Retail Merchandising Handout Part2

Handouts & Study Material
Course Title: RETAIL MERCHANDISING
Programme: B.Voc. FDR

Semester: V
Total no. of Sessions: 24 Sessions
Session Duration: 1.5 hrs.
Total hrs. of the Course: 36 hrs.
Total Credits: 3 Credits
Learning Outcomes:
After studying this course, the candidate shall be able to understand the following:
 To help them understand about the whole process of Retail Merchandising, which
includes Retail operations, Retail Mix, Retail Buying & Merchandising, Vendor
Selection, Inventory Control etc.
 To make them aware about how a Retail Merchandiser works and what are his duties.
 To understand basic mathematical calculations frequently used in making decisions
related to merchandising, pricing and management activities.
 To enhance their ability in planning and purchasing merchandise and controlling their
movement.
1|Page
Course Title: Retail Merchandising
Semester: V
Session Planner
Session hrs Topic Mode of Delivery Page

no. No.
1. 1 hr 30 Introduction Lectures/Ppt/Youtube 5.
min Videos,etc.
2. 1 hr 30 Retail Store Operations Lectures/Ppt/Youtube 11.
min Videos,etc.
3. 1 hr 30 Store Operation Management Lectures/Ppt/Youtube 21.
min Videos,etc.
4. 1 hr 30 CRM Lectures/Ppt/Youtube 31.
min Videos,etc.
5. 1 hr 30 Types of CRM Systems and Benefits. Lectures/Ppt/Youtube 37.
min Videos,etc.
6. 1 hr 30 Customer Service Lectures/Ppt/Youtube 43.
min Videos,etc.
7. 1 hr 30 Retail Space Productivity Lectures/Ppt/Youtube 50.
min Videos,etc.
8. 1 hr 30 Staff Productivity Lectures/Ppt/Youtube 56.
min Videos,etc.
9. 1 hr 30 Sales Management Lectures/Ppt/Youtube 61.
min Videos,etc.
10. 1 hr 30 Retail Merchandising Lectures/Ppt/Youtube 67.
min Videos,etc.
11. 1 hr 30 Retail Mix Lectures/Ppt/Youtube 76.
min Videos,etc.
12. 1 hr 30 Merchandise Management Lectures/Ppt/Youtube 80.
min Videos,etc.
13. 1 hr 30 Principles and Merchandise Strategy Lectures/Ppt/Youtube 88.
min Videos,etc.
2|Page
14. 1 hr 30 Retail buying and Merchandising – Lectures/Ppt/Youtube 94.
min Types of Merchandise Videos,etc.
15. 1 hr 30 Merchandise Buying , Handling and Lectures/Ppt/Youtube 104.
min Vendor Selection Videos,etc.
16. 1 hr 30 Merchandise Mathematics Lectures/Ppt/Youtube 112.
min Videos,etc.
17. 1 hr 30 OTB – Open to Buy Lectures/Ppt/Youtube 118.
min Videos,etc.
18. 1 hr 30 Planning and Controlling Lectures/Ppt/Youtube 123.
min Merchandise Purchase Videos,etc.
19. 1 hr 30 Merchandise Planning Process Lectures/Ppt/Youtube 129.
min Videos,etc.
20. 1 hr 30 Inventory Management Lectures/Ppt/Youtube 135.
min Videos,etc.
21. 1 hr 30 Inventory Control Systems Lectures/Ppt/Youtube 145.
min Videos,etc.
22. 1 hr 30 Merchandise Pricing ; Types of Lectures/Ppt/Youtube 153.
min Pricing Videos,etc.
23. 1 hr 30 Factors Affecting Merchandise Lectures/Ppt/Youtube 158.
min Pricing Videos,etc.
24. 1 hr 30 Retail Pricing Terminology Lectures/Ppt/Youtube 162.
min Videos,etc.
25. Reference 166.
26. Sample Question Papers 168.
3|Page
Course: Retail Merchandising

Semester: Semester - V
Session no: 1
Session Topic: Introduction
Teaching Pedagogy: Lecture & Videos
Assignment Submission
Preparation for Session: Class Room Theory Session
Handouts/Notes to be provided to students
OHP projector/Kyan for YouTube Vide
YouTube Link: https://youtu.be/DeKifBcExvQ

https://youtu.be/JzLoo8cFJBI
4|Page
Session 1
Introduction
What is Retail?
Retail, by definition, is the sale of goods or service from a business to a

consumer for their own use. A retail transaction handles small quantities of
goods whereas wholesale deals with the purchasing of goods on a large scale.
Retail transactions are not to be confused with online transactions; goods must
be sold from a single point directly to a consumer for their end users.
A retailer is a person or business that you purchase goods from. Retailers

typically don’t manufacture their own items. They purchase goods from a
manufacturer or a wholesaler and sell these goods to consumers in small
quantities.
Retailing is the distribution process of a retailer obtaining goods or services

and selling them to customers for use. This process is explained through the
supply chain.
Etymology : The word retail comes from the Old French verb tailler, meaning
"to cut off, clip, pare, divide in terms of tailoring" (c. 1365). It was first recorded
as a noun in 1433 with the meaning of "a sale in small quantities" from the
Middle French verb retailler meaning "a piece cut off, shred, scrap, paring".
5|Page
What is a supply chain?
A supply chain is a process the occurs between companies and suppliers in

order to distribute products to end users. It is how a good or service is
delivered to consumers. Retailers must understand their supply chain to ensure
they receive the right products at an affordable price within a reasonable
timeframe. If something goes wrong somewhere along the supply chain, it will
likely lead to an increase in product cost or delivery time.
This is what a basic supply chain looks like from start to finish:
 Manufacturers and Wholesalers
Manufacturers produce goods from raw materials using machines and labor.
Once production is complete, wholesalers purchase the goods and sell them to
retailers. Wholesalers sell large quantities of goods to retailers at low prices.
 Retailer (also known as the merchant)
Retailers purchase goods either from the wholesaler or directly from the
manufacturer. From there they will sell those goods in small quantities to end
users.
6|Page
 Consumer (end user)
Purchases goods from the retailer in small quantities to satisfy demand.
 Shopping
The process of purchasing products by the consumer is called as shopping.

However there are certain cases where shopping does not always end in
buying of products.
Sometimes individuals do go for shopping but return home empty handed.

Such a shopping is merely for fun and is called window shopping. In window
shopping, individuals generally go to the market, check out various options and
their prices but do not buy anything. This kind of shopping helps to break the
monotony.
Retail Mechanism - How does retail work?

Let us now understand the various ways a consumer can purchase goods from
the retailer.
 Counter service
As the name suggests, counter service refers to the process of procuring the
merchandise from the counter. The buyer does not have an easy access to the
merchandise of the store and he can’t pick up things on his own. In such a
mechanism the buyer has to walk up to the counter and ask for his
requirements.
Example –
Jewellery Store
Can you go to a jewellery store and pick up things on your own? No….
You need to ask the sales person to show you the sample designs for you
to finalize something as per your taste and pocket.
Chemist Shop
7|Page
Chemist shop does not allow the buyers to simply walk into the store and
pick up medicines. One needs to walk up to the counter, show his
prescription from the doctor to get the medicines from the retailer.
 Delivery Service
The mechanism of shipping goods to the customer’s doorsteps is called as

delivery service. The end-user does not have to walk up to the store to procure
his merchandise; instead the goods are directly delivered to his house through
various means of transportation. Delivery service is a boon for the individuals
who have an extremely busy life style and do not have enough time to walk up
to the store.
 Online Shopping
Internet has helped end-users to shop from their homes only. Online shopping
sites like Amazon, eBay etc provide a wide range of options to the consumers
who can order the desired merchandise through internet. Once the payment is
done through debit or credit cards, the goods are delivered at the address the
customer requests for. The transportation charges however are borne by the
consumer himself.
 Order through telephone
Nowadays, several restaurants and eating joints provide an option of ordering
food while sitting at home. The food outlets upload their complete menu in the
website providing a wide range of options to the end-users. One can easily
place his order over the phone and the food is delivered at his doorstep within
no time.
Pizza Hut, Dominos (Promise to deliver hot and crisp pizza within 30 minutes of
placing the order)
 Door To Door Sales: Door to door sale is a process where the sales person
travels from one house to the other and prompts the customers to buy the
product. He gives the demo of his product and strives hard to convince the
individual to buy the merchandise.
Examples - Eureka Forbes operates on this mechanism where experienced

sales professional visits the doorsteps of the potential customers, gives them
presentations and influences them to purchase the product.
8|Page
Telephone companies also sometimes rely on this mechanism to sell their
connections.
 Self Service: In self service the individuals have the liberty to pick up
merchandise on their own and help themselves.
 Second Hand Retail: In second hand retail shops the retailer sells second
hand goods to the end-users. Such shops generally run for charity where
people donate their used merchandise to be resold to the poor and needy
free of cost.
Let us understand the concept with the help of an example.

Tim wanted to purchase a mobile handset. He went to the nearby store and
purchased one for himself.
In the above case, Tim is the buyer who went to a fixed location (in this case the
nearby store). He purchased a mobile handset (Quantity - One) to be used by him
(An example of retail)
The store from where Tim purchased the handset must have shown him several
options for him to select one according to his budget and need.
From where do you think the store owner (also called the retailer) purchased all
the handsets?
Here the manufacturers and the wholesalers come into the picture.
The retailers purchase goods in bulk quantities (huge numbers) to be sold to the
end-users either directly from the manufacturers or through a wholesaler.
9|Page

Session no: 2
Session Topic: Retail Store Operations
YouTube Link: https://youtu.be/sVyAHreDouE

https://youtu.be/P1v755q359M
10 | P a g e
Session – 2
Retail Store Operations
The field of retail store operations concerns all of the activities that keep a
store functioning well each day. In the best-run stores, everything is carefully
considered, planned, and executed. Operations includes many aspects, such
as store design, display placement, customer service, money and credit
handling, shoplifting prevention, premises maintenance, staff management,
inventory optimization, and dealing with the entire supply chain that leads to
having products in the store.
Retail hasn’t been easy in recent years. The rise of e-commerce, such as the
Amazon, has disrupted many retail store operations, and it’s vital that today’s
retail operations professionals adapt to handle that challenge. Many retail
professionals say the key to success - in stores or online - lies in superior
customer service, both today and in the future.
There is a lot of synergy between physical store and online operation, if one
just has a physical store and not an online presence, he can distinguish himself
by having amazing customer service. Actual human interaction can never be
replaced and that is the advantage that a store owner has.
11 | P a g e
Typically, when people use the term retail store operations, they’re referring to
most of the functions and jobs in stores. So, retail operations can encompass
everything about how a store operates each day. Start with choosing the
store’s location and designing the store. Then think about how the store
plans, orders, and adjusts its product inventory: How it prices items and
displays them in the store, under what lighting, in what arrangement, and
with what signs. How it treats its customers throughout the store experience,
from entry to exit. How it handles cash and credit. How it handles returns and
refunds. How it handles price markdowns and sales. How it manages its staff
and maintains its premises. How it handles data about customers, products,
sales, and revenue. All of this can fall under the field of retail operations.
Retail can fall under goods or services. Some stores are both. A retail clothing
store is mostly goods. A dry-cleaner offers a service. A tire store sells both a
product (tires) and service (installation).
Traditionally, the term “Store” meant a brick-and-mortar store, but increasingly

people blur the distinction, even referring to online stores. The term retail
clearly applies to both physical stores and online operations. Each year, more
and more sales are made online as consumer habits continue to change, and as
the nature of competition changes.
The next six sections provide a more detailed overview of responsibilities that
may fall under the field of retail store operations:
 Design
 Customer Service
 Cash, Fraud, and Internal
Controls
 Product Inventory
 Administration
 Store Management
12 | P a g e
1. Store Design Responsibilities
Design and aesthetics are a

major part of the shopping
experience. Design is both art
and science, often using data to
help make choices, such as
product display and placement.
Here are aspects of design that
fall under retail operations.
 Store location: As the adage goes, location, location, location. Visibility

and customer traffic patterns play a key role in a store’s success. People
will travel off the beaten path for something special, but it’s generally
harder to build that business.
 Store design and layout: The store’s exterior and interior design sets the
tone for the shopping experience. Design can signal a clean, well-
organized, a well-stocked, or an upscale, well-appointed department
store or clothing boutique.
Another consideration is the display layout. Racks, shelves, or displays
can be arranged straight, at angles, or in a geometric pattern to create
visual interest in addition to organization.
Similarly, traffic patterns for customers can be gridded, almost like
streets, looping or curving, or more free flowing. Changes in these
patterns can affect what customers see and what they purchase.
 Creating departments within a store: This is important for item

findability in a store, as well as for delivering tailored customer service.
By creating specialty areas, such as jewelry, shoes, sporting goods, and
house wares, retail professionals create “stores within stores” and have
specialty employees who are better able to serve customers.
13 | P a g e
 Visual merchandising and display: Create attractive displays of products
to set a tone and an expectation. Sometimes, you aren’t just selling a
product - you’re selling an experience. A pleasing display of merchandise
sends a message to the would-be buyer, and so does a sloppy, unkempt
table. Even the height at which items are placed can make a big
difference. Some professionals use a retail pangram, a type of diagram,
to detail the placement of items in a store.
 Store atmosphere: Lighting, music, and consistent overall store

maintenance create a pleasant atmosphere that makes customers want
to shop there. Unpleasant factors like clutter, odour, inadequate air
conditioning, or unserviced restrooms can turn off customers. At the
best stores, employees strive to create a pleasant atmosphere that helps
to define the brand.
 Signage: Posting signs, both outside and inside, help to direct customers
and make them aware of products, services, and offers. Without good
signage, a store can be difficult to navigate, and customers might not see
what store managers want them to see.
 Store space management: Avoid clutter and disorganization by

managing space well in the store. Make items easily accessible and use
out-of-the-way space for storage.
2. Customer Service Functions
14 | P a g e
Much of a store’s success depends on customer service - how it treats
its customers. Customers may not always be right, but they’re always the
customer, representing a potential sale and potential review. With excellent
customer service, stores can increase their competitiveness, and even make
up for shortfalls in other areas, such as convenience or pricing. Positive,
personalized customer service can help brick-and-mortar stores compete
against online operations. However, online operations have been increasingly
good at providing remote customer service, with services such as convenient
returns. The best-run stores comprehensively train their employees on how to
treat customers and provide superior service to keep them coming back.
The following questions address elements of customer service:
 How are the customers greeted when they enter the store?
 Is there a familiarity with repeat customers?
 Is personal service offered? At what point?
 If the store doesn’t have what the customer wants, how does the store
handle that? Is it willing to say who else might have the item?
 Does the store offer helpful guidance - after really listening to the
customer?
 Is loyalty rewarded, such as through loyalty programs?
 If the customer has a problem or concern, how does the store handle it?
Returns and refunds are another vital area of customer service. A store buys
faith and loyalty with customers when it handles returns easily and without
hassle. Customers want to know that if they make a mistake with a purchase,
the store won’t penalize them. Stores should also carefully track returns to
understand patterns and resolve problems. Technology makes this process
easier.
3. Cash, Fraud, and Internal Control Functions
Stores need to carefully define, implement, and monitor these areas of their
operations, as they directly impact the bottom line.
Handling cash and credit: Good cash and credit handling requires both good
people and a good system to track everything, quickly discover discrepancies,
and keep the store’s finances and inventory on accurate, solid footing. Today’s
15 | P a g e
technology often comes in the form of a point of sale (POS) system that can
handle not only daily sales, but also customer management and inventory. This
can make it much easier to track and reconcile each day’s sales with the cash
and credit showing in the system. Still, some stores may compare POS statistics
with manual counting or cross-checking. They also might do surprise counts of
cash or inventory during the day, especially if problems have been occurring. It
all depends on the size and complexity of the retail operation. In any case, it’s
critical that a store maintain accurate figures with cash, credit, and inventory.
Shoplifting and fraud prevention: Stores devote significant resources (both

people and technology) to deter shoplifting and fraud. Some keep it behind
the scenes so as not to interrupt the customer experience. Others may be
more upfront, as in the case of having a guard at a jewelry store entrance.
Security cameras, monitoring, and product scanners are also common. Losses
from shoplifting and fraud can be significant, including by organized rings and
scams, so stores need to be vigilant and find problems quickly if they do occur.
Internal controls: Stores develop and maintain internal controls, or standard

operating procedures, to prevent problems with cash handling, credit,
shoplifting, and fraud. These controls help to prevent money or inventory
theft. They include cross-checks such as deposit slips for cash and a well-
defined set of authorized functions, so that only a certain level of employees
have access to certain items or parts of the store. It’s also vital to have
different levels of employees sign off on others’ work, so no one employee can
operate in secret. Without these controls, a store could be at the mercy of
theft or fraud by employees, customers, or suppliers.
Safety and security: Stores try to ensure that their employees and customers
are safe. They may use security guards and security camera monitoring. Police
calls to stores can be common, depending on the store’s practices. With
liability issues, some stores are quicker nowadays to turn matters over to the
police.
4. Product Inventory Responsibilities
For a store to succeed, it needs to have the products to satisfy its customers.
This is the fourth area of retail operations: Inventory management. Stores do
16 | P a g e
their best to balance
supply and demand for
products in a constant
cycle of selling and
restocking. If a product
doesn’t move well, it is
replaced with something
that does. If a product
does sell well, the store
increases its inventory. It
may sound simple, but the quirks of supply and demand can make inventory
management difficult. Problems in the supply chain can make it hard to get
hold of desired products. A sudden shift in demand, such as a new product
making an older one less attractive, can catch a store by surprise.
These functions fall under inventory management:
-Ordering merchandise: Buyers place orders for products, trying to anticipate

the demands of customers. They’re trying to get the right products in the right
quantities at the right time. To be efficient and cost-conscious, they don’t want
to order too much. In an automated system, the inventory needs are
forecasted, so stock replenishment is automated. Another factor to consider is
the merchandise mix. Stores want to ensure that the customer has a variety of
products, sizes, colors, and other features to choose from, at appropriate price
points.
-Receiving stock: Stores receive shipments from suppliers and distributors.

They carefully track and record it all, and make sure it’s handled properly and is
in good condition.
-Using an inventory system: The three main types are perpetual inventory,
physical inventory, and combined. With perpetual inventory, the counts are
updated upon each sale. This is what happens with today’s computerized POS
systems. With physical inventory accounting, the business physically counts its
inventory. With a combined system, both methods are used, where the
physical count provides a cross-check of the computerized system.
17 | P a g e
-Pricing: Stores set the prices and mark the products either physically on the
product or in the computer via the product’s barcode, or both ways. Price
reductions are based on supply and demand, season, promotions, and other
factors.
-Merchandise handling: This includes stocking shelves and displays, moving

items for customers, and shipping items to customers.
Managing the supply chain:
Operations people manage relationships with suppliers, distributors and

other vendors, and keep products coming to the store for retail sale to
customers. Problems can arise in the supply chain, which can result in
bottlenecks, backorders, or quality issues, and store operations people handle
them.
5. Retail Administration Responsibilities
These functions fall under administration, the fifth major area of operations.
Managing the premises: Maintain the store in good working order. Make sure
customers aren’t turned off by inadequate facilities or poor maintenance. Like
a home, a store requires consistent care and attention. Customers may judge
you based on a littered parking lot, insufficient air conditioning, or dirty
restrooms.
Training of employees: Employee

training is essential, especially given
the frequent turnover in retail jobs.
Employees must be trained in
customer service and store
procedures, such as cash handling and
internal controls.
Managing of promotions and

events: Stores rely on promotions and
sales to drive additional business.
18 | P a g e
Data management and use of technology: This includes streamlining store
operations with POS systems, bar-coding, and use of a customer relationship
management (CRM) platform. With smart use of customer data, stores can
guide targeted customers toward sales and offers, build their loyalty, and
improve customer service to them - while increasing the store’s bottom line.
Stores can also use data to root out bottlenecks and discrepancies, thereby
increasing efficiency and timeliness.
19 | P a g e

Session no: 3
Session Topic: Store Operation Management
YouTube Link: https://youtu.be/gv80nU-9fEU
20 | P a g e
Session – 3
Store Operation Management
What Is Store Operations Management?
The final area of operations responsibility is store operations management.

The store manager is responsible for keeping daily operations functioning
smoothly and managing employees. It’s a challenging role in a challenging
environment. The store manager reports to regional or corporate managers, or
an owner, and may have to follow broad strategies or directives from them.
But within the environment of the store, the store manager is the boss and is
often responsible for all aspects of its performance, including its finances.
Other areas of responsibility may include:
 Hiring, firing, training, and managing of employees

 Forecasting sales and budgeting
 Oversight of inventory and loss prevention
 Oversight of all internal controls, such as for cash handling
 All aspects of customer service
 Internal and external communication
 Legal compliance
21 | P a g e
Standard Operating Procedures and Checklists for Store Operations -
To run smoothly and efficiently, stores should define their daily, weekly, and
monthly processes in written standard operating procedures. These
procedures can be paired with checklists to ensure they are being carried out
properly, by the correct people at the correct time. Virtually every operation
function should have a detailed written procedure compiled into an operation’s
manual to ensure uniformity and consistency.
General Store Opening and Closing
 Employees assigned to open should arrive early to prepare the store for
its opening to the public.
 The store should be opened to the public on time, indicated with signs or
lights as appropriate.
 Employees should begin preparing at a designated time for the store to
close. This typically includes cleaning and other preparation for opening
the next day.
 The store alerts customers at a specified time, such as thirty minutes
before and again ten minutes before, that the store will be closing. Staff
may pull gates, change the lighting or perform other steps to alert
customers.
 All cash is counted, reconciled, checked by a manager, and locked. All
keys go to the person in charge of that. The procedure should define in
detail how important matters like this are carried out.
 Opening and closing work is subject to inspection by someone
responsible for that, as appropriate.
Store Staffing
 Employees should be interviewed, hired, on boarded, and trained in a

prescribed manner.
 Job descriptions should be clear and regularly updated to reflect
responsibilities.
 Employee reviews should be done consistently, with regular feedback
and follow-up.
22 | P a g e
 Employee work hours should be accounted for through a system,
especially with variable part-time work or overtime.
 Compensation should be spelled out, as well as determine when and
how payment is made in the case of bonuses, such as sales incentives.
Cash Management
 Front-end cash procedures ensure proper handling at the POS. This

includes how and when to take cash to the back office, and how to
reconcile cash and credit against sales.
 Back-office cash procedures are usually a bigger-picture accounting
function, making sure the store is on track and carrying out its internal
controls to prevent loss and pilferage. They catch cashier mistakes or
possible fraud.
 Cash refunds to customers should be consistent with store policy.
Sometimes a store may choose to only give a credit on a credit card, or
store credit. This is all important to decide as part of cash handling and
customer service.
Merchandise Handling
 Product shipments should be received in a set procedure to ensure

everything arrives in good condition and in the proper quantity.
 Route products in an efficient manner to the proper location in the store,
either to the shelves, storage, or holding area.
 Enter products in the inventory system for tracking.
 Return damaged goods according to standard operating procedures.
Customer Service
 Help customers in a way that befits the brand (this can be spelled out in
written procedures).
 Accept and route customer complaints to the proper person for
response and resolution.
 Do home delivery of large items on a certain schedule.
 Special orders may be possible to get items not regularly stocked.
23 | P a g e
Retail Store Cleaning
24 | P a g e
25 | P a g e
26 | P a g e
Retail Management Strategies
The retail industry is a very dynamic and competitive sector in the market. You
have to apply various management strategies for the survival and growth of
your retail business. The retail management strategies include marketing,
pricing of the product, discounts to attract the customers as well as other
techniques that help to grow your business.
 Retail Marketing
Whether you talk about the product selling or service providing, marketing is
the crucial part to reach your target customers and make them aware about
your business. If you really want to grow your business properly, you must
include a marketing budget for the promotion of your products or services.
You can reach your target audience advertisements by the means of
newspaper, television, brochures, etc. And if you want promotions through
digital channel, then you can go for Search Engine Optimization, Social Media
Marketing, Google Ads and YouTube Ads etc.
 Effective Pricing
Everybody knows very well that India is a very

price-sensitive market. It is one of the major key
factors to gain more customers. You should always
keep in mind the price of your product based on
your target audience. The purchasing power of the customers plays a very
important role to decide the price segment that you should go for.
 Discounts & Sale
The graph of sales never remains constant. It always

keeps fluctuating as different months of the year
are offseason for every business. But, discounts
always attract a customer. The retailer can provide
offers and discounts in the offseason or announce
sales on special occasions. It often helps to balance
the sales and sometimes gives you healthy profit
27 | P a g e
where you play upon volume of sales instead of high margin per product.
 Coupons & Freebies
There is another marketing strategy to build

a loyal customer base for long term. The
retailer can provide coupons or freebies on
large ticket size. It provokes the customers
to purchase more products in one go. But,
make sure that you have done the current
calculation before taking this kind of actions or else you may have to bear a
huge loss.
 Feedbacks Mechanism
A retailer always tries to provide best products and services to his customer.
But, it is very important to analyse the customer experience. So, if you are a
retailer, you must have a feedback
mechanism in your business to track the
buying behavior and response of the
customers towards your products,
brands, or services. You can ask them to
fill a feedback form or put a suggestion
box at your workplace. Also, Check those feedback on a regular basis and
always work on the provided suggestions improve yourself.
 Digital Transformation
If you are still running your business in the old traditional methods, it is
recommended that you to upgrade from physical retail to digital retail. It is
nothing so different. It brings you an online identity to showcase your business
to the world. You just need a website according to your business requirements.
So, if you want to promote your business and boost your sales, you can go for
digital marketing to acquire the customers that you cannot reach in offline
retail.
28 | P a g e
Importance of Retail Management
Retail management is one of the most important factors to run a retail

business flawlessly. You might know any person who started a business but,
could not survive in the market for the long term. The reason behind this is lack
of knowledge of business operations and their management.
So, it helps you to serve your customers in a proper manner and boost the
customer satisfaction. If one is sincerely following the retail management
process, they notice an increment in the productivity of their employees also.
Whether you have a small shop for a big store, if you are running a retail
business, then retail management is must to run it efficiently.
You are either a seller or a customer, everybody has 24 hours in a day and the
time is very important for all. Suppose if a customer enters your store and you
are unable to provide the products of his requirement in the desired time, you
have wasted his time as well as yours this is not a good sign.
Firstly, it ruins the customer experience and the probability of converting them
into a recurring customer decreases. Hence, this is kind of a loss for the future
of your business.
29 | P a g e

Session no: 4
Session Topic: CRM – Customer Relationship Management
YouTube Link: https://youtu.be/hnEQq7kNFWo

https://youtu.be/Hh4HnpxyEGE
30 | P a g e
Session – 4
Customer Relationship Management (CRM)
CRM, short for Customer Relationship Management, is a collective term for

ideas, practices and strategies that help businesses create meaningful
relationships with their customers. Its ultimate goal is to help improve sales
and customer retention.
A good customer relationship management system helps achieve this by
facilitating quality conversations with prospects and customers.
In retail business, one deals with the customer directly and it is highly
important that they approach them with and take care of every detail and need
so that they can have loyal customers and more number of buyers.
IMPORTANCE OF CRM
 Foresee customer needs.

 Details of a customer.
 Grouping customers.
 Acquiring new customers.
 Cost effective.
 Handy details.
 Customer satisfaction
 Customer loyalty.
31 | P a g e
Role of CRM in Retail business
 Customer history
CRM stores all the customer

information and profile like their last
purchase, business cards, phone
numbers. This helps in recording all the
history of a customer so you know
each one of them individually and you
know who your regular customers are
and what their needs are. Which also
helps you in for seeing the demands
and getting better business and makes
the customers” experience better at your store.
 Segmenting
Collecting all the information about the customers allows it to put your
customers in different section so you can attend them accordingly. This way
you can segment your market. There might be families, youngsters, vegetarian,
non vegetarian, new buyers, long term customers, heavy purchase customers,
lighter purchase customers, etc. The segmentation in your market helps you in
providing better strategy that suits your customers.
 Tracking
CRM software helps you in tracking all the customers individually. This provides
you the clear information as to which customers are beneficial for you and
which are not. And which customers have proven to be loyal which have not.
So you can also provide them better service and at times reward your loyal
customers to keep up their loyalty and get more buyers indirectly.
 Promotions
Promotions help you target the right audience as it tracks each customer.
Therefore you can manage them putting in groups or even individually. This will
help you provide them better service. And when a customer visits your website
32 | P a g e
you can accordingly look into what they are looking for and include the
promotion of that particular product in their newsletter. For example you have
a sports related store and a customer looked into some fitness wear hence you
can include the promotion of that product in their newsletter or emails, etc.
 Purchase tracking
CRM allows you to track each customers purchase separately so you know
their interests and if their product had any issue or any damage. This way you
will be able to provide them better service by having their interests included in
their sms and emails or newsletters. In case of damage or issue you will be able
to provide them with the same item in lower price in their next purchase or
even give free service, etc to provide them to gain more customer satisfaction.
 Loyalty
CRM allows you to focus on each customer individually hence you can pay
attention to their needs more closely. This way you can also focus on your long
term customers and provide them with points, bonuses and rewards which will
help you gain customer loyalty. This way you can have better business as
loyalty will bring you committed customers which will set the level of your sale
and profit in the right track.
 Cost effective
It allows you to manage the customers in the most cost effective way. You can
send out bulk sms and email easily updating them about the upcoming sale,
offers and also allows you to take care of them individually by focusing on their
individual needs. CRM implementation is a simple and cost effective process
it also saves you more income as you will have have lesser staff and lesser
resources to spend on.
 New buyers
CRM does not only manage your old customers or existing customers for you.
It also has an intelligence that helps you identify potential buyers and convert
them into leads which can turn into customers. CRM can help you get their
attention by identifying them for your sales department who can then go
33 | P a g e
ahead and deliver their interests to them from your business”™ side with
sophistication so they show up at your door soon.
Functions of CRM
CRM exists to optimize the management of your customer relationships.
Acting as a centralized source of information, communication, and
engagement, quality CRM software gives businesses a full 360-degree view of
their customer base, from potential prospects right through to committed
brand advocates. By combining a range of features and functionality, CRM
provides businesses with the opportunity to grow their sales, strengthen their
brand and improve the loyalty and satisfaction of their existing audience.
CRM provides a central platform from which customer relationships can be

tracked, maintained, and improved upon. Not only does it enable marketing
and sales teams to better understand the individual prospects that they’re
attracting and nurturing, but it also helps give a broader insight into the
motivations, reservations, and pain points of your customers.
Acting as a “single source of truth” for customer relationships, a customer

relationship management system enables company-wide alignment when it
comes to the way that leads are explored and developed. The processes can be
streamlined and information made is more freely accessible. The result is
happier, more connected, and fully satisfied customers, who feel understood,
supported, and listened to.
34 | P a g e
Difference between Traditional Marketing & CRM
Traditional marketing CRM

 Goal- Expand customer  Goal- Establish a
base, Increase market profitable, long term, One-
share by mass marketing. to-one relationship with
customer understanding
their needs, preferences,
expectations.
 Product oriented view  Customer oriented view
 Mass marketing/mass  Standardization of

production. customer needs.
 Transactional relationship  Rational approach.
35 | P a g e

Session no: 5
Session Topic: Types of CRM Systems & Benefits
YouTube Link: https://youtu.be/XX1TVm-iHyM
36 | P a g e
Session – 5
Types of CRM System and Benefits
What are the types of CRM systems?

There are different types of CRM available, and the best fit will depend on the
need and purpose of the sales and marketing teams in question.
With a well planned customer-centric CRM strategy, one can implement one or
more of the following types of CRM:
1. Operational CRM
Designed to streamline the operations of different departments in a business.
Helps achieve lead generation, conversation, and customer retention.
There are three parts of it:
 Sales force Automation-

Sales CRM is meant to streamline a company’s sales process, enabling its
salespeople to spend more time prospecting and converting.
 Marketing CRM-
Even though they can serve as standalone solutions, marketing automation
tools are often incorporated in CRMs. They form another core part of
operational CRMs.
37 | P a g e
 Service CRM-
Helps create an extraordinary experience for its customers and retain them.
Service automation delegates service tasks to agents via ticketing systems.
Features like live chat, assistance with knowledge bases, and FAQ pages are
also commonly associated with service automation.
2. Analytical CRM
Analytical CRMs gather prospect and customer data for analysis to help the
companies better understand and serve their customers.
These CRMs are generally used to analyze prospect information, customer
preferences, contact data, and other information gathered from customers
both on and offline.
With the data collected, the management can better understand the course of
action needed to increase revenue and make a profit. While salespeople will
know which sales activities work and which don’t.
3. Collaborative CRM
A collaborative CRM solution enables different teams within a company to
work together no matter which part of the world they are in.
A business's sales, marketing, and service departments share customer
information in one system to improve synchronicity and give each department
a better understanding of their customers’ needs, wants, and interests.
Think how much faster you will gain your prospects' and customers' trust when
your teams engage with them in contextual conversations, remember what is
important to them, and respond quickly to their concerns.
4. Social CRM
Social CRM (also known as social customer relationship management) involves
the inclusion of social media channels within a business’s Customer
Relationship Management (CRM) platform. As social media’s popularity
continues to grow, enabling customers to communicate directly with your
business in this fashion can greatly improve the customer service experience.
38 | P a g e
Businesses benefit from a comprehensive overview of communication, as well
as improved marketing insights gathered from the data these CRMs can
generate.
5. Mobile CRM
Mobile CRM relates to the ability to engage with your full CRM platform on a
mobile device. From phones through to tablets, the amount of traffic
generated by mobile sources continues to climb, and so it's increasingly
important that a business can access its customer and CRM data on any device,
anywhere, at any time.
Benefits of CRM:
 Improves Customer Service

CRM manages all your contacts and aggregates lead and customer information
to build profiles of everyone you interact with. This gives you easy access to
important information on customer behavior like purchase records and
previous communications with contacts across different channels (social
media, chat, email, etc.). Customers won’t have to repeat their stories over and
over to you, and you’ll be able to address issues with best practice and less
effort for improved customer loyalty.
 Increase in Sales
Streamlining and improving the sales process, building a sales pipeline,
automating tasks, and analyzing your sales data will inevitably lead to one
outcome—increased sales and sales productivity. CRM allows you to have all
your customer-facing voice, chat, social media, and email touch points
accessible in one place. You’ll clinch more deals by building a repeatable,
proven sales process, and delivering the right message on the right channel at
just the right time.
39 | P a g e
 Retain More Customers
Retention and churn rates are extremely important determiners for a
company’s success; customer churn is a major obstacle to business growth.
CRM tools like sentiment analysis, automated ticketing, and customer support
and customer service automation can dramatically improve your retention by
letting human agents defuse problems. Analytics tools that look at customer
life cycle can show you when churn happens and why, so you can identify and
address pain points.
 Better Analytics
Analytical CRM tools make your data available, intelligible, and relevant to your
business needs. All your heaps of sales data, finance data, and marketing data
flow into CRM to become visible metrics, with data warehousing and data
mining there to make sense of everything. The net benefit is customer
acquisition, customer retention, and better data management.
 Higher Efficiency
Having all your major day-to-day business functions in one place makes for
better workflow, easier collaboration between team members, and better
project management. Task automation eliminates menial, repetitive work and
gives more time for the cognitive tasks humans are best at. Dashboards and
analytics will help you gain insights into your work and optimize all kinds of
business processes.
 Better knowledge sharing
Miscommunication and lack of information transfer are two major time-
wasters. When people take time self-learning to do things other team
members already know how to do, or work on redundant tasks, you’re losing a
lot of hours per week. Collaborative CRM tools can streamline your teamwork
by letting you build a knowledge base, establish best practice workflows, and
allowing for frictionless communication between team members.
 More transparency
CRM allows you to foster greater transparency in your organization by
assigning tasks, showing work and delineating exactly who is who and who is
40 | P a g e
doing what. If your main concern is sales, you can make use of performance
tracking for individual sales agents. CRM allows everyone in your organization
to gain visibility on your business processes, fostering more mutual
understanding and collaboration.
Challenges in CRM:
 Richness of customer data.

 Integrated view of customer information.
 Feedback mechanism from customer.
 Intelligence at operational touch points
 Consistence of communication.
 Convenience of interacting with Insurer.
41 | P a g e

Session no: 6
Session Topic: Customer Service
YouTube Link: https://youtu.be/a2ytQ2jLFYY

https://youtu.be/sV-aQakkMkM
42 | P a g e
Session – 6
Customer Service
The lifeblood of retail businesses has always been sales. But it is customer
service that turns those casual purchasers into loyal customers. Things like
well-trained salespeople, responsive communication, effective use of
technology, showing empathy for customer needs and providing personalized
experiences are just a few retail customer service examples your company can
do to ensure positive outcomes.
People go back to retailers

because they receive a
personalized experience. Your
products may have been what got
them in the door the first time but
keeping them happy and coming
back with repeat business is all
about providing a positive and consistent customer-centric experience. In a
world of retail commoditization, you can make customer service your
competitive advantage.
What is Retail Customer Service all about?

Retail customer service is about providing seamless experiences that tell the
customer that you not only care about making the sale, you care about them
being satisfied with their purchase. Customers value their time – if they need to
seek support either before or after the sale, they want it to be easy, efficient,
and without a lot of hassle.
Why is retail customer service so important?

There is an innate joy for many people when it comes to shopping. Whether it’s
buying a gift for a loved one or treating themselves to something special, the
joy of shopping is the sum total of all parts – the products and the
experience. While its important to make sure you’ve got enough stock and a
variety of products, the experience you deliver is a much bigger factor in
deciding whether a customer will return to your store or not.
43 | P a g e
Here are two reasons why the retail customer service experience is so critical in
today’s competitive landscape:
1. Converting Casual Purchasers into Loyal Customers -
The customer experience doesn’t end when the sale is made, and the customer
leaves the store. A retailer’s customer service strategy and returns policy can
also be a differentiator in the eyes of the customer. 78% of consumers
have bailed on a transaction or not made an intended purchase because of
poor service experience.
If customers can be confident that you will be there to give them support after
the sale and promptly address any problems or concerns without a lot of
hassle, they will be more likely to give you their businesses and may even be
willing to pay a little bit more for your products. According to Harris
Interactive, 9 out of 10 U.S. consumers say they would pay more to ensure a
superior customer experience.
2. Shoppers use feedback, reviews from peers & broadcast bad experiences
online -
Modern consumers are highly engaged in rating, reading and sharing reviews
of products and services online. They also rely heavily on opinions from their
social group in developing brand perceptions and making purchasing decisions.
If your retail customer service is not up to the mark both online and at your
physical stores, it won’t take long for customers to lose patience.
The effect of a bad experience can become amplified when word of it gets out
on social media. Facebook and Twitter are the go-to platforms for customers
to vent their frustrations over poor experiences with a brand and this can be
extremely damaging to your reputation. In fact, once there is a negative word
of mouth in the market, damage control will be even harder to fix.
How Retail Customer Service can differentiate you From Competitors?

70% of buying experiences are based on how the customer feels they are being
treated. While customers set the bar of expectations high for service
experience, most small and medium-size retailers find it hard to meet customer
service expectations.
44 | P a g e
One doesn’t have to be perfect at customer service, but one needs to perform
sufficiently better than their competitors to stand out from the crowd. 81% of
companies with strong capabilities and competencies for delivering customer
experience excellence are outperforming their competition.
Here are a few of the things a retailer can do as to stand out from the
competition:
 Easy Access to Information about Products and Processes
The customer service experience starts before the customer enters your store
(whether that be for a new purchase or for help with a previous purchase).
Most customers will do research online – read reviews, check your store
opening time and maybe your refund policy. You can take advantage of this by
giving this information ahead of time. Set up a FAQ section on your website, or
provide it in the form of support articles. Improving the quality and value of
this information will make the in-person interaction when the customer visits
your store more smoothly.
 Effortless experience and easy-to-access service
Providing a good service experience is only part of the story. You also have to
make it easy for customers to find the information they are looking for. This is
possible either by guiding them to the different channels on which they could
reach you, or offering an exhaustive self-service portal. Whether they are
reaching out on email, chat, social Media or phone, having an omnichannel
presence is key to making the experience as effortless as possible for
customers.
 Effective Communications on the Status of Customer Questions and

Requests
Not every question or a request from a customer can be addressed

immediately. Your customer service teams solve issues with varying degrees of
complexity every day. However, every customer needs to be well informed of
how long the issue is going to take to fix while also providing a reason for the
same.
45 | P a g e
Customers are more empathetic to longer wait times as long as they are kept in
the loop and given timely updates. On the other hand, keeping them in the
dark about how long they have to wait won’t be tolerated and can effectively
make a bad situation, worse. So the important thing is to ensure your
communication is effective. Give customers the right information about the
problem, how long it will take to resolve it, and provide regular status updates.
 Efficient Returns Processes
Returns are the most common request for post-sale support. It also happens to
be a situation where most companies lose happy customers. There are some
companies that have turned it into a differentiator. Their returns policies and
easy-to-use tools/processes are creating a competitive advantage and drawing
more customers in the door.
One example of this is by a US retail chain called Trader Joe’s. They have an
‘unlimited days’ return policy on many of their items, where items purchased at
their store can be returned no matter when they were purchased. They also
don’t ask for a receipt which avoids the problem of trying to find that small
piece of paper you most likely threw away already. This not only encourages
more consumers to choose their store, but they also differentiate themselves
from other retailers.
Small and medium businesses, without the massive customer service budgets,
need to be leaner, smarter and even more personalized. They need the
leverage that technology provides to accomplish the same results with fewer
resources.
Retail Customer Service Tips to Create a Better Experience –
1. Competent Service Representatives and Sales People:
Customers do their research often before coming into the store. When they
engage with a sales or customer service representative, customers expect your
employees to be more knowledgeable about the products you sell than they
are.
46 | P a g e
2. Easy access of information for Customers to Solve Problems on Their Own:
There are many common questions about your products and processes (like
exchanges and returns) that customers don’t need to talk to a person for an
answer. Making this data accessible and informative can help make the
customer service experience simpler for the customer.
3. Personalization:
Customers assume that companies that they do business regularly with them
know something about their needs and preferences through data that is being
collected about them (loyalty cards, mobile apps, surveys, etc.) and they
expect that to result in personalized shopping and customer service
experiences.
4. Engaging at a Time Convenient to the Customer:
As mentioned earlier, customers are busy and their time is valuable. One of the
key reasons customers shop online is because they can do it at a time that is
convenient for them. Brick & mortar retail businesses are at a bit of a
disadvantage because most of them have business hours. Technology can help
them overcome this by making services available to customers even when the
physical store is closed.
5. Predictable and Customer Friendly Processes and Experiences:
When a customer has a question or needs help, they want to talk with
someone who cares, and they want to know ahead of time what to expect in
the process and experience.
6. Manage Expectations with Timely Communications:
Not all issues or questions can (or need to) be addressed immediately.
Customers are generally understanding about this if they know you are
working on it. Regular and timely communication can improve customer
service perception by showing customers that you are still paying attention
and working on the issue, even if they aren’t actively engaged.
47 | P a g e
Retail customer service is about providing seamless
experiences that tell the customer that you care about them as people.
Customers’ time is valuable to them and you need to show them you respect
that by giving them the tools they need to do things on their own and the
friendly/personalized experience when they interact with your employees.
Well trained salespeople, responsive communication, effective use of

technology and showing empathy for customer needs are just a few things
that your company can do to ensure positive outcomes. It is customer service
that turns casual purchasers into loyal customers and one-time sales into long
term company success.
48 | P a g e

Session no: 7
Session Topic: Retail Space Productivity
YouTube Link: https://youtu.be/HeJzDbCTseo
49 | P a g e
Session – 7
Retail Space Productivity
Retail Space Productivity –

Retail space, flow and design are one of the most valuable tools to influence
the shopper’s purchase. Poor aisle and space/shelf design can undermine any
well-intended shopper engagement. Leading retailers recognize that
orchestrating shopper behavior requires disciplined planning that to deliver the
following objectives:
 Attract – Prompt the Shopper to the aisle or category
 Guide – Assist the shopper in finding the solution to their need
 Influence – Encourage the shopper to learn, explore, experiment,
trade up, build baskets
 Optimize – Design the right balance of product availability, labor
costs and inventory turns.
By understanding the shopper motivations, purchase barriers, and behaviors

along the consumer and shopper journey retailers uncover required actions for
effective shopper engagement. Retailers that are successfully translating
these actions are reinventing the shopping experience and driving profitable
growth.
What is Space Management?
It is the process of managing the floor space adequately to facilitate the
customers and to increase the sale. Since store space is a limited resource, it
needs to be used wisely.
Space management is one of the crucial challenges faced by today’s retail
managers. A well-organized shopping place increases productivity of
inventory, enhances customers’ shopping experience, reduces operating
costs, and increases financial performance of the retail store. It also elevates
the chances of customer loyalty.
Optimum Space Use
While allocating the space to various products, the managers need to consider
the following points –
50 | P a g e
 Product Category −
 Profit builders − High profit margins-low sales products. Allocate
quality space rather than quantity.
 Star performers − Products exceeding sales and profit margins.
Allocate large amount of quality space.
 Space wasters − Low sales-low profit margins products. Put them
at the top or bottom of shelves.
 Traffic builders − High sales-low profit margins products. These
products need to be displayed close to impulse products.
 Size, shape, and weight of the product.
 Product adjacencies − It means which products can coexist on display.
 Product life on the shelf.
Retail Floor Space
Here are the steps to take into consideration for using floor space effectively −
 Measure the total area of space available.
 Divide this area into selling and non-selling areas such as aisle, storage,
promotional displays, customer support cell, (trial rooms in case of
clothing retail) and billing counters.
 Create a Planogram, a pictorial diagram that depicts how and where to
place specific retail products on shelves or displays in order to increase
customer purchases.
 Allocate the selling space to each product category. Determine the
amount of space for a particular category by considering historical and
forecasted sales data. Determine the space for billing counter by
referring historical customer volume data. In case of clothing retail,
allocate a separate space for trial rooms that is near the product display
but away from the billing area.
 Determine the location of the product categories within the space. This
helps the customers to locate the required product easily.
51 | P a g e
 Decide product adjacencies logically. This facilitates multiple product
purchase. For example, pasta sauces and spices are kept near raw pasta
packets.
 Make use of irregular shaped corner space wisely. Some products such
as domestic cleaning devices or garden furniture can stand in a corner.
 Allocate space for promotional displays and schemes facing towards
road to notify and attract the customers. Use glass walls or doors wisely
for promotion.
Store Layout and Design
Customer buying behavior is an important point of consideration while
designing store layout. The objectives of store layout and design are −
 It should attract customers.

 It should help the customers to locate the products effortlessly.
 It should help the customers spend longer time in the store.
 It should motivate customers to make unplanned, impulsive purchases.
 It should influence the customers’ buying behavior.
Store Layout Formats

The retail store layouts are designed in way to use the space efficiently. There
are broadly three popular layouts for retail stores –
 Grid Layout − Mainly used in grocery stores.
52 | P a g e
 Loop Layout − Used in malls and departmental stores.
 Free Flow Layout − Followed mainly in luxury retail or fashion stores.
Store Design
Both internal and external factors matter when it comes to store design.
Interior Design
The store interior is the area where customers actually look for products and
make purchases. It directly contributes to influence customer decision making.
In includes the following −
 Clear and adequate walking space, separate from product display area.
53 | P a g e
 Free standing displays: Fixtures, rotary displays, or mannequins installed
to attract customers’ attention and bring them to the store.
 End caps: These displays at the end of the aisles can be used to display
promotional offers.
 Windows and doors can provide visual messages about merchandise on
sale.
 Proper lighting at the product display. For example, jewelry retail needs
more acute lighting.
 Relevant signage with readable typefaces and limited text for product
categories, for promotional schemes, and at Point of Sale (POS) that
guides customers’ decision-making process. It can also include hanging
signage for enhancing visibility.
 Sitting area for a few differently abled people or senior citizens.
Exterior Design
This area outside the store is as much important as the interior of the store. It
communicates with the customer on who the retailer is and what it stands for.
The exterior includes −
 Name of the store, which tells the world that it exists. It can be a plain
painted board or as fancy as an aesthetically designed digital board of
the outlet.
 The store entrance: Standard or automatic, glass, wood, or metal? Width
of the entrance.
 The cleanliness of the area around the store.
 The aesthetics used to draw the customers inside the store.
54 | P a g e

Session no: 8
Session Topic: Staff Productivity
55 | P a g e
Session – 8
Staff Productivity
Staff Productivity –
The main driving force behind every retail business is the staff. Without staff,
your store can’t run. That’s why investing in your staff is the most important
thing you can do for your retail business. When you have enthusiastic and
productive staff, sales will soar. With disengaged staff, your business suffers.
Here are 5 ways to maximize staff productivity in your retail store:

1. Hire the Right Staff:
In any business, be it retail or other, it’s vital to hire the right staff. Because
working in a retail store doesn’t require extensive qualifications, retailers tend
to hire staff quickly and with minimal scrutiny, especially during crunch periods
like the holiday season. Store
managers should, however, still hire
carefully.
In-store staffs, especially the front-

line staff, represent your brand and
can make or break it. Customers are
sensitive to service. Unattended
customers, unfriendly service, and
slow checkouts lead to complaining
customers who will eventually stop
shopping at your store.
The human resources department should develop a well-rounded recruitment

process for stores to follow. If you own a small store, there are recruitment
software that allows you to manage the process yourself. Alternatively, you
can outsource to an agency that specializes in retail staff recruitment.
56 | P a g e
2. Train Staff Thoroughly:
Training is the key to staff productivity. The retail industry is fast-moving and
staff needs to meet customer demands quickly and efficiently. They can’t do
that without proper training. Staff should be schooled in every aspect of the
business. This includes in-depth knowledge of the products and brand, an
understanding of the customer profile, and broader knowledge of the industry.
Training shouldn’t stop with induction. Invest in the ongoing training and
development of your staff. It helps keep them motivated and provides an
incentive to remain with the company if continued training will open up
opportunities to advance up the ranks.
3. Communicate Effectively:
One of the biggest stumbling

blocks to retail productivity is
poor communication. Stores
don’t operate in a vacuum.
The management at
headquarters makes decisions
and passes those decisions
down to stores to implement.
Sometimes this means action
needs to be taken the next
day. Inefficient
communication systems are
one of the main reasons next-day tasks are not carried out.
If the line of communication is an email from headquarters to busy store

managers who only check emails occasionally during the day, most stores
probably won’t implement the action promptly. If it’s a promotion that stores
only start running a few days later, that’s a loss of potential sales.
A quick way to deliver information to staff is in a pre-shift meeting. Pre-shift

huddles are also a great way to encourage and praise staff, ask for feedback,
and pump up the vibe.
57 | P a g e
Another way to improve communication is with a platform that allows
everyone in the company to interact. An app like Zipline centralizes
communications and streamlines task management to speed up the execution
of tasks. The app allows for cross-communication between stores and with
headquarters so that everyone is on the same page at the same time.
4. Give Staff The Best Tools For The Job:
Productivity input is directly related

to profit output. However, staff can
only do so much with the tools at
their disposal. If you have an
outdated point-of-sale system,
inaccurate inventory keeping, and a
poor communication system, it
limits staff productivity.
The latest retail software enables

easy reporting, are often cloud-
based, and can automate certain tasks. If your store frequently runs short on
stock, upgrading to a more efficient inventory system can alert staff when
stocks are low so that they can reorder before it runs out.
If there’s a bottleneck at the checkout counters over peak periods, equipping

your sales staff with roving handheld scanners to process a sale anywhere in
the store is a great way to expedite sales.
5. Foster a Culture That Motivates Staff:
Retail is known for low employee engagement and high staff turnover. In the
U.S., staff turnover in the retail sector is at 60% compared to 15% in other
industries.
An undervalued employee isn’t a productive employee and won’t think twice

about moving on to another job. That’s why fostering a company culture that
58 | P a g e
appreciates and recognizes staff performance is important. It helps motivate
and inspire staff to give their best to the company.
Team Building is one way to improve employee engagement and create good
fellowship among employees. This can involve anything from taking the team
out for a fun activity to sales
competitions with rewards like
gift vouchers or bonus pay.
When employee engagement
increases, so does productivity.
Brick-and-mortar stores face

a challenge against online
stores. The crucial difference
between the two is face-to-face
interaction with customers.
Many shoppers still enjoy browsing a physical store but most won’t hesitate to
shop online if in-store service isn’t to their satisfaction. Keeping staff motivated
and engaged ensures customers return time after time.
59 | P a g e

Session no: 9
Session Topic: Sales Management
YouTube Link: https://www.slideshare.net/TroopsAI/what-is-sales-operations
https://youtu.be/fvOYVM5Idao
60 | P a g e
Session – 9
Sales Management
What is Sales Management?
Sales management is the process of developing a sales force, coordinating

sales operations, and implementing sales techniques that allow a business to
consistently hit, and even surpass, its sales targets.
If your business brings in any revenue at all, a sales management strategy is an

absolute must. When it comes to boosting sales performance for any size of
operation, no matter the industry, the secret to success is always precise sales
management processes, which starts with a great sales manager who knows
how to inspire and lead a sales department.
Besides helping a company reach its sales objectives, the sales management
process allows it to stay in tune with the industry as it grows, and the
company's sales process is managed, allowing one to become more in sync
with the team, create a better relationship with the manager, and achieve
better sales results.
Overall, sales management will help businesses and their workers better
understand results, predict future performance, and develop a sense of
control by covering the following three aspects.
Sales Management Process:

An effective sales management process will encompass lead and opportunity
management, sales forecasting, and reporting and management techniques
that empower sales representatives to meet and surpass their targets.
 Setting goals for the sales teams.

 Formulating a sales management strategy to achieve those goals.
 Executing that strategy while managing and motivating staff.
 Evaluation and reporting on results of the strategy.
61 | P a g e
The Three Key Aspects of Sales Management:
There are three “umbrellas” to manage within the sales process:
 Sales Operations
 Sales Strategy
 Sales Analysis
The process will vary from business

to business, especially as you work
your way down the line, but
operations, strategy and analysis
are the three key starting or focal
points.
 Talent management-
 The first step in good management is finding. Hiring and retaining the
best staff.
 Recruitment is an expensive process, but the managers will save
money in the long run if they pay out upfront to secure the best
people for the job.
 Choose highly skilled staff and match candidates carefully to the social
and organizational goals of the business.
 Successful sales organizations have regular training and professional
development, both to stay on top of the industry and to help
motivate staff.
 Feedback Loops-
 The sales profession breeds independent, highly competitive workers
and they are not always the easiest people to manage.
 Effective sales managers know how to take that competition and use
it to motivate everyone.
 Managers can make sure that key performance indicators are clear
and concise.
 Sales staff needs to know exactly what is expected of them and
exactly what happens if they hit or miss a target.
62 | P a g e
 Tracking and Forecasting-
 Sales managers need to work
on forecasting wide range of
numbers, not just quarterly in
the bag, but pipelines for the
future development of sales or
leads as well.
 Real-time tracking and
interaction with sales reps can
help by letting managers make
last-minute adjustments in a
dynamic sales environment.
Functions:
 Analysis of markets thoroughly, including products and market research.

 Adoption of sound and defensible sales-policy.
 Accurate market or sales forecasting and planning the sales-campaign,
based on relevant data or Information supplied by the marketing research
staff.
 Deciding about prices of the goods and services; terms of sales and pricing
policies to be implemented in the potential and existing markets.
 Labelling, Packing for the customer, who wants a container, which will
satisfy his desire for attractive appearance; keeping qualities, utility,
quantity. And correct price and many other factors in view.
 Branding or naming the products or services to differentiate them from the
competitors and to recognize easily by the customer.
 Deciding the channels of distribution foe easy accessibility and timely
delivery of the products and services.
63 | P a g e
 Preparation of customer record-card to the customer loyalty about the
products.
 Arranging for advertising and publicity to inform the customer about the
new products and services and their multiple uses.
 Maintenance of salesman’s records to know their efficiency and to develop
them
Who Benefits from Sales Management?
Sales management in practice positively affects everyone involved in the sales

cycle. The more mature the sales process is and the more the sales manager
adapts and improves it over time, the more likely your team will achieve top
performance.
There are three key stakeholders involved with the sales management process:
the sales manager, salesperson, and customer.
 Sales Manager
A sales manager is someone who directs an organization’s sales team, oversees

its processes, and is typically in charge of talent development and leadership.
Clarity and scope is essential to sales managers, as they typically need to

oversee planning and execution of companywide targets. Having an effective
management process will allow them to drive their company forward. They’ll
have a clearer vision of where they stand amongst their competition and know
how to stay ahead of the competition.
 Salesperson
A salesperson represents their company and is in direct contact with potential

customers whether in person or over the phone or solely online. Salespeople
typically report to and work closely with their sales managers on performance
goals.
64 | P a g e
Sales is tough; to succeed you need to be able to engage your current base
while also expanding your reach. Like the sales manager, scope and clarity via
effective sales management boosts confidence and will give the salesperson
better visibility of their work. If you’re a business owner, consider investing in
sales training for every member of your sales team; it’ll pay off in the long run.
 Customer
The customer will inevitably have a better experience and be more inclined to
benefit from your company and purchase your product or services with an
effective sales management process. They may even spread the word, which
means more business for you and more social proof for future prospects.
With all of these parts working well together, a company can set themselves
up for success, especially against their competitors.
65 | P a g e

Session no: 10
Session Topic: Retail Merchandising
66 | P a g e
Session – 10
Retail Merchandising
What Is Retail Merchandising?
In the retail sector, merchandise is a classification professionals use to

categorize the industry by the types of goods and services offered (e.g.,
automotive parts, shoes, jewelry, etc.). Merchandising is both an activity and a
strategy that contributes to the sale of goods and services by stimulating
interest or otherwise enticing customers to make a purchase (examples include
promotional deals and discounting methods).
Retail merchandising attracts customers to particular goods and services in

various ways. Retail merchandising includes activities and strategies such as
in-store design, the selection of specific merchandise to match a target
market, and the physical and digital marketing of merchandise to customers.
As a form of marketing, promotional merchandising includes programs such as
attractive promotional displays featuring recognizable adult celebrities or
licensing agreements between retailers and entertainment companies that
utilize identifiable animated children’s movie characters.
The goal of retail

merchandising activity is to
support a retail strategy that
generates revenue for the
retailer and value for the
customer. The selection of
retail merchandise and the
type of goods and services a
retailer decides to stock are
key retail strategies.
67 | P a g e
 Retail Strategy: Retail strategy is the how that guides retail management
— how the retailer plans for and directs its resources to accomplish its
objectives. It involves planning for and directing the business processes
involved in satisfying wants and needs and creating customer value at
the end of the retail supply chain by selling goods or services (or both) to
customers for a profit. Levy defines retail strategy in three parts:
 The target market(s) in which a retailer focuses its resources

 The retail format (products and services, pricing, communications,
location) that satisfies the needs of the target market
 How the retailer will build a sustainable (long-term) advantage
over competitors.
Merchandising Strategy: Merchandising strategy involves the tactics (or

business processes) that contribute to the sale of goods and services to the
customer for profit. Tactics within the overall retail strategy include the variety
of merchandise available for sale in store or online and how the retailer
advertises and displays that merchandise to stimulate interest and create a
customer experience. A sound retail strategy involves developing a desirable
retail merchandise mix of products that add unique customer value.
Must-Follow Rules for Retail Merchandising:
Merchandising - the promoting and sale of goods in a store - can become

challenging, especially when some retailers such as independent shops don’t
know exactly what “merchandising” means in practice. If you don't have a
clear working definition, it's tough to succeed at merchandising your store and
turning a profit.
While merchandising can be defined in different terms and using various

strategies, the five rules below can be considered foundational to mastering
the art of merchandising, and make good sense for most retailers. Consider
some statistics about the millennial and Generation Z shoppers, the future
majority of consumers:
 They prefer merchandising methods that allow them to touch and feel.
68 | P a g e
 They often prefer shopping in stores versus online, but only if
merchandised in a way that they find appealing.
 They value merchandising much more than their predecessor
generations.
With this being the case, it makes sense to emphasize and improve
merchandising in your store. While merchandising has always been important,
the new priority being placed on it by these shoppers makes these five rules
your new textbook.
1. Present Merchandise in the Way Customers Want to Buy
Great merchandising entails having what the customer wants to buy, at the
time they want to buy it, at the price they want to pay for it, and in a way, they
want to purchase it. The way in
which customers want
to purchase products has
changed dramatically, from the
peddler in the town square to
the one-click purchase on
Amazon. But customers aren't
really buying specialty items on
Amazon; they’re buying
everyday basics, like garbage
bags and Keurig K-cups for their morning coffee.
How do customers want to buy your specialty products? Figure that out, and
factor it into your merchandising strategy. No matter what products you sell,
you can make them more appealing and accessible with targeted
merchandising. Customers used to be satisfied with simply touching and
feeling merchandise. Today's customer has been trained to interact. Make sure
your displays include a way for the customer to "experience" the product.
2. Discover the Best Merchandise Pricing Through Experimentation
Merchandising a store correctly deals so much with pricing, but there aren’t set
formulas. The basic rule is that the higher the price, the slower the rate of sale.
69 | P a g e
However, this rule may not be true for your store, and you need to experiment
to find out what pricing rules apply.
If you buy something wholesale for $5.00, you may need to sell it at $10.99 to
turn a profit. But you can start with an initial markup to $11.99, then later drop
to $10.99 and see if that really affects the rate of sale. You won’t know unless
you experiment. Pricing doesn't have to be difficult; you just need to test the
waters by reprising and tracking sales to figure out what customers are willing
to pay.
3. Offer Three Categories of Merchandise
Think of your merchandise as it would exist on a bell curve. On the right side of
the curve lives expensive, prestigious merchandise that makes up 10 percent of
your store’s products. Every store needs these products, even if customers
don’t always buy them, because they "wow" customers.
On the left side of the curve lives the promotional merchandise, which also
makes up 10 percent of your store’s products. Every retail store needs these
products too, even if they don’t generate a lot of profit, because they also
"wow" customers.
In the middle of the curve lives your bread-and-butter merchandise, the

products that generate the most profit.
Although most of your profit comes from the middle merchandise, customers
talk mostly about the left and right-side products. This is why retailers who
remove the high and low-end products are making a mistake, not realizing
they’re potentially removing the products that generate word-of-mouth
advertising for their business.
In fashion, the high and low-end merchandise is referred to as the throw-away

merchandise. Retailers don’t necessarily sell it, but this merchandise makes
everything else look good.
Don’t get rid of products just because they don’t turn a ton of profit. Evaluate
how those products make your store the right experience for your customer.
Even though these products do not sell at the same rate as others, their
presence is part of your branding as a leader in your retail space.
70 | P a g e
4. A Retailer's Merchandise Should Last Three Months
Ninety days inventory cycle. Why? Because seasons are three months long and
consumption habits for specialty items follow seasonal trends. This may
change if you’re a big, high-volume store that needs only about two weeks
worth of merchandise at any given time. But if you’re a specialty retailer, you
should carry three months' worth. In terms of how much merchandise you
need to turn a profit, get to know the open to thrive strategy.
5. Merchandise Should Fit the Lifestyle of your Tribe
While merchandising has everything to do with the products you sell, it has
even more to do with the customer who is buying your products. And it’s not
just the demographics that are important; it’s the psychographics, or what
some call lifestyle marketing.
Think about the store “Tommy Bahama”
“Tommy Bahama” doesn’t necessarily market towards a specific demographic

or age, it markets towards a lifestyle: the kinds of ideas, philosophies, and life
experiences wanted by its "tribe." Urban Outfitters and Anthropologie also
make clear examples of this type of merchandising. Anthropologie especially
understands the idea that if you know your tribe, you can sell them lots of
different items from the same store, even items that don't necessarily fit
together, such as clothing and kitchen drawer pulls.
The 6 Types of Merchandise A Retail Store Must Carry:
The success formula in retail is to sell as much merchandise as you can at the
highest possible margin. Sounds simple, right? Most retailers agree with and
operate their stores based on this principle. But it doesn’t mean retailers buy
products they think will be good or simply merchandise they like for their store
and give each a high mark-up. Retailers need to be much more strategic.
The six types of merchandise identified below play a specific and beneficial role
to the profitability of a retail store. And any retailer who wants to survive in
today’s marketplace needs to consistently carry all six types. Customer
71 | P a g e
experience is impacted dramatically by your merchandising skills, and the six
types listed here were identified as major customer experience enhancers.
 Destination Merchandise
Why do customers come to your store? What product do you sell that
motivates customers enough to pass two or three other stores to come to
yours instead? This destination merchandise elevates you above the
competition. It may be a product no one else sells or a product that’s far better
than what your competitor sells. In many cases, it is a limited edition item. But
even if it's regular stock, what do you carry that your competition ignores?
Think of it as your signature merchandise, or what you are known for.
 Image Enhancers
This type of merchandise

wows customers and
heightens their impression of
your business. All retailers
should maintain a level of at
least 10% of this type of
merchandise as part of
their overall inventory mix.
Note that while customers are
wowed by these products,
they don't necessarily buy
them; which is why you want
to keep the amount low and controllable. Image-enhancer merchandise is
necessary to create the wow factor that generates word-of-mouth advertising
among your customers.
 Transaction Builders
When customers buy a transaction-builder item, they are required to purchase

several more products to use it. For example, if someone buys a gallon of paint,
they’ll need to buy a brush, a roller, a drop cloth, and all the other accessories
required to use the paint. Therefore, the store owner can give a huge discount
on the price of the paint and rely on the huge margins of the accessories. Look
72 | P a g e
for ways to incorporate more transaction-building merchandise throughout
your store. And consider bundles for these types of merchandise as well to
help maintain your margins.
Training is a big part of making this type of merchandising work in your store.
Make sure your employees know the strategy. Remember, an employee will
sell the discounted paint and think they did a good job for having sold
something. You need to educate them on the strategy and make sure they are
using their selling skills to add on to the sale.
 Traffic Builders
What merchandise do you carry that attracts customers to your store over and
over again? What products do you carry that keep customers in your store
longer? For example, if you are
a convenience store,
you would want to carry
lottery tickets. While traffic
builders are usually products,
they might also be strong
visual merchandising ideas
features like an interactive
display. These kinds of
products and visual
merchandising techniques
create buying frenzies among consumers.
 Profit Generators
This is the merchandise you sell with high margins. Of course, customers don’t
define these products as “profit generators,” but they should always be
included in the mix of merchandise you sell. Consider buying closeouts from
your vendors so you can get higher margins, but still show a discount to the
customer.
 Turf Protectors
Retailers typically don’t enjoy carrying this type of merchandise, but they must
in order to do business. For example, a travel stop may hate carrying diesel fuel
73 | P a g e
needed by large trucks. They don’t make money on the fuel; they make money
on the other products and services they offer in the store, like coffee, food,
or showers. But no one will come into the store if the retailer doesn’t sell the
diesel fuel. This is proof that the products you sell may not be products you
personally like, so start thinking in terms of what will bring customers into your
store.
74 | P a g e

Session no: 11
Session Topic: Retail Mix
75 | P a g e
Session – 11
Retail Mix
The part of the success of any retailer is taking a strategic plan and breaking it
apart into actionable and meaningful steps that will lead to success. A well
thought out and planned retail mix provides the retailer with a focused
position and helps differentiate them from the competition. A retail mix is the
marketing plan put in place to address key factors such as location, price,
personnel, services, and goods. The retail mix is also referred to as the “6 Ps.”
One important thing to keep in

mind is that any competitive
advantages in the strategy
should help in developing the
retail mix. In addition, the retail
mix should always have the
target market in mind. The
retail mix will differ based on
the store and the type of
product offered to the
customer.
Discussing and evaluating your

retail mix in the organization
offers a number of benefits.
First, you are addressing the
needs of the target market. In
essence it forces the retailer to make the customer top of mind and foremost
in all strategy decisions. It also allows for a business planning strategy within
the retailer. By approaching all six components the retailer is ensuring they
are able to meet the needs of the customer using all these components.
Lastly, it allows the retailer to respond to competition.
For example, a key competitor for JCPenney is Kohl’s. If Kohl’s drops prices a
national brand such as Levi’s, JCPenney might follow suit.
76 | P a g e
Let’s now take a look at the components of the retail mix that are ultimately
the pieces of the retailer’s strategy.
1. Price
What is my pricing strategy? What is my markup

strategy and how does that affect my overall retail
price? One must make sure to calculate the retail
price based on the markup you receive and not the
costs involved. You also want to think about
profitability and relate this back to the goals of
your area as well as your organization.
2. Promotion
What promotional tools will you use to influence

the consumer’s purchase decision and, overall,
their intention to purchase? This is where you also
want to make sure you include a budget that shows
where resources are allocated as well as a time
table for the promotional activities. Remember to
include specific examples of your proposed
promotional activities. Some examples include
online promotions, print advertising, and any
television advertising.
3. Place
What are the hours of operation for your store?

How many employees do you need and when do
you need them? This is where you can also include
a general description of the responsibilities of each
associate along with some type of detailed info on
the organization’s structure. This could also be
dependent upon the area in which you are located
as well as the needs of the customer.
77 | P a g e
4. Product
What type of product do you intend

to carry? What is the depth (how
much you will carry of an item) as
well as the breadth (number of
SKUs) you will carry in your
assortment? What is your
anticipated turn as well as inventory
levels? Later we will discuss in more
detail the importance of inventory turnover and how it contributes to
profitability. This is where you want to make sure you have adequate inventory
levels to meet customer demand. Too much product could lead to excessive
markdowns which deteriorates profitability while too little desired
merchandise might lead to missed sales opportunities. Does your product
meet your customer’s needs?
5. Physical Evidence / Presentation
Will you have a free-standing location? Will you be located in the mall? How is
the location you have chosen a good fit for your target market? It is during this
time you will also want to provide a thorough trade analysis that shows the
population in the area and how
they are a good fit for your
business
6. People / Personnel
How are you selling to your

customers? What kind of
internal marketing supports
your sales team? What are the
graphics that set your store
apart? What does the signage look like inside and outside of your store? These
are all key elements you want to consider.
78 | P a g e

Session no: 12
Session Topic: Merchandise Management
OHP projector/Kyan for YouTube Vide0
You Tube Link : Merchandise Management in Retail: Definition, Components

& Categories - Video & Lesson Transcript | Study.com
79 | P a g e
Session – 12
Merchandise Management
Merchandise Management involves understanding and evaluating the

consumer's buying habits to effectively source, plan, display, and stock
merchandise. Merchandise is a broader concept than a product. It includes
various features with which a product is offered at the store. Merchandising is
the process and function of designing and delivering the product to ensure
customers satisfaction and meet the objective of profit making to the
organization.
Merchandise management is the process through which each retailer decides
what items to carry, how much to have on hand to meet the needs of
customers, where they should be displayed in the store to maximize sales,
and how they should be priced to sell the best and maximize profits.
Merchandise management is a process by which a retailer attempts to:
 Offer the right quantity of the right merchandise.
 In the right place at the right time.
 Meet the company’s financial goals or profit objectives.
In short, Merchandise Management includes:
• Analysis: Understand customers to make ascertain their needs and

desires for good buying decision
• Planning: Plan the merchandise to be sold in the future now
• Acquisition: Acquire merchandise from different vendors
• Handling: Keep the merchandise in proper condition where it can be
sold easily
• Control: Control money spent in procuring merchandise.
80 | P a g e
The six rights of merchandising:
The six rights of merchandising ensure products are displayed correctly and
for maximum impact. Visual merchandisers working in retail are often involved
in both the physical visual implementation and also the planning.
Often the role covers window displays; in–store displays; stock

merchandising; planograms; ticketing and upholding and maintaining
company standards.
 The Right product
The product range must be merchandise that the customer wants – following
current trends or relevant brands. We expect to go into an Apparel retailer and
see the ‘latest look’ for winter and when we are shopping in an electrical
retailer for a flat screen TV we would expect to see common popular brands
such as Samsung and Sony.
 The Right place
The location of the product is of prime importance since it decides the

accessibility to the customer. For example you would expect to see a ‘sale’
product on a trestle table near the front entrance; whereas you might see a
new range displayed on a mannequin with accessories close by.
 The Right time
A lot of merchandise is of a seasonal nature and must be on hand when most

needed by the customer. Think about going into an electrical retailer on a hot
summer day to purchase an air conditioner only to discover they are out of
stock but can offer you many different brands of heaters!
 The Right quantities
A retailer is always aiming for a profitable balance between the volume of sales
and the amount of inventory in store. This is to make sure that there is always
available stock for the customers to buy (avoiding out of stocks) and the
opposite challenge of over stocking which can sometimes lead to discounting
and a loss of profit.
81 | P a g e
 The Right price
Having product at the ‘right price’ is a balance between making sure that it is
high enough to make a profit and yet low enough to meet the competition and
customers’ expectations.
 The Right manner
Having Visual Merchandising standards which allow the team in store to deliver
a consistent visual message to the customer.
For example, colour blocking of wall units, the use of gondolas, or handwritten
versus printed ticketing.
What Does It Take to Succeed in Merchandise Management?
Merchandise managers are vital to the retail management ecosystem. A variety

of specialized roles related to merchandise management exists as well,
including specialty buyers, purchasing and vendor managers, sales trainers
and consultants, professional service providers, turnaround managers, supply
chain specialists, and technologists who specialize in inventory management
and POS systems software. The role of a merchandise manager varies but
aligns with retail management philosophy, planning, strategy, and activity.
Retail merchandise management responsibilities include the following
activities:
 Merchandising Planning: The expenses involved in running a retail business

can make or break a retailer because of slim operating margins and strict
competition. In fact, proper retail merchandise planning is so critical to
profitability that the retail industry supports separate job categories for
merchandise planners and the major retail management system software
solutions providers design planning tools and technology for users. The
planning responsibilities for merchandise managers include sales
forecasting, inventory planning, customer trend analysis with vendors,
visual merchandising design, and seasonal store layout.
82 | P a g e
 Merchandise Budgeting: Managing and selling inventory is not an easy task,
and retailers with large amounts of inventory or expensive merchandise rely
on the accuracy of their merchandising budgets. The merchandise
budgeting process requires projecting demand, projecting sales,
determining which costs to attribute (cost of goods sold, marketing
expenses, software cost, shipping) and estimating purchases and reduction
(inventory theft or damage). The budget may be static or flexible,
depending on the business history and retail category, and consists of
projected sales, inventory cost, estimated reduction, and estimated
purchases.
 Inventory Planning: Merchandise managers are responsible for maintaining

accurate inventory levels according to customer demand and operational
capacity. The ultimate goal for retailers is profitability, and there are various
methods used to manage a profitable
inventory. For example, merchandise
managers budget for real-time inventory
expenses to identify how much capital is
available at any given time. This portion of
the merchandise budget is called open to
buy (OTB). For more information on
common retail formulas related to inventory
planning methods, including average inventory, stock-to-sales ratio, sell-
through rate, and stock turnover, visit the article How to Survive and Thrive
in Retail Management.
 Retail Assortment Strategies: Assortment strategy is the process of

planning for the type and number of products a retailer carries.
Merchandise managers plan for how many product variations of a particular
product to carry, as well as how many types of products to carry overall.
This requires determining trade-offs and savvy analysis of customer trends,
operational capacity, and internal capabilities (such as sales staff
experience). Merchandise managers may work for retailers known
as category killers: A retailer using a deep assortment strategy of a limited
number of products to dominate a category and make competition difficult
(for example, Staples’ assortment of business supplies and services). A
83 | P a g e
greater percentage of retail sales
shifting to digital channels makes
category killers less of a threat to
smaller retailers leveraging narrow
assortment strategies.
Assortment Planning
Retailers define the range of products to be sold by width and depth: –
 The width is the number or variety of different product categories.
 The depth is the amount of product and brand variation within an

individual category.
The following factors determine how retailers do their assortment

planning:
1. First, they must adapt their category and product choices to the potential,
but also the limitations of their outlets. Busy stores in city centres might do
better with one type of assortment, perhaps further adapted to suit smaller
floor and shelf space. Larger outlets in suburban malls may need a different
assortment, and so on.
2. Second, retailers often seek to simplify their planning. Rather than plan
for each store, they will group stores with similar characteristics. This
clustering, as it is known, can be done in different ways: by sales revenue
range, by amount of floor space, by shopper demographics, or other.
3. The merchandising mix is the Variety, Breadth and Depth of the products
carried by the retailers.
4. It includes competing brands within a category.
5. Agenda
84 | P a g e
 Maximize the revenue
 Customers make purchases according to their preferences
 Wide & Deep – Many categories & large assortment in each category.
Example- Big Bazaar, Miniso, Walmart
 Wide & Shallow – Many categories & limited assortment in each category.
Example- Zara, H&M
 Narrow & Deep – Few categories & large assortment in each category.
Example- Peter England, Biba
 Narrow & Shallow – Few categories & limited assortment in each category.
Example- Keventers, Hidesign
`Shelf space is at a premium’
Optimal Assortment Planning
 3 Dimensions
 Variety - Refers to the mix in terms of number of different lines the

retailer stocks in the store.
Example- Men’s wear, women’s wear, toys, appliances, cosmetics, sports
goods etc.
 Breadth - Or assortment is the number of merchandise brands that are
found in a merchandise line.
Example- Shoppers Stop carries 6-8 brands of jeans or men's shirts. -
Battle of brands vs. private labels
 Depth - The average number of SKU’s within each brand of individual
merchandise line.
Example- Due to shelf space constraints a 7-11 store may carry only 1-2
fast moving sizes whereas a Wal-Mart may carry all sizes & sufficient
quantity of each.
85 | P a g e
 Retailers task is to find a balance between the above 3 dimensions in
relation to his store, it’s positioning, customer profile & finances.
 Sourcing Planning- A sourcing or tender process is used to select the best

product or service for a certain category of expenditure. When selecting
suppliers through a tender or sourcing process, the buyer works in
collaboration with internal customers or budget holders.
 Pricing Planning- Pricing is the process whereby a business sets the price at
which it will sell its products and services, and may be part of the business's
marketing plan.
 Replenishment Planning- Replenishment Planning determines the best

balance between customer service levels and inventory. Replenishment
Planning reconciles customer demand with an organization's
manufacturing, distribution or procurement capabilities enabling rapid
response to changing requirements.
86 | P a g e

Session no: 13
Session Topic: Principles of Merchandising

87 | P a g e
Session – 13
Principles of Merchandising
Merchandising is delivery of right product at right place and right time to the
targeted customer. The successful operation of merchandising dependents on
following principles:
1. Offer What Customer Wants: Retailer must offer in his store what the
customer wants or desires. He must select the segment of customer to
whom he has to serve (like rich, middle class, Youngsters, kids, ladies)
assemble the goods that they expect, assort and Offer them at a price, style
and content etc., that is liked by them.
2. Prepare Merchandise Plan: Merchandiser has to finalise the merchandise

plan. Such plan must be based on demands and specialty of each store and
department. Micro details like types of products, brands, price category
etc., have to be planned. And it must be based on past records, consider the
likely changes in fashion, consumption habits.
3. Selection of Sources of Supply: It is said goods well bought are half sold.
Merchandiser has to select vendors or suppliers who meet his requirements
in terms price, quality, delivery and reliability. He has to search the list of
suppliers available locally or at regional or international level depending on
his need and select the supplies who meets his demands. Merchandiser has
to negotiate with the vendor the terms of buying price, terms of delivery,
payment base.
4. Consistency and Change: There should be consistency in merchandise

assortment. Regular customers are habituated to particular lifestyle,
products, price etc. Retailers should be capable of offering regularly as to
what his customer’s desire. Along with this he has to introduce an element
88 | P a g e
of novelty, bringing the gradual change in product, style of operation etc. to
match the changing trend and demand of his customers.
5. Present Right Assortment: Retailers has to present right assortments of

merchandise, i.e., types of product, brand, price range, and other features
that the regular customer expects. Products must be presented category
wise offering convenience and comfort to the customer in selection of
product.
6. CRM (Customer Relationship Management): Sale to a customer is not a

once day affair or a single transaction. A customer who visits a store must
repeatedly visit the store. Retailer has to develop relationship with the
customers.
MERCHANDISING PLANNING PROCESS

Success of any retail organisation depends on its merchandise planning.
Merchandise planning is defined as “Planning and control of merchandise
inventory of the retail firm, in a manner, which balances between the
expectation of target customer and strategy of firm”.
Process of merchandise planning is as follows:
1. Forecast of Sales: Merchandise plan or budget is dependent on estimated
sales. Forecast of sales for entire organisation, department and product
wise is to be made. Further new products to be added or deletion of
product is to be considered. Estimate is made based on past records,
present scenario; impact of fashion economic trend etc., Firm also has to
determine pricing strategy in the sale of product.
2. Merchandise Budget: Estimate is made at head office level that determines

merchandise required for each store or department. Merchandise required
for each department and likewise for each store and for entire organisation.
Along with this firm also makes financial implication of investment in
89 | P a g e
merchandise. Plan ensures that investment on merchandise assures
expected gross profit or return.
3. Merchandise Control: Retailer has to balance between purchase and sale of

merchandise. It is necessary to avoid either over or under stocking of
merchandise. Daily and weekly stock reports are taken to monitor the
movement of stock. Fresh order of purchase is made before the stock
reaches danger level.
4. Assortment Planning: Assortment is arrangement of products category

wise. It is presentation of entire products range classified under categories,
department or section. E.g. – Food section, cosmetics, Garments etc.,
merchandiser has to ensure that there is proper assortment i.e., each
assortment or section must have relevant or related items, every category
must have adequate SKU (Stock keeping units) no shelf , rack, should be
empty. At the same time it should be ensured no department or product
category is overloaded.
MERCHANDISING STRATEGY
Merchandising strategies are an inherent part of any retailer’s success. To
stay relevant in a competitive market, your strategies should vary by
category and should be customized to respond to a particular objective. For
example, you could look to increase traffic towards a particular category or
create excitement by inviting customers to try a new brand or product line
that you've recently introduced. 6 merchandising strategies are:
1. Traffic Building: The aim of the traffic building strategy is to draw your
customers’ attention into the store, then to the aisle, and into a category.
Typically, this strategy is used for products that are price sensitive, are
frequently purchased and have a high degree of household penetration.
2. Transaction Building / Cash Generating: This strategy focuses on

increasing the size of the average category transaction, by
90 | P a g e
encouraging your consumers to purchase complementary products.
For example, if a consumer intends on buying paint, he might also
need to buy complementary items such as brushes, rollers, thinners,
sandpaper, overalls, masking tape or black bags to complete the job.
3. Profit Generating: When identifying your profit-generating categories, you

need to consider three factors. These factors are higher selling price, higher
gross profit % (margin) and categories that have a high GP% and a high stock
turn.
4. Turf Defending: A turf defending category is a category brought in to

maintain and protect a market share against a known competitor. Turf
defending strategies usually consist of aggressive pricing and promotion
strategies and ensuring these categories are positioned and merchandised
optimally.
5. Excitement Generating: This strategy is used to create excitement for a

particular category by communicating a sense of urgency or opportunity to
the consumer. Excitement generating strategies essentially focus on
offering fashionable and innovative products or promotions.
6. Image Enhancing: Image enhancing strategies are used to enhance your

image in any of the following areas: quality, variety, price, service,
presentation, delivery and brands available. This may include anything from
exclusive product offerings, meal solution suggestions, the variety of
product assortments, or competitive pricing.
ROLE OF MERCHANDISE MIX

Merchandise mix is the total set of all products offered for sale by a retailer,
including all product lines sold to all consumer groups. The variety of products
in a retail store is a key for establishing its identity. The term "merchandise
mix" is essentially the product assortment that a retail store offers, whereas
91 | P a g e
some stores have a wide merchandise mix, such as Wal-Mart. If a merchandise
mix is too small or limited, the store runs the risk of being overshadowed by
better-stocked competitors. There are a few key indicators to consider.
 Know What to Stock: To know what products to stock, look at a few key
business metrics, such as your inventory status, price-point analysis, square-
inch analysis, category analysis, and gross margin percentage. Each metric
provides insight into what products are selling. Also review your marketing
results to gain data on average items sold per order, response rates, and
response to offers.
 Know Your Customer Base: It's important not only to know what your
customers have bought in the past but to understand what they might buy
in the future. Since most retailers don't have a crystal ball, they need to find
ways to reasonably predict what customers will want. Customer surveys are
one way to learn what items your customers want and are willing and able
to pay for.
92 | P a g e

Session no: 14
Session Topic: Retail Buying and Merchandising – Types of Merchandise

YouTube Link: https://youtu.be/LrG63GTXq4M
93 | P a g e
Session – 14
Retail Buying and Merchandising – Types of Merchandise
Retail buying and merchandising is a very exciting field that looks at how
retail enterprises go about planning the buying and selling of the right
products, at the right place, right time, in the correct quantities, to the correct
customer and at the correct price.
Buying is one of the most important roles in the retail and consumer sector. It
is the buyers who decide what products the company is going to sell, and from
where it is going to be sourced. Whether a supermarket stocks mangos from
Brazil, or beef from Japan, it will be the buyers who made the decision.
Merchandisers will decide how the products will be displayed and packaged.
Increasingly that means looking at how the products will be displayed in shops,
online or in apps, as well as deciding where to allocate stock around the
network.
Responsibilities and roles in Buying and Merchandising:
A job in buying and merchandising brings with it lot of responsibility: if a buyer

misjudges the demand for products, or overestimates, then it could hit a
company's bottom line instantly, and damage the brand long term. The profit
margin can also rely heavily on the buyer's ability to drive negotiations with
suppliers.
One needs good commercial instinct, a thorough understanding of the sector

within which you work and an ability to respond quickly when things don't go
to plan.
First and foremost role suits a graduate with commercial empathy. Buyers
work very closely with marketers to discuss pricing, customer needs, trends
and strategy so it is vital the graduate naturally puts themselves in the
customer's shoes. It also suits a natural trend setter as buyers sometimes have
to remain months ahead of the consumer and know what future fashions will
be.
94 | P a g e
The ability to draw conclusions from data and make decisions is critical too.
Buyers will constantly review sales data and see what products are selling well
and what are not, in order to decide what to buy in the future.
The Factors to Bring Customers Back into Stores:
1. Admit that your customers don't care about channels.
The time has long passed for retailers to admit that they need to create brand
experiences, enable one-click shopping engagement, and build checkout
experiences that transcend the concept of channels, without having to
duplicate efforts for every place you want to sell. Your customers want to
shop, period. The faster you are in control with a development platform that
supports your 'Commerce Anywhere' mindset so you are able to engage
wherever your customer wants or needs to be, the faster you'll own a next-gen
strategy built on unified marketing, engagement, and service.
2. Create convenient, easy, and appealing online and mobile shopping

experiences linked to physical stores.
Digital transformation is about using innovative technology to engage

customers in the places and ways they prefer to shop, both digitally and
physically. There is little point in trying to compete and defeat an online-only
retailer. Instead, use online to stimulate a visit to a physical store or to start a
shopping transaction that completes in-store or at the curb.
3. Attract digital natives to the store, stem the drift of traditional shoppers to
online, and reclaim customer loyalty.
Embrace your own 'Commerce Anywhere' strategy by bringing digital

experiences (trending online, recommendations) into the store. Simplify and
increase store experience relevance to drive footfall traffic with appointments,
pickups, personalized shopping, shopping lists, and shared carts. Enable your
'Pay Anywhere' mentality to get your staff out from behind the counter and
instead arm them to bring value wherever the customer is ready to transact.
95 | P a g e
4. To go from product-centric to customer-centric, retailers must focus on
delivering value in the experiences customers want.
Build processes and technology that optimize excellent customer outcomes.

Leverage a modern tech stack to capture, interpret, and understand customer
activity, behaviors, and preferences. This creates an insight-driven culture that
uses data and analytics to drive decisions on products, promotions, and how to
use tech to serve customers.
5. Target digital transformation investment for impact and value by

harvesting what you have in legacy systems.
Build modern digital channels and front-end experiences that easily connect to
legacy systems. Leverage the latest cloud architecture to embrace new digital
development and delivery
methods, use new software
tools (APIs, micro services)
and new integration
architectures to create a
single-minded focus on
innovation, speed, and agility.
 MERCHANDISING:
Merchandising includes all the promotions done at a retail store to make the
consumers buy the products at the store. In other words, merchandising is
planning the marketing of products at the right place and right time in the
right quantities to help the retailer reach his goals. Activities that fall under
merchandising are display techniques, spot demos, free samples, point-of-sale
methods, product design, packaging, etc.
96 | P a g e
Types of Merchandise
 Convenience goods: Convenience goods are usually inexpensive and

have a low opportunity cost for customers, but this also means a
higher sensitivity to price. In this case, the main objective for retailers
is to balance out price and demand, ensuring that incremental price
increases don’t have a negative effect on quantities of goods sold.
As a result, to make maximum profit retailers need to ensure they sell

large volumes of convenience goods at a fast pace. Examples of
convenience goods include food, newspapers, cleaning products, and
personal hygiene products .
 Impulse goods: This is a merchandising strategy implemented by

retailers where they stock impulse goods – goods which are purchased
instantaneously without significant thought process – to great effect.
Impulse purchases are never planned – customers simply see them,

pick them up and head to checkout. The most important factors for
impulse goods to sell however lies in display and location. If not well
displayed or located in unassuming sections of the store, they will be
missed.
97 | P a g e
These products are often displayed at till and check out points to
entice customers to quickly add it to their purchases. They include
magazines, sweets, or complimentary products.
 Shopping products: Customers normally compare a number of

alternative brands based on price, quality and content, etc before
making a final decision. There are also psychological and emotional
aspects of this purchase such as acceptance, appreciation or belonging.
For example, many people purchase the iPhone not just for the utility
of the phone but for the association it has with being a status symbol.
Examples of shopping products include clothing, electronics, and
furniture
 Speciality goods: Imagine travelling to another town or locale to a

particular store for a particular purchase. In this case, the store is
known as a speciality store which carries speciality goods. For speciality
goods, customers are prepared to do extensive research, pay much
more and travel long distances if necessary. These products also have a
much higher cost attached to them, causing customers to be much
more selective.
Regarding demand transfer, customers are often not willing to go with

another offering – they will not compare products because they know
exactly what they want. An alternative offering is not acceptable.
Speciality products do not need to be conveniently located either.
Examples may include luxury cars, expensive alcohol, and service
experts.
There are different types of merchandising:
1. Micro merchandising: is where the retailer modifies the arrangement of

various products in shelves in accordance with the customers’ needs and the
local markets.
2. Cross merchandising: involves combining complementary products in the

store placement in order to boost sales.
98 | P a g e
3. Visual Merchandising: is presenting the store in such a way that it will
attract the consumers. It includes decorating the store, floor and wall displays,
three dimensional plans, window displays
etc.
4. Digital merchandising: is making use of
digital displays to attract customers to buy
the products in a store.
5. Promotional merchandising: is where
stores make use of occasions like New
Year, Christmas, festivals etc. to increase
their footfalls and sales. Other types
include automatic, scrambled etc.
Importance of Merchandising:
It is an important aspect of business and marketing. Companies put in a lot
of efforts in ensure that the target customers are aware of the product
offerings of a company. However, simply advertising on media channels does
not drive sales. This is where having merchandises plays a pivotal role in
business. Increasing visibility at stores, retail outlets through display kiosks,
package design, free sample products or merchandise etc is known as
merchandising. Companies put in a substantial amount of money for such
promotions. Merchandising service companies help boost the business for
companies by helping them out with a layout plan for their products &
offerings.
Advantages of merchandising
1. Building incremental revenue: Displaying products, especially best-selling

ones, closer to the customer’s line of sight is one of the merchandising
activities that help shoppers notice products they may not have noticed
otherwise. As goods fly off the shelves, sales will increase rapidly. This shows
that an effective merchandising implementation results in a significant increase
99 | P a g e
in your retail sales and revenue. It helps retailers take full advantage of their
retail space without further store expansion or renovations.
We all have to admit that we buy and consume with our eyes. Using various
merchandising techniques, including storefront displays, product
demonstrations, lighting, product packaging, pricing, sales signages, and
promotional marketing, will drive sales while providing a unique shopping
experience to your shoppers. They may link your appealing merchandising with
your store, which in turn enhances your brand image and increases customer
loyalty to your store.
2. Increase foot traffic: First impressions do make a difference. A neat, well-lit

storefront may attract passersby to notice and come into your store to look
further. And merchandising can help retailers with that. You should apply
merchandising right at the entrance of your store, or perhaps further at your
parking lot if your store has one.
A clean parking lot, manicured grounds, bright storefront signage, and clean
windows may gain customers’ attention and lead their footsteps to your store.
Whether they decide to purchase your products or not is up to your interior
merchandising, product line, and pricing. But at least enhancing your store’s
exterior appearance guarantees an increase in footfall.
3. A flexible and more usable store space: From arranging the layout of the
interior retail space to allocating spaces for different products on aisles,
shelves, all of these activities contribute to a proper merchandising strategy.
These techniques give you more usable store space and more flexibility for
customers to browse your store. More space means that you can handle more
traffic efficiently and direct your shoppers to important sale items and
significant displays. An easy-to-navigate store space makes the overall
shopping experience less of a chore, which can be a plus point in your
customers’ minds and increase your brand perception.
100 | P a g e
Disadvantages of merchandising
1. Fail to update your merchandising: Once is never enough. One of the

downsides of merchandising is that store owners need to change their
merchandising seasonally or keep up to date with the current merchandising
trends. Only that way can they satisfy their current clientele who have set a
pretty high bar for them, and maintain a steady stream of new customers to
their store.
Showcasing too few or too many products or not changing the displays
frequently enough can turn shoppers off from coming into or returning to your
store, which hurts your store sales. Many stores, especially small ones, only
implement merchandising once or twice a year during big holiday seasons or
refuse to change their merchandising display because of their limited budget.
This makes their stores look less attractive compared to others and may result
in shrinking their customer base.
2. Demands on staff: Once you carry out a successful merchandising campaign

and get a lot more footfalls on a daily basis, you will have to deal with, of
course, more sales, more deliveries and more service issues. These issues
translate into longer working hours for your current staff and perhaps hiring
more staff to handle the work. The demand for more staff and the demand for
higher payroll can become the burden for small businesses with limited budget.
3. Increased expenses: It’s now clear that merchandising can cost you a
fortune. The expense of improving your store interior and exterior appearance,
updating them frequently, or hiring merchandising experts can add up quickly.
Although a proper merchandising campaign may cost you time and effort and
be a strain on your pocket initially, it guarantees to expand your customer base
and increase your profitability in the long run. Being comfortable with the
disadvantages of an investment is the very first step to reap the rewards later
in the process.
101 | P a g e
Factors Affecting the Merchandising:
 Size of retail: Whether it is very small, small, medium, large, or very

large.
 Type of store.
 Organisational Structure.
 Merchandise to be carried.
102 | P a g e

Session no: 15
Session Topic: Merchandise Buying, Handling & Vendor Selection

Process

YouTube Link: https://youtu.be/pIuoGfkeucQ

https://youtu.be/0YGiCrZGOlI
103 | P a g e
Session – 15
Merchandise Buying, Handling & Vendor Selection Process
Merchandise buying and handling is a vital part of implementing merchandise

plans. This involves step by step process that consists of the following stages:
1. Collecting information.
2. Selecting vendors.
3. Evaluating merchandise.
4. Negotiation with vendors.
5. Buying merchandise.
6. Receiving and stocking

merchandise.
7. Re-ordering.
8. Re-evaluating.
 Collecting Information:
This is a very first step of merchandise buying and handling process. Once the
firm’s overall merchandise plans are defined, exact information about current
market needs and potential vendors is required. For collecting information, a
retailer/buyer has several possible sources defined as internal and external
sources.
104 | P a g e
It depends on the retailer (buyer) which source he would like to choose.
Normally, global retailers rely on both internal and external sources to have the
better picture of consumers’ requirements. Undoubtedly, the most valuable
source is the ‘study of consumers’. Global retailers like Wall Mart, Spencer and
Noodle Ki Doodle have proper consumer study divisions those continuously
monitor the consumers’ lifestyles, living habits and their changing
demographics in order to study the consumer demand directly.
Vendors (manufacturers and wholesalers), on the other hand, do their own
projections about the future sales and market demand, while finalizing the
‘buying deal’ with retailers. Vendors present these projections through pie-
charts, bar-diagrams and various two and/ or three dimensional charts.
They also inform the retailers how much promotional support will be provided
to them which may have major impact on retailers’ buying decision. But
retailers must understand one thing that they are the one who have to interact
with the customers and are responsible for satisfying the needs of the target
market.
 Selecting Vendors:
Vendor: A vendor is a party in the supply chain that makes goods and services
available to companies or consumers. The term "vendor" is typically used to
describe the entity that is paid for goods that are provided, rather than the
manufacturer of the goods itself. However, it is possible for a vendor to
operate as both a supplier (or seller) of goods and a manufacturer.
How Vendors Work

A vendor, also known as a supplier, is a person or a business entity
that sells something. Large retail store chains such as Target, for example,
generally have a list of vendors from which they purchase goods at wholesale
prices that they then sell at retail prices to their customers.
Some vendors also can sell directly to the customer, as seen with street
vendors and food trucks. In addition, a vendor can act as a business-to-
105 | P a g e
business (B2B) sales organization that provides parts of a product to another
business to make an end product.
 A vendor is a general term used to describe any supplier of goods or

services.
 A vendor sells products or services to another company or individual.
 Large retailers, like Target, rely on many different vendors to supply
products, which it buys at wholesale prices and sells at higher retail prices.
 A manufacturer that turns raw materials into a finished good is a vendor to
retailers or wholesalers.
 Some vendors, like food trucks, sell directly to customers.
After collecting the information about consumers’ demands, the next step is to
select sources of merchandise and to interact with them to select the potential
vendors.
 Company-owned vendors:
As the very name implies, these vendors are owned by the company
themselves. Large retailers have their own manufacturing or wholesale
operations. They work only for particular retailers and provide as per their
requirements.
 External, widely used supplier:
This type of supplier is not owned by the retailer but used frequently by him.
The retailer is buying merchandise for long and is aware about the quality
and services offered by him.
 External, not used supplier:
Retailers may use any one type of supplier as per their requirements,
budget and area of operations or they can use a combination of them. Big
retailers often deal with all types of suppliers. Therefore, after selecting the
106 | P a g e
supplier category, a retailer should interact with them about the buying
terms and conditions.
Vendor Selection Criteria

The purchasing department takes responsibility for the vendor selection which
is an integral part of the procurement management process. The vendor
selection is a subsidiary process that allows clearly stating, defining and
approving those vendors which meet requirements of the procurement
process. The buying department is responsible for creating a list of potential
suppliers and submitting that list to the project manager in order to decide on
the vendors in conference.
However, the ultimate decisions on
the vendors cannot be made
without vendor selection criteria,
so the purchase department in
cooperation with the project
manager needs to develop and use
such criteria.
Often vendor selection criteria vary
between organizations; however,
they need to be identified and included as a component of the inventory
management plan.
The criteria for vendor selection include the following:

 Delivery – An ability of the contractor to procure all required items within
desired delivery dates.
 Quality of the procurement services – An ability of the contractor to
provide products with the expected quality.
 Cost of the procurement services – A comparison of prices provided by
several contractors.
 Past performance – Records on the contractor’s procurement activities
undertaken in the past.
107 | P a g e
Following points must be considered while selecting the vendors:
 Goodwill of the vendor in the market.
 Guarantee and/or warranty offerings.
 Which vendor offers merchandise at the lowest total cost?
 Quality offered by the vendor.
 Will the vendor provide transport storing and other facilities?
 Is vendor’s merchandise line conservative or innovative?
 Is vendor offering credit purchase?
 What promotional support is provided by the vendor?
 How quick will orders be delivered?
 Is vendor interested or will be available for long term relations?
 Evaluating Merchandise:
After deciding upon the source of merchandise, next step is to evaluate the
vendor’s merchandise quality.
 Whether the whole lot be examined, or
 Purchasing be made only on vendor’s description.
Retailer after interacting with suppliers should evaluate merchandise under

purchase consideration. Should each unit of merchandise be examined, Or
items should be bought only on the basis of description and demonstrations
presented by the suppliers.
108 | P a g e
For evaluating merchandise items, retailer has three choices in hand:
 Inspection is a process of examining each item of merchandise

thoroughly before the merchandise procurement and also after delivery.
Jewelry (diamond, gold, platinum and other precious stones) is one of
the examples where retailer inspects all the items of purchase.
 Sampling technique is used when retailer is buying items on regular

basis in large quantity that is perishable, breakable or costly ones.
Therefore, retailer uses Acceptance Sampling method. It simply means
accepting or rejecting the supplier’s merchandise assortment.
 Description buying is a process of merchandise purchase where a

retailer orders the merchandise items after going through supplier’s
pictorial catalogue mentioning the product features, price, size and
other relevant details. For instance, a retailer can order food and
clothing items from a catalogue or concerned company website. On
receipt of items, they are only counted for matching order size.
The method to be followed depends on the items’ features, cost and the
frequency of purchase.
 Negotiation:
Once the retailer has evaluated the merchandise quality and other features, he
negotiates with the vendor for its price and consequent terms and conditions.
Both parties listen to each other carefully and ask questions wherever doubt
arises. Terms and conditions are then decided and contract is made involving
total amount to be paid by the retailer, delivery date, delivery conditions and
other legal aspects. A retailer while negotiating also talks about the conditions
for the re-order.
 Buying Merchandise:
After negotiating the terms and conditions and agreed upon price, a retailer
after placing the size of the order (quantity and quality of each merchandise
category), pays the initial money as per the agreement. Big retailers usually
place the order and pay the bills online through electronic data interchange
(EDI) and quick response (QR) Inventory planning, small retailers due to limited
sources, conclude purchase manually.
109 | P a g e
 Acquiring Merchandise:
It means after paying for the invoices, retailer should receive the merchandise
and stock it properly. While acquiring the merchandise, retailer physically
receive the items, counts the supplies, pays the invoices, marks the items,
displays the items and stock in godowns/warehouses to avoid any pilferage
and damage. In case of centralized buying, goods are received by regional
office/central warehouse and then transferred to chain stores as per their
requirements and order received from them.
In case of central buying, distribution management is the key to store

performance. Buyers/concerned staff should take care while shifting
merchandise to chain stores or warehouses.
Precautions must be taken under this stage:
 Inspect the invoices physically for its accuracy. Once the invoices are
signed and paid, vendor will not be responsible for any loss in transit or in
case of missing items. Therefore, when orders are received, they must be
thoroughly checked for size of order placed and any breakage/pilferage
during transit.
 While unloading merchandise, take precautions that their packing should

not spoil. Further, keep the items at distance and at proper place as
unloading generally causes breakage and mixing of items with one
another.
110 | P a g e

Session no: 16
Session Topic: Merchandise Mathematics
YouTube Link: https://youtu.be/7NpUY2pS7z0

https://youtu.be/7UGsIc9cKDE
111 | P a g e
Session – 16
Merchandise Mathematics
Understanding basic merchandising mathematics is essential in order to carry

on successfully the daily operations of a retail business. A good mathematical
review is beneficial for sharpening skills and improving handling of calculations
with speed and accuracy.
Merchandisers constantly make decisions that require a thorough

understanding of retail mathematics. To be a successful merchandiser you
must both understand this math and be proficient at it. Performing calculations
with speed and accuracy is essential in operating a successful retail, wholesale,
or manufacturing business. To operate a profitable business one must be able
to work effectively with numbers and to visualize numbers quickly.
Retail math is used daily in various ways by store owners, managers, retail
buyers, and other retail employees to evaluate inventory purchasing plans,
analyze sales figures, add-on markup, and apply markdown pricing to plan
stock levels in the store. Although most accounting programs do the math but,
as a business owner or accountant one should know the most common retail
math formulas that are used to track merchandise, measure sales
performance, determine profitability, and help create pricing strategies.
 Acid-Test Ratio
This is a measurement of how well a business could meet its short-term

financial obligations if sales suddenly stopped. The purpose of this calculation
is to determine how easily a company could be liquidated and helps financial
institutions determine creditworthiness. The easier it is to liquidate, the less
risk to the bank or financial institution. Retail stores may have very low acid-
test ratios without necessarily being in danger. For instance, for the fiscal year
ending January 2017, Walmart Inc.'s acid-test ratio was 0.22, while Target
Corp.'s was 0.29, equating to ratios of 0.86 and 0.94, respectively.
Acid-Test Ratio = Current Assets - Inventory ÷ Current Liabilities
112 | P a g e
 Average Inventory
This can be figured by taking an item price and subtracting discounts, plus
freight and taxes. The average is found by adding the beginning cost inventory
for each month plus the ending cost inventory for the last month in the period.
 If calculating for a season, divide by 7.

 If calculating for a year, divide by 13.
Here's a cost example: If a clothing retailer has an average inventory of

$100,000 and the cost of goods sold is $200,000, then you would divide
$200,000 by $100,000 to give you a ratio of 2:1, which can be expressed simply
as 2.
Average Inventory (Month) = (Beginning of Month Inventory + End of Month

Inventory) ÷ 2
 Break-Even Analysis
This is the point in your retail business where sales equal expenses. There is no
profit and no loss.
For example, for a retail store, rent is likely to be the same regardless of the
number of units sold.
Break-Even ($) = Fixed Costs ÷ Gross Margin Percentage
 Contribution Margin
This is the difference between total sales revenue and total variable costs. In
retail, the gross margin percent is recognized as the contribution margin percent.
This is useful information for deciding whether to add or remove products and
make pricing decisions.
Contribution Margin = Total Sales - Variable Costs
113 | P a g e
 Cost of Goods Sold
This is the price paid for a product, plus any additional costs necessary to get
the merchandise into inventory and ready for sale, including shipping and
handling. This method is pretty straight-forward, and very easy to use and
implement in a low-volume, high-cost-per-item retail format.
 Gross Margin
This is simply the difference between what an item cost and the price for which
it sells.
For example, if Store A and B have the same sales, yet Store A's gross margin is
50 percent and Store B's gross margin is 55 percent, it's easy to see which store
is faring better.
Gross Margin = Total Sales - Cost of Goods
 Gross Margin Return on Investment (GMROI)
GMROI calculations assist buyers in evaluating whether a sufficient gross

margin is being earned by the products purchased, compared to the
investment in inventory required to generate those gross margin dollars.
For example, if a store has a sales volume of $1 million a year on an average

inventory of $500,000 that would be pretty good. But $1 million on an average
inventory of $200,000 (though uncommon) would be even better.
GMROI = Gross Margin $ ÷ Average Inventory Cost
 Initial Markup
Initial markup (IMU) is a calculation to determine the selling price a retailer

puts on an item in their store. Some of the things that affect initial markup are
brand, competition, market saturation, anticipated markdowns, and perceived
customer value, to name a few.
114 | P a g e
 Inventory Turnover (Stock Turn)
Inventory turnover is how many times during a certain calendar period a

retailer sells its inventory and replaces it.
Turnover = Net Sales ÷ Average Retail Stock
 Margin
This is the amount of gross profit a business earns when an item is sold.
For example, if one has to pay $15 for each sweater and you then sell it to
customers for $39, your retail margin equals $24.
Margin % = (Retail Price - Cost) ÷ Retail Price
 Net Sales
Net sales is the number of sales generated by a business after the deduction of
returns, allowances for damaged or missing goods, and any discounts allowed.
Net Sales = Gross Sales - Returns and Allowances
 Open to Buy
Open to Buy (OTB) is the difference between how much inventory is needed
and how much is available. That includes inventory on hand, in transit, and any
outstanding orders.
OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month

Inventory - Planned Beginning of Month Inventory
115 | P a g e
 Sales per Square Foot
The sales per square foot data is most commonly used for planning inventory
purchases. This data can also roughly calculate return on investment and is
used to determine rent at a retail location.
Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space
 Sell-Through Rate
This figure is a comparison of the amount of inventory a retailer receives from a

manufacturer or supplier to what is actually sold and is typically expressed as a
percentage.
Sell-Through % = Units Sold ÷ Units Received
 Stock-to-Sales Ratio
Stock-to-sales ratio is the beginning-of-the-month-stock to the number of sales

for the month. The key takeaway is that this ratio is a monthly metric.
Stock-to-Sales = Beginning of Month Stock ÷ Sales for the Month
116 | P a g e

Session no: 17
Session Topic: OTB – Open to Buy
117 | P a g e
Session – 17
Open to Buy (OTB)
Open-to-buy (OTB) is an inventory management system that works with a

retail business. It is the amount of merchandise a retail store can buy during a
certain time period. In other words, it helps determine the amount of
inventory that one will need to purchase to meet customer demand while
maintaining a positive cash flow. An OTB plan helps a retailer stock the right
amount of the right products at the right time by showing the difference
between how much inventory is needed and how much is available.
It is the amount one need to buy products, in order to achieve the set sales
budget for a certain period, usually 6 months. It is calculated at cost and
assigned to different product categories based on each category’s contribution
to total sales.
Open-to-Buy Planning
Good inventory control is critical to ensure an adequate level of stock is on

hand for the number of sales being generated. Having too much inventory or
the wrong type, during certain periods can slow your cash flow and reduce
profits with too many markdowns. On the other hand, if you under-buy
meaning buy too little product and miss sales opportunities, you are not
making your potential profit and are damaging the customer experience. A
retailer can be sure to stock the proper amount of the right products at the
right time by using an open-to-buy plan.
OTB can be calculated in either units or dollars. However, it's best to use
dollars, as there are significant variations in costs between products. OTB is
essentially the difference between how much inventory is needed and how
much is actually available. This includes physical inventory on hand, in transit,
and any outstanding orders.
To take advantage of special buys or to add new products, some of the OTB
dollars should be retained for future stock purchases. This also allows the
retailer to react to fast-selling items and quickly restock shelves.
118 | P a g e
Consider maintaining an OTB plan for your business as a whole, but also plan
for each category of merchandise you stock. The plan can be maintained on
paper, in a spreadsheet, or by purchasing one of the several retail software
packages available that contain OTB programs.
OTB in fashion and season:
It is important to note from the start, that as a replenishment tool, an Open-To-

Buy is not appropriate for all categories of merchandise. It is most appropriate
for fashion merchandise where the specific items may change, but the
departments, classifications and sub-classifications remain relatively stable, and
seasonal merchandise where inventories are brought in at the beginning of the
selling season, and need to be managed down to pre-determined ending level
at the end of the selling season.
In the case of fashion or seasonal merchandise, an Open-To-Buy answers the
question of how much to buy, but not necessarily the question of which
specific items to buy. For that, a detailed assortment plan is necessary, which
lays out exactly what items will be coming in when, and provides a plan for
how all of the individual items come together to form a compelling
merchandise assortment
In contrast, an Open-To Buy is not appropriate as a replenishment tool for day-
in and day-out basics. These staple items are more effectively replenished using
an automatic replenishment program running off of pre-determined minimum
and maximum inventory parameters. In the case of these in-stock basics, an
Open-To-Buy may still serve a valuable budget and control function at a
department or category level.
The Open-to-Buy Formula
OTB calculation is one of the most important tasks to master when starting a
retail business. Failing to calculate the open to buy budget can be detrimental
for the business, due to stock problems that will soon arise from improper
planning.
Calculating Open to Buy is an essential step in the product sourcing process for
the next season and is directly linked to the same period’s sales budget.
119 | P a g e
Whether you are running a multi-brand store or your own private label
business, you will probably need to know how to calculate your OTB.
Planned Sales
+ Planned Markdowns
+ Planned End-of-Month Inventory
- Planned Beginning of Month Inventory
----------------------------------------
= Open-to-Buy (retail)
 Planned Beginning of Month Inventory: How much inventory (in dollars)

you expect to have at the beginning of the month.
 Planned Sales: How much in sales (in dollars) you forecast during a given
month.
 Planned Markdowns: A projection of product markdowns (in dollars).
 Planned Open-To-Buy Dollars: The dollar amount that you have available
to buy more inventory at the end of the month.
 Planned End-Of-Month Inventory: A forecast of balance inventory (in

dollars) at the end of the month. End-of-month inventory carries over to
become the beginning-of-month inventory for the next month.
For example, a retailer has an inventory level of $150,000 on July 1 and planned
$152,000 end-of-month inventory for July 31. The planned sales for the store are
$48,000 with $750 in planned markdowns. Therefore, the retailer has $50,750
OTB at retail.
Note: Multiply that number by the initial markup to reach the OTB at cost. If
our markup is 40%, then our OTB at cost is $20,300. This initial markup is also
known as IMU.
120 | P a g e
Before putting your OTB plan into operation, make sure each number is
realistic and make sense for the way you do business. Keep in mind that many
of the figures in your inventory plan are only guidelines. A guideline is that if
your actual ending inventory is within 5% of your plan, you are doing very well.
Another consideration is inventory turnover. While too little product can mean
missed sales, too much product can cause revenue loss. To assist with
inventory management, inventory turnover is measured as follows:
Sample Six-Month Plan
Six-Month OTB Plan June July August September October November
Beginning of Month 155,000 150,000 152,000 157,000 157,000 165,000

Inventory $
Sales 47,000 48,000 50,000 50,000 52,000 48,000
Markdowns 1,000 750 750 1000 1500 1000
Open-to-Buy 43,000 50,750 55,750 51,000 61,500 37,000
End of Month 150,000 152,000 157,000 157,000 165,000 153,000

Inventory $
Every year, retailers go out of business primarily because their inventory is not
properly managed. One of the biggest contributing factors to retail
mismanagement is the lack of an OTB system.
121 | P a g e

Session no: 18
Session Topic: Planning and Controlling Merchandise Purchase
122 | P a g e
Session – 18
Planning and Controlling Merchandise Purchase
Meaning of Merchandise Planning:
Merchandising is defined as offering right kind of product at right place and in

right price. A retailer has to plan to have in his store the product that is desired
by the customer. Success of any retail organisation depends on its merchandise
planning.
Merchandise planning is defined as “Planning and control of merchandise

inventory of the retail firm, in a manner, which balances between the
expectation of target customer and strategy of firm”.
Strategy of a firm may be profit maximization growth and expansion of its

market. Expectation of customers is always a product that is desired by him and
that satisfies his need. There is interlink between them, i.e., a firm can meet its
target of profit or market share, when it is in a position to stock and sell the
product that is liked by the customer. This call for merchandise planning.
Components of Merchandise Planning:
Following are important components of merchandise planning:
(1) Product:
Product or merchandise is the basic component of marketing mix. Retailer has

to cater to the products that are expected by his segments. He has to maintain
adequate inventory of product category expected by his customer.
Products may be broadly classified into:
 Staple Products- Like food and clothing that have regular demand.
Adequate stock of that is to be maintained.
 Seasonal Products- They are in demand during the season. Adequate
inventory of that is to be augmented before the season and the stock is to
be maintained to sustain the season.
123 | P a g e
 Fashion Products- Goods that are in demand until the fashion prevails.
Retailer has to estimate the quantum of demand to last the fashion trend.
 Fads- the kind of products that have limited period of demand. Retailer
has to be careful to estimate the demand and buy the fad products.
(2) Price:
Another important component of marketing mix. Price is an important variable

in a country like India, where people are price sensitive. Retailer has to
determine his segment and the price range to which they belong. Broadly it can
be classified as low, Medium and premium range.
Retailer has to offer the product that meets price range of his target customers.
Apart from this retailer has to adopt different price strategies like Price
Skimming, Mark down price, discounts price and offers like buy one and get one
depending on demand for the goods and extent of stock. The planning should
be to offer an attractive price package that can result in regular sale, stock
clearance and assure adequate profits.
(3) Range:
Range refers to width, breadth and depth of products offered for sale.
Customers should have opportunity to make choice or selection depending on
the type of retail store i.e.-
Specially store specialises in limited width i.e., particular category (Bata,

Raymond’s) But it must have depth i.e., different designs, number, color, price-
range etc., so that customer can make choice. Departmental store which deals in
long category of products must not only have width, but also must have breadth
(different brands) and depth.
A wide range of product demands more investment in merchandise. Retailer has

to evaluate that there is adequate return on investment made. Apart from this
he has to ensure that merchandise is acceptable and saleable. Buy and store that
range of merchandise that can be sold.
124 | P a g e
(4) Assortment:
It refer to combination of products made available to customer at retail outlet.

Merchandise is assorted and presented category wise and department wise.
Example - Cosmetics, Toiletries, Electronics, Staples, Vegetable, Furniture etc.,

each category further will have different products or different brands at
different size and price level.
Example – Toothpaste, Shampoo, Soaps, etc., are presented in one category of

different brands companies and brands.
Retailer must make systematic assortment or classification. Goods of similar

category must be made available at one place. Items of electronics should not
be placed along with vegetables.
Apart from this retailer must keep adequate SKU (Stock Keeping Unit) of each
item of products. He has to regularly monitor that enough number of
merchandise is available for customer’s choice. He has to ensure that such
assortment of merchandise is convenient for customers to select, and enough
variety is available to choose from.
At the same time, he has to ensure that assortment stock is moving and there is
better turnover. He has to ensure that each line of product is contributing
towards profit. The product line that is not popular may be replaced with a new
and more popular line.
(5) Space:
Products should visible to visiting customer. Retailer have limited floor space, he
should provide adequate space for display of each product. Available space for
display of each product is utilized to showcase and presents goods, through
different types of fixtures, hangers, gondolas, mannequins, fridge depending on
the nature, size, dimension of goods.
125 | P a g e
Retailer will also decide merchandise hierarchy as to how space is to be created
for various category of products. E.g. -Products may be classified as new arrivals,
fads, fashions staples, vegetable, electronics, furniture’s, kids etc.
Retailer has to prioritise the place for different products:
 He has to ensure that the products are visible.

 Customers have convenience and comfort in picking the products.
Merchandise planning is planning of product price, range and assortment.

Every industry will have a different way of approach to merchandise planning
that will suit their specific needs. Retail industries like clothing will have to focus
on the size, color, and design that will be in demand and how many of them they
will be selling. In contrast, an online grocery store will have to focus on selling
different types of edible items and what people will need more in a particular
season.
Nevertheless, there is still a fundamental process of merchandising, which is

followed by most of the companies and around which they structure their plan
of action. It has following implications:
 Finance:
Finance large amount is invested in merchandise the planning regarding price,

product, range etc., must ensure adequate return on investment.
 Marketing:
Retailer has to undertake, marketing measures like advertising sales promotion

etc., to ensure that the merchandise is sold.
 Warehousing and Logistics:
This department has responsibility of receiving, taking account of stock, stock

keeping and dispatching the goods, to stores to departments and stores.
126 | P a g e
 Store Operations:
Each store of department is to be informed regarding merchandise bought. The

store has to initiate measures to clear the sale and to clear stock.
Merchandise planning buying right kind of product, fixing a right kind of price
providing adequate range of products through an appropriate assortment, and
ensure adequate space to showcase and sell the product.
127 | P a g e

Session no: 19
Session Topic: Merchandise Planning Process
YouTube Link:
https://slideplayer.com/slide/4244247/63/video/The+Process+of+Merchandise+
Planning.mp4
128 | P a g e
Session – 19
Merchandise Planning Process
Process of Merchandise Planning:
Success of any retail organisation depends on presenting the merchandise that

is needed by the customer. Firms have to make meticulous planning regarding
type of merchandise to be bought, its presentation, pricing etc., planning
process has to be detailed and elaborate. It must cover every angle of
merchandise management.
Success of organisation depends on buying what the customers wants and

selling it to him in the manner desired by him.
Merchandise planning has to be:
 Time Based:
It must make annual budget of merchandise required. Budget has to be further

broken into quarterly, weekly and daily on requirements.
 Location Based:
Merchandise for entire organisation covering each store under the company’s
umbrella. It should be broken into demand for each individual store.
 Store Based:
Demand of store or each department, category wise, product wise etc.
Micro and macro estimation of merchandise needed that has to be acquired in

right time, right quantity so that it can be sold in right time when demanded by
customer. Planning should ensure optimum stock of each product, because
shortage of stock is lost opportunity of sale. Excess stock is a burden on finance
and cost.
129 | P a g e
Steps involved in the Process of Merchandise Planning are as follows:
1. Forecast of Sales:
Merchandise plan or budget is dependent on estimated sales. Forecast of sales

for entire organisation, department and product wise is to be made. Further
new products to be added, or deletion of product is to be considered. Estimate
is made based on past records, present scenario, impact of fashion economic
trend etc., firm also has to determine pricing strategy in the sale of product.
2. Merchandise Budget:
Estimate of merchandise required is made based on expected sales. Estimate is

made at head office level that determines merchandise required for each store
or department. Merchandise required for each department and likewise for each
store and for entire organisation.
Along with this firm also makes financial implication of investment in

merchandise. Plan ensures that investment on merchandise assures expected
gross profit or return. Plan has to assure that each store and departments is
given adequate stock support to avoid scarcity. At the same time it has to ensure
that there is turn-over of merchandise, if not to adopt strategy like markdown
sales to replenish the stock.
3. Merchandise Control:
Retailer has to balance between purchase and sale of merchandise. It is

necessary to avoid either over or under stocking of merchandise. Daily and
weekly stock reports are taken to monitor the movement of stock. Fresh order
of purchase is made before the stock reaches danger level.
Firms will have their own policy of maintaining stock levels. Control over
inventory can be ensured by monitoring movement of merchandise from the
godown to the store and from there to the department. Adequate control can
minimise the problem of stock clearance, or discount or mark down sale.
130 | P a g e
4. Assortment Planning:
Assortment is arrangement of products category wise. It is presentation of

entire products range classified under categories, department or section. E.g. –
Food section, cosmetics, Garments etc., merchandiser has to ensure that there is
proper assortment i.e., each assortment or section must have relevant or related
items, every category must have adequate SKU (Stock keeping units) no shelf ,
rack, should be empty. At the same time it should be ensured no department or
product category is overloaded.
Assorted merchandise need to be presented making optimum use of space and

positioning the products in racks, hangers etc., so that it is visible, and
comfortable for customer to select.
Why you Need to Plan your Merchandise?
Retailers of modern times might not ask this question because they know how
vital merchandise planning is; however, for the beginners or the ones who think
that it is not that important, here are some of the reasons why you should plan
your merchandise.
 Merchandise planning can help you stock your warehouse in a way that
increases the inventory turnover ratio.
 It decreases inventory carrying costs as there is less unwanted inventory

in the warehouse and hence less labor, less maintenance cost, less loss
through obsolescence as most of the stock is sold, less depreciation of
inventory, etc.
 Brings value addition to the company as your customer very rarely goes
empty-handed and has enough options to compare products to make a
purchase.
 Since you have the right product, in the right quantities, at the right time,
at the right place, and at the right selling price, you don’t have to provide
more discounts to get rid of old inventory, and there are very few out of
stock situations.
131 | P a g e
 You don’t have to go through situations of panic while trying to manage
your inventory and meet the demand.
 Planning merchandise smartly leads to smart investment in inventory i.e.;

your money is tied to only those stocks that will generate revenue.
 Your revenues increase as there are fewer markdowns, and products are
available for sale.
Challenges in Merchandise Planning
Merchandise planning isn’t as easy as it seems on paper. There are a lot of

dilemmas involved in this, and as a smart planner, you need to make correct
decisions to get out of those dilemmas.
 Maintaining a balance between an online and offline retail business
Yes, retailers having business both online and offline have to design a course of
action for both and ensure that the inventory is available for both portals.
Understanding the needs of an online customer and offline customer is the key
because both, though they want a quality product, have a different approach to
shopping. As far as offline is concerned, visual merchandising plays a vital role in
sealing the deal.
You need to have an omni-channel approach to make it work, and therefore you
should have a great connection between all the stores and their inventory. For
that, a centralized inventory management system can help you to accumulate all
the data on one desktop screen.
 Blindly believing the historical data
Most big companies are cursed with this because they have data in abundance,
and it’s straightforward for a planner to get lost in the details of the data and
forget the current situations. Therefore, it’s essential to take the current market
behavior seriously and amalgamate the historical data with the current trends.
132 | P a g e
 How much of the right product is enough?
This is also a balancing act because after you know that a product is right for the
consumers, you need to figure out how much of that correct product is enough.
The quantity is significant because you might think that the merchandise will sell
smoothly, but there is a limit to everything, so you need to understand how
much you should stock without overstocking. You can use the OTB formula i.e.,
open to buy to make sure you are buying in a controlled manner.
 Planning merchandise for international markets
It is very much essential to understand that the plan that works for the domestic
markets may fall flat for the international market, including the choice of
merchandise because of the change in culture, geological demographics, and
weather.
Remember, analyzing previous years’ sales and inventory data and current year’s
trends are very crucial in merchandising. One must use the OTB formula so that
they don’t overspend. Also employing an automated inventory management
system would help you in centralizing your inventory data so that you can plan
your inventory for all the sales channels in a smarter way.
“Business isn’t about investing a lot of money, it’s about investing the correct
amount of money in the correct amount of the correct product at the correct
time to be sold to the correct customers at the correct time. And that’s why
Merchandise Planning is crucial.”
133 | P a g e

Session no: 20
Session Topic: Inventory Management
YouTube Link: https://youtu.be/8NPW9rn2_X8
134 | P a g e
Session – 20
Inventory Management
What is Inventory?
Inventory represents a current asset since a company typically intends to sell

its finished goods within a short amount of time, typically a year. Inventory
has to be physically counted or measured before it can be put on a balance
sheet. Companies typically maintain sophisticated inventory management
systems capable of tracking real-time
inventory levels.
Inventory is accounted for using one of

three methods: first-in-first-out
(FIFO) costing; last-in-first-out
(LIFO) costing; or weighted-average
costing.
What Are the 4 Types of Inventory?

Before getting into details about the
types of inventory control systems, it’s
important to understand the different
types of inventory.
Generally, inventory can be grouped into four primary classifications:
 Raw materials – Raw materials are inventory items used in the manufacturing
process to create finished goods. What is considered a raw material to one
company may be considered finished goods to another. For example, a
company that creates parts or components for machinery or equipment
would consider those components finished goods. A manufacturer that
purchases those components for use in their manufacturing process would
consider the same components raw materials. Raw materials may consist of
things like paper or steel, nuts and bolts, chemicals, wheels, and other items.
 Work-in-progress – Work-in-progress (WIP) inventory includes items that are

currently being processed. WIP inventory can include raw materials and
135 | P a g e
components that are going through the manufacturing process to produce
finished goods as well as finished items that are waiting for final inspection or
quality control. After those final steps are complete, these finished items
would be considered finished goods.
 Finished goods – Finished goods are comprised of all completed items that
are ready for sale to the final customer.
 MRO goods – MRO stands for maintenance, repair, and operating supplies.
MRO inventory consists of items necessary to operate, such as equipment
and machinery, and the items needed for maintaining equipment and
infrastructure. That means MRO inventory can also include items that are
sometimes considered raw materials but in this case are essentially spare
parts. Nuts and bolts are a good example. When nuts and bolts are on hand
to assemble finished products, they’d be classified as raw materials. Extra
nuts and bolts a company keeps in storage to repair equipment, on the other
hand, are classified as MRO. Other examples of MRO inventory include
janitorial supplies such as cleaning solutions, mops, and brooms, tools,
packaging materials, uniforms and gloves, and office supplies such as paper,
pens, calculators, printer ink, and other items.
Inventory can be further classified in several ways depending on the industry,

the company’s operations, and the types of inventory the company manages.
Companies that purchase finished goods and sell them to customers at a
markup have just one type of inventory called merchandising inventory.
Some companies, such as manufacturers, need to manage a variety of

inventory in different classifications, making efficient inventory tracking a
must. To effectively manage inventory, an inventory tracking solution is paired
with an inventory control app or inventory management app.
Inventory Management
Inventory Management refers to the process of ordering, storing, using, and

selling a company's inventory. This includes the management of raw
materials, components, and finished products, as well as warehousing and
processing of such items.
136 | P a g e
For companies with complex supply chains and manufacturing processes,
balancing the risks of inventory gluts and shortages is especially difficult. To
achieve these balances, firms have developed several methods for inventory
management, including just-in-time (JIT) and materials requirement planning
(MRP).
 Inventory management is the

entire process of managing
inventories from raw materials to
finished products.
 Inventory management tries to

efficiently streamline inventories
to avoid both gluts and shortages.
 Two major methods for inventory

management are just-in-time (JIT)
and materials requirement
planning (MRP).
Why inventory management is is important?

Effective inventory management enables businesses to balance the amount of
inventory they have coming in and going out. The better a business controls its
inventory, the more money it can save in business operations.
A business that has too much stock has overstock. Overstocked businesses
have money tied up in inventory, limiting cash flow and potentially creating a
budget deficit. This overstocked inventory, which is also called dead stock, will
often sit in storage, unable to be sold, and eat into a business's profit margin.
But if a business doesn't have enough inventory, it can negatively affect

customer service. Lack of inventory means that a business may lose sales.
137 | P a g e
Telling customers they don't have something, and continually backordering
items, can cause customers to take their business elsewhere.
An inventory management system can help businesses strike the balance

between being under- and overstocked for optimal efficiency and
profitability.
A company's inventory is one of its most valuable assets. In retail,

manufacturing, food services, and other inventory-intensive sectors, a
company's inputs and finished products are the core of its business. A shortage
of inventory when and where it's needed can be extremely detrimental.
At the same time, inventory can be thought of as a liability (if not in an

accounting sense). A large inventory carries the risk of spoilage, theft,
damage, or shifts in demand. Inventory must be insured, and if it is not sold in
time it may have to be disposed of at clearance prices—or simply destroyed.
For these reasons, inventory management is important for businesses of any

size. Knowing when to restock inventory, what amounts to purchase or
produce, what price to pay—as well as when to sell and at what price—can
easily become complex decisions. Small businesses will often keep track of
stock manually and determine the reorder points and quantities using Excel
formulas. Larger businesses will use specialized enterprise resource planning
(ERP) software. The largest corporations use highly customized software as a
service (SaaS – Software as a service) applications.
Appropriate inventory management strategies vary depending on the

industry. An oil depot is able to store large amounts of inventory for extended
periods of time, allowing it to wait for demand to pick up. While storing oil is
expensive and risky, a fire in the UK in 2005 led to millions of pounds in damage
and fines, there is no risk that the inventory will spoil or go out of style. For
businesses dealing in perishable goods or products for which demand is
extremely high and time-sensitive or fast-fashion items, sitting on inventory is
not an option, and misjudging the timing or quantities of orders can be costly.
138 | P a g e
The inventory Management Process
Inventory management is a complex process, particularly for larger

organizations, but the basics are essentially the same, regardless of the
organization's size or type. In inventory management, goods are delivered in
the receiving area of a warehouse -- typically, in the form of raw materials or
components -- and are put into stock areas or onto shelves.
Compared to larger organizations with more physical space, in smaller

companies, the goods may go directly to the stock area instead of a receiving
location. If the business is a wholesale distributor, the goods may be finished
products, rather than raw materials or components. Unfinished goods are then
pulled from the stock areas and moved to production facilities where they are
made into finished goods. The finished goods may be returned to stock areas
where they are held prior to shipment, or they may be shipped directly to
customers.
Inventory management uses a variety of data to keep track of the goods as

they move through the process, including lot numbers, serial numbers, cost of
goods, quantity of goods and the dates when they move through the process.
Inventory management techniques:

Inventory management uses several methodologies to keep the right amount
of goods on hand to fulfill customer demand and operate profitably. This task
is particularly complex when organizations need to deal with thousands of
stock-keeping units (SKUs) that can span multiple warehouses. The
methodologies include:
 Stock review, which is the simplest inventory management methodology

and is, generally, more appealing to smaller businesses. Stock review
involves a regular analysis of stock on hand versus projected future needs. It
primarily uses manual effort, although there can be automated stock review
139 | P a g e
to define minimum stock levels that then enables regular inventory
inspections and reordering of supplies to meet the minimum levels. Stock
review can provide a measure of control over the inventory management
process, but it can be labor-intensive and prone to errors.
 Just-in-time (JIT) methodology, in which products arrive as they are

ordered by customers and is based on analyzing customer behavior. This
approach involves researching buying patterns, seasonal demand and
location-based factors that present an accurate picture of which goods are
needed at certain times and places. The advantage of JIT is customer
demand can be met without needing to keep large quantities of products
on hand and in close to real time. However, the risks include misreading the
market demand or having distribution problems with suppliers, which can
lead to out-of-stock issues.
Just-in-time (JIT) manufacturing originated in Japan in the 1960s and 1970s.

Toyota Motor (TM) contributed the most to its development. The method
allows companies to save significant amounts of money and reduce waste
by keeping only the inventory they need to produce and sell products. This
approach reduces storage and insurance costs, as well as the cost of
liquidating or discarding excess inventory.
 ABC analysis methodology, which classifies inventory into three categories

that represent the inventory values and cost significance of the goods.
Category A represents high-value and low-quantity goods, Category B
represents moderate-value and moderate-quantity goods, and Category C
represents low-value and high-quantity goods. Each category can be
managed separately by an inventory management system. It's important to
know which items are the best sellers to keep enough buffer stock on hand.
140 | P a g e
For example, more expensive category A items may take longer to sell, but
they may not need to be kept in large quantities. One of the advantages of
ABC analysis is that it provides better control over high-value goods, but a
disadvantage is that it can require a considerable amount of resources to
continually analyze the inventory levels of all the categories.
 Materials Requirement Planning(MRP), inventory management method is

sales-forecast dependent, meaning that manufacturers must have accurate
sales records to enable accurate planning of inventory needs and to
communicate those needs with materials suppliers in a timely manner. For
example, a ski manufacturer using an MRP inventory system might ensure
that materials such as plastic, fiberglass, wood, and aluminum are in stock
based on forecasted orders. Inability to accurately forecast sales and plan
inventory acquisitions results in a manufacturer's inability to fulfill orders.
 Economic order quantity (EOQ) methodology, in which a formula

determines the optimal time to reorder inventory in a warehouse
management system. The goal here is to identify the largest number of
products to order at any given time. This, in turn, frees up money that would
otherwise be tied up in excess inventory and minimizes costs.
 Minimum order quantity (MOQ) methodology, in which the smallest

amount of product a supplier is willing to sell is determined. If a business
can't purchase the minimum, the supplier won't sell it to them. This method
benefits suppliers, enabling them to quickly get rid of inventory while
weeding out bargain shoppers.
 First in, first out (FIFO) methodology, in which the oldest inventory is sold
first to help keep inventory fresh. This is an especially important method for
businesses dealing with perishable products that will spoil if they aren't sold
within a specific time period. It also prevents items from becoming obsolete
141 | P a g e
before a business has the chance to sell them. This typically means keeping
older merchandise at the front of shelves and moving new items to the
back.
 Last in, first out (LIFO) methodology, in which the newest inventory is
typically recorded as sold first. This is a good practice when inflation is an
issue and prices are rising. Because the newest inventory has the highest
cost of production, selling it before older inventory means lower profits and
less taxable income. LIFO also means the lower cost of older products left
on the shelves is what's reported as inventory. However, this is a difficult
technique to put into practice, as older items that sit around have a chance
of becoming obsolete or perishing.
 Safety stock methodology, in which a business sets aside inventory in case

of an emergency. The safety stock approach also provides a signal that it's
time to reorder merchandise before dipping into the safety stock. It's a
good idea for businesses to work safety stock into their warehouse
management strategy in case their supply chain is disrupted.
 Days Sales of Inventory (DSI), is a financial ratio that indicates the average
time in days that a company takes to turn its inventory, including goods
that are a work in progress, into sales.
DSI is also known as the average age of inventory, days inventory

outstanding (DIO), days in inventory (DII), days sales in inventory or days
inventory and is interpreted in multiple ways. Indicating the liquidity of the
inventory, the figure represents how many days a company’s current stock
of inventory will last. Generally, a lower DSI is preferred as it indicates a
shorter duration to clear off the inventory, though the average DSI varies
from one industry to another.
142 | P a g e
 Qualitative Analysis of Inventory, there are other methods to analyze
inventory. If a company frequently switches its method of inventory
accounting without reasonable justification, it is likely its management is
trying to paint a brighter picture of its business than what is true. The SEC
requires public companies to disclose LIFO reserve that can make
inventories under LIFO costing comparable to FIFO costing.
143 | P a g e

Session no: 21
Session Topic: Inventory Control System
YouTube Link: https://youtu.be/-54OFCE__qs

https://youtu.be/GutCKICOESw
144 | P a g e
Session – 21
Inventory Control System
Inventory control systems are technology solutions that integrate all aspects of
an organization’s inventory tasks, including shipping, purchasing, receiving,
warehouse storage, turnover, tracking, and reordering. While there is
some debate about the differences between inventory management and
inventory control, the truth is that a good inventory control system does it all
by taking a holistic approach to inventory and empowering organizations to
utilize lean practices to optimize productivity and efficiency along the supply
chain while having the right inventory at the right locations to meet customer
expectations.
There are two different types of inventory control systems available today:
perpetual inventory systems and periodic inventory systems. Within those
systems, two main types of inventory management systems – barcode systems
and radio frequency identification (RFID) systems – used to support the overall
inventory control process.
145 | P a g e
 Main Inventory Control System Types:
 Perpetual Inventory System
 Periodic Inventory System
 Types of Inventory Management Systems within Inventory Control Systems:

 Barcode System
 Radio Frequency Identification (RFID) System
Inventory control systems helps in track inventory and provides with the data
required to control and manage it. No matter which type of inventory control
system you choose, make sure that it includes a system for identifying
inventory items and their information including barcode labels or asset tags;
hardware tools for scanning barcode labels or RFID tags; a central database for
all inventory in addition to the ability to analyze data, generate reports, and
forecast demand; and processes for labeling, documenting, and reporting
inventory along with a proven inventory methodology like just-in-time, ABC
analysis, first-in, or first out (FIFO), or last-in-first-out (LIFO).
How Do Inventory Control Systems Work?

Inventory control systems, such as inventory control apps, offer a variety of
functions that help companies manage various types of inventory. Inventory
control systems typically consist of inventory management apps paired
with barcode tagging to identify inventory assets, and information about each
item is stored in a central database. Barcode labels serve as inventory trackers,
allowing users to bring up information about the item on a computer system,
such as the item’s price, the number of items in stock, the location of an item
within a warehouse, and more.
The best inventory control apps are mobile-compatible, with companion apps
that allow users to track and manage inventory while they move throughout a
facility or from site to site. There are many inventory tracking apps for smart
phones, some of which are mobile-exclusive, while others have desktop
applications to allow users to track inventory from any device. There are also
many inventory tracking apps designed specifically to meet the needs
of warehouse managers. When looking for an inventory management app, look
for features that accommodate your company’s needs, such as trigger alerts
146 | P a g e
when inventory levels reach pre-defined thresholds, re-ordering capabilities,
and analysis and reporting to support functions such as forecasting.
The 2 Types of Inventory Control Systems:
 Perpetual Inventory System
When you use a perpetual inventory system, it continually updates inventory

records and accounts for additions and subtractions when inventory items are
received, sold from stock, moved from one location to another, picked from
inventory, and scrapped. Some organizations prefer perpetual inventory
systems because they deliver up-to-date inventory information and better
handle minimal physical inventory counts. Perpetual inventory systems also are
preferred for inventory tracking because they deliver accurate results on a
continual basis when managed properly.
This type of inventory control system

works best when used in conjunction
with a database of inventory quantities
and bin locations updated in real time
by warehouse workers using barcode
scanners. Inventory management apps
are perpetual inventory systems.
There are some challenges associated with perpetual inventory systems.
 First, these systems cannot be maintained manually and require specialized

equipment and software that results in a higher cost of implementation,
especially for businesses with multiple locations or warehouses. Periodic
maintenance and upgrades are necessary for perpetual inventory systems,
which also can become costly.
 Another challenge of using a perpetual inventory system is that recorded

inventory may not reflect actual inventory as time goes by because they do
not conduct periodic physical inventory counts, a necessary activity even
147 | P a g e
when inventory trackers are used. The result is that errors, stolen items, and
improperly scanned items impact the recorded inventory records and cause
them not to match actual inventory counts.
 Periodic Inventory System
Periodic inventory systems do not track inventory on a daily basis; rather, they
allow organizations to know the beginning and ending inventory levels during a
certain period of time. These types of inventory control systems track
inventory using physical inventory counts. When physical inventory is
complete, the balance in the purchases account shifts into the inventory
account and is adjusted to match the cost of the ending inventory.
Organizations may choose whether to calculate the cost of ending inventory

using LIFO or FIFO inventory accounting methods or another method; keep in
mind that beginning inventory is the previous period’s ending inventory.
There are a few disadvantages of using a periodic inventory system:
 First, when physical inventory counts are being completed, normal business
activities nearly become suspended. As a result, workers may hurry through
their physical counts because of time constraints.
 Periodic inventory systems typically don’t use inventory trackers, so errors

and fraud may be more prevalent because there is no continuous control
over inventory.
 It also becomes more difficult to identify where discrepancies in inventory

counts occur when using a periodic inventory control system because so
much time passes between counts. The amount of labor that is required for
periodic inventory control systems make them better suited to smaller
businesses.
 Barcode Inventory Systems
Inventory management systems using barcode technology are more accurate

and efficient than those using manual processes. When used as part of an
overall inventory control system, barcode systems update inventory levels
148 | P a g e
automatically when workers scan them with a barcode scanner or mobile
device.
The benefits of using bar-coding in your inventory management processes

are numerous and include:
 Accurate records of all inventory transactions.
 Eliminating time-consuming data errors that

occur frequently with manual or paper
systems.
 Eliminating manual data entry mistakes.
 Ease and speed of scanning.
 Updates on-hand inventory automatically.
 Record transaction histories and easily

determine minimum levels and reorder
quantities.
 Streamline documentation and reporting.
 Rapid return on investment (ROI).
 Facilitate the movement of inventory within warehouses and between

multiple locations and from receiving to picking, packing, and shipping.
 Radio Frequency Identification (RFID) Inventory Systems
Radio frequency identification (RFID) inventory systems use active and

passive technology to manage inventory movements.
149 | P a g e
Active RFID technology uses fixed tag readers throughout the warehouse;
RFID tags pass the reader, and the movement is recorded in the inventory
management software. For this reason, active systems work best for
organizations that require real-time inventory tracking or where inventory
security has been an issue.
Passive RFID technology, on the other hand, requires the use of handheld
readers to monitor inventory movement. When a tag is read, the data is
recorded by the inventory management software. RFID technology has a
reading range of approximately 40 feet with passive technology and 300 feet
with active technology.
RFID inventory management systems have some associated challenges.
 First, RFID tags are far more expensive than barcode labels; thus, they
typically are used for higher value goods.
 RFID tags also have been known to have interference issues, especially
when tags are used in environments with a lot of metal or liquids.
 It also costs a great deal to transition to RFID equipment, and the suppliers,
customers, and transportation companies need to have the required
equipment as well.
150 | P a g e
 Additionally, RFID tags carry more data than barcode labels, which means
your system and servers can become bogged down with too much
information.
When choosing an inventory control system for the organization, one should
first decide whether a perpetual inventory system or periodic inventory system
is best suited to their needs.
Then, choose a barcode system or RFID system to use in conjunction with the
inventory control system for a complete solution that will enable them to have
a visibility into their inventory for improved accuracy in scanning, tracking,
recording, and reporting inventory movement.
151 | P a g e

Session no: 22
Session Topic: Merchandise Pricing
YouTube Link: https://youtu.be/00NPBtUn44s

https://youtu.be/2tzd7XivFqk
https://youtu.be/XBmWEduod5k
152 | P a g e
Session – 22
Merchandise Pricing
A retailer must price merchandise in a way that besides satisfying the

customers, achieves profitability for the firm. Pricing is a crucial exercise due to
its direct relationship with a firm’s goals and its interaction with other retailing
matters. A pricing policy, if not appropriate, send a store out of competition.
Price plays an important role in retailing as it explains the interrelationship

between the objectives of the retail store and the components of the retail
mix. A pricing strategy should help retailers earn a profit and, at the same time,
benefit the customers.
A pricing strategy must be consistent over a period of time and consider

retailer’s overall positioning, profits, sales and appropriate rate of return on
investment. Lowest price does not necessarily be the best price, but the lowest
responsible price is the best right price. The difference between price and cost
is profit which can be very high when the sales person wants to exploit an
urgent situation.
Retailers should understand the importance of pricing because it has direct

relation with consumer purchases and perceptions. During pricing decisions,
retailers should also under the price elasticity of customers to price changes in
terms of the quantities bought.
153 | P a g e
The formula to compute price elasticity is given below. The price elasticity is
calculated by dividing the percentage change in the quality demanded by the
percentage change in the price charged. Because in retail market sales usually
decline as prices go up, elasticity tends to be on negative side.
Types of Pricing:
(i) Premium Pricing:
It is a type of pricing which involves establishing a price higher than your

competitors to achieve a premium positioning. You can use this kind of pricing
when your product or service presents some unique features or core
advantages, or when the company has a unique competitive advantage
compared to its rivals. For example, Audi and Mercedes are premium brands of
cars because they are far above the rest in their product design as well as in
their marketing communications.
(ii) Penetration Pricing:
It is a commonly used pricing method designed to capture market share by

entering the market with a low price as compared to the competition. The
penetration pricing strategy is used in order to attract more customers and to
make the customer switch from current brands existing in the market. The
main target group is price sensitive customers. Once a market share is
captured, the prices are increased by the company.
(iii) Economy Pricing:
This type of pricing takes a very low cost approach. Just the bare minimum to
keep prices low and attract a specific segment of the market that is highly price
sensitive. Examples of companies focusing on this type of pricing include
Walmart, Lidl and Aldi.
154 | P a g e
(iv) Skimming Price:
Skimming is a type of pricing used by companies that have a significant

competitive advantages and which can gain maximum revenue advantage
before other competitors begin offering similar products or substitutes. It can
be the case for innovative electronics entering the marketing before the
products are copied by close competitors or Chinese manufacturers.
(v) Psychological Pricing:
It is a type of pricing which can be translated into a small incentive that can
make a huge impact psychologically on customers. Customers are more willing
to buy the necessary products at $4, 99 than products costing $5. The
difference in price is actually completely irrelevant. However, it makes a great
difference in the mind of the customers. This strategy can frequently be seen in
the supermarkets and small shops.
(vi) Neutral Strategy:
This type of pricing focuses on keeping the price at the same level for all four
periods of the product lifecycle. However, with this type of strategy, there is no
opportunity to make higher profits and at the same time, it doesn’t allow for
increasing the market share. Also, when the product declines in turnover,
keeping the same price effects the margins thereby causing an early demise.
This pricing is used very rarely.
(vii) Captive Product Pricing:
It is a type of pricing which focuses on captive products accompanying the core

products. For example, the ink for a printer is a captive product where the core
product is the printer. When employing this strategy companies usually put a
higher price on the captive products resulting in increased revenue margins,
than on the core product.
(viii) Bundling Price:
Ever heard of the offer of 1 + 1 free? In the supermarket, when two different
products are combined together such as a razor and the lotion for shaving, and
155 | P a g e
they are offered as a deal, then we get to experience the bundling type of
pricing first hand. This strategy is mainly used to get rid of excess stocks.
(ix) Promotional Pricing Strategy:
It is just like Bundling price. But here, the products are bundled so as to make
the customer use the bundled product for the first time. This type of pricing
focuses on buying one, and getting a new type of product for free.
Promotional pricing can also serve as a way to move old stock as well as to
increase brand awareness.
(x) Geographical Pricing:
It involves variations of prices depending on the location where the product

and service is being sold and is mostly influenced by the changes in the
currencies as well as inflation. An example of geographic pricing can also be
the sales of heavy machinery, which are sold after considering the
transportation cost of different locations.
156 | P a g e

Session no: 23
Session Topic: Factors affecting Merchandise Pricing
157 | P a g e
Session – 23
Factors Affecting Merchandise Pricing
The following are the factors affecting Merchandise Pricing:
 External Factors-
 Competition:
While fixing the price of the product, the firm needs to study the degree of
competition in the market. If there is high competition, the prices may be
kept low to effectively face the competition, and if competition is low, the
prices may be kept high.
 Consumers:
The marketer should consider various consumer factors while fixing the
prices. The consumer factors that must be considered includes the price
sensitivity of the buyer, purchasing power, and so on.
 Government control:
Government rules and regulation must be considered while fixing the prices.
In certain products, government may announce administered prices, and
158 | P a g e
therefore the marketer has to consider such regulation while fixing the
prices.
 Economic conditions:
The marketer may also have to consider the economic condition prevailing
in the market while fixing the prices. At the time of recession, the consumer
may have less money to spend, so the marketer may reduce the prices in
order to influence the buying decision of the consumers.
 Channel intermediaries:
The marketer must consider a number of channel intermediaries and their

expectations. The longer the chain of intermediaries, the higher would be
the prices of the goods.
 Internal Factors-
 Cost:
While fixing the prices of a product, the firm should consider the cost
involved in producing the product. This cost includes both the variable and
fixed costs. Thus, while fixing the prices, the firm must be able to recover
both the variable and fixed costs.
 The predetermined objectives:
While fixing the prices of the product, the marketer should consider the
objectives of the firm. For instance, if the objective of a firm is to increase
return on investment, then it may charge a higher price, and if the objective
is to capture a large market share, then it may charge a lower price.
 Images of the firm:
The price of the product may also be determined on the basis of the image
of the firm in the market. For instance, HUL and Procter & Gamble can
159 | P a g e
demand a higher price for their brands, as they enjoy goodwill in the
market.
 Product life cycle:
The stage at which the product is in its product life cycle also affects its
price. For instance, during the introductory stage the firm may charge lower
price to attract the customers, and during the growth stage, a firm may
increase the price.
 Credit period offered:
The pricing of the product is also affected by the credit period offered by
the company. Longer the credit period, higher may be the price, and shorter
the credit period, lower may be the price of the product.
 Promotional activity:
The promotional activity undertaken by the firm also determines the price.
If the firm incurs heavy advertising and sales promotion costs, then the
pricing of the product shall be kept high in order to recover the cost.
160 | P a g e

Session no: 24
Session Topic: Retail Pricing Terminologies
161 | P a g e
Session – 24
Retail Pricing Terminologies
Retail pricing terminology defined for “Calculating Markup: A Merchandising

Tool”.
 Billed cost of goods: Gross wholesale cost of goods after deduction for
trade and quantity discounts but before cash discounts are calculated;
invoiced cost of goods.
 Competition: Firms, organizations or retail formats with which the retailer

must compete for business and the same target consumers in the
marketplace.
 Industry: Group or firms which offer products that are identical,

similar, or close substitutes of each other.
 Market: Products/services which seek to satisfy the same

consumer need or serve the same customer group.
 Cost: Wholesale, billed cost, invoiced cost charged by vendor for

merchandise purchased by retailer.
 Discounts: At retail level, price reduction in the current retail price of

goods (i.e., customer allowance and returns, employee discounts).
 Customer Allowances and Returns: Reduction, usually after the

completion of sale, in the retail price due to soiled, damaged, or
incorrect style, color, size of merchandise.
 Employee Discounts: Reduction in price on employee purchases;

an employee benefit and incentive for employee to become
familiar with stock.
 Discounts: At manufacturing level, a reduction in cost allowed by the

vendor.
162 | P a g e
 Cash Discount: Predetermined discount percentage deductible
from invoiced cost or billed cost of goods on invoice if invoice is
paid on or before the designated payment date.
 Quantity Discount: Discount given to retailer based on quantity of

purchase bought of specific product classification or total sum of
purchases over a specified period of time.
 Trade Discount: Series of discounts deducted from manufacturer’s

list price; invoice is billed with discounted price.
 Gross Margin: Dollar or percentage difference between net sales and cost
of goods sold.
 Invoice: Vendor’s bill or itemized statement of items shipped, unit and

extended cost for items and charges for transportation and insurance (if
applicable).
 Keystone: Doubling the wholesale cost of the item to calculate retail price.
 Markdowns: Reduction in retail price of merchandise; reduction in original

retail price of goods; expressed in dollars as difference between the original
retail price and new retail price; expressed in percent as a percent of net
sales or markdown dollars divided by net sales dollars.
 Markup: Amount of dollars added to the cost of goods to determine retail

price; difference between retail price and wholesale cost of goods; must
cover expenses, retail reductions and profit of retailer.
 Average Markup: Markup over product classifications, groups of
items, or over departments and stores; markup determined by
using total cost and total retail of merchandise on order copy;
markup on goods over period of time, or on entire inventory, a
single purchase, or group of purchases.
 Cumulative Markup: Difference between total cost of goods and
total retail of all merchandise handled to date or during a specified
period of time; includes markup on beginning inventory and
purchases during a given period of time.
163 | P a g e
 Individual Markup: Markup calculated for one item of
merchandise or one stock keeping unit (SKU).
 Initial Markup: Original or first markup placed on goods;
difference between delivered wholesale cost and original retail
price of merchandise.
 Gross Markup: Difference between total retail and total cost on
group of items.
 Maintained Markup: Difference between net sales and gross cost
of merchandise sold; difference between delivered cost of goods
and retail that is actually realized.
 Operating Expenses: All expenses, direct (controllable) and indirect (fixed

and variable), incurred while operating a business.
 Pricing: Planning retail price for retailer’s inventory or determining the

amount of money charged by the retailer for a product or services; planning
strategies and policies to price merchandise in retail store.
 Policies: Procedures and guidelines for determining retail price
for retailer’s inventory.
 Strategies: Pricing policies, action plans and techniques, and
guidelines for price adjustments for implementing policies.
 Types: Pricing models to implement pricing strategies.
 Procuring goods: Sourcing, searching for, selecting and buying

merchandise.
 Profit: Results when operating expenses do not exceed net sales or

revenue; money remaining after operating expenses has been subtracted
from gross margin.
 Operating Profit: Money remaining after operating expenses
has been subtracted from gross margin.
 Net Profit: Operating profit minus taxes.
 Profit & Loss Statement: Statement of revenue or net sales, cost of goods
sold, expenses and profit for a specified period of time; Income Statement;
Operating Statement.
164 | P a g e
 Retail Price: The price the consumer pays for the merchandise or the dollar
value of the merchandise the consumer pays to the retailer when making a
purchase.
 Retail Reductions: Customer returns and allowances, employee discounts,

markdowns, shrinkage.
 Sales: Revenue or sales volume for retail store.
 Gross Sales: Total retail prices charged a customer, both cash and
credit, for all merchandise and services before any deductions in
retail price.
 Net Sales: Gross sales less reductions; operating income; sales
volume.
 Shrinkage (Shortage): Difference between book inventory and physical

inventory counts.
 Terms of Sale: Cash discounts, dating, and delivery stipulations specifying

the purchase agreement between retailer and vendor.
 Vendor: Manufacturer, contractor, importer, jobber, wholesaler, other

retailers; source from which retailer purchases goods.
 Wholesale cost: It is also known as the billed cost or invoiced cost of goods.
(When working with calculations, many retailers designate the wholesale
cost as cost of goods sold.) Specifically, it is the amount that the retailer
pays the vendor (i.e., manufacturers, contractors, importers, jobbers,
wholesalers, other retailers) for merchandise purchased for the retail store.
165 | P a g e
References
 https://en.wikipedia.org/wiki/Retail
 https://erply.com/what-is-retail/
 https://www.smartsheet.com/retail-store-operations
 https://www.tradegecko.com/retail-operations
 https://www.creatio.com/page/what-is-crm
 https://www.salesforce.com/in/crm/what-is-crm/
 https://freshdesk.com/customer-support/customer-service-in-retail-a-
differentiatorblog/#:~:text=Retail%20customer%20service%20is%20about,
being%20satisfied%20with%20their%20purchase.
 https://www.yourarticlelibrary.com/customer-management/good-
customer-service-in-retail-management-7-essentials/48344
 https://www.linkedin.com/pulse/space-productivity-index-spi-david-
nguyentiendung#:~:text=Space%20Productivity%20Index%20is%20well,tot
al%20store%20selling%20space%20used.
 https://www.thepartneringgroup.com/retail-consulting-services/buying-
merchandising/retail-space-productivity/
 https://www.workplace.com/blog/employee-productivity
166 | P a g e
 https://egyankosh.ac.in/bitstream/123456789/15023/1/Unit-1.pdf
 https://www.tutorialspoint.com/retail_management/retail_management
_pricing.htm#:~:text=What%20is%20Retail%20Pricing%3F,time%20of%20ch
arging%20the%20customer.
 https://www.investopedia.com/terms/i/inventory-management.asp
 https://www.tradegecko.com/inventory-management
 https://www.tradegecko.com/inventory-management/inventory-control
 https://www.yourarticlelibrary.com/production/7-important-factors-that-
determine-the-fixation-of-price/1093
167 | P a g e
Sample Question Paper 1
Bachelor of Vocation (B.Voc)

Fashion Design Retail (FDR)
Semester-V
Subject: Retail Merchandising
Attempt all questions
Time: 2 Hrs Maximum Marks: 60
Q.1 Choose the right option: (1Markx10=10 Marks)
i. The word Retail is derived from the ................. Word.

a. Latin b. French c. English d. German
ii. In retailing there is a direct interaction with ................

a.Producer b. customer c. wholesaler d. all of these
iii. The main objective of the management is ..................

a. Profitability b. sales growth c. return on investment d. all of these
iv. Who is the last link in the chain connecting the producer and customer?
a. wholesaler b. agent c. retailer d. store keeper
v. ‘NIKE’ is the example of the brand name of .................

a. women's swim wear b. children's wear c. bridal d. sports wear
vi. Retailing creates .............

a. time utility b. ownership utility c. place utility d. all of these
vii. What is the full form of VAT?

a. value added tax b. value additional tax c. very important additional tax
d. value added theory
168 | P a g e
viii. ............... is the next step after recruiting the retail personnel.
a. Supervision b. Compensation c. training d. Selection
ix. E-retailing refers to ................

a. Retailing shopping using the internet b. catalogue shopping c. music store
d. Sales of electronics items in store
x. MRP stands for……………………..

a. Minimum retail price b. Maximum retail price c. Minimum rate of profit
d. Maximum rate of profit
Q.2 Give two examples of each: (1Markx10= 10 Marks)
1. Inventory Planning Methods

_______________________ ,____________________
2. Key Elements of OTB

_______________________ ,____________________
3. Name 2 E-Tailers
_______________________ ,____________________
4. Websites related to fashion

_______________________, ____________________
5. Retail Store Operations

_______________________, ____________________
6. Examples of CRM
_______________________ ,____________________
7. Two elements of retail mix

_______________________, ____________________
8. Companies retail in India

_______________________ ,____________________
169 | P a g e
9. Retail Sectors
_______________________ ,____________________
10. Key players in the World of retail

_______________________, ____________________
Q.3 Match the following: (1Markx5= 5 Marks)
1. Merchandise Strategies a. process, people and physical environment

2. Shrinkage b. customer service
3. Retail Mix c. Inventory control system
4. Email Support d. Merchandise Mathematics
5. ABC analysis e. window and in-store displays
Q.4 Fill in the blanks: (1Markx5= 5 Marks)
a) Merchandising does not consists of ____________ factor. (Forecasts

sales/Customer handling)
b) ____________ is the excess of Net sales over COGS. (Gross profit/Net

profit)
c) Sales forecast, opening stock, closing stock are the parameters of

_____________ (Merchandise budget/Merchandise control).
d) ____________ deciding how much space should be allocated to a

merchandise category. (Space productivity/atmospheric)
e) SKU represents the full form of ____________ (Stock keeping unit/Sales

keeping unit).
Q.5 Arrange the step by step process and involves following stages:
(5 Marks)
Evaluate the merchandise items Finalize the purchase Record

the buying figures Collect information Negotiate the prices
Determine merchandise sources Handle and store merchandise.
170 | P a g e
Q.6 Answer any five of the following: (5 Markx5=25 Marks)
1. Describe retail marketing mix and its types (with diagrams).

2. What is Customer Service and why Customer service is so important?
3. Discuss the implication of OTB system.
4. What is CRM? Why we need CRM.
5. Discuss the inventory control system and its importance in a Retail House
6. Define staff productivity. How can the employee productivity be
improved.
171 | P a g e
Sample Question Paper 2
Term End Examination-Jan 2020
Bachelor of Vocation (B.Voc)
Fashion Design Retail (FDR)
Semester-V
Subject: Retail Merchandising
Attempt all questions
Time: 2 Hrs Maximum Marks: 60
Q.1 Choose the correct option- (1Markx10=10 Marks)

1. ___________________refers to the principles, practices, and guidelines that
an organization follows when interacting with its customers.
a) Customer Resource Management
b) Customer Relationship Management
c) Call Relationship Management
d) Call Recall Management
2. The customer traffic in a store is termed as____________.

a) Store traffic
b) Store population
c) Walk inside
d) Walk-ins
172 | P a g e
3. ______________________= No of transactions / Customer traffic x 100
a) Sell thru
b) Customer Conversion Ratio
c) Average Transaction Value
d) Customer Catch- up Ratio
4. Size of an average shopping cart is termed as________________________

a) Vessel Size
b) Basket Size
c) Holder Size
d) Box Size
5. In “ABC analysis”, A stands for articles of______________

a) Extreme importance
b) Less importance
c) Least importance
d) None of these
6. ROI stands for_________________________.

a) Reverse on Interest
b) Return on Investment
c) Return of Interest
d) Rate of Investment
173 | P a g e
7. BOM stands for _______________________.
a) Base option model
b) Beginning of the month
c) Base of Management
d) None of these
8. GMROI stands for ________________________.

a) Gross Margin Return on Investment
b) General Management of Refund on on Investment
c) Gross Margin Refund on Investment
d) General Management of Reversed Investment
9. _________________ assumes that customers will not buy merchandise

displayed if price fixed are too low. It is based on the price-quality association.
a) None of these
b) Predatory pricing
c) Price skimming
d) Prestige pricing
10. ________________laws prevent retailers from selling certain items for less
than their cost plus a fixed percentage to cover overhead.
a) Minimum wage act
b) Minimum price laws
c) Customer Protection Act
d) None of these
174 | P a g e
Q.2 Give 2 examples each: (1Markx10=10 Marks)
Q.3 Match the following: (1Markx5=5 Marks)
Q.4 Fill in the blanks: (1Markx5=5 Marks)
1.Cash Registers, electronic cash management system or an elaborate

computerized ______________ (POS) system help the retailer to manage the
daily sales and the revenue generated.
2. One satisfied customer brings five more individuals to the store, this is
called __________
3.In order to prevent theft, each and every merchandise should have a
__________ tag.
4. The full form of COGS is ___________________
5. The full form of CRM is ______________________
175 | P a g e
Q.5 Arrange the step by step process and involves following stages: (5 Marks)
People Price Physical environment Product Place

Promotion Process
Q.6 Attempt any 5 : (5 Markx5=25 Marks)
1. Explain the types of Pricing options and pricing objectives.

2. What is SKU? Explain with Example.
3. Explain the vendor selection process.
4. What is OTB, explain its advantages.
5. Write a short note on Retail operations.
6. What are the qualities required for a good vendor?
176 | P a g e

Retail Merchandising Handout Part2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Retail Merchandising Handout Part2

Uploaded by

Copyright:

Available Formats

Handouts & Study Material

Course Title: RETAIL MERCHANDISING

Programme: B.Voc. FDR

Session hrs Topic Mode of Delivery Page

26. Sample Question Papers 168.

Programme: B.Voc. FDR

YouTube Link: https://youtu.be/DeKifBcExvQ

Retail, by definition, is the sale of goods or service from a business to a

A retailer is a person or business that you purchase goods from. Retailers

Retailing is the distribution process of a retailer obtaining goods or services

A supply chain is a process the occurs between companies and suppliers in

 Manufacturers and Wholesalers

 Retailer (also known as the merchant)

Purchases goods from the retailer in small quantities to satisfy demand.

The process of purchasing products by the consumer is called as shopping.

Sometimes individuals do go for shopping but return home empty handed.

Retail Mechanism - How does retail work?

The mechanism of shipping goods to the customer’s doorsteps is called as

Examples - Eureka Forbes operates on this mechanism where experienced

Let us understand the concept with the help of an example.

Programme: B.Voc. FDR

YouTube Link: https://youtu.be/sVyAHreDouE

Retail Store Operations

Traditionally, the term “Store” meant a brick-and-mortar store, but increasingly

Design and aesthetics are a

 Store location: As the adage goes, location, location, location. Visibility

 Creating departments within a store: This is important for item

 Store atmosphere: Lighting, music, and consistent overall store

 Store space management: Avoid clutter and disorganization by

2. Customer Service Functions

The following questions address elements of customer service:

3. Cash, Fraud, and Internal Control Functions

Shoplifting and fraud prevention: Stores devote significant resources (both

Internal controls: Stores develop and maintain internal controls, or standard

4. Product Inventory Responsibilities

These functions fall under inventory management:

-Ordering merchandise: Buyers place orders for products, trying to anticipate

-Receiving stock: Stores receive shipments from suppliers and distributors.

-Merchandise handling: This includes stocking shelves and displays, moving

Managing the supply chain:

Operations people manage relationships with suppliers, distributors and

5. Retail Administration Responsibilities

Training of employees: Employee

Managing of promotions and

Programme: B.Voc. FDR

YouTube Link: https://youtu.be/gv80nU-9fEU

Store Operation Management

What Is Store Operations Management?

The final area of operations responsibility is store operations management.

 Hiring, firing, training, and managing of employees

General Store Opening and Closing

 Employees should be interviewed, hired, on boarded, and trained in a

 Front-end cash procedures ensure proper handling at the POS. This

 Product shipments should be received in a set procedure to ensure

Everybody knows very well that India is a very

 Discounts & Sale

The graph of sales never remains constant. It always

 Coupons & Freebies

There is another marketing strategy to build

Retail management is one of the most important factors to run a retail

Programme: B.Voc. FDR

YouTube Link: https://youtu.be/hnEQq7kNFWo

Customer Relationship Management (CRM)