retail buying & merchandising

1. BUYING AND MERCHANDISING
BY GROUP 1
PANKTI VADHANI-81
SURBHI SEN-68
POOJA VENKAT-58
ZEUS BALAPORIA-02
KINGSHUK-09
AISHWARYA-49

2. WHAT IS BUYING AND
MERCHANDISING?
• The activity of promoting the sale of goods at
retail.
• Merchandising activities may include
display techniques, free samples, on-the-spot
demonstration, pricing, shelf talkers, special
offers, and other point-of-sale methods.
• According to American Marketing Association,
merchandising encompasses "planning involved
in marketing the right merchandise or service at
the right place, at the right time, in the right
quantities, and at the right price.”

3. PROCEDURES TO BE FOLLOWED IN
BUYING AND MERCHANDISING
This is a step by step process and involves following stages:
• (i) Collecting information
• (ii) Selecting vendors
• (iii) Evaluating merchandise
• (iv) Negotiation with vendors
• (v) Buying merchandise
• (vi) Receiving and stocking merchandise
• (vii) Re-ordering
• (viii) Re-evaluating

4. Step 1: COLLECTING INFORMATION
• Once the firm’s overall merchandise plans are defined, exact
information about current market needs and potential
vendors is required.
• This is essential as a retailer before buying merchandise would
like to know:
• (i) What consumers are looking for,
• (ii) Where the vendors are located and what is their goodwill
in the market, and
• (iii) What their competitors are offering.
• After understanding these aspects, retailer will be in a
position to decide what he wants to buy and from whom.

5. • For collecting information, a retailer/buyer has several
possible sources defined as internal and external sources.
Internal Sources –
• -Global retailers like Wal-Mart, Spencer’s, Zara 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

6. External Sources –
• Visiting suppliers, talking with sales’ experts and observing
consumer behavior.
• Besides this data provided by trade associations, government
bodies projects like RAI, ASSOCHAM, FICCI bulletins may be
consulted.
Internet has also become a vital source for collecting information
and is also time saving. Retailers may use collected information
for making merchandise decisions about (i) staple merchandise
and (ii) fashion merchandise

7. Step 2 : Selecting Vendors
• For vendor selection, retailers have 3 alternatives:
1) Company owned vendors – these are owned by company
themselves. Work for particular retailers and provide as per
their requirement.
2) External, widely used supplier – not owned by the retailer
but is frequently used. The quality of goods and the services
offered are known.
3) External, not used supplier – retailer has not purchases
anything from this supplier. Once the supplier is decided,
retailer should interact about the buying terms and
conditions.

8. Step 2 : Selecting Vendors (Contd)
• Vendor evaluation on the basis of following:
1) Reputation/Goodwill of vendor in the market
2) Quality of goods offered
3) Which vendor offers merchandise as lowest total cost?
4) How quickly the good will be delivered
5) Guarantee/Warrantee offerings
6) Is vendor offering credit purchases?
7) Promotional support provided by the vendor
8) Selling history
9) Steady source of supply
10) Is vendor’s merchandise line conservative or innovative?
11) Liquidation and shrinkage policies

9. Step 3 : Evaluating Merchandise

10. Step 3 : Evaluating Merchandise (Contd)
The merchandise planning to a great extent depends on the following
factors and is handled by the respective CATEGORY MANAGERS
• The type of Retail Display Assets Used :
Bays, EndCaps, Bins, FSUs , SideCaps, Floor Stacks , Promotional
Chimneys , Aisles , Gondolas
• The Offtakes of the SKUs from the corresponding seasonal months
in the past, along with evaluation of the store’s ATV (Average Ticket
Value), NOB (Number of Bills), the Promotions running on the SKUs,
the Terms of Trade (TOTs) signed with the selected vendors, the
pre-decided Scan/Promo Margins which eventually decide the gross
margin realized on the sale of each SKU.

12. Step 3 : Evaluating Merchandise

13. Step 3 : Evaluating Merchandise

14. Step 3 : Evaluating Merchandise
• The Merchandise evaluation has specialized ERP Databases and software
assistance to help the Category Managers in planning the Merchandise and
Assortment that will be reflected in their system through the following
matrices – Sales, Inventory , Prices , Shrinkage Databases.
• Merchandise evaluation for a KVI (Key Value Item) is usually jointly done by
the Vendor and Retailer, at the time of signing the TOT, where the SKUs and
their placement assets are also decided along with the RLP (Retailer Landing
Price) and Scan Margins.
• Most modern retailers today have a robust ERP software to help them assist in
Merchandise planning and forecasting on the basis of past trends and offtakes.
• The Throughput Sales decisions are eventually discussed with the Material
Planning and Replenishment Teams (MPR) which look after the re-ordering
and replenishment of the respective category SKUS ; after the ordering
assortment and quantities is confirmed, the plan is shared with the Store
Planogram Team which shares the layout of the how the assortment shall
appear on the pre-decided Display Asset.

15. Step 4 : Negotiation with Vendors
In case of Evaluation of a New SKU which is to be included in the
retailing format, the following steps are undertaken –
• The Vendor and Retailer discuss the projected offtake for the new
SKU and according arrive at an adhoc Retailer Margin, based on the
planned ROI for the retailer and corresponding business throughput
and ordering plans for the SKU.
• After the completion of the said tenure, the retailer evaluates the
offtake for the New SKU (with and without the promotional effect)
and accordingly recalibrates the Terms of Trade with the Vendor.
• Any decision of the retailer to engage in an OTT Promotional Offer
that eventually affects the Retail Selling Price of the SKU is jointly
undertaken after discussion with the Vendor on all the Sales and
Pricing considerations.

16. Step 4 : Negotiation with Vendors
Additionally, Merchandise Evaluation at the Retail store is based on additional
factors like –
• The additional trade promotion margins offered by the vendor to the
retailer (Eg. The whole Floor Stack by HUL for the New Dove Pink Range of
Bath Soaps)
• The Sales of the said SKUs on a month-on-month basis, as observed by
the retailer – in the presence and absence of any planned promotional
activity
• The ROI and Retail margins that the retailer benefits with on the offtake
of the assortment (Eg. High volume and Low Margin vs Low Volume and
High Margin)
• The Vendor’s association with the retailer, in terms of capital budgeting,
additional trade discounts for data sharing, category competitor analysis
etc.

17. What To Buy?
How much to Buy?
For which stores and which territories?
How much to price it at?
Does it need any seasonal promotional?
What are the Competitor Sales for the same category?
New Trends in Consumer Buying Behavior and Other Channels
Step 5 : Buying Merchandise

18. Step 5 : Buying Merchandise
• The Buying Plan is usually decided 8-12 weeks prior to the week of
implementation (Eg. Planning in July for October’s Merchandise)
• Buying entails the consideration of a host of factors :–
- Seasonality
- Existing Stocks and their health (Date of Expiry)
- Competition analysis to understand the top grossing Products - Variants-
SKUs
- Ordering Cycles for the forecasted quantities of merchandise
- Pricing and Promotions for the planned assortment

20. Step 5 : Buying Merchandise
Key functions of any Category Buying and Merchandising
Manager would include:
- Vendor Relationship Management
- Co-ordination with the Stores’ Category Division Heads to
ensure hassle-free implementation of the said assortment
- Thoroughly updated of all the developments in the industry
and category – with respect to new products, competitive
prices, alternate retail channels etc.
- Budgetary planning

21. Step 6 : Receiving merchandise
 While acquiring the merchandise, retailer physically receives the items, counts
the supplies, pays the invoices, marks the items, transfers the items and stock
in go downs/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
 The process of checking freight by comparing the vendors invoice against the
store's purchase order is also done to ensure:
 Prices and additional terms of sale are as agreed upon
 Quantities received by the retailer match purchase order
 Product styles, colors, sizes received are identical to purchase order
 Merchandise quality equals, the buyer's expectations
 Problems and discrepancies should be documented and reported to the proper
party responsible

22. Step 6 :
Stocking
merchandise
 Received inventory should
immediately make its way
to the appropriate location
within the store
 Chain stores and larger
retail environments may
use PLAN-O-GRAMS
( Store and Space Planning
Layout )
A planogram is a
diagram that shows how and
where specific retail products
should be placed on retail
shelves or displays in order to
increase customer purchases.
Planogramming is a skill used
in merchandising and retail
space planning

23. Step 7 : Re-ordering Merchandise
Three factors are critical in reordering merchandise that the retailer purchases
more than once: order and delivery time- Lead time, inventory turnover and
inventory versus ordering costs
 Lead time
 Inventory turnover
 Inventory versus ordering costs:- There are trade-offs between inventory
holding and ordering costs
 A large inventory fosters customer satisfaction, volume discounts, low
per-item shipping costs, and easier handling. It also means high
investments; greater obsolescence and damages; and storage,
insurance, and opportunity costs
 Placing many orders and keeping a small inventory mean a low
investment, low opportunity costs, low storage costs, and little
obsolescence. Yet, there may be higher unit costs, adverse effects from
order delays, a need for partial shipments, service charges, complex
handling, and disappointed customers (if items are out of stock)

24. Step 8 : Re-evaluating Merchandise
As shown in the figure, it is
the feedback process. This
includes,
 Customer:-
VFM/Quality/Ease of use
etc.
 Employees:- Ease of
handling/ Safety concerns/
Their view on the products
 Market changes:- New or
alternate vendors/ New
technology/ New trends
etc.