MERCHANDISE

MANAGEMENT
Merchandise management concerns itself with
the selection of the right quantity of the
product and ensuing its availability at the
right place and time.
The primary function of retailing is to sell the
product / merchandise.
One of the most strategic aspect of the retail
business is to decide the merchandise mix
and the quantity to be purchased.
RETAIL MERCHANDISING MGMT PROCESS

Analysis
Planning
Acquisition
Handling and
Control of merchandise investments of a
retail operation.
 ANALYSIS

The retailers must be able to correctly

identify their customers before they can
ascertain consumer desires &
requirements for making a good buying
decision.
Understanding of the demography of the
community where the store would be
located is very important.
Before retailers begin to adjust the
design, display and merchandising of
their store, they – clear understanding
of the image they wish to project.
 PLANNING

It is more important because

merchandise to be sold in future must
be bought now.
It involves marketing the right
merchandise at right place at right price
in right quantities at right time
It consists of establishing objectives
and plans for obtaining merchandise
well in advance of selling season.
 ACQUISITION : It is because the
merchandise needs to be procured from
others, either distributors or manufacturers.
HANDLING : It involves to see where
merchandise is needed and to be sold in a
proper condition.
 CONTROLLING
Merchandise control involves designing
the policies and procedures in order to
determine – the stated objectives or
goals – achieved or not.
Planning – process of establishing
performance guidelines, - controlling is
process – checking how well
management is following – guidelines.
Steps in the Retail Merchandising Process

1. Develop the merchandise mix and establish the

merchandising budget.

2. Build the logistic system for procuring the merchandise

mix.

3. Price the merchandise offering.

4. Organise the customer support service and manage the

personal selling effort.

5. Create the retailer’s advertising, sales incentive and

publicity programs.
MERCHANDISE MIX
Merchandise Mix leads to appropriate
combination of product lines, product items
and product units.
Merchandise Variety- the no of different
product lines that a retailer stocks in the store.
Merchandise Assortment is the no of different
product items a retailer stocks in the store.
Merchandise Support is the planning and
control of the no of units that a retailer should
have at hand to meet the expected sales for a
particular product.
MANAGEMENT OF THE MERCHANDISE MIX
1. Planning Merchandise Variety
2. Controlling Merchandise Variety
3. Planning Merchandise Assortment/Support
4. Controlling Merchandise
Assortment/Support
5. Merchandise Mix Strategies

Developing the merchandise mix allows the

retailer to segment the market and appeal to a
select group of consumers.
MERCHANDISE MIX

MERCHANDISE VARIETY- PRODUCT

LINES – shirts, trousers, sport
wears, lounge wear, casual
MERCHANDISE ASSORTMENT
PRODUCT items- various brands of
shirts /trousers/casuals
MERCHANDISE SUPPORT – NO OF
UNITS –each category.
PRODUCT VARIETY
SUPPORT
RETAIL ASSORTMENT
STRATEGY
VARIETY AND ASSORTMENT STRATEGY
- RETAILER

FOR NARROW VARIETY AND SHALLOW

ASSORTMENT –vending machines, door to
door selling , news stands.
FOR WIDE VARIETY AND SHALLOW
ASSORTMENT- Variety stores, general stores,
discount stores.
FOR NARROW VARIETY AND DEEP
ASSORTMENT- speciality stores
FOR WIDE VARIETY AND DEEP ASSORTMENT-
Full lines departmental store
 INVENTORY PLAN

It provides information regarding inventory

availability, ordered quantity, inventory
turnover, sales forecast, and the quantity to
order for a specific STOCK KEEPING UNIT
(SKU)

The inventory plan helps to devise the stock

support levels for a specific sales period.
 The stock keeping unit (SKU)

It is an alphanumeric code assigned to inventory

that allows retailers to track their stock, measure
sales by product and category, design store
layouts and flow, and enhance shopping
experiences.

These codes are designed by retailers based on

criteria they deem important.

Stock keeping units have many uses beyond

identifying a product.
It's important to know what these
codes are, and how to design one.
A stock keeping unit is a unique
identifier for an item sold by a
retailer.
Retailers create their own codes
based on various characteristics of
their merchandise.
Typically, SKUs are broken down into
classifications and categories.
 How a SKU Works

SKUs work to differentiate products from each

other.
It would be difficult to track sales and inventory
without classifying them by make, model, type,
color, size, or any other identifying traits.
Beginning of the month (BOM )ratio
method

Also known as stock /sales ratio method

Relates to the inventory on the first of the
month to the planned sales for that month .
This ration informs the retailers about the
quantity of inventory needed in the
beginning of the month to support the
month’s estimated sales.
BOM inventory= Planned monthly sales X
Desired stock/sales ratio
 EXAMPLE
stock/sales ratio =1.5

Planned monthly sales – 10,000SKUs

BOM inventory= 15,000.

Hence the ratio of 1.5 , indicates the

retailer – maintain one and one-half
times that month forecasted sales on hand
in inventory- beginning of the month
 WEEKS SUPPLY METHOD
The inventory level should be set equal to a predetermined
number of weeks supply , which is directly related to the
desired rate of stock turnover.
Most widely used by retailers in urban and rural areas, where
inventories are planned on a weekly basis and in which sales
do not fluctuate substantially.
 EXAMPLE

This allows the retailor to replenish stock frequently

preventing stocks out, - avoiding inconvenience to the
customers.
PERCENTAGE VARIATION METHOD

Used for planning necessary stock support

levels – stock levels are adjusted on the
basis of variation in the sales.
Used for product categories which
experience frequent fluctuations , high
yearly turnovers rates – 6 or more times a
year.
BOM stock= Average inventory X ½(1+
(Planned sales fro the month /Average
monthly sales)
EXAMPLE
 BASIC STOCK LIST

Specifies the inventory level,

color, brand, style category, size,
package, and so on for every staple
item carried by the retailer.
Most compatible approach for the
retail/departmental stores with low
inventory turnover rates
 MODEL STOCK

It is the maintenance of adequate levels

of stock of an item so that an adequate
supply is always available for selling.
Model stock is designed to assist in
purchasing decisions and to ensure there
is an adequate supply of merchandise on
hand.
Model stock represents the
highest inventory amount desired.
 NEVER-OUT LIST

It includes key items (best

sellers) that are listed
separately from a model stock
plan or basic stock list, or that
are especially identified on the
basic stock list by colored stars
or other suitable means.