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Merchandising
Significance
 What is the hallmark of a successful retail operation?

Introduction Merchandise selection that matches the tastes,

preferences, and expectations
of its target customers
  Merchandise selection effects all aspects of retail
operations

 Funds allocation to hold stock

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

Introduction  Quality,
 Price,
 And
 Selection
  The goal of merchandising

Introduction  Select the right mix of

 products or services
 To sell at the store
  Merchandise is the primary means of satisfying
customers

Introduction  that meets the tastes and preferences of the target

market
 And is consistent with store positioning
 Merchandising framework
Consumer
s
Distributio Retail
Warehouses
n Centres Stores

Consumer
Suppliers s

STORE
Suppliers BUYERS MERCHANDISERS Consumer
MANAGEMENT
s

Suppliers
Retail Objective Consumer
~ Positioning 11/08/20 8
s
  ANALYSIS
 PLANNING
 ACQUISITION
IN DETAIL IT  HANDLING/STOCK MANAGEMENT

MEANS -  CONTROL

 SAID TO BE THE CORE OF RETAIL

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  ANALYSIS – identification of customers and their needs
 PLANNING – as merchandise is purchased 6-12 months
before
 ACQUISITION – bought from wholesalers/vendors

IN DETAIL IT  HANDLING/STOCK MANAGEMENT – where is it needed

and in proper shape
MEANS -  CONTROL – of large money inventory to ensure financial
return

 SAID TO BE THE CORE OF RETAIL

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  Merchandising decisions in retail is equivalent to the
product line decisions in marketing

Analogy  Product decisions involve optimizing the product mix of

the organization whereas merchandising decisions
involve optimizing the merchandise mix for the retail
store

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

LAMPS TABLES CHAIRS

•Table •Kitchen •Dining Room
•Ceiling •Dining Room •Living Room
•Track •End •Bedroom
•Desk •Coffee •Outdoor
•Outdoor •Desk
•Conference
•Computer
Selected
Acme Furniture Co.
Products
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  Variety or Merchandise lines – or categories e.g. dept
store (appliances, shoes, clothing, perfumes, etc.) or
an apparel store (men, women, teens, kids etc.)

Merchandise  Assortment– selection of products / brands/

styles/colours etc. under each business category
classification
 Depth – number of each SKU to be kept. Large stock
raises inventory cost and low stock reduces customer
satisfaction


Merchandise strategy

 Variety + assortment

Variety Hypermarket Department stores

Carrefour Department store
 Big Bazaar Debenhams
High Spencers Shoppers Stop
Westside

Service outlets Specialty stores

McDonald Clarks
KFC Plug Inns
Low Currency exchange Zara
Dunkin Donuts
Shoe city / Shoe Mart

Low High
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assortment
  The heart of merchandising is
 balancing variety, assortment and depth

Merchandise  Example – add a new department (variety) in the

same space – reduce assortment or depth – leads to
strategy reduced customer satisfaction and reduced sales

 Every merchandise decision has three dimensions

 Variety + assortment impact

Constraint Action Trade-off

•Fixed investment •Expand variety •Reduce assortment,

maintain depth for
remaining assortment
factors, or
•Maintain assortment,
reduce depth

•Expand assortment for a

•Reduce variety or depth
product group
•Reduce variety or depth
•Expand depth for a
product item
 Variety + assortment impact

Constraint Action Trade-off

•Fixed variety •Reduce total investment •Reduce assortment or

depth

•Increase assortment of •Increase assortment or

product group reduce depth

•Fixed investment and •Increase assortment for •Reduce depth

fixed variety product group

•Increase depth of •Reduce assortment

product item
Advantages
 Broad Market
 Full Selection of Items
 High Level of Customer
Traffic
 Customer Loyalty
 One-Stop Shopping
 No Disappointed
Customers
Disadvantages
 High Inventory
Investment
 General Image
 Many Items with Low
Turnover
 Some Obsolete
Merchandise

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Advantages Disadvantages
 Broad Market  Low Variety Within
 High Level of Customer Produce Lines
Traffic  Some Disappointed
 Emphasis on Customers
Convenience Customers  Weak Image
 Less Costly Than Wide  Many Items with Low
and Deep Turnover
 One-Stop Shopping  Reduced Customer
Loyalty

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Advantages Disadvantages
 Special Image  Too Much Emphasis on
 Good Customer Choice One Category
in Category(ies)  No One-Stop Shopping
 Specialized Personnel  More Susceptible to
Trends/Cycles
 Customer Loyalty
 Greater Effort Needed
 No Disappointed
to Enlarge the Size of
Customers
the Trading Area
 Less Costly Than Wide  Little (no) Scrambled
and Deep
Merchandising
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Advantages Disadvantages
 Aimed at Convenience  Little Width and Depth
Customers  No One-Stop Shopping
 Least Costly  Some Disappointed
 High Turnover of Items Customers
 Weak Image
 Limited Customer Loyalty
 Small Trading Area
 Little (no) Scrambled
Merchandising

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 Manufacturer (National)
 Private Label (Dealer)

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Buying Organization Formats &
Processes
 A merchandising plan cannot be properly devised and implemented unless the
buying organization and its processes are well defined
 Figure on next slide highlights the range of attributes from which retailers may
choose

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 Formal
Level of Formality
Informal

Centralized
Degree of Centralization
Decentralized

General
Breadth
Specialized

Internal
Source of Personnel External
Resident Buying Office
Cooperative Buying

Merchandising
Philosophy
Buying

Staffing Buyer
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Sales Manager
Merchandise Heirarchy
Company TESCO India

Division Non Food Grocery

Department Health & Beauty

Category Personal Care BabyCare Beauty

Sub Category Hair Care Skin Care Oral Care

Product Group Shampoo Conditioner &

Colorants
Oil & Gels

Product SubGroup Anti-dandruff Regular Herbal

Product XXXXXXXX XXXXXXXX

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XXXXX
Standard Merchandise Classification
Scheme and Organizational Chart

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