PROCESS OF

MERCHANDISING
Planning, buying and selling functions
Merchandise Planning
• A systematic approach by the retailer, aimed at:

• Maximising return on investment, through sales

• Inventory planning, in order to increase profitability
Why a Merchandise Plan is Important?

Merchandise plans help stores avoid the two pitfalls

retailers fear most:

• Greeting customers with sparsely stocked shelves

• Greeting themwith gluts of unpopular, out-of-style,

merchandise.
Merchandise Planning
the right product
in the right place
at the right time
at the right price
in the right quantity
COMPONENTS OF
MERCHANDISE
PLANNING
 Product
 Staple
 Seasonal products
 Fashion
 Fad
 Price
 Price range can be broadly classified as low, Medium
and premium range
 Retailer has to offer the product that meets price range
of his target customers. Apart from this retailer has to
adopt different price strategies like Price Skimming,
Mark down price, discounts price and offers like buy
one and get one depending on demand for the goods
and extent of stock. The planning should be to offer an
attractive price package that can result in regular sale,
stock clearance and assure adequate profits.
 Range
 Range refers to width, breadth and depth of products
offered for sale. Customers should have opportunity
to make choice or selection depending on the type of
retail store 
 A wide range of product demands more investment
in merchandise. Retailer has to evaluate that there is
adequate return on investment made. Apart from this
he has to ensure that merchandise is acceptable and
saleable. Buy and store that range of merchandise
that can be sold.
 Assortment

 It refers to combination of products made available

to customer at retail outlet. Merchandise is assorted
and presented category wise and department wise.
 Space

 Products should visible to visiting customer.

Retailer have limited floor space, he should provide
adequate space for display of each product.
MERCHANDISE
PLANNING PROCESS
 Sales Forecast
 Merchandise plan or budget is dependent on estimated
sales.
 Forecast of sales for entire organisation, department and
product wise is to be made.
 Further new products to be added, or deletion of product
is to be considered.
 Estimate is made based on past records, present scenario,
impact of fashion economic trend etc.
 Firm also has to determine pricing strategy in the sale of
product.
 Developing the Sales Forecast
 Reviewing Past Sales
  Analysing the changes in the economic conditions
  Analysing the changes in the sales potential 
 Analyse the changes in the marketing strategies of the
retail organisation and the competition
  Creating the sales forecast 
 Merchandise Budget:

 It is a financial plan which gives an indication of

how much to invest in product inventories, stated in
monetary terms.
 Factors affecting merchandise budget
(a)   The sales plan
how much of each product needs to be sold, this may be department wise, division
wise or store wise.
(b)   The stock support plan
how much inventory or stock is needed to achieve those sales.
(c)   The planned reductions
need to be made in case the product does not sell.
(d)   The planned purchase levels
the quantity of each product that needs to be procured from the market.
(e)   The gross margins
the difference between sales and cost of goods sold that the department, division or
store contributes to the overall profitability of the company
 Merchandise control
 Retailer has to balance between purchase and sale of
merchandise. It is necessary to avoid either over or under
stocking of merchandise. Daily and weekly stock reports are
taken to monitor the movement of stock. Fresh order of purchase
is made before the stock reaches danger level.
 Firms will have their own policy of maintaining stock levels.
Control over inventory can be ensured by monitoring movement
of merchandise from the warehouse to the store and from there
to the department. Adequate control can minimise the problem of
stock clearance, or discount or mark down sale.
 Assortment Planning
Assortment planning is extremely important and challenging for retailers.

Assortment has been defined by Van Herpen as

 ” the combination of all products made available in a store”
 ‘a set of products offered within a product category’.
These products form a set because they share similar physical characteristics.

 Assortment Planning involves determining the quantities of each product

that will be purchased to fit into the overall merchandise plan. Details of
colour, size, materials, brand etc. have to be specified. The main purpose of
creating an assortment plan is to create a balanced assortment of merchandise
for the customer.
 Assortment is arrangement of products category wise. It is presentation
of entire products range classified under categories, department or
section. e.g. – Food section, cosmetics, Garments etc.

 Merchandiser has to ensure that there is proper assortment i.e., each

assortment or section must have relevant or related items, every category
must have adequate SKU (Stock keeping units) no shelf , rack, should
be empty. At the same time it should be ensured no department or
product category is overloaded.

 Assorted merchandise need to be presented making optimum use of

space and positioning the products in racks, hangers etc., so that it is
visible, and comfortable for customer to select.
buying and handling process
(i) Collecting information
(ii) Selecting vendors
(iii) Evaluating merchandise
(iv) Negotiation with vendors
(v) Buying merchandise
(vi) Receiving and stocking merchandise
(vii) Re-ordering and
(viii) Re-evaluating
Collecting information
 Once the firm’s overall merchandise plans are
defined, exact information about current market
needs and potential
 What consumers are looking for?
 Where the vendors are located and what is their
goodwill in the market ?
 What their competitors are offering ?
Selecting Vendors:
Company-owned vendors:
As the very name implies, these vendors are owned by the company themselves. Large retailers have their own manufacturing or wholesale operations. They work only for particular retailers and provide as per their requirements.
(ii) External, widely used supplier:
This type of supplier is not owned by the retailer but used frequently by him. The retailer is buying merchandise for long and is aware about the quality and services offered by him.
(iii) External, not used supplier:

This type of retailer has not been used by the retailer as he is either a new entrant or retailer has not purchased anything from him so far. Therefore, what quality he is offering cannot be known in advance. Retailers may use any one type of supplier as per their requirements, budget and area of operations or they can use a combination of them. Big retailers often deal with all types of suppliers. Therefore, after selecting the supplier

category, a retailer should interact with them about the buying terms and conditions .