Merchandising-• Introduction and definition- each retailer competes for C’s attention and share of wallet. products to b sold r also very important besides right location and communication for the store. e.g. Or else C switches to other store if right size of shirt or any other merchandise is not available.• Success of store is largely based on its ability to provide right goods to C at right- time, and right price• Process of merchandising or merchandise mgt covers all functions involved in identifying the right product , sourcing it and then ensuring that it reaches the end consumer- i.e. merchandising• merchandising is an art and also a science as retailer takes analytical and disciplined approach to merchandising function,• Retailer can place right product in front of right customer at right times leading to growth in revenues and profits thru significant gains in gross margins and hefty reduction in inventories.• Merchandising covers–planning, buying and selling of merchandise. “Goods well bought r half sold”. Achieving 5 rights-1-product,quantity,,place,time and price is key to success to successful merchandising.
• Merchandise management termed as analyzing, planning acquisition, handling and control of the merchandise investment in retail operation.1-analysis -correct identification of needs and requirements of target C enabling a good buying decision.2- planning -estimation of future requirements,3-aqusition -prcurement from producers, 4-handling- reaching where it needed that to in sound condition,5-control- money involved in buying products so necessary financial system /controls .• Merchandising refers to entire process of inventory planning and management in retail organization leads to increase in ROI and finally more profitability.• Steps in merchandise planning Achieve 7 rights in order to satisfy every C’s needs. Retail store must have right products in the right place in store, in the right quantity, with right quality, at the right price ,with the right mix of sizes or variants at the right time. It also involves forecasting sales, estimating consumer demand, and forecasting impacts of any change in retail environments. So the sales r high with an ideal level of inventory holding in store and thus more profit.
• Objectives of M. planning- Profit improvement. Buyer plans procurement for each dept.Entire process of M planning involves finance dept, marketing etc. Stages in M planning- stage -1-developing sales forecast,- includes-1-review of past sale. for the same period 2-Changes if any in economic conditions like slow downs, c’s spending patterns etc 3-analysing changes if any in sales potential, demographic changes4-analysing changes if any in mktg strategies, i.e. if any new store or new merchandise introduced by comp store,5-creating sales forecast-estimates of projected increase for various categories r arrived-outline for what sales 2 b achieved. stage 2- determining m requirements- plan required for serving C with all rights. 2 levels of planning i.e. 1st at creation of budgets and 2nd at assortment plan. 2 methods of m planing-1st- top down 2nd-bottom up. i.e. either from mktg head or from each dept Then budgets r made for planning inventory levels, investments etc which includes-1-productwise sale, 2-stock supports 2 achieve those planned sales, 3-stock reductions if not getting sold,4-purchase levels-procurement levels, 5- gross margins (diff sales revenue and cost of goods. Next stage after budgeting is assortment planning as per hierarchy
• Merchandise Hierarchy M. mix clarity of hierarchy is necessary. (fig)• M.H. is a disciplined way of grouping the m.mix at different levels starting from a high level grouping at Div/dept level to the lowest level of stock keeping unit (SKU).• Grouping may at times b at 4-5 levels (fig) forming platform needed to create suitable mix inline with the vision of store .• Building M.mix on fallowing concepts of hierarchy has advantages- a) define in terms of ratios the mix of elements at each level of hierarchy, b) analyze and drill down thru rungs of hierarchy to the problem areas if any up to sku level. c) based on level of performance related to merchandise, may not b at sku level but at category levels• SKU- unit at lowest level of hierarchy, div-food,-dept-packaged food,-category-sauces-sub-category-tomato,- brand-magi- last options-250 gms, and so on• Range planning- 1st step in planning is merchandise assortment planning. Mix in percentage terms at every rung of the store’s M.H. Range plan step is strategic step normally taken at high levels as a critical success factor for merchandising in terms of sales,
• Category level margin plans is also created to compare and know the gross margins that each level up to sku contributes to the store.• Clear definition of merchandise and the assortment planning is based on hierarchy levels helps in analyzing weekly sales, stock and intake plan etc at the category, sub-category, brand or sku levels. store manager can identify problem if any in sales or inventory holding at each level and take corrective actions. So OTB system needed in buying process. assortment plans helps replenish items after sold and at min and max levels arrived at.• Another way generally for high turnover categories is to trigger off reorders as and when the merchandise is sold with a cap on max stock holding. fmcg in volumes.• Planogram – A graphical/visual presentation of range plan instead of numerical. digitally stored data changed to images. Like space planning software packages graphic based stock mapping -planograms -helps in easy replenishment planning and effective store space utilization• Merchandise assortment planning, base stock mapping— numerical and visual numerical methods enables calculating returns on footage.
• Buying process- A critical function of merchandising.• It begins with preparation of buying plan called OTB. which helps retailer for projections of merchandise requirement and control future buying to maintain uninterrupted flow of each M matching its anticipated sales at desired stock turn rates to give positive cash flow.• OTB as organized buying plan prevents over buying, eliminates confusion and enables retail org to make more profits.• OTB-refers to merchandise budgeted for purchase during a certain period of time for which stocks have not yet been ordered.• It is also a process of forecasting sales and purchases.• It is a planning tool that assists in setting budgets for sales and merchandise inventory levels and in monitoring the current status of the otb quantity remaining to b ordered to meet the budget.• It helps to fix the ideal quantity of stock that shd b in hand at the beginning of any given month and new quantity to b received during the month.
• Elements of efficient otb plan–a) forward sales planning i.e. sales forecast to b prepared in monthly break-up for the entire year and also flexibility to react and reschedule deliveries., b) forward cover i.e. planned stock turns, if 4 stock turn planned /year then stock holding at any point of time is 3 months quantity. c) stock required- based on forward cover planned for the month ,d) opening stock-closing stock of previous month. e) Intake requirement- difference between required closing and opening stock, f) on order-ordered stock, g) open 2 receive, h) closing stock• Advantages of otb-1-enables to estimate working capital req for inventory,2-ensure inventory levels supporting planned sales and GMROI.3-ensures right buy, 4-enables continuous flow,5- enables comparison of stock performance and more profit.• Factors affecting merchandise function -1-retail org- buying function centralized or decentralized geographically as per regional preferences contrary to direct mktg or e-tailing which needs all advanced buying only of unique products at competitive price.2-buying of basic i.e. core merchandise 2 b always kept in stock, 3- role of buyer and role of merchandiser in large org.
• Role and responsibilities of merchandiser- Responsible at category or sub-category level for planning-sales forecast and budgets, directing- guiding buyers, coordinating- 2/3 buyers and controlling-buyers performance and maintain performance levels. Some large org have Div-MM, who also carry somewhat same responsibilities.• Buyers role- select and orders m 2 b sold at store/dept/category level with the help of comps.1-developing m strategies for category,2-planning ad sorting assortments as per demand trends ,economics.3-vendor selection development and management 4-pricing of merchandise- in terms of gross margins,5-inventory mgt- thru timely procurement and avoiding stock- outs, markdown for slow moving m.• Merchandise planning – and control of the merchandise inventory of the retail firm in a manner which balances between expectations of target C and strategy of the firm.• Proper merchandise planning and buying is beneficial to both customer and retailer. Retailer gets benefit as planned buying process enhances 1-the possibility of right assortments with adequate depth and width, 2-posibility of increased stock turns,3- so better working capital mgt as funds gets released on time to time.
• The process of merchandising management- (Fig)• Implications of M. Planning- (fig), fallowing functions in retail org r involved with M planning-1. Finance- finance dept involved as soon as purchase order is placed in line with overall objective of profit of the store. who make payment and calculate projected profitability of the merchandise p.o.2. Marketing- they need to create suitable campaigns for c.p.3. Warehousing and logistics- get ready to receive and physical verification of fresh stock. discrepancies to b informed to finance with dispatch details as per assortments if chain of stores for redistribution from rdc.4. Store operation- communicate to store manger so as to plan space and avoid duplication if purchase powers r authorized at each store levels.• An interaction with sales staff is needed by the buyer of M to make aware of needs and wants and to get valuable insights as to why particular product is selling and not-selling.• An analysis of trade info thru journals, surveys needs to b gathered and analyzed by the buyer.
• Merchandise classification- on the basis of hierarchy e.g. Household electronics is one class and its categories could b kitchens appliances, home entertainment etc• Few terms generally used in merchandising-1. staple/basic/classic m- which r always in steady demand in store e.g. sugar, or white shirts, or stationary etc in different classifications2. Fashion m-high demand for short/limited period. excessive buying may result in mark downs. e.g. short and long jeans etc a style of a time, get outdated as per trends..3. Seasonal m- sells over non-consecutive periods- rainwears, winter wears4. Fad m.- enjoy popularity for a short period.5. Style- unique shape or form of any product, specialized type of expression, taste etc6. Assortment- selection of m carried by retailer including breadth and variety. Variety- different lines stocked- m/w/c wears ,Width- number of m brands in m line, Depth of assortment- variety in one catgory-10 designs of shirts in 5 different sizes, in 4 colors.