vendors. Vendors can supply information
cards and toll-free phone numbers so that consumers can call directly to the source of
the product for information and assistance with complaints. After the sale, support is
vital to ensuring that the consumer is satisfied with the product, remains satisfied, and
returns for more products.
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INTRODUCTION TO MERCHANDISING 11
Marketing
Marketing is the total set of activities for interaction between any supplier and any
customer. This set includes the planning, pricing, promoting, and distributing of the
goods and services for a profit. Marketing involves generating and sustaining the flow
of goods from the raw material to the manufacturer to the retailer, and, finally, to the
consumer. Each stage of the pipeline is facilitated by marketing activities. Underlying
all of the marketing activities is the goal of customer satisfaction and ultimate profit
for each segment in the pipeline. Marketing is used to facilitate transactions from
business to business as well as business to consumer, exists beyond the retail segment,
and can have a broader scope than merchandising. Finally, covering product develop-
ment at both manufacturing and retailing, marketing can include functions of cost-
ing, product design, and management that are not usually included in the scope of
merchandising.
Summary
Marketing, merchandising, and retailing are sets of activities that are necessary to pro-
mote the profitable sale of merchandise to a consumer for that consumer’s ultimate
use and satisfaction. The type of retail business, the merchandise carried by retailers,
and the number and jobs of the retail employees vary, but selling to the final con-
sumer is the focus of all merchandising. The retail employees involved in these activi-
ties have overlapping functions, but one, single goal—profit through consumer
satisfaction.
Key Terms
Accountant
Apparel merchandiser
Assistant store manager
Breaking bulk
Brick-and-mortar store
Buyer
Buying the merchandise
Catalog business
Chain store organizational chart
Click-and-mortar store
Consumer
Control (Financial)
Controller
Department store
Discounter
District manager (DM)
Divisional merchandise manager
(DMM)
Doors
E-commerce
E-tailing
Financial control
General merchandise manager
(GMM)
Housing the merchandise
Large store organizational chart
Line and staff organizational chart
Mail order business
Marketing
Mass merchandiser
Merchandising
Operations
Operations manager
Owning real estate
Personnel manager
Planning the merchandise
Promoting the merchandise
Promotions
Promotions manager
Raw material
Retail matrix
Reuse
Rights of merchandising:
Right goods, right price, right
location, right consumer, right
time, right quantity
Selling the merchandise
Specialty retailer
Store group
Store manager
Store merchandise manager
Vendor
Vendor (Retail) matrix
Virtual store
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12 CHAPTER 1
Discussion Questions
1. What are retailing, marketing, and merchandising?
2. How are retailing, marketing, and merchandising
related?
3. Why is retailing important to consumers?
4. How has the increased accessibility of electronic
commerce changed retailing?
5. As a store grows, what are the problems involved
with the separation between merchandising and
operations?
6. How is the job of a buyer different in a small store
than in a multistore chain?
7. What are the rights of merchandising?
8. What are the steps of merchandising?
9. How does the buyer work with promotions and
operations in merchandising?
10. Why does the buyer need contact with the sales
associates? with target customers?
Exercises
1. Access the Web site for the Department of Commerce. Investigate the categories
of businesses within the retail industry sector.
2. Create an organizational chart for a small, “mom and pop” store, where the owner
is also the buyer. Explain your chart.
3. Create an organizational chart for a chain store that has a buyer for women’s,
children’s, shoes, men’s, cosmetics, and jewelry departments.
4. Create an organizational chart for a large chain store that has three geographic
regions and buyers for 10 categories of merchandise.
5. Find the Web site of several top retail stores. What do they include on their sites
about jobs, internships, their organizational structure, their merchandise, and
their history?
6. Examine a current store in your area that has the “right merchandise.” Explain
your selection by detailing what they have done correctly with each of the mer-
chandising rights.
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