EVALUATING MERCHANDISING

MANAGEMENT PROCESS
RAGHAV MITTAL
MBA (GENERAL)
SEMESTER- III
A7001917031
 WHAT IS MAERCHANDISING
MANAGEMENT?
It is the science of evaluating human behavior and buying habits in order to determine the way
to stock, display, and sell goods at a retail store. The process wherein you arrange a group of
products that highlights those that you want to sell fast or those that you want people to get
noticed.

Therefore, the increased visibility and appeal of products leads to increase in sale ability. It
includes product packaging, placement, promotion, etc. .
 RETAIL MERCHANDISE
MANAGEMENT PROCESS
• Analyzing:- retailer must be able to correctly identify their customers before they can
ascertain consumer needs & requirements for making a good buying decision.
• Acquisition:- it is because merchandise needs to be procured from others, either distributors
or manufacturers.
• Handling:- it involves where merchandise is needed and to be sold in a proper condition.
• Controlling:- since the function of merchandising involves spending money, it is necessary
to control the amount spent in the process.
 EVALUTING MERCHANDISING
PERFORMANCE
A good performance measure for evaluating a retail firm is ROA. Return on assets is
composed of two components, asset turnover and net profit margin percentage. But ROA is not
a good measure for evaluating the performance of merchandise managers because they do not
have control over all of the retailer’s assets or all the expenses that the retailer incurs.
Merchandise managers have control only over the merchandise they buy (the retailer’s
merchandise inventory assets), the price at which the merchandise is sold, and the cost of the
merchandise. Thus, buyers generally have control over the gross margin but not operating
expenses, such as store operations, human resources, real estate, and logistics and information
systems. There are two methods:–
1. GMROI
2. Sales-to-Stock ratio
 GMROI (GROSS MARGIN RETURN
ON INVENTORY)
It is a critical performance measure for merchandising and buying.
Margin = Turnover at MRP – Cost of Goods Sold
GMROI = (Margin) / (Avg. Inventory Holding)
OR
GMROI = Gross Margin / Avg. Inventory at Cost
Means of getting better GMROI
• Reducing the CoGS by achieving better buying efficiencies.
• Increasing the stock turnover rate by reducing the average inventory held.
 SALES-TO-STOCK RATIO
Inventory Turnover or Merchandise Stock Turnover or Sales-to-Stock Ratio measures how
long inventory is on hand before it is sold.
Inventory Turnover = Net sales / Avg. Inventory at Reatil
OR
Inventory Turnover = Cost of Merchandising Sold / Avg. Inventory at Cost
OR
Inventory Turnover = Units Sold / Avg. Units in Inventory
 OTHER METHODS
• Recorder Point:- considers safety stocks, speed of sale of the product, lead time.
• Economic Order Quantity:- considers sale of product, cost, discounts, cost of holding
inventory.
EOQ = 2DS / IC
D = demand, S = Cost of Placing Order, I = % of annual carrying cost to unit cost, C = Unit
cost of an Item
• Direct Product Profit:- contribution profit of individual retail items in individual stores.
DPP = Item’s Gross Margin + Discounts & Allowances Earned – Direct Handling, Selling and
Inventory Holding Costs.
THANKYOU