Sub- Merchandising Management

Presented by- Shubham Senapati

Class- B.Voc (RM)

 Introduction

Merchandising traces growth to the rise of organized retail in the

world. Initially as the retailers operated one or two stores, the function
of buying the merchandise, pricing it, etc was much simpler. In many
cases the retailer himself did it. However, when retailers started adding
stores and categories, the work load on the buyers increased
significantly. Often buyers had little information or time and they
ended up using approximations based on sales volumes to allocate
merchandise between stores. This sometimes resulted in stores
exchanging merchandise among them! In order to overcome this
limitation, the function of a "PLANNER" came into being; the planner
job was to act as a link between stores and the buyer. The de-linking of
the functions allowed better interaction between the stores. Planners
were able to devote more time to collect and study store level data, the
buyers on the other hand were able to spend more time with the
vendors

Retail Merchandising is the process of developing, securing, pricing,

supporting and communicating the retailer’s merchandise offering

It means offering the right product at the right time at the right price
with the right appeal!
 Product management

It is an organizational lifecycle function within a company dealing with

the planning or marketing of a product or products at all stages of the
product lifecycle. Product management (inbound focused) and product
marketing (outbound focused) are different yet complementary efforts
with the objective of maximizing sales revenues, market share, and
profit margins.

The role of product management spans many activities from strategic

to tactical and varies based on the organizational structure of the
company. Product management can be a function separate on its own
or a member of marketing or engineering. While involved with the
entire product lifecycle, product management's main focus is on driving
new product development. According to the Product Development and
Management Association (PDMA), superior and differentiated new
products - ones that deliver unique benefits and superior value to the
customer - is the number one driver of success and product
profitability.

Aspects of product planning

Depending on the company size and history, product management has

a variety of functions and roles. Sometimes there is a product manager,
and sometimes the role of product manager is held by others.
Frequently there is Profit and Loss (P&L) responsibility as a key metric
for evaluating product manager performance. In some companies, the
product management function is the hub of many other activities
around the product. In others, it is one of many things that need to
happen to bring a product to market.
 • Defining new products

• Gathering market requirements

• Building product roadmaps, particularly Technology roadmaps

• Product Life Cycle considerations

• Product differentiation

• More detail on Product planning

Brand management in Retailing

Brand management is the application of marketing techniques to a specific
product, product line, or brand. It seeks to increase the product's perceived value
to the customer and thereby increase brand franchise and brand equity.
Marketers see a brand as an implied promise that the level of quality people have
come to expect from a brand will continue with future purchases of the same
product. This may increase sales by making a comparison with competing
products more favorable.

This can result from a combination of increased sales and increased price, and/or
reduced COGS (cost of goods sold), and/or reduced or more efficient marketing
investment. All of these enhancements may improve the profitability of a brand,
and thus, "Brand Managers" often carry line-management accountability for a
brand's P&L.

The annual list of the world’s most valuable brands, published by Inter- brand and
Business Week, indicates that the market value of companies often consists
largely of brand equity. Research by McKinsey & Company, a global consulting
firm, in 2000 suggested that strong, well-leveraged brands produce higher returns
to shareholders than weaker, narrower brands. Taken together, this means that
brands seriously impact shareholder value, which ultimately makes branding a
CEO responsibility.
 Principles of brand management

Brands are people. People make friends with people when they have things in
common, want to spend time together, and find something special in the
relationship.

Branding is about the totality of a customer's experience. Your brand is about

everything you do which impinges on the consciousness of the customer and,
more importantly, it is about everything s/he thinks you do. Some experiences
carry greater weight than others. Some experiences have been forgotten entirely
consciously by your customer, but are nevertheless of paramount importance in
the way s/he views you.

Brands last forever, if managed correctly. The most exciting brands to have are
icon brands that represent a certain moment in history. Icon brands grow rapidly,
become outdated and decline, and can then bounce back on the next cycle of
history.

Brands win when they create a powerful experience that is totally compelling to
the customer, and deliver it better than anyone else. The fewer the people you
target with your brand, the more compelling is likely to be your claim in a highly
competitive market. The more people you try to capture with your brand, the
weaker may be your claim on any given customer, with one exception. In an
environment where your customers do not have a relationship with any brands in
particular, they will probably be drawn to those they recognize the best.

As brands are people, they can be analyzed like people. There are two
psychological theories that are especially relevant to the analysis of brand-

Personal Construct Theory - this theory argues that individuals develop theories
(constructs) about how the world works, what values are to be espoused, and
how personal success is achieved. These constructs are specific to the individual
and bi-polar - they exist along a scale between two points defined by the
individual. While one person may contrast hard vs. soft, another may contrast
hard vs. squelchy, or hard vs. weak
Attribution theory - this theory argues that people ascribe characters to the
people they meet based on a very few clues around which they spin elaborate
stories. So from a gesture, or a turn of phrase, or an intonation of voice, they
quickly come to a conclusion as to the sort of person they are dealing with (often
within 20 seconds of meeting the person, in fact).

Types of brands

1) Premium brand - costs more than other products in the same category.
2) Economic brand - is a brand targeted to a high price elasticity market
segment.
3) Fighting brand- is a brand created specifically to counter a competitive
threat.
4) Employment brand- is created when a company wants to build awareness
with potential candidates. In many cases, such as Google, this brand is an
integrated extension of their customer.
5) Green brand- dealing with environmental friendly products only.
Sometimes these brands try to operate by renewable energy sources only,
ex- ITC.
6) Piggy back branding- is a strategy where a smaller business uses the
familiarity of a stronger brand to create an identity for itself.
7) Surrogate branding- A surrogate advertisement can be defined as an
advertisement that duplicates the brand image of one product to promote
another product of the same brand. Surrogate advertisements are used to
promote and advertise products of brands when the original product
cannot be advertised on mass media.
8) Sub-conscious brand- Brands with memorable names and positive, strong
brand associations have what’s known as brand equity. Economic evidence
has shown that this leads to additional sales and better margins.
9) Umbrella branding - (also known as family branding) is a marketing practice
involving the use of a single brand name for the sale of two or more related
products. Umbrella branding is mainly used by companies with
positive brand equity (value of a brand in a certain marketplace).
 Merchandising Management
Steps in the Retail Merchandising Process -
1. Develop the merchandise mix and establish the merchandise budget.
2. Build the logistic system for procuring the merchandise mix.
3. Price the merchandise offering.
4. Organize the customer support service and manage the personal selling
effort.
5. Create the retailer’s advertising, sales incentive and publicity programs.

Retail Merchandising is the process of developing, securing, pricing,

supporting and communicating the retailer’s merchandise offering. It
means offering the right product at the right time at the right price with the
right appeal!!

Retail merchandising requires management of the merchandise mix

including
1. Planning Merchandise Variety
2. Controlling Merchandise Variety
3. Planning Merchandise Assortment/Support
4. Controlling Merchandise Assortment/Support
5. Merchandise Mix Strategies

The Components of the Merchandise Mix

- Merchandise Variety (# of product lines)

- Merchandise Assortment (# of product items)

- Merchandise Support (#of product units)

 Concentrating Factors

There are many applications that call for the determination of the points at
which a function changes values in a discontinuous fashion and that require
knowledge of the change in the function's value at such points. Concentration
factors take the Fourier coercions of a function and return a function that tends
to zero at points of continuity of the original function and that tends to the
height of the jumps at the location of the jumps.

Types of suppliers include:

• Manufacturer- uses tools and labor to make things for sale.

• Processor (manufacturing) - converts a product from one form to another.

• Packager (manufacturing) - encloses products for distribution, storage, sale,

and use.

• Distributor (business) - the middleman between the manufacturer and retailer.

• Wholesaler sells goods or merchandise to retailers.

• Dealership- local franchised distribution.

• Drug dealer- supplies illegal drugs.

• Merchant- a professional dealing with trade.

Criteria for selection of a supplier

Common supplier selection criteria:

• Previous experience and past performance with the product/service to be

purchased.
• Relative level of sophistication of the quality system, including meeting
regulatory requirements or mandated quality system registration (for example,
ISO 9001, QS-9000).

• Ability to meet current and potential capacity requirements, and do so on the

desired delivery schedule.

• Financial stability.

• Technical support availability and willingness to participate as a partner in

developing and optimizing design and a long-term relationship.

• Total cost of dealing with the supplier (including material cost, communications
methods, inventory requirements and incoming verification required).

• The supplier's track record for business-performance improvement.

• Total cost assessment.

Selection of the best possible set of suppliers has a significant impact on the
overall profitability and success of any business. For this reason, it is usually
necessary to optimize all business processes and to make use of cost-effective
alternatives for additional savings.

This paper proposes a new efficient context-aware supplier selection model that
takes into account possible changes of the environment while significantly
reducing selection costs.

The proposed model is based on data clustering techniques while inspiring

certain principles of online algorithms for an optimally selection of suppliers.
Unlike common selection models which re-run the selection algorithm from the
scratch-line for any decision-making sub-period on the whole environment, our
model considers the changes only and superimposes it to the previously defined
best set of suppliers to obtain a new best set of suppliers.
 Category management

Category Management is a retailing concept in which the total range of products

sold by a retailer is broken down into discrete groups of similar or related
products; these groups are known as product categories.

Examples of grocery categories may be: tinned fish, washing detergent,

toothpastes, etc. Each category is then run like a "mini business" (Business Unit)
in its own right, with its own set of turnover and/or profitability targets and
strategies.

An important facet of Category Management is the shift in relationship between

retailer and supplier, instead of the traditional adversarial relationship, the
relationship moves to one of collaboration, exchange of information and data
and joint business.

The focus of all negotiations is centered on the effects of the turnover of the
total category, not just the sales on the individual products therein.

Suppliers are expected, indeed in many cases, mandated to only suggest new
product introductions, a new Planogram or promotional activity if it is expected
to have a beneficial effect on the turnover or profit of the total category and be
beneficial to the shoppers of that category.

The concept was initiated, and is still most commonly found in Grocery (Mass
merchandising) retailing, but now also found in other retail sectors such as DIY,
Cash and Carry, Pharmacy/Drugstore and even Book retailing.

Category Management lacks a single definition thus leading to some ambiguity

even among industry professionals as to its exact function.

Three comparative mainstream definitions are as follows: Category

Management is a process that involves managing product categories as business
units and customizing them [on a store by store basis] to satisfy customer needs.
The Category Management 8 Step Process

The industry standard model for Category Management is the 8-step process, or
8-step cycle developed by the Partnering Group. The eight steps are:

1. Define the Category (i.e. what products are included/ excluded).

2. Define the role of the category within the retailer.

3. Assess the current performance.

4. Set objectives and targets for the category.

5. Devise an overall Strategy.

6. Devise specific tactics.

7. Implementation.

8. The eighth step is one of review which takes us back to step 1.

The 8-step process, whilst being very comprehensive and thorough has been
criticized for being rather too unwieldy and time-consuming in today's fast-
moving sales environment; in one survey only 9% of supplier companies stated
they used the full 8-step process. The current industry trend is for supplier
companies to use the standard process as a basis to develop their own more
streamlined processes, tailored to their own particular products.

Category Captains It is commonplace for one particular supplier into a category

to be nominated by the retailer as a Category Captain. The Category Captain will
be expected to have the closest and most regular contact with the retailer and
will also be expected to invest time, effort, and often financial investment into
the strategic development of the category within the retailer.
 RETAIL SEGMENTS WITH EMERGING TECHNOLOGIES – ERP

Enterprise Resource Planning systems or the ERP systems refer to the software
packages that integrate all the data and the related processes of an organization
into a unified Information System (IS).

An ERP system uses a central database that holds all the data relating to the
various system modules. In order to achieve a seamless integration, an ERP
system uses multiple hardware and software components. ERP packages are
heavily used by larger retail chains.

Designed to facilitate the administration and optimization of internal business

processes across an enterprise, ERP packages have become the competitive tool
for most large retail organizations.

ERP software uses a single database that allows the different departments to
communicate with each other through information sharing. ERP systems
comprise function-specific components that are designed to interact with the
other modules such as the Order Entry, Accounts Payable, Accounts Receivable,
Purchasing, Distribution etc.

In the current business environment, the retail industry faces two major
challenges that threaten its profitability and the long-term survival prospects.
The twin challenges are:

1 Market competition – To beat the competition, retailers have to understand

consumer demand at the point of interaction and respond to the various inputs
in real time across the enterprise.. Moreover, margins in the retail business
generally are very low and that removes any scope for waste or inefficiencies in
the business processes. Efficiency is critical to survive in the retail industry.
2 Regulatory pressures – In order to meet the regulatory standards, the retailers
require an enterprise wide process visibility, data access and near-instant
performance reporting. However, the need for flexibility, process efficiency,
reliable information, and responsiveness is very hard to achieve given the
existing portfolio of legacy, home grown and packaged software applications
used by a majority of the retail organizations.

Major problem areas in the existing enterprise applications in Retail include:

1. Outdated architecture – Most of the legacy enterprise applications in retail

have an outdated architecture that is inflexible and rigid. This inflexibility and
rigidity pose a challenge to the business efficiency. The lack of flexibility prevents
the legacy software to be used with the contemporary products available in the
market that may add muscle to the retail operations. Today’s business
environment demands real time adaptability from the software systems.

2. Limited scope – Most of the legacy systems were designed to take care of
specific problems tasks and as a result, lacked an enterprise wide approach to
the problem solving process. This makes such systems unsuitable for use in the
contemporary business environment that is highly competitive in nature.
Modern businesses require an enterprise wide approach to retail management
process and legacy systems fall short of such a requirement.

3. High maintenance costs – Legacy information systems are costly to maintain.

The cost component is high because such systems are no longer used in the
industry and require specialized personnel for maintenance purposes. Moreover,
the maintenance cost of legacy systems keeps on increasing with the passage of
time. The older an information system is, the higher are its associated
maintenance costs to be borne by the retail business.

4. Integration and scalability problems – Legacy software does not allow addition
and integration of new applications. This prevents such systems from scaling up
or integrating with similar systems used by the associates or business partners.
Such integration and scalability problems tend to multiply as the size and scope of
retail operations increases.
Other limitations are-

1. Low flexibility – One of the main causes for the failure of ERP systems is that
they are often seen as too rigid and difficult to adapt to the specific workflow
and business process needs of the client companies. The workflow and business
process needs differ from one organization to the other. This calls for minute
customization by the user organization that may not be allowed by the ERP
package.

2. Situation misfit – An ERP package may prove to be a misfit in a particular

situation. Many companies end-up re-engineering their business processes to fit
the “industry standard” prescribed by the ERP system and this frequently leads
to a loss of competitive advantage. Ideally, an ERP package should suit the
requirements of a company and not the other way around.

3. Limited scope for customization – The ERP software packages allow only a
limited scope for customization. Some customization in the ERP package may
involve making changes to the ERP software structure that are not allowed under
the license agreement. This can make the situation of the ERP package user very
difficult indeed.

4. Complex usage – ERP systems can be complicated to use. In order to utilize an

ERP package to its full potential, the users are required to undergo considerable
training which obviously costs time and money.

5. High restrictions – Some ERP systems are too restrictive and do not allow
much flexibility in terms of the implementation and usage of the software
package. These restrictions prove to be a bottleneck in efficient use of this
resource in streamlining the business process.

6. Weakest link problem – An ERP system can suffer from the “weakest link”
problem where inefficiency in one department or partner may affect the other
parties. An ERP package spans an entire organization while aiming to streamline
the business process as a whole and introducing efficiencies that ultimately lead
to an increase in the bottom line or
profits of the retail organizations. The integration of different components
produces more problems due to the weakest link effect.

7. High switching costs – Once a system is established, switching costs are quite
high for any one of the partners involved. This leads to reduction in flexibility and
strategic control at the corporate level. The high switching costs can be
attributed to the fact that installation of an ERP package involves considerable
investment of both time as well as the money.

8. Reduced departmental Insulation – The blurring of company boundaries can

cause problems in accountability, lines of responsibility, and lead to reduction in
the employee morale. Since an ERP package spans an entire organization, its
implementation integrates the different departments in such a way that no
department works in isolation from the rest of the organization.

9. requires total transparency – Resistance in sharing sensitive internal

information between departments can reduce the effectiveness of the ERP
package. An ERP package is designed in such a way that seamless information
interchange between the different departments is an essential prerequisite to
achieve its full benefits.

10. Compatibility issues – There are frequent compatibility problems with the
various legacy systems of the business partners. A company may have installed
the latest ERP package but it has to be compatible with the legacy systems used
by its associates or business partners.

11. Overkill – An ERP system may be over-engineered relative to the actual needs
of the customer. Such a situation may be called overkill since an organization
may not require the functions or capabilities extended by an ERP system.
 STRENGTHS - Provides an enterprise wide view of the workflow, allows
integration with systems of associates and business partners Helps in routine
decision making Allows streamlining of business processes

WEAKNESS- Expensive to procure, Requires significant employee

training Compatibility issues with other/legacy systems Security concerns

OPPORTUNITIES Booming retail sector in the emerging global

markets The retail sector is overlooked by the major ERP solution providers
High efficiencies becoming critical in the retail sector due to the cut-throat
competition and paper-thin margins

THREATS Opposition to globalization and transnational movement of

goods Increasing complexity of such systems Divided opinion over the Return-
OnInvestment (ROI) from such tools Security concerns regarding sharing of data
over a network.