MERCHANDISING

• Merchandising is any practice which

contributes to the sale of products to a retail
consumer.
• At retail in store level, merchandising refers to
the variety of products available for sale and
the display of those products in such a way
that it stimulates interest of consumer to
make a purchase.
What is merchandising ?
In general or layman language we can say buying &
selling of goods is known as Merchandising.
OR
We can also say Merchandising can be termed as
the Planning, buying and selling of merchandise.

The function of merchandising is an integral part of

retailling & is one of the most important function.
So, that’s why the retailers says “GOODS WELL
BOUGHT ARE HALF SOLD”.
• Define Merchandising as “The analysis,
planning, acquisition, handling and control
of merchandise investments of a retail
operation.”
• Merchandising is the core of retailing.
• The function of merchandising is an integral
part of retailing and also one of the most
challenging functions.
• AMA define “The planning involved in
marketing the right merchandise at the
right place at the right time in the right
quantities at the right price.”
• Achieving these five Right is the key to
successful merchandising and many a times,
this remains an elusive goal for most
 merchandising
DEFINATION:-
“Merchandising can be defined as the planning involved in
marketing the right merchandise at the right place, at the
right time, in the right quantities, at the right price”.

KEYS OF SUCCESFUL MERCHANDISING:-

There are 5 keys of successful merchandising
1. Right Product.
2. Right Quantity.
3. Right Place.
4. Right Time.
5. Right Price.
• Analysis: because retailers must be able to
correctly identify their customers before they can
ascertain consumer desires and their
needs/requirements for making a good buying
decision.

• Planning is important because merchandise to be

sold in the future must be bought now.

• Acquisitions because the merchandise needs to be

procured from others, either distributors or
manufactures.

• Handling involves seeing that the merchandise is

where it is needed and in the proper condition to
be sold.

• Control is required since the function of

 THE EVOLUTION OF MERCHANDISING
• As, the Retailer initially operates 2 or more stores, the
function of buying the products or merchandise ,it’s pricing
etc. was much simple & easier.
• In many cases the retailer did it himself. However, when a
retailer adds new stores and categories of the Merchandise,
the workload on the buyers increased automatically.
• To overcome this limitation, the function of a planner starts.
The job of a planner is to act as a link between stores & the
buyers.
• Planners were able to devote more time in collecting &
studying store level data & the buyer spends his more time
with the VENDORS.
 Factors Affecting the Merchandising Function

• Merchandising does not function in

isolation.
• It is affected by various factors like
organization structure
size of the retail organization
merchandise to be carried.

• Rarely are any two stores organized in

the same way.
• The function of the merchandising is
vary from one organization to another.
 Size of organisation

Merchandise to be carried
Organisation Structure

Merchandising
function

Management Philosophy
FACTORS AFFECTING THE MERCHANDISING
FUNCTION
Merchandising does not function in isolation. It is affected by
various factors like:-
1. Organization Structure.
2. Size of retail organization.
3. Merchandise to be Carried.
4. Management Philosophy

1. Organization Structure:-Organization structure also affects the

merchandising function. Some organization defines or
demarcates the role of the buyer & the role of the Merchandiser
separately, while in a smaller organization one person may carry
out all the duties.
2. Size of retail organization:-
• The Needs for an Independent Retailer vary
consistently from those of a large chain store
operations. In every retailing endeavor/business, no
matters what is the size, the most fundamental
activities are buying Merchandise & re-selling it to its
customers.
• In case of the single store, the owner or the manager
who may be assisted by the sales persons may
perform the buying function himself.
• As the single store Grows in terms of Business, it may
add departments.
• Departmentalization functioning occurs & the no. of
persons involved in the buying process increases.
3. Merchandise to be carried:-
• The Merchandise to be carried/taken care of off by a
retailer largely determines the responsibilities of a
Merchandiser.
• The Buying for the Basic Merchandise is fairly different
from buying the Fashion Merchandise.
• Basic Merchandise are those Products which the retailer
will always keep in stock. This is because these
products/items are always in demand and the sales
variance is minimal from year to year.
• For Example:-OIL, sugar and pulses etc.
• Fashion Products are those products which may sell very
well in one season or a year & may not have any demand
in the next season or year.
 4. MERCHANDISING PHILOSOPHY:-
• These factors affects largely the Merchandising
decisions taken by the retailers and also affects
the Merchandising Philosophy of the Retailer.
• The Merchandising Philosophy varies from
person to person. Keeping in mind the target
markets, the retailer has to evolve/make a
strategy for:-
* Store Location.
* Pricing and
* The product assortment that he offers to the
customers.
• The MERCHANDISE PHILOSOPHY will
also help a retailer in determining the
role to be played by the various
persons involved in the functioning of
the Merchandise.
• The Duties & the responsibilities can
be clearly defined and this helps in the
smooth functioning of the
Merchandising Department.
 The Merchandises Role &
Responsibilities

• Planning: Thought the merchandising may not be

directly involved in the actual purchase of
merchandise.
• They formulate the policies for the areas in
which they are responsible.
• Forecasting sale for the forth coming budget
period and can estimate the consumer demand
and the impact of changes in the retail
environment.

• Directing: Guiding and training buyers as and

when the need arises, is also a function of the
merchandiser.
• The buyers have to be guided to take additional
markdowns for products which may not be doing
• Co-ordinating: Merchandise
managers supervise the work of more
than one buyer.
• They need to coordinate the buying
effort in terms of how well it fits in
with the store image and with the
other products being bought by other
buyers.

• Controlling: assessing the buyers

performance , is a also part of the
merchandise manager’s Job.
• The merchandiser to be carried by a retailer
largely determines the responsibilities of the
merchandiser.

• Merchandise to be carried: The buying for

basic merchandise is fairly different from
buying fashion merchandise.
• A merchandisers who I handling fashion
products will need to spend more time in the
market, and looking for the products which
is more suitable for the customers.

• Organization structure that the retail

organization adopts also affects the
 MERCHANDISE PLANNING
Merchandise Planning is a combination of two terms:-
MERCHANDISE + PLANNING

• Definition:- M.P is defined as the planning & control of

the merchandise inventory of a retail firm in such a
manner that it balances the expectations of the target
customers & the strategy of the firm.
• "A systematic approach. It is aimed at maximizing return
on investment, through planning sales and inventory in
order to increase profitability. It does this by maximizing
sales potential and minimizing losses from mark - downs
and stock - outs."
 Concept of Merchandise Planning
• M.P concept is used to improve the profit margin of an
organization OR we can say the primary objective of
M.P is to improve the profit.

1. Beneficial for the Retailers:- Because it increases the

possibility of the right assortment of Goods, with the
appropriate/adequate amount to be available at the stores
where it is required.

2. Beneficial for the Customers:- Because it increases

the choice availability of the customers and reduce the
situation of facing a problem when the store is out of
stock.
 IMPLICATIONS OF MERCHANDISE PLANNING
1. Finance:- At the end of the merchandise planning
process, when P.O is raised on a particular supplier, the
finance department needs to be informed about it as
they are finally the ones who will be making the
payments. Finance department will also evaluate the
profitability of the Merchandise purchased by the
buyer.

2. Marketing:- The Marketing department needs to be

aware about the products that are being purchased , as
they may want to create campaign for advertising the
product or sales promotion.
 IMPLICATIONS OF MERCHANDISE PLANNING

3. Ware housing & logistics:-

• Almost in all the retail organization warehousing & logistics both

these functions are handled by a single or a common department.
When orders are placed for the new merchandise this department
needs to know as it he one that actually receive the products and do
the physical verification of the same. The quantity’s mentioned in
the P.O is tallied with the actual qty. received. Any shortfall or
discrepancy have to be informed immediately to the Accounts
department And also the merchandiser who has placed that order.
• This department also needs to know the dispatch details of the
various products that are received i.e.. it needs to know the qty.,
 IMPLICATIONS OF MERCHANDISE PLANNING

4. Store Operations:- The Information

about the merchandise being purchased
needs to be communicated to the retail
stores. If the product purchased is new,
the features of that product needs to be
communicated. Information about the
Merchandise to be received in the store
helps in the space planning in the retail
store.
 PROCESS of Merchandise Planning
1. Developing the sales forecast:-
Forecasting involves predicting what a consumer
may do under a given set of condition. A sales
forecast may be made by the Merchandiser
based on the Targets given by the TOP
Management.
A sales forecast is the first step in determining
the inventory needs of the products.
Now the Question arises why the sales forecast is
Developed?

Sales forecast is developed to answer the following

Questions:-

1. How much of each product will need to be purchased?

2. Should new products to be added to the merchandise

assortment?

3. What price should for the Product?

• A sales forecast is made for a specific time
period(weeks/ a season or a year). A forecast
may be for a short term- i.e. up to one year or
for the long term i.e. for a period of more than
one year

• The person who is responsible to make sales

forecast for a particular product must be aware
about the changes in the taste and attitude of
the customers & also the changes in the money
spending pattern.
 Sales forecast Process
The following steps are involved in the sales
forecast process:-
1. Reviewing the Past Sales.
2. Analyzing the changes in the Economic
conditions.
3. Analyzing the changes in sales potential.
4. Analyzing the changes in the Marketing
Strategies of the Retail organization and the
competition.
5. Creating the sales forecast.
2.Determining the Merchandise
Requirement:-
Planning is essential for providing the direction
and to provide the right goods to the consumers
at the right place & time.

Planning in merchandising can be done at two

levels:-
1. The creation of the merchandise Budget.
2. Assortment Plan.
 There are two methods of Developing the Merchandise
Plan:-
1. Top Down Planning.
2. Bottom up Planning.

3. Top Down Planning:- The Top management themselves

works on the sales plan & then it passes down to the
merchandising Team.

2.Bottom up Planning:- In this the Individual department.

Managers works on the estimated sales projection. The
Merchandise Budget is the first stage in the planning of the
merchandise. It is a financial plan which gives an indication
of how much to invest in the product inventories.
 The merchandise budget usually comprises of 5 Parts:-

• Sales Plan:- How much of each product needs to be sold to

achieve the sales target. This may be department wise.

• Stock support plan:- The stock level which is required to achieve

the sales target.

• Planned Reduction:- It is needed in such cases where the products

does not sell as compared to the other products available in the
store.

• Planned purchase Level:- The qty. of each products that needs to be

purchased from the market.

• The Gross Margins:-The overall profitability of the company that is

contributed by al, the departments.
 MERCHANDISE HIERARCHY
It means the manner or the way or the sequence in which the classifications of the products is
to be done:-

COMPANY

DEPTT./SECTIONS

MERCHANDISE CLASSIFICATION
(EATABLES)

MERCHANDISECATEGORY
(IN READY EATABLE BISC./CHIPPS/WAFFERS ETC.)

MERCHANDISE SUB-CATEGORY
(IN CHIPPS DIFFERENT FLAVOURS)

STYLE PRICE POINT

(PACKING SIZE & THERE PRICE)

SKU: stock keeping unit

(COMPLETE BREAKUP OF THE QTY.THAT WE REQ.FOR EACH & EVERY PRODUCT THAT IS TO BE
 Some Key Merchandising Terms

1. Staple/Basic Merchandise: products which are always

in demand (ex. Sugar, salt, oil, pulses, stationery, white
shirts for men etc.)
2. Fashion Merchandise: that has high demand for a
relatively short period (ex. Ray ban sun glasses, short
length kurtas, jeans of a particular style)
3. Seasonal Merchandise: products that sell well over
nonconsecutive time periods. (Ex. rain coat, umbrellas,
winter wear, thermal clothing etc.)
4. Fad Merchandise: contrast to fashion and enjoys
popularity for limited period of time and generates
high level of sales for a short time. (ex. Odd designs,
style)
3. Merchandise Control-the open to buy:-

The purpose of this concept of open to buy is of

two –folds.
• First, depending upon the sales for the month
and reductions, the merchandise buying can be
adjusted.
• Second, maintain a planned relation between
stock and the sales
When open to buy is used effectively, it ensures
that the buyer:

• Limits overbuying and under buying

• Prevents loss of sales due to unavailability of
the required stock
• Maintains purchases within the budgeted limits
• Reduces markdowns which may arise due to
excess buying
4. Assortment Planning:-

It involves in determining the quantities of each

product that will be purchased to fit into the
overall merchandise plan. Details of color, size,
brand, quality etc have to be specified.

The main purpose of creating an assortment

plan is to create a balanced assortment of
merchandise for the Customer.
 FACTORS THAT AFFECTS THE ASSORTMNET
PLANNING PROCESS
There are various factors that affects the Assortment
planning process such as :-

1. Type of merchandise that is to be stocked in the retail

store.Merchandise can be classified as Basic or staple
merchandise, fashion , convenience or speciality
goods.

2. The retailer’s policies with respect to the type of

brands stocked and the level of exclusivity to be
maintaied in the store.
3.The Range Plan:-
The purpose or we can the aim of the range plan is to
create a balanced/ appropriate range for each category
of products that the retailer chooses to offer.

Some of the points that are to be taken care in range planning

which are as follws:-
• The no. of items/options available to the customers should be
sufficient at all times and should be such that it helps the
customers in making a choice.
• The range planning process should ensure that the
overbuying and under buying is limited.
• Sufficient qty. Of the product are available so that all the
stores can be served or we can say that the product should be
available at all stores across the various locations.
4.The Model Stock Plan:-
After determining the availability of money for buying of the
merchandise, a decision should be taken for “what to buy &
how much to buy”.

The Model stock plan gives the precise items and quantity
that needs to be purchased for each merchandise or product
line.

To arrive at the model stock plan, the buyer needs to identify

the attributes that a customer would consider while
purchasing a product and then allocate/divide the total
money available for the respective items categories.
Example:-
A retailer has allocated Rs. 2 lakh for buying of shirts. Assuming that the purchase price of
each shirt is Rs. 200, so he will able to stock 1000 Shirts in the store.

Step 1.
The First thing that the retailer needs to do is to identify the factor that affects the
customers buying decision or buying pattern & the no. of levels under each attribute.

Step 2.
Identify the no. Of levels of each attribute.As per the above example the following
attributes and levels are identified such as:-
(i) Type of shirt (dress,formal, casual,sports)
(ii) Size (small, medium,larre extra large)
(iii) Sleeves length ( full, half)
(iv) Collar Type ( Saville,button down)
(v) Colour (White,Blue, cream, grey)
(vi) Fabric ( cotton, cotton satin, polyster)

Step 3.
Allocate the total units to the respective items categories.
Thank you