St.

Mary University

Retail Marketing

Retail Mix Management

Chapter Five
5. Retail Mix Management: Implementing the Retail Mix
5.1. Introduction
An efficient retail store provides the
rights goods both in quality and quantity
at the right place and at right time.
The entire process of retailing depends
on efficient inventory management
In this section, you will learn to plan
Merchandise and merchandise Budget.
 In a large retail stores, we find an array of goods such as clothes, home
appliances, entertainment materials, etc…
 All these merchandise comes in a variety of sizes,colours,makes and models
 Bringing it all together requires successful coordination of many individuals
and divisions,including buyers(purchasers in the store),warehouse
employees, financial staff, store operation, etc…
 Yet, merchandising takes top priority. No matter what other departments
are operating.(It is a silent salesman)
 If the company merchandising is not firing on all cylinders, the company can
not succeed.
 The merchandising management process allows the retail buyer(the
purchaser o f goods for the store)to forecast with some degree of accuracy
what to purchase and when to have it delivered.
 This will greatly assist company in attaining its sales and gross margin goals.
 Buyers will rely on historical data,personal experience and their own
knowledge about the market trends.
5.2. Product Strategy:-Planning Merchandise Assortments

5.2.1. Merchandise Defined

 Merchandise refers to the goods bought and sold in business.
 Merchandising refers to the activities aimed at quick retail sale
of goods using bundling, 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”
5.3. Merchandise Presentation Techniques

Merchandise displays are special presentations of

a store’s products or services to the buying public.
Merchandise displays are an integral element of
the overall merchandising concept, which seeks to
promote product sales by coordinating marketing,
advertising, and sales strategies.
 Merchandise displays generally take one of several basic
forms:
 Storefront Window Displays: These typically open on to a street or
shopping mall walk or courtyard and are intended to attract
passerby that might not otherwise enter the store.
 Showcase Displays: These typically feature items that (1) are
deemed to be too valuable for display in storefront set-ups, or (2)
are niche items of high interest to the business’s primary clientele.
-These display centers are usually located in high traffic areas and
typically feature multiple tiers for product display and a sliding door
on the clerk’s side for access.
 “Found-Space” Displays: This term refers to product presentations
that utilize small but nonetheless usable areas of the store, such as
the tops of product carousels or available wall space.
 Storefront window displays and “found space” displays are
particularly popular tools for publicizing and selling sale items.
Store front window display Show case display

Found space displays

5.3.1. Cross Merchandising
 Cross merchandising is simply grouping related products together.
 Cross merchandising is a visual merchandising strategy that involves
displaying complementary products next to each other
 There are a few methods that can be used to accomplish this
technique in an online setting
1. Create gift baskets or sets that include multiple related items, such as
a skincare basket with a moisturizer, cleanser, toner, and an eye cream.
 Whether you sell DVDs, game consoles, fragrances, lingerie, or toys,
you can build gift baskets or sets.
 Customers love sets like these for the holidays.

 It saves them time and money, because they don’t have to shop
around for ideas or each piece to make a set. You did the work for
them.
2. Group similar items on the same web page.
 A customer who plans to purchase a game console
would be a prime candidate for buying games as
well. (Complementarity)
 This approach is similar to the gift basket idea, yet
products are sold individually.
 Present related products near each other to
suggestive sell additional merchandise.
3. Another popular method used by many stores, such
as Victoria Secret, offers a related product once an
item has been added to the customer’s cart.
 For example, when a customer adds a pair of
pajamas to their cart, an offer for matching slippers
appears – either on the shopping cart page or
through a pop-up.
 Nowadays, many Internet users block pop-ups, so an
ad placed on the actual web page may be a better
option.
5.3.2.Successful Merchandise Display

 The effectiveness of these bases of merchandising display strategy can be

increased by applying the following Tips
1. Keep your targets customers demographics while allocating merchandising display
space and expenditure
Example:- if a large part of your target customers are males between 20 and 40,the bulk
of your display should be shaped to catch their interest
2. Make certain that the cleanliness and neatness of the display is maintained.
3. Do not overcrowd a display. Customers tend to pass over messy, busy-looking
displays.
4. Combine complementary products together in dispalys.For example pairing a shirt
with trouser can be more attractive than pulling them up in display individually.TV,TV
stand,and other accessories,etc…
5. Merchandise displays can sometimes be utilized to educate customers. A well-
conceived display could, for example, illustrate a product use that may not have
occurred to most customers. “In addition to selling actual merchandise, display can be
used to introduce a new product, a fashion trend, and a new ‘look’ or idea,” The display
may also supply pertinent information, the price, and other special features.”(New
TV/mobile,etc…)
Poor Practice Poor Practice

Best Practice Poor practice

5.4. Assortment Planning
 Webster dictionary definition- of Assortment:- A
miscellaneous collection of things or people
 Assorted:- Assorted candies are a bunch of different
candies
 Assortment planning:-is defined as at its simplest, as the
process retailers use to decide which product and
variation to carry and sell in an upcoming season
 In Assortment Planning, we use store grades as a way to
reduce the number of decisions we have to make.
 Retailers grade their stores by analyzing the store sales
with a percentage of average sales across all other stores.
• Retailers commonly use sales value as the
basis for store grading.
• As they become more sophisticated many
retailers begin to incorporate space into the
equation
• When we are making decisions about
assortments we are primarily deciding which
items will go to which stores in which periods
5.5. Allocating Merchandise To Stores
Allocating Merchandise to stores involve three basic decisions

1. What type of merchandise to allocate

2. When to allocate(Re-order level)
3. How much merchandise to allocate(quantity of each products to allocate i.e
Economic Order Quantity-EOQ)
 Before allocating merchandise to stores the retailer has to go
through the following process:-
1. Define your merchandise Policy
 Every retail organization must have a vision in order to provide its
buyers with some insight in to the following business components
 Demographics of current and potential customers(No of pop’n by
age, gender, employment level, social class, Income, family size,
etc…)
 Store’s Image(The shop’s visibility, location,etc…)
 Merchandise quality levels(Company provides medium
quality products with high value to customers)
 Price point policy(Eg. company follows fixed or
negotiable price)
 Marketing approach(Eg-Company uses both streamline
and social medias,visual dispalys in the store,etc…)
 Customer service levels(quality of service company
provides to customers.Measure of customer service
levels include unsatisfactory to exceptional)
 Desired profit margin(5%,10% or 20%,etc…)
2. Gather Historical Information
 The first step in preparing this plan is to pull the sales information for
the same period last year.
 Statistics on Returns
 Statistics on Markdowns
 Statistics on any Inventory carry over
Using computerized system of filing or even with manual analysis to
provide the store with an acceptable level of data is essential.

3. Perform Qualitative Analysis

 Most professionals agree that the buying process is 90% analytical
and 10% intuitive.
 As the most critical aspect of a successful operation,
buying/merchandise management is what retail is all about.
 Qualitative Analysis refers to “Identifying the
proper components in a mixture”.
 In this case, the mixture is the merchandise plan
and the components that affect this plan are as
follows:-
3.1. Customer Profile Analysis
 Who are our best customers, what are their
buying behavior, and attitude?
 Who do we want our customers to be?
 Who are our secondary customers and what
should we buying for them?
3.2. Department Analysis
To effectively forecast sales and purchase the
right product,you need a further breakdown
of your stores major departments.For
example,a typical family shoe store may have
the following departmets:men’s
footwear,women footwear,children’s
footwaer.To plan at the class level,you need
sales and inventory data at the “class” level.
3.3. Key Department Trend
 The professional buyer is always looking for trends in his
market. For example, what is happening in men’s footwear?
Maybe Western boots are growing in popularity, brown dress
shoes have been declining for the last two seasons and black
sport shoes are hot with the youth market.
 Do you always run out of large sizes in slippers weeks before
Xmas?
 Trend information is available from a number of sources,
including trade publications, merchandise suppliers, the
competition, other stores in the country, and your own
experience.
3.4. Major Vendor Analysis
 “Information is power.” Even a minor analysis of the performance of your major vendors can identify
significant buying issues.

3.5. Advertising review

 Increased traffic flow often results in higher sales. To this end, advertising and promotions are used to
improve traffic levels. The buying and advertising departments must work closely together to ensure
the company’s investments in this area result in strong performance.

3.6. Visual presentation analysis

 People usually respond best to visual stimuli, so product presentation is a major driver of sales. For
this reason, another segment of the buyer’s seasonal written report describes their thoughts about
visual merchandising for the products. This includes the following:
– Are any special fixtures required?
– Where should the product be displayed?
– What type of signage is necessary?

Buying department-The retail store that buys in bulk in and sell in retail
Vendor-Supplier
5.5.1.When to Allocate
 This problem of merchandise inventory control deals with the point
of time when the order for fresh merchandise inventory is to be
given.
 The problem of when to order is solved by fixing the appropriate re-
order level of each type of inventory.
 Reorder Level
The re-order level is the level of inventory at which the order for
additional stock should be placed.

Re-order point example

Demand=1000units/year
Store open=320 days/year
Average usage(Au)=1000/320=3.33 units/day
Lead time=10 days
R=Au*L=33.3 units
5.5.2. How Much To Allocate
 After solving the problem of When to order the next
immediate issue is how much to order.
 Overbuying can lead to unproductive use of working capital
 Under buying leads to unwanted emergency orders and
increases the work load of the purchase department
 Hence, a balance is achieved by selecting the right quantity
for each order. It is called Economic Order Quantity(EOQ)
 EOQ refers to the optimal order size that will result in the
lowest total of order and carrying cost for an item of
inventory given its expected usage, carrying cost and
ordering cost
5.6. Evaluating Merchandising Performance
 Measuring the performance of merchandise is necessary in order to gain an
understanding of the products which have performed well and which have not
performed well as per the target
 Three methods of analyzing merchandising performance
1. ABC Analysis
 ABC analysis ranks the merchandise on the basis of how important the item is.
 It uses some performance measures to determine
 which items should never be out of stocks---A item
 which items should occasionally be allowed to be out of stock—B item
 which items should be deleted from the stock selection-C item

Examples
1. There are 100 SKUs in Coca Cola Company
 65% of the SKUs contribute 10% of Sales—C items
 10% of the Skus contribute 20% of sales-B items
 5% of the SKUs contribute 70% of sales---A items
 20% of the SKUs contribute 0% or no sales in the past season---D item
2. Sell Through Analysis
 Involves a comparison between the actual and
planned sales to assess whether early markdown
will be required or more merchandise will be
needed to satisfy the demand
Example:- Sales target=1000 unit/year
Actual sales =1200 units/year
Thus, simply it requires more merchandise of the
best performing item.
3. Multiple attribute Method

 This method uses a weighted average score for each

vendor. The following steps are followed
 Develop a list of issues to consider for decision making.
Example-Vendor reputation, service, merchandise quality,
selling history, etc…
 Give importance weight for each attribute
 Make judgments about each individual brand’s
performance on each issue
 Combine the importance and performance scores
 Add all to arrive at the brand score
Thank You