1.

2 Concept of Merchandising
1. Definition
Merchandising involves planning, buying, and selling the right product at the right time and
price to the right customer.
2. Purpose
Its main goal is to maximize sales and profit while satisfying customer needs.
3. Customer Orientation
Focuses on understanding and meeting customer preferences.
4. Product Management
Involves selection, sourcing, pricing, and promotion of products.
5. Sales Planning
Aims at achieving sales targets through forecasting and stock planning.
6. Inventory Control
Ensures optimum stock levels are maintained to avoid overstocking or shortages.
7. Visual Presentation
Products are displayed attractively to influence purchase decisions.
8. Seasonal Strategy
Merchandise changes according to seasons and trends.
9. Profit Maximization
Proper merchandising increases sales and reduces costs.
10. Market Responsiveness
Adjusts merchandise according to market demand and competition.

1.3 Key Elements of Merchandising

1. Product
Selecting the right type, style, and quality of products.
2. Place
Choosing the best retail locations and display areas.
3. Price
Setting competitive and profitable pricing.
4. Promotion
Using advertising and displays to attract buyers.
5. Presentation
Arranging products appealingly in the store.
6. People
Trained staff who understand products and customer service.
7. Planning
Accurate forecasting and inventory management.
8. Positioning
Creating a product image that appeals to the target market.
9. Profitability
Ensuring that each merchandising decision adds value.
10. Timing
Introducing the right products at the right time.
1.4 Process of Merchandising
1. Market Research
Collecting data on trends and consumer preferences.
2. Merchandise Planning
Setting targets, budgets, and assortments.
3. Assortment Planning
Deciding product variety and quantities for each category.
4. Vendor Selection
Choosing reliable suppliers for quality products.
5. Pricing Strategy
Setting prices to balance profit and market competitiveness.
6. Purchasing
Placing orders with suppliers based on plans.
7. Inventory Management
Monitoring stock levels and replenishment.
8. Visual Merchandising
Designing store layout and product displays.
9. Promotion Planning
Advertising and marketing campaigns.
10. Performance Review
Evaluating sales and adjusting strategies.

1.5 Roles of Merchandisers

1. Planner
Forecasts sales and decides product needs.
2. Buyer
Selects and purchases merchandise from vendors.
3. Coordinator
Links production, suppliers, and sales teams.
4. Negotiator
Discusses terms and prices with vendors.
5. Analyzer
Uses data to improve inventory and sales performance.
6. Visualizer
Assists in store layout and product presentation.
7. Inventory Manager
Ensures optimal stock availability.
8. Trend Spotter
Identifies and acts on fashion and market trends.
9. Profit Driver
Makes decisions aimed at maximizing profits.
10. Customer-Focused
Ensures offerings match customer expectations.
1.5.1 Role of Merchandiser in Historical Times
1. Trade Facilitator
Merchants linked producers and buyers in markets.
2. Local Sourcing
Products were sourced locally due to limited transportation.
3. Manual Inventory
Stock was tracked using manual methods.
4. Product Maker
Often involved in both making and selling goods.
5. Barter System
Trade often occurred without money—using barter.
6. Basic Products
Focused on essentials like food, cloth, and tools.
7. Seasonal Selling
Goods were sold based on seasonal availability.
8. Limited Promotion
Word-of-mouth was the main promotional method.
9. Small-Scale Operations
Merchandising was conducted in local markets or fairs.
10. Personal Relationships
Trust and relationships drove customer loyalty.

1.5.2 Role of Merchandiser in an Export Business

1. Client Communication
Coordinates with foreign buyers for orders.
2. Sampling
Develops and sends product samples for approval.
3. Order Follow-Up
Tracks production and shipment timelines.
4. Documentation
Prepares export documents like invoices, packing lists, etc.
5. Pricing & Costing
Calculates accurate prices for export orders.
6. Quality Control
Ensures products meet international quality standards.
7. Logistics Coordination
Manages shipping and transportation.
8. Compliance Management
Ensures adherence to legal and customs regulations.
9. Payment Follow-Up
Tracks and ensures receipt of payment from buyers.
10. Market Research
Studies trends in international markets.
1.5.3 Role of Merchandiser in a Retail Business
1. Customer Analysis
Understands shopper behavior and preferences.
2. Product Selection
Chooses the right products for the store.
3. Vendor Negotiation
Deals with suppliers for best terms.
4. Stock Management
Maintains ideal stock levels on the floor.
5. Visual Merchandising
Arranges products attractively.
6. Sales Monitoring
Tracks fast-moving and slow-moving items.
7. Pricing Strategy
Ensures price competitiveness.
8. Seasonal Planning
Plans collections for festivals and seasons.
9. Promotional Activities
Supports sales through discounts and events.
10. Feedback Loop
Collects customer feedback for improvements.

1.6 Merchandising Philosophy

1. Customer-Centric
Focuses on customer satisfaction and loyalty.
2. Profit Orientation
Aims at maximizing return on investment.
3. Right Product, Right Time
Ensures availability of desirable products on time.
4. Assortment Balance
Offers a mix of staple and trendy items.
5. Data-Driven Decisions
Uses analytics for effective planning.
6. Quality Assurance
Prioritizes consistency in product quality.
7. Brand Representation
Reflects brand identity in product selection and display.
8. Responsiveness
Quickly adapts to market and consumer shifts.
9. Sustainability
Considers environmental and ethical factors.
10. Collaboration
Encourages teamwork across departments.
1.7 Merchandise Types
1. Staple Merchandise
Regularly purchased, essential items.
2. Fashion Merchandise
Trend-based, seasonal products.
3. Impulse Goods
Purchased without prior planning.
4. Convenience Products
Easily accessible, low-effort purchases.
5. Specialty Merchandise
Unique, high-involvement products.
6. Seasonal Merchandise
Sold during particular times of the year.
7. Promotional Merchandise
Sold during campaigns to boost traffic.
8. Private Label Goods
Store-branded products.
9. Durable Goods
Long-lasting items like appliances.
10. Non-Durable Goods
Items consumed quickly like groceries.

1.8 Merchandise Classification / Hierarchy

1. Department
Broadest category like Men's Wear, Electronics.
2. Category
Subdivision within departments, e.g., Shirts in Men’s Wear.
3. Sub-Category
Further divides categories, e.g., Formal Shirts.
4. Class
Groups similar products by use or material.
5. Subclass
More detailed classification by brand, fit, or design.
6. Style
Refers to specific cuts or designs.
7. Color
Classification by color variants.
8. Size
Segregation based on product sizes.
9. SKU (Stock Keeping Unit)
Unique code for each item variant.
10. Brand
Classification by brand name and product line.
2.1 The Process of Buying
1. Need Identification
Recognizing the requirement for a product based on sales trends or customer demand.
2. Market Research
Gathering information about product availability, prices, and suppliers.
3. Product Evaluation
Comparing quality, price, brand, and features of different options.
4. Supplier Selection
Choosing vendors based on reliability, pricing, and quality standards.
5. Negotiation
Discussing prices, terms, discounts, and delivery timelines.
6. Purchase Decision
Finalizing the product and supplier based on evaluation.
7. Order Placement
Issuing a purchase order (PO) for the selected items.
8. Delivery and Inspection
Receiving goods and checking them for quality and quantity.
9. Inventory Entry
Recording items into the inventory system.
10. Payment and Feedback
Making payment and giving feedback to the supplier.

2.2 Objectives of Buying Process

1. Right Product
Ensure the product matches customer expectations and business needs.
2. Right Quantity
Buy enough to meet demand but avoid overstocking.
3. Right Price
Aim to get the best value while ensuring profitability.
4. Right Time
Purchase in sync with sales cycles and seasons.
5. Right Supplier
Choose reliable vendors to ensure quality and timely delivery.
6. Customer Satisfaction
Meet or exceed customer expectations through smart buying.
7. Cost Control
Minimize buying costs through negotiations and planning.
8. Trend Alignment
Buy products that reflect market and fashion trends.
9. Stock Optimization
Maintain healthy stock levels without wastage.
10. Business Growth
Support sales and revenue targets through effective buying.
2.3 Role of Buying Function
1. Sales Support
Provides the right products to support sales activities.
2. Revenue Generation
Good buying decisions lead to profitable sales.
3. Inventory Control
Helps maintain optimal inventory levels.
4. Cost Management
Manages product cost through smart negotiations.
5. Vendor Relationship
Builds and maintains strong supplier networks.
6. Product Assortment
Ensures variety and freshness in product offerings.
7. Market Trend Response
Adjusts buying decisions based on market changes.
8. Promotion Planning
Coordinates with marketing for offers and discounts.
9. Quality Assurance
Ensures products meet customer and brand standards.
10. Strategic Planning
Aligns buying with business objectives and forecasts.

2.4 Organizational Buying

1. Team Involvement
Involves multiple departments like finance, logistics, and marketing.
2. Bulk Purchases
Buying is done in large quantities for cost efficiency.
3. Formal Procedures
Follows a documented process with purchase orders and approvals.
4. Vendor Evaluation
Suppliers are selected based on strict criteria.
5. Contractual Agreements
Long-term contracts are common for stability.
6. Budget Constraints
Purchases must align with the organization's financial plans.
7. Technical Specifications
Products must meet precise requirements and standards.
8. Risk Assessment
Considers risks like supplier reliability and price fluctuation.
9. Approval Hierarchy
Multiple layers of approval are needed before purchasing.
10. Relationship Management
Focus on building partnerships with trusted suppliers.
2.5 Buying Behaviour of Retailers
1. Customer-Centric
Retailers buy based on what their target customers want.
2. Trend Sensitivity
Quickly respond to fashion or seasonal trends.
3. Data-Driven
Use sales data and analytics to guide buying decisions.
4. Brand Preference
Choose products from trusted and well-known brands.
5. Profit-Oriented
Focus on margins and turnover to maximize profit.
6. Product Differentiation
Seek unique products to stand out from competitors.
7. Supplier Trust
Prefer reliable and consistent suppliers.
8. Negotiation Skills
Strong focus on getting best deals and discounts.
9. Promotional Planning
Buy items that can be used in sales campaigns.
10. Impulse Product Inclusion
Include fast-selling and impulse products in assortment.

2.6 Buying Behaviour Model

1. Problem Recognition
Realization of a product gap or customer demand.
2. Information Search
Gathering data about products, trends, and vendors.
3. Evaluation of Alternatives
Comparing products based on quality, price, and features.
4. Purchase Decision
Choosing the product and supplier after analysis.
5. Post-Purchase Evaluation
Checking customer feedback and sales performance.
6. Influencing Factors
Includes cost, trends, supplier performance, and demand.
7. Feedback Loop
Learnings from past purchases influence future buying.
8. Internal Influences
Store policies, buyer experience, and stock levels.
9. External Influences
Customer feedback, competitor offerings, market shifts.
10. Decision-Making Unit (DMU)
Multiple stakeholders involved in large purchase decisions.
2.7 Responsibilities of a Buyer
1. Product Selection
Choose the right products to match customer needs.
2. Vendor Management
Find and manage supplier relationships.
3. Price Negotiation
Ensure competitive pricing to support profit margins.
4. Purchase Planning
Schedule purchases based on forecasts and seasons.
5. Inventory Monitoring
Avoid overstocking and stockouts through smart planning.
6. Trend Analysis
Stay updated with market and fashion trends.
7. Sales Analysis
Review product performance to adjust future buys.
8. Budget Adherence
Ensure purchases stay within financial limits.
9. Quality Checks
Maintain product quality as per brand standards.
10. Reporting
Prepare regular reports on buying and stock status.

2.8 Characteristics of a Buyer

1. Analytical Skills
Capable of interpreting sales data and trends.
2. Decision-Making Ability
Makes quick and effective purchase decisions.
3. Negotiation Skills
Skilled in getting favourable terms from vendors.
4. Trend Awareness
Always aware of current and upcoming trends.
5. Customer Orientation
Understands what customers want and need.
6. Financial Discipline
Keeps buying within budget while maximizing value.
7. Attention to Detail
Ensures product specs and quality match expectations.
8. Time Management
Meets buying deadlines and seasonal demands.
9. Product Knowledge
Deep understanding of product features and benefits.
10. Communication Skills
Effectively interacts with suppliers and internal teams.
3.1 Margins and Profitability
1. Definition
Margin is the difference between selling price and cost; profitability is the ability to generate
earnings over expenses.
2. Gross Margin
Calculated as Net Sales minus Cost of Goods Sold (COGS), showing basic profitability.
3. Operating Margin
Reflects earnings after operational expenses, highlighting business efficiency.
4. Net Profit Margin
Final profit after all expenses, including taxes and interest.
5. Pricing Strategy
Impacts margins directly through markups and discounting policies.
6. Cost Control
Lowering costs improves margins without changing sales price.
7. Inventory Management
Efficient stock handling avoids markdowns and increases profitability.
8. Sales Volume
Higher volume can lead to better profit even with smaller margins.
9. Supplier Negotiation
Better purchase terms help increase gross margins.
10. Product Mix
Balancing high- and low-margin products boosts overall profitability.

3.2 Relationship Among Basic Factors

1. Sales and COGS
Higher sales with lower COGS lead to better margins.
2. Gross Margin and Profit
Gross margin is the starting point to measure profit potential.
3. Operating Expenses
Higher expenses reduce operating and net profit.
4. Contribution Margin
Sales minus variable costs; critical for break-even analysis.
5. Markup vs. Margin
Markup is based on cost, margin is based on selling price.
6. Volume and Profitability
High volume can compensate for low margin products.
7. Cost Efficiency
Lowering operating costs improves the margin relationship.
8. Net Sales Impact
Discounts and returns reduce net sales, affecting profits.
9. Direct & Indirect Expenses
Both influence operating profit and overall business health.
10. Balance Across Factors
Profitability depends on balancing sales, cost, and expense control.
3.3 Gross Margin
1. Definition
Gross Margin = Net Sales – Cost of Goods Sold.
2. Indicator of Core Profit
Measures profitability before operating expenses.
3. Percentage Formula
Gross Margin % = (Gross Margin ÷ Net Sales) × 100.
4. Helps in Pricing
Guides decisions on product pricing and markdowns.
5. Supplier Role
Lower cost prices from suppliers can improve gross margins.
6. Category Management
Different categories have varied gross margins; mix matters.
7. Loss Leader Strategy
Some low-margin items attract customers to buy high-margin ones.
8. Return Management
Returns reduce net sales and therefore the margin.
9. Helps Track Trends
Margins over time show how profitability is changing.
10. Benchmarking Tool
Used to compare performance across stores or periods.

3.4 Operating Profit

1. Definition
Profit earned after deducting operating expenses from gross margin.
2. Formula
Operating Profit = Gross Margin – Operating Expenses.
3. Reflects Efficiency
Shows how well a business controls its operational costs.
4. Core Business Health
Excludes taxes and finance costs, focusing on business operations.
5. Budget Management
Cost control improves operating profits.
6. Wages and Rent Impact
Major operating expenses that can reduce profit if not managed.
7. Linked to Sales
Higher sales typically improve operating profit, all else equal.
8. Comparison Tool
Used to compare performance across departments or stores.
9. Non-Operating Exclusions
Does not include income from non-retail operations.
10. Forecasting Use
Helps in financial forecasting and planning.
3.5 Basic Profit Factors
3.5.1 Net Sales
1. Definition
Net Sales = Gross Sales – Returns and Allowances.
2. True Revenue
Represents actual revenue generated.
3. Discount Impact
High discounts reduce net sales.
4. Performance Metric
Basis for evaluating margins and profits.
5. Drives Business Health
Directly linked to profitability.
6. Seasonality Effects
Sales vary with seasons, impacting planning.
7. Customer Experience Role
Good service boosts net sales through repeat business.
8. Product Availability
Stockouts can limit net sales.
9. Promotion Planning
Marketing strategies aim to increase net sales.
10. Store Comparisons
Useful for comparing different stores or departments.

3.5.2 Cost of Merchandise Sold (COGS)

1. Definition
The total cost incurred to acquire goods sold.
2. Includes All Direct Costs
Such as purchase price, shipping, and handling.
3. Gross Margin Dependent
Lower COGS means better gross margin.
4. Inventory Valuation
Based on FIFO or LIFO accounting methods.
5. Purchase Planning
Helps decide how much to buy and when.
6. Affects Pricing Strategy
COGS influences the final selling price.
7. Volume Discounts
Buying in bulk reduces COGS per unit.
8. Supplier Selection
Key to controlling and lowering COGS.
9. Losses and Damages
Must be considered as part of COGS.
10. Financial Reporting
Shown on income statements to calculate profit.
3.5.3 Operating Expenses
1. Definition
Day-to-day expenses to run the business (e.g., rent, salaries).
2. Fixed and Variable
Some are constant, others vary with business activity.
3. Reduces Profit
Must be subtracted from gross margin.
4. Need for Control
Keeping these in check improves profitability.
5. Staff Cost
Wages and benefits are major operating expenses.
6. Utility Bills
Electricity, water, and internet contribute to costs.
7. Advertising
Marketing spends fall under this category.
8. Depreciation
Cost of equipment usage over time.
9. Expense Budgeting
Helps in setting realistic financial goals.
10. Operational Efficiency
Less wastage means better operating profit.

3.5.4 Direct Expenses

1. Directly Linked to Sales
Costs incurred directly for selling specific products.
2. Examples
Packaging, commission, freight on purchase.
3. Product-Specific
Tied to particular items or batches.
4. Variable in Nature
Increase with more sales or purchases.
5. Affects Profitability
Directly reduces gross or contribution margin.
6. Separate Accounting
Tracked separately for clear profit analysis.
7. Can Be Controlled
Through efficiency and bulk sourcing.
8. Performance Evaluation
Helps assess individual product line costs.
9. Sales-Based
Some direct costs vary by sales performance.
10. Tax Deductions
Often allowed as deductions in profit calculation.
3.5.5 Indirect Expenses
1. Definition
Not directly linked to a specific sale or product.
2. Examples
Office rent, admin salaries, security, maintenance.
3. Fixed Costs
Often recurring and less affected by sales volume.
4. Reduces Operating Profit
Must be deducted after gross margin.
5. Spread Across Products
Shared across all goods and services.
6. Difficult to Assign
Not traceable to specific products.
7. Cost Reduction Focus
Critical for improving net profit.
8. Budget Planning
Controlled via department-level budgets.
9. Long-Term Impact
Important in determining business sustainability.
10. Depreciation Included
Part of indirect costs in financial statements.

3.5.6 Contribution
1. Definition
Contribution = Sales – Variable Costs.
2. Profit Indicator
Shows how much each unit contributes to fixed costs and profit.
3. Break-Even Analysis
Helps calculate break-even point.
4. Pricing Decisions
Guides how low a price can be set profitably.
5. Focus on Variable Costs
Highlights importance of managing variable costs.
6. Per Unit Analysis
Useful for understanding product-level profitability.
7. Sales Strategy Input
Helps focus on high-contribution products.
8. Not Affected by Fixed Costs
Focuses only on variable cost-related profit.
9. Short-Term Planning
Vital for tactical decisions during sales campaigns.
10. Margin vs. Contribution
Contribution looks at cost behavior; margin at profitability.
4.2 Importance of Mark-Ups
1. Determines Selling Price
Mark-up helps set a product’s final retail price above cost.
2. Ensures Profitability
It covers costs and generates profit.
3. Pricing Strategy
Supports competitive and value-based pricing decisions.
4. Cost Recovery
Recovers both direct and indirect costs of goods.
5. Inventory Planning
Affects reordering and stock investment strategies.
6. Margin Management
Helps in maintaining healthy gross margins.
7. Retail Benchmarking
Enables comparisons between product categories or stores.
8. Sales Promotion Readiness
Higher mark-ups allow room for discounts.
9. Financial Forecasting
Assists in projecting revenue and profit figures.
10. Business Sustainability
Proper mark-ups ensure long-term financial health.

4.3 Calculating Mark-Up and Percentages

1. Definition of Mark-Up
Mark-up is the difference between cost and selling price.
2. Mark-Up Formula
Mark-Up = Selling Price – Cost Price.
3. Mark-Up Percentage (Retail Based)
= (Mark-Up ÷ Retail Price) × 100.
4. Mark-Up Percentage (Cost Based)
= (Mark-Up ÷ Cost Price) × 100.
5. Uses in Budgeting
Helps determine retail prices during assortment planning.
6. Adaptable for Sales Volume
Higher mark-up may be required for low-volume products.
7. Retail vs Cost Base Difference
Retail-based mark-up gives a lower percentage than cost-based.
8. Affects Profit Projection
Helps calculate how much is earned per item sold.
9. Simple but Effective
Quick to calculate using price and cost data.
10. Important for Merchandisers
Used daily for pricing and margin decisions.
4.3.1 Method of Calculating Mark-Up Percent Based on Retail Price
1. Formula
= (Retail Price – Cost Price) ÷ Retail Price × 100.
2. Retail-Focused Approach
Reflects how much of the selling price is profit.
3. Used in Pricing Strategy
Common in setting competitive retail prices.
4. Straightforward for POS Systems
Easy to input into billing systems.
5. Useful in Discount Planning
Knowing retail-based margin helps when planning markdowns.
6. Gives Realistic Margin View
Since it is based on final sale price.
7. Examples in Apparel Pricing
Widely used in fashion merchandising.
8. Lower % Than Cost-Based
Since denominator is higher (retail price).
9. Helps Forecast Gross Margin
Aids in calculating gross profit %.
10. Essential for Planning Sales Mix
Optimizes high- and low-margin items.

4.3.2 Method of Calculating Mark-Up on Cost Price

1. Formula
= (Retail Price – Cost Price) ÷ Cost Price × 100.
2. Cost-Based Perspective
Shows how much profit is made over cost.
3. High % Values
Mark-up percent appears higher than retail-based.
4. Popular in Wholesale and Export
Often used when cost is the base for pricing.
5. Helps in Supplier Negotiation
You know exactly how much over cost you're charging.
6. Supports Break-Even Analysis
Key in calculating cost recovery points.
7. Clear Profit Tracking
Reflects profitability over input costs.
8. Better for Internal Reporting
Common in finance and costing departments.
9. Simple Input Requirement
Only requires cost and selling price data.
10. Vital for Product Comparison
Helps compare profitability between items.
4.3.3 Comparison of Mark-Up on Retail Price vs Cost Price
1. Base Difference
Retail-based uses selling price; cost-based uses cost price.
2. Percentage Impact
Cost-based mark-up is always higher than retail-based.
3. Perspective
Retail-based is customer-facing; cost-based is supplier-focused.
4. Use Case
Retail-based used in pricing; cost-based in profit planning.
5. Calculation Simplicity
Both use same numerator but different denominators.
6. Gross Margin Link
Retail mark-up aligns with gross margin calculations.
7. Wholesale Relevance
Cost mark-up is standard for B2B pricing.
8. Retail Store Preference
Mostly use mark-up on retail price for price tags.
9. Planning Flexibility
Both help determine different planning strategies.
10. Need for Awareness
Merchandisers must know both to avoid pricing errors.

4.3.4 Calculating the Unknown Factor When Two Are Known

1. Identify Known Elements
Usually any two of cost, retail, and mark-up % are known.
2. Formula Adjustment
Rearrange mark-up formula to find the third variable.
3. If Cost and Mark-Up % Known
Use: Retail = Cost ÷ (1 – Mark-up % on Retail).
4. If Retail and Mark-Up % Known
Use: Cost = Retail × (1 – Mark-up % on Retail).
5. Helps Set Selling Price
Useful in pricing when cost and profit goals are known.
6. Supports Margin Goals
Ensure each product meets profitability targets.
7. Retail Planning Use
Used while planning assortment prices and vendor quotes.
8. Aids Discount Decisions
Helps decide minimum price during clearance.
9. Increases Pricing Accuracy
Reduces guesswork in pricing items.
10. Useful in Excel Templates
Easy to automate using formulas.
4.4 Planned Mark-Up Goals
1. Retail Strategy Planning
Set a target mark-up % for profit consistency.
2. Helps Achieve Profit Targets
Links to gross margin and overall business profitability.
3. Inventory Allocation
Guides how much to buy of different priced items.
4. Vendor Selection
Buy from vendors that help achieve mark-up goals.
5. Helps Forecast Average Selling Price
To meet margin requirements.
6. Supports Seasonal Planning
Varies with sales seasons and consumer trends.
7. Useful in Category Management
Targets set per product category.
8. Assortment Planning
Decide product mix based on planned mark-up.
9. Control Over Markdown Loss
Higher initial mark-up offsets future discounting.
10. Guides Replenishment
Re-ordering based on achieving planned margins.

4.4.1 Mark-Up % on Balance Quantity

1. For Partial Inventory Purchases
When only part of stock is bought and rest is pending.
2. Adjust to Meet Overall Target
New balance must be bought at higher/lower mark-up to meet average goal.
3. Formula-Based Adjustment
Helps find needed mark-up % for remaining quantity.
4. Used in Reordering
Ensures final blended margin matches plan.
5. Quantity and Cost Analysis
Balancing units with their mark-up % is key.
6. Avoids Overpricing or Under-pricing
Corrects early purchase pricing errors.
7. Dynamic Pricing Control
Adjusts for market conditions or vendor prices.
8. Retail Optimization
Maintains profitability despite inventory mix changes.
9. Excel Planning Friendly
Easily applied in spreadsheet models.
10. Improves Buying Accuracy
Ensures each batch aligns with margin goals.
4.4.2 Achieve Average Cost Value with Known Retail and Mark-Up %
1. Useful in Cost Planning
Calculate allowable average cost to meet mark-up targets.
2. Formula
Average Cost = Retail Price × (1 – Mark-Up %).
3. Retail-Focused Planning
Helps set cost limits while meeting retail pricing.
4. Vendor Negotiation
Know the maximum price to negotiate with supplier.
5. Protects Profit Margin
Keeps pricing within profitability range.
6. Applicable for Bulk Orders
Especially when buying large stock lots.
7. Retail Budgeting
Supports assortment budgeting.
8. Quick Decision-Making
Helps buyers make fast cost decisions.
9. Flexible Calculation
Works even when prices vary.
10. Efficient in Promotions
Maintains margin during sale pricing.

4.4.3 Average Retail Price with Known Cost and Mark-Up %

1. Retail Planning Focus
Calculate selling price based on cost and desired mark-up.
2. Formula
Average Retail = Cost ÷ (1 – Mark-Up %).
3. Ensures Target Margin
Selling price ensures set margin is met.
4. Useful for Pricing Labels
Decides actual price tags for products.
5. Works with Mixed Products
Calculates average when cost varies by item.
6. Supports Clearance Pricing
Find minimum price to break even or profit.
7. Buyer’s Tool
Ensures purchasing decisions remain profitable.
8. Essential in Budget Stores
Helps set competitive yet profitable prices.
9. Improves Cost Control
Sets cost limits during buying phase.
10. Aids in Category Pricing
Ensures consistency across product ranges.
4.5 Calculation of Mark-Ups
4.5.1 Initial Mark-Up
1. Definition
The mark-up added when the product is first priced.
2. Set Before Selling Begins
Planned margin based on retail strategy.
3. Initial Pricing Tool
Used to calculate original selling price.
4. Retailer’s Profit Planning
Covers all anticipated costs + profit.
5. Includes Estimated Reductions
Accounts for markdowns and losses.
6. Formula
IMU = (Planned Retail – Cost) ÷ Planned Retail × 100.
7. Supports Seasonal Planning
Higher IMU for seasonal risk products.
8. Ensures Profit Cushion
Helps absorb cost changes or markdowns.
9. Applied Across Assortments
Different products have different IMUs.
10. Used in Open-to-Buy Planning
Part of financial merchandise planning.

4.5.2 Maintained Mark-Up

1. Definition
The actual mark-up retained after selling.
2. Based on Actual Sales
Factors in markdowns and reductions.
3. Reflects Final Profitability
Shows real profit earned per product.
4. Formula
MMU = (Net Sales – Cost of Goods Sold) ÷ Net Sales × 100.
5. Important for Evaluation
Used to assess pricing and sales efficiency.
6. Varies With Promotions
Discounts reduce MMU.
7. Post-Sale Analysis
Calculated after all sales are complete.
8. Supports Future Planning
Helps adjust future initial mark-up targets.
9. Affects Gross Margin
Lower MMU reduces overall margin.
10. Retail Performance Metric
Used to compare departments or stores.
4.5.3 Cumulative Mark-Up
1. Definition
Average mark-up for a group of purchases over time.
2. Used in Mixed Inventory
Where stock is bought at different prices.
3. Tracks Total Profit Margin
Reflects overall profitability of assortment.
4. Formula
= (Total Retail – Total Cost) ÷ Total Retail × 100.
5. Important for OTB Planning
Supports open-to-buy calculations.
6. Blended Average
Smoothens out cost fluctuations over time.
7. Useful for Seasonal Buying
Tracks mark-up across pre-, mid-, and post-season buys.
8. Applied in Long-Term Plans
Tracks margin over an extended period.
9. Improves Accuracy
Prevents errors due to ignoring earlier costs.
10. Buyer Performance Measure
Reflects how well a buyer managed cost and pricing.

5.1 RETAIL PRICING AND MARKDOWNS

1. Definition of Retail Pricing
The process of setting the final price a customer pays for a product.
2. Definition of Markdown
A reduction from the original retail price, often used to clear inventory.
3. Purpose of Pricing
Helps in positioning the brand and attracting the target customer.
4. Pricing for Profit
Ensures costs are covered and margins are maintained.
5. Strategic Markdown Use
Boosts sales of slow-moving or seasonal items.
6. Balancing Act
Must maintain a balance between pricing high enough for profit and low enough for
demand.
7. Inventory Management Tool
Pricing and markdowns help control stock levels.
8. Customer Perception
Influences how customers view product value.
9. Competitive Pricing
Must align with what competitors are offering.
10. Part of Merchandising Plan
Both pricing and markdowns are planned to meet sales goals.
5.2 IMPORTANCE OF PRICING IN RETAIL
1. Revenue Generation
Pricing is the primary way retailers earn money.
2. Customer Attraction
Competitive prices can draw in more customers.
3. Brand Image
High prices suggest premium quality; low prices indicate affordability.
4. Sales Volume Control
Right pricing boosts purchase frequency and volumes.
5. Profit Margin Management
Determines how much profit is earned on each sale.
6. Influences Demand
Price affects how desirable a product is.
7. Product Positioning
Helps categorize products (budget, value, premium).
8. Price Sensitivity Matching
Different markets require different pricing strategies.
9. Sales Promotion Basis
Discounts and offers are derived from original prices.
10. Inventory Turnover
Smart pricing ensures regular movement of stock.

5.3 FACTORS AFFECTING RETAIL PRICING

1. Cost of Goods Sold (COGS)
Pricing must be above cost to earn profit.
2. Market Demand
Higher demand allows for higher pricing.
3. Competition
Prices must be competitive to attract buyers.
4. Customer Perception
Customers must feel the price is fair.
5. Product Life Cycle
New items are priced high; older ones are marked down.
6. Seasonality
Prices may be higher in peak season and lower during off-season.
7. Retail Format
Pricing differs in supermarkets, boutiques, and online stores.
8. Government Regulations
Some products have price caps or tax impacts.
9. Brand Strategy
Premium brands price higher for exclusivity.
10. Economic Conditions
Inflation or recession affects pricing flexibility.
5.4 IMPORTANCE OF MARKDOWNS
1. Clears Old Stock
Helps move outdated or seasonal inventory.
2. Increases Store Traffic
Discounts attract more footfall and attention.
3. Boosts Sales Volume
Lower prices often lead to increased sales.
4. Prepares for New Inventory
Makes space for new merchandise.
5. Reduces Holding Costs
Avoids the cost of storing unsold goods.
6. Minimizes Obsolescence
Prevents products from becoming completely unsellable.
7. Sales Targets Fulfillment
Helps reach sales goals during slow periods.
8. Enhances Cash Flow
Converts inventory into cash quickly.
9. Customer Engagement
Keeps regular shoppers interested with deals.
10. Price Image Management
Can be used to show value to customers.

5.5 CALCULATION OF MARKDOWN VALUE AND PERCENTAGES

1. Markdown Value Formula
= Original Price – Reduced Price.
2. Markdown % Formula
= (Markdown Amount ÷ Original Price) × 100.
3. Helps Track Profit Impact
Shows how much revenue is reduced.
4. Used for Planning Promotions
Retailers estimate how much discount to give.
5. Affects Gross Margin
Reduces overall profit margin.
6. Important in Clearance Sales
High markdowns often required to clear old stock.
7. Spreadsheet Ready
Easy to calculate using Excel or POS systems.
8. Used in Markdown Budgeting
Helps retailers allocate discount funds.
9. Guides Discount Limits
Ensures markdowns don’t cross loss thresholds.
10. Supports Price Optimization
Balance between markdown % and expected demand increase.
5.6 DETERMINATION OF NET MARKDOWNS
1. Definition
Net markdown is total markdown after all adjustments.
2. Includes Cancellations
Reductions due to cancelled sales are considered.
3. Adjusts for Returns
Returns at lower price points affect net markdown.
4. Gross Markdown – Returns
Net Markdown = Total markdown – markdown recoveries.
5. Important for Profit Analysis
Gives a true picture of how much price was reduced.
6. Impacts Maintained Markup
Affects final margin on products sold.
7. Essential for Retail Accounting
Used in preparing profit and loss statements.
8. Varies by Category
Fashion may have higher markdowns than electronics.
9. Calculated Periodically
Done weekly or monthly for accurate tracking.
10. Used in Seasonal Clearance
Helps retailers adjust ongoing discount strategies.

5.7 CALCULATION OF DISCOUNTS AND REDUCTIONS

1. Discount Definition
Price reduction offered to the customer on marked retail price.
2. Types of Discounts
Includes trade discounts, cash discounts, promotional offers, etc.
3. Reduction Includes Markdown
Any decrease from original retail price is a reduction.
4. Formula for Discount %
= (Discount ÷ Original Price) × 100.
5. Gross Reductions
Total of all markdowns, discounts, returns, and allowances.
6. Net Sales Calculation
Net Sales = Gross Sales – Reductions.
7. Affects Gross Margin
Higher reductions lead to lower margins.
8. Supports Pricing Analysis
Helps determine how well pricing strategies performed.
9. Used in Sales Promotions
Enables control over offer profitability.
10. Retailer’s Strategic Tool
Helps manage customer loyalty and inventory flow.
6.1 Stock Management
1. Definition
Stock management involves controlling the flow of goods in and out of the inventory.
2. Inventory Levels
Maintaining optimal stock levels avoids overstocking and stockouts.
3. Stock Turnover Ratio
Measures how frequently inventory is sold and replaced in a period.
4. Efficient Replenishment
Ensures goods are restocked before they run out.
5. Inventory Control Systems
Uses software like ERP and POS systems for tracking stock.
6. Avoiding Obsolescence
Ensures that products are sold before becoming outdated or expired.
7. Cost Control
Proper stock management reduces holding and wastage costs.
8. Improved Cash Flow
Prevents money from being stuck in unsold inventory.
9. Demand Forecasting
Helps estimate future sales to plan stock needs.
10. Shrinkage Reduction
Tracks inventory to reduce theft, damage, and loss.

6.2 Calculation of Book Inventory

1. Definition
Book inventory is the recorded stock level in accounting records.
2. Opening Inventory
Starting stock value at the beginning of a period.
3. Purchases
Added to inventory during the period.
4. Returns
Returned items are added back to inventory.
5. Sales
Deducted from the inventory record.
6. Adjustments
Includes damaged, expired, or donated items.
7. Formula
Book Inventory = Opening Inventory + Purchases – Sales ± Adjustments
8. Accuracy Importance
Accurate book inventory helps compare with physical stock.
9. System Updates
Book inventory must be updated in real-time through POS.
10. Discrepancy Detection
Differences between book and physical inventory reveal shortages or theft.
6.3 Calculation of Shortages
1. Definition
Shortages occur when physical stock is less than book inventory.
2. Formula
Shortage = Book Inventory – Physical Inventory.
3. Causes of Shortage
Theft, damage, errors in billing or receiving.
4. Physical Count
Conducted regularly to detect shortages.
5. Shrinkage Calculation
Expressed as a percentage of total inventory.
6. Investigation Required
Major shortages should be investigated thoroughly.
7. Reporting
Shortages must be documented for audits.
8. Preventive Measures
Include CCTV, tagging, and staff training.
9. Reconciliation
Adjust book inventory after finding the shortage.
10. Cost Impact
Directly affects profit margins and financial statements.

6.4 Methods of Inventory Valuations

1. Purpose of Valuation
Determines the monetary value of closing stock.
2. Retail Method (RMI)
Uses retail price and markup percentages to estimate inventory cost.
3. Cost Method
Uses actual purchase cost of goods for valuation.
4. FIFO Method
Assumes oldest stock is sold first; newer stock remains in inventory.
5. LIFO Method
Assumes newest stock is sold first; older stock remains in inventory.
6. Weighted Average
Calculates average cost of inventory items.
7. Choice of Method
Depends on business type and tax policies.
8. Periodic Valuation
Done monthly or yearly to update stock values.
9. Accuracy Required
Inventory valuation directly impacts profitability and tax.
10. Software Use
Retailers use software to automate valuation methods.
6.4.1 Retail Method of Inventory Valuation (RMI)
1. Definition
RMI uses retail prices and markup percentages to estimate inventory cost.
2. Used in Retail Stores
Especially helpful where prices vary and tagging is difficult.
3. Quick Estimation
Provides a fast and easy way to value large inventories.
4. Calculations
Value = Retail Inventory × Cost-to-Retail Ratio.
5. Not 100% Accurate
Estimates rather than exact figures.
6. Suitable for Fashion & FMCG
Where product turnover is fast and frequent.
7. Simplifies Valuation
Avoids the need for item-by-item calculation.
8. Used in Interim Reports
Helpful for quarterly financial reports.
9. System Dependency
Relies on accurate markup and sales data.
10. Cross-checked with Physical Counts
Must be verified with actual inventory data.

6.4.2 Stock Management at the Front and Back End

1. Front-End Stock
Displayed stock visible to customers in the sales area.
2. Back-End Stock
Stock stored in the storeroom or warehouse.
3. Display Optimization
Front-end stock needs frequent replenishment.
4. Space Utilization
Back-end stock requires efficient space management.
5. Inventory Sync
Both should be synchronized for smooth operations.
6. Avoiding Overstock
Prevents excess items in front that may not sell quickly.
7. Quick Access
Back-end stock should be organized for fast retrieval.
8. Sales Tracking
Sales at front-end help decide what to restock from the back.
9. Damage Prevention
Back-end storage must prevent damage or spoilage.
10. Technology Use
POS systems help track and manage both stock types.
6.4.3 Cost Method of Inventory Valuation
1. Definition
Uses actual purchase price to value inventory.
2. Accuracy
More accurate than estimation methods like RMI.
3. FIFO & LIFO Basis
Often uses FIFO or LIFO techniques for tracking costs.
4. Popular in Accounting
Preferred for tax and audit purposes.
5. Requires Record-Keeping
Needs detailed purchase and pricing records.
6. Time Consuming
More effort required than retail method.
7. Good for Low Turnover Items
Best for items that don’t change often in price.
8. Reflects True Profitability
Matches cost with revenue more closely.
9. Requires Skilled Staff
Proper training needed to manage cost tracking.
10. Supports Financial Audits
Aligns well with accounting and reporting norms.

6.4.4 RMI Issues

1. Estimation-Based
May not reflects the true inventory value.
2. Markup Errors
Wrong markup calculations lead to wrong inventory valuation.
3. Sales Returns Not Adjusted
Can distort actual stock figures.
4. Outdated Data
Old pricing data gives inaccurate values.
5. Not Suitable for All Retailers
Doesn’t work well for unique or luxury items.
6. Margin Fluctuation Impact
Frequent changes in markup affect valuation.
7. Doesn’t Consider Theft
Shrinkage is not accounted for unless physical count is done.
8. Difficulty in Multi-price Items
Complex when same items are sold at various prices.
9. Requires Regular Updates
Needs ongoing revision of pricing and markup records.
10. Not Used for Final Accounts
Often not accepted for year-end financial reporting.
6.4.5 Merits and Demerits of RMI
Merits:
1. Quick Valuation
Saves time and effort in large inventory environments.
2. Easy to Use
Simple method for everyday store operations.
3. Cost-Effective
Requires less labor and fewer resources.
4. Useful for Interim Reports
Helps prepare fast estimates for short-term financial statements.
5. Standard Practice in Retail
Widely used across chain stores and supermarkets.
Demerits:
6. Lacks Accuracy
Not suitable for precise financial reporting.
7. Not Audit-Ready
May not be accepted by auditors.
8. Assumes Constant Markup
Not true for all product categories.
9. Ignores Losses
Cannot detect stock loss, theft, or spoilage.
10. Dependent on Clean Data
Inaccurate pricing data leads to wrong inventory value.

6.5 Determining the Inventory at the Front Level

1. Visual Merchandising Check
Regularly monitor displayed items to determine quantity.
2. Sales Report Analysis
Past sales help predict how much stock is needed.
3. Customer Demand
Stock must meet customer expectations at the shelf.
4. Stock Rotation
Older items are brought forward for sale.
5. Daily Refill Plans
Front-level inventory is often restocked daily.
6. POS Data Integration
Tracks fast-selling items that need quick replacement.
7. Avoid Overcrowding
Too much stock at front may look cluttered.
8. Seasonal Adjustments
Change stock level based on current trends.
9. Product Category Based Planning
Essentials need more front inventory than luxury items.
10. Display Capacity Analysis
Determined by how much a shelf or rack can hold efficiently.
6.6 Stock to be Maintained at the Back-End
1. Buffer Stock
Acts as backup when front-end runs low.
2. Bulk Storage
Keeps larger quantities not immediately needed on the floor.
3. Efficient Layout
Organized to ensure fast retrieval.
4. Minimum Stock Level
Maintain a base quantity to avoid stockouts.
5. Reorder Point Analysis
Determines when new stock should be ordered.
6. Avoid Overstocking
Prevents wastage and storage issues.
7. Category-wise Segmentation
Stored by department, type, or size for easier access.
8. FIFO Implementation
Ensures older stock is used first to avoid expiry.
9. Use of Technology
Barcode scanners and inventory systems manage backend stock.
10. Regular Audits
Helps detect shortages, damages, or excesses in time.

7.1 Preparing a Merchandise Plan

1. Definition
A merchandise plan outlines the sales and inventory goals for a specific period.
2. Sales Forecasting
Estimate future sales based on past data, trends, and market analysis.
3. Budget Allocation
Allocate budget for buying merchandise based on forecasted sales.
4. Inventory Planning
Determine how much stock to keep to meet sales without overstocking.
5. Reduction Planning
Plan markdowns or discounts for slow-moving or seasonal items.
6. Timing and Seasonality
Adjust plans according to seasonal demand fluctuations.
7. Vendor Coordination
Coordinate with suppliers to ensure timely delivery.
8. Financial Targets
Set profit margins and cost targets aligned with company goals.
9. Risk Management
Prepare contingencies for uncertain market conditions.
10. Review and Update
Regularly review the plan and adjust based on actual performance.
7.2 Format for the Merchandise Plan
1. Sales Forecast Section
Contains expected sales volume and revenue for the period.
2. Inventory Opening Balance
Lists stock on hand at the start of the planning period.
3. Planned Purchases
Amount of new merchandise to be bought.
4. Planned Reductions
Expected markdowns, discounts, and losses.
5. Closing Inventory
Projected stock at the end of the period.
6. Gross Margin Goals
Target profit margins included in the plan.
7. Seasonal Adjustments
Special considerations for holiday or seasonal peaks.
8. Time Frames
Divided by weeks, months, or quarters for detailed tracking.
9. Cost and Retail Pricing
Include purchase costs and planned retail prices.
10. Summary Section
Quick overview of total sales, stock, and profit targets.

7.3 Planning Sales for the Current Period

1. Historical Sales Data
Analyze past sales for the same period.
2. Market Trends
Include current trends affecting demand.
3. Promotions and Events
Factor in planned sales campaigns or holidays.
4. Competitive Analysis
Understand competitors' influence on sales.
5. Customer Preferences
Adjust based on customer buying behavior.
6. Economic Conditions
Consider economic factors impacting consumer spending.
7. New Product Launches
Anticipate sales from newly introduced merchandise.
8. Seasonal Demand
Account for peaks or dips during the season.
9. Sales Channels
Plan separately for online and offline channels.
10. Sales Goals
Set realistic but challenging targets for sales.
7.4 Planning Stocks on the Floor
1. Inventory Allocation
Decide how much stock to display on the sales floor.
2. Demand Matching
Ensure stock levels align with expected sales.
3. Space Constraints
Consider physical limitations of display area.
4. Product Variety
Maintain variety while optimizing space.
5. Replenishment Frequency
Plan how often stock will be refreshed.
6. Avoid Overstocking
Prevent clutter and slow-moving inventory.
7. Customer Experience
Keep shelves attractive and well-stocked.
8. Safety Stock
Maintain buffer stock for unexpected demand.
9. Monitoring Sales Velocity
Track how quickly items sell to adjust stock.
10. Collaboration with Buying Team
Coordinate to ensure adequate stock is available.

7.4.1 Stock Turnover or Sales to Stock Ratio

1. Definition
Measures how many times stock is sold and replaced during a period.
2. Formula
Stock Turnover = Sales / Average Inventory.
3. High Turnover
Indicates good sales or insufficient inventory.
4. Low Turnover
May indicate overstocking or slow sales.
5. Benchmarking
Compare turnover against industry standards.
6. Impact on Cash Flow
Faster turnover improves liquidity.
7. Inventory Management
Helps plan replenishment and reduce holding costs.
8. Seasonal Adjustments
Turnover varies across seasons; adjust plans accordingly.
9. Profitability Correlation
Efficient turnover can increase profitability.
10. Use in Planning
Helps set inventory targets in merchandise planning.
7.4.2 Basic Stock Method
1. Definition
Maintains a fixed amount of stock relative to planned sales.
2. Calculation
Basic Stock = Planned Sales × Stock-to-Sales Ratio.
3. Simple to Use
Useful for retailers with stable sales patterns.
4. Maintains Constant Inventory
Ensures inventory is always proportional to sales.
5. Avoids Overstocking
Limits excessive inventory buildup.
6. Responsive to Sales Changes
Stock adjusts with sales fluctuations.
7. Useful for Slow-Moving Items
Helps maintain minimum stock.
8. Stock Turnover Impact
Encourages regular stock replenishment.
9. Requires Accurate Sales Forecasts
Dependent on precise sales planning.
10. Widely Used
Common in retail merchandise management.

7.4.3 Week’s Supply Method

1. Definition
Determines stock based on the number of weeks' sales it should cover.
2. Formula
Stock = Weekly Sales × Number of Weeks Supply.
3. Flexibility
Allows adjusting stock levels for demand changes.
4. Useful for Seasonal Items
Adjust weeks supply based on seasonality.
5. Avoids Stockouts
Maintains sufficient stock for a set period.
6. Improves Stock Planning
Helps in detailed replenishment scheduling.
7. Aligns Inventory with Sales
Stock is directly related to actual sales velocity.
8. Supports Promotions
Can increase weeks supply during sales campaigns.
9. Easy to Calculate
Simple formula for retail managers.
10. Requires Weekly Sales Data
Needs reliable sales tracking for accuracy.
7.4.4 Stock to Sales Ratio
1. Definition
Ratio of inventory on hand to expected sales.
2. Formula
Stock to Sales Ratio = Stock / Sales.
3. Measures Inventory Efficiency
Shows if inventory matches sales demand.
4. High Ratio
May indicate overstocking.
5. Low Ratio
Indicates possible stock shortages.
6. Target Ratio
Retailers set an optimal ratio based on category.
7. Monitoring Tool
Helps manage inventory levels dynamically.
8. Impact on Cash Flow
Affects working capital and liquidity.
9. Used for Stock Replenishment
Guides ordering decisions.
10. Adjusts for Seasonality
Ratio can vary across different sales periods.

7.5 Planning Reductions

1. Definition
Planning for markdowns and discounts on slow-moving stock.
2. Objective
To clear out excess or outdated inventory.
3. Timing
Early planning prevents heavy end-of-season markdowns.
4. Impact on Profitability
Helps minimize losses while maintaining sales.
5. Types of Reductions
Includes clearance sales, promotional discounts, and bulk offers.
6. Inventory Turnover Improvement
Reduces holding of obsolete stock.
7. Customer Attraction
Markdown sales can increase footfall.
8. Budgeting for Reductions
Allocate financial impact in merchandise plan.
9. Communication with Marketing
Coordinate promotions and advertising.
10. Monitoring Effectiveness
Track how reductions affect sales and margins.
7.6 Finalisation of the Merchandise Plan
1. Review Sales Targets
Confirm if sales goals are realistic.
2. Check Inventory Levels
Ensure stock plans align with sales forecasts.
3. Confirm Budget
Validate purchase budgets and cash flow.
4. Integrate Reduction Plans
Include markdown and promotional strategies.
5. Vendor Coordination
Finalize order quantities and delivery schedules.
6. Approval Process
Submit plan for managerial approval.
7. Documentation
Keep clear records of the finalized plan.
8. Communication
Share plan with buying, sales, and inventory teams.
9. Set Monitoring Metrics
Define KPIs to track plan performance.
10. Prepare for Adjustments
Allow flexibility for mid-period updates.

8.2 Figuring Open to Buy (OTB)

1. Definition of OTB
Open-to-Buy is the planned budget for inventory purchases in a given period, after
accounting for existing stock and sales forecasts.
2. Sales Forecast Input
Uses projected sales for the period to determine how much new inventory is needed.
3. Planned Markdown Allowance
Accounts for expected reductions (discounts, promotions) so that purchase budgets cover
net margin goals.
4. Current Inventory Value
Begins with the value of beginning inventory (on-hand at the start of the period), both at
cost and retail.
5. Planned Ending Inventory
Sets a target for inventory on hand at period’s end; ensures stock levels meet next period’s
needs.
6. Calculating BOM (Beginning of Month) Stock
BOM is the actual stock at the start of a month; used to compare against planned BOM.
7. Purchase Budget Formula
OTB (Retail) = Planned Sales + Planned Markdowns + Planned Ending Inventory – BOM on
Hand.
 8. Balancing Cash Flow
Ensures buying is paced so capital isn’t tied up in excess inventory, preserving cash for
operations.
9. Adjustment for Lead Times
Incorporates supplier lead times—OTB must be computed early enough so orders arrive on
schedule.
10. Monitoring and Revision
Compare actual sales and receipts to the plan; adjust OTB monthly to respond to
unanticipated changes.

8.3 Unit Planning

1. Definition of Unit Plan
Unit planning translates the monetary OTB budget into the number of units to buy for each
SKU.
2. Sales Units Forecast
Estimate how many units of each item will sell during the period, based on historical unit-
sales data.
3. Average Unit Retail (AUR)
Uses the average selling price per unit to convert dollar-based OTB into required units: Units
= OTB $ ÷ AUR.
4. Stock Turnover Target
Considers how many times inventory should turn over for each product; influences how
many units to buy.
5. Size/Color Breakdown
Within each SKU, decide how many pieces of each size/color are needed to meet projected
demand.
6. Promotion Units Allocation
Reserve a portion of the unit plan for promotional events (e.g., “Buy One, Get One”),
ensuring supply meets special-event demand.
7. Safety Stock Units
Include extra units beyond sales forecast as buffer against stockouts (often expressed as a
percentage of forecast).
8. Supplier Minimum Order Quantities (MOQ)
Adjust unit plan to meet vendor-imposed minimums; may require rounding up unit orders.
9. Open-to-Buy Reconciliation
Unit plan must reconcile with OTB dollars; if unit costs change, recalculate to keep the plan
on budget.
10. Ongoing Unit Plan Review
Update unit plan weekly or monthly to reflect changes in sales velocity, returns, or
cancellations.
8.4 Reorder Quantities
1. Economic Order Quantity (EOQ)
A mathematical model that calculates the optimal reorder quantity to minimize total
inventory costs (ordering + holding costs).
2. Reorder Point (ROP)
The inventory level at which a new purchase order should be placed, calculated as: ROP =
Lead Time × Average Daily Usage + Safety Stock.
3. Lead Time Consideration
Includes supplier processing time, transit time, and receiving/inspecting time to avoid
stockouts.
4. Safety Stock Calculation
Extra inventory kept to cover demand variability: Safety Stock = (Maximum Daily Usage –
Average Daily Usage) × Lead Time.
5. Minimum Order Quantity (MOQ)
Suppliers often set a minimum order size; reorder quantity must satisfy MOQ and not lead to
overstock.
6. Fixed-Order Quantity System
Every time inventory reaches ROP, the same (fixed) quantity is ordered—simplifies planning
but may not suit all demand patterns.
7. Periodic Review System
Inventory is checked at set intervals, and order quantity varies to top up stock to a target
level, which can simplify administration.
8. Batch-Size Constraints
Some products can only be purchased in full cartons or lots (e.g., multiples of 10 units);
reorder quantity must align with these constraints.
9. Total Cost Minimization
EOQ balances ordering cost (lower with larger, less frequent orders) and holding cost (lower
with smaller, more frequent orders).
10. Adjusting for Seasonality
During peak season, reorder quantities may be increased to ensure adequate inventory;
during off-peak, reorder less frequently to reduce carrying cost.

8.5 Format for Replenishments and Placing Orders

8.5.1 Format to Capture the Sales and Stock Feedback
1. SKU and Description
Lists item code, description, brand, and style so buyers know exactly which product the data
refers to.
2. Beginning Inventory (BI)
Stock on hand at the start of the review period, usually the week or month.
3. Sales Quantity
Number of units sold in the period; critical for identifying fast- vs. slow-moving items.
4. Receipts/Put-away
Quantity of units received into stock during the period; includes shipments that have arrived
and been processed.
5. Damages/Returns
Units removed from stock due to defects, customer returns, or markdown disposals; helps
measure true sell-through.
 6. Ending Inventory (EI)
Calculated as BI + Receipts – Sales – Returns; used to verify physical count and identify
discrepancies.
7. Sales Rate or Sell-Through %
Sell-Through % = Sales ÷ (BI + Receipts) × 100; indicates how quickly stock is selling.
8. On-Order Quantity
Units that have been ordered but not yet received; helps project future stock levels.
9. Recommended Reorder
Based on ROP or recommended by replenishment algorithm, indicating how many additional
units to purchase.
10. Comments/Notes
Space for buyer or planner to note supplier issues, upcoming promotions, or unexpected
events affecting demand.
8.5.2 System of Replenishment
1. Manual Replenishment
Buyer’s review sales and stock reports, then manually decide reorder quantities and submit
purchase orders.
2. Automated Replenishment (ERP/POS-Driven)
Inventory management software automatically calculates ROP and EOQ, generating
suggested purchase orders that buyers can review.
3. Vendor-Managed Inventory (VMI)
Suppliers monitor retailer’s stock levels (via shared data) and initiate replenishment orders
when stock approaches ROP.
4. Cross-Docking
Incoming shipments are quickly transferred from receiving dock to outbound shipments—
reducing handling and storage time.
5. Just-In-Time (JIT)
Reorders are timed so that new stock arrives exactly when needed to meet demand,
minimizing holding costs.
6. Automatic Allocation
When a centralized warehouse receives inventory, the system allocates product to each store
or channel based on projected demand.
7. Min/Max Replenishment
Each SKU has a minimum and maximum inventory threshold; orders are placed when stock
falls to the minimum, topping up to the maximum.
8. Replenishment by Exception
Only SKUs that fall below a certain threshold or show unusual sales trends are flagged for
review—reducing unnecessary reorder checks.
9. Collaborative Planning, Forecasting, & Replenishment (CPFR)
Retailer and supplier share forecasts and sales data to jointly plan inventory levels and
replenishment schedules.
10. Roll-Forward Replenishment
Uses rolling historical data (e.g., last 4–12 weeks of sales) to update ROP/EOQ dynamically
each period, ensuring formulas stay current.
8.6 Online Inventory
1. Definition and Scope
Online inventory refers to real-time stock information accessible across channels (e-
commerce site, mobile apps, and all physical stores).
2. Real-Time Visibility
Inventory systems must update immediately whenever a sale, return, or transfer occurs—
ensuring accurate availability data.
3. Omnichannel Fulfilment
Unified inventory allows orders to be fulfilled from any location (store, warehouse, third-
party), optimizing stock usage.
4. Buy Online, Pick Up In-Store (BOPIS)
Requires synchronization between virtual catalog and physical stock so customers can
reliably purchase online and collect in store.
5. Safety Stock Integration
Online channels often carry a small buffer of safety stock per SKU, preventing overselling
even when stock is displayed as available.
6. Back-Order and Lead-Time Transparency
When an item is out of stock, the system provides customers with an estimated restock date
or allows them to back-order.
7. Dropship Capability
Products not carried in local inventory can be ordered directly from a supplier or
manufacturer to fulfil online orders.
8. Distributed Inventory Pools
multi-warehouse or store inventory is pooled so the system can route orders to the closest
location for fastest delivery and lowest shipping cost.
9. Returns and Reverse Logistics
Returns processed online are fed back into the inventory system—restocking or marking
inventory as unsellable, depending on condition.
10. Analytics and Reporting
Online inventory dashboards track sell-through, out-of-stocks, and aging inventory by
channel, helping planners make data-driven replenishment decisions.

9.2 Identification of Range Needs

1. Understanding Customer Demands
Analyze what the target customers want in terms of style, size, price, and quality.
2. Seasonal Requirements
Determine product ranges based on seasonal variations—summer, winter, festivals, etc.
3. Store Format and Location
Product needs differ for high-end stores, value stores, or regional markets based on
demographics.
4. Sales Data Analysis
Historical sales help identify which products sell well, guiding future range planning.
5. Inventory Gaps
Identifying missing categories or overstocked items helps balance the product assortment.
 6. Brand Strategy Alignment
Range must reflect brand identity—premium, value, youth-oriented, sustainable, etc.
7. Price Point Planning
Range needs must cover different price bands to target all customer segments.
8. Product Lifecycle Stage
Consider where products fall in the lifecycle—new, growing, mature, or declining.
9. Store Space Constraints
Range selection should match the available shelf/floor space to avoid overcrowding.
10. Customer Feedback
Direct input from customers (surveys, complaints, requests) reveals range gaps or needs.

9.3 Range Board

1. Definition of Range Board
A visual planning tool that outlines the complete product range, including styles, colors,
sizes, and price points.
2. Product Categories
Organized by category (tops, bottoms, accessories, etc.) for easy planning and selection.
3. Seasonal Assortment
Includes breakdown for various seasons or campaigns (e.g., Spring/Summer or Festive).
4. Planned vs. Actual
Helps track planned products versus actual bought and delivered products.
5. Color and Style Balance
Ensures visual harmony and variety by managing color and design representation.
6. Fabric and Material Distribution
Ensures a mix of materials (cotton, denim, silk, etc.) to appeal to various customer
preferences.
7. Price Point Segmentation
Categorized by low, mid, and premium prices for range diversification.
8. Stock Keeping Units (SKUs)
Shows number of SKUs per category and ensures enough options without overwhelming the
customer.
9. Coordination with Marketing
Used to align promotions, photoshoots, and visual merchandising plans with the actual
product range.
10. Approval and Monitoring Tool
Serves as a tool for cross-functional teams (buying, design, and sales) to approve and track
the range.

9.4 Study of Competitors

1. Competitor Benchmarking
Analyse what similar retailers are offering in terms of products, prices, and styles.
2. Product Mix Comparison
Examine the variety and depth of categories offered by competitors.
3. Pricing Strategy
Understand how competitors’ price similar products to ensure competitive offerings.
4. Quality Assessment
Compare the quality of competitors' merchandise to position your range better.
 5. Promotional Activities
Observe how competitors’ market and discount their products.
6. Store Experience
Evaluate how competitors display and organize merchandise to attract customers.
7. Customer Reviews
Use online feedback to identify what customers like or dislike about competitor products.
8. Market Positioning
Identify whether competitors are targeting budget-conscious, mid-range, or luxury segments.
9. Unique Selling Points (USP)
Understand competitors' differentiators to strengthen your own range offering.
10. Trend Identification
Spot emerging styles or themes gaining popularity through competitor analysis.

9.5 Market Information

1. Market Trends
Stay updated with changing customer preferences and upcoming trends through market
reports.
2. Industry Publications
Use fashion magazines, online portals, and trade journals for trend forecasts and insights.
3. Sales and POS Data
Retailers analyse their own and industry sales data to guide future product decisions.
4. Supplier Input
Vendors and manufacturers often provide trend and fabric forecasts based on global
demand.
5. Trade Shows and Exhibitions
These are valuable sources for discovering new materials, technologies, and trends.
6. Customer Interaction
Direct conversations, reviews, and surveys provide rich information on market expectations.
7. Economic Indicators
Inflation, income trends, and economic forecasts influence pricing and product range
decisions.
8. Social media Trends
Platforms like Instagram, Pinterest, and TikTok highlight trending styles and preferences.
9. Demographic Changes
Shifts in population, age groups, or urbanization can create new demands in the market.
10. Competitor Monitoring
Watching how other players react to market changes gives clues on where the market is
heading.

9.6 Core and Fashion Ranges

1. Core Range Definition
Basic, consistent products that are always in stock and have steady sales (e.g., plain white t-
shirts).
2. Fashion Range Definition
Trend-driven, seasonal, or experimental products designed to attract attention and build
brand image.
 3. Sales Stability
Core products offer predictable revenue, while fashion products drive peaks in sales.
4. Margin Differences
Fashion products often have higher markups, while core products focus on volume and
efficiency.
5. Inventory Planning
Core ranges require long-term planning; fashion ranges require fast decisions and short lead
times.
6. Customer Base
Core products appeal to loyal customers; fashion ranges attract new and trend-focused
buyers.
7. Risk Levels
Core items carry low risk due to steady demand; fashion products are high-risk but high-
reward.
8. Supply Chain Differences
Core products often use stable vendors, while fashion ranges may need agile sourcing for
flexibility.
9. Stock Replenishment
Core items follow regular replenishment cycles; fashion items may not be restocked after
selling out.
10. Brand Image Balance
A good range mix ensures brand consistency (via core) and freshness (via fashion).

9.7 Product Development versus Product Sourcing

1. Product Development (PD)
Involves designing and creating new products from scratch, including sketches, samples, and
prototyping.
2. Product Sourcing
Involves purchasing ready-made or semi-customized products from suppliers or
manufacturers.
3. Control Over Design
PD offers full creative control; sourcing is limited to what suppliers offer or modify.
4. Cost Factors
Sourcing is often cheaper upfront, while PD involves higher development costs but may offer
better margins.
5. Lead Time
Sourcing is faster since products are often already available; PD takes longer due to sampling
and approvals.
6. Quality Assurance
PD ensures quality from the ground up; sourcing quality depends on supplier standards.
7. Brand Uniqueness
PD allows differentiation and exclusivity; sourcing may result in similar products seen at
competitors.
8. Risk Management
Sourcing is less risky for small volumes; PD is riskier but can result in breakthrough products.
9. Sustainability Goals
PD can integrate sustainable materials and practices; sourcing may limit these choices.
 10. Flexibility
Sourcing provides quick entry to trends; PD gives full flexibility in design and function.

9.8 Product Development

1. Concept Generation
Start with market research, inspiration, and idea brainstorming to conceptualize the product.
2. Design Creation
Sketches, CAD models, or mood boards are created to visualize the product.
3. Material Selection
Choose fabrics, trims, colours, and accessories based on cost, aesthetics, and performance.
4. Sampling Process
Create prototype samples to test fit, look, and feel; make adjustments based on feedback.
5. Costing
Calculate production cost, margins, and final retail price based on material and labor.
6. Supplier Negotiation
Discuss minimum order quantities (MOQs), lead time, and prices with selected
manufacturers.
7. Product Testing
Quality, durability, and safety tests are conducted before mass production.
8. Approval and Sign-off
Final product is approved by the buying or merchandising team before placing bulk orders.
9. Production Planning
Plan timelines for production, quality checks, and delivery to stores/warehouses.
10. Launch and Feedback
Product is released, sales tracked, and customer feedback collected for future
improvements.

10.2 Visual Merchandising from a Buyer’s Perspective

1. Alignment with Buying Plan
Visual merchandising (VM) ensures that product presentation supports the buyer’s sales and
stock plan.
2. Highlighting Key Lines
Buyers want visual displays to emphasize fast-moving or seasonal products to maximize ROI.
3. Trend Presentation
Buyers rely on VM to communicate new trends clearly, attracting attention and boosting
conversion.
4. Inventory Management
VM helps manage stock turnover by promoting overstocked or slow-moving products
effectively.
5. Category Focus
Strategic VM displays guide customer flow and focus on categories that buyers prioritize.
6. Sales Enhancement
VM enhances the attractiveness of products, making buyer-selected ranges more appealing.
7. Thematic Displays
Buyers collaborate with VM teams to create stories or themes around product collections.
 8. Price Point Display
Clear pricing and promotional signage support buyer goals for price-led campaigns.
9. Customer Engagement
Effective VM attracts and retains customer interest, improving sell-through rates.
10. Store Consistency
Buyers expect VM to reflect brand image and maintain consistency across store formats.

10.3 Communicating Ideal Presentation Standards

1. Standard Operating Procedures (SOPs)
Detailed SOPs guide store teams on product presentation, signage, and fixture usage.
2. Visual Merchandising Manuals
Manuals include layouts, planograms, and display guidelines for each category.
3. Store Walkthroughs
Regular visits by VM or buying teams ensure standards are being maintained.
4. Training Sessions
Staff are trained on folding, product spacing, color blocking, and display setups.
5. Fixture Planning
Guidelines specify which racks, mannequins, or stands to use for specific merchandise.
6. Signage Protocol
Instructions are given for the placement and content of price tags, discounts, and
promotional signs.
7. Photo Guidelines
Reference photos help stores replicate VM setups consistently.
8. Brand Representation
Standards help ensure visual cues match brand aesthetics and values.
9. Product Handling Instructions
Teams are trained to handle products with care to maintain neatness and quality.
10. Performance Audits
Regular store audits assess compliance and identify areas for improvement.

10.4 Methods of Presentation

1. Grid Layout
A structured method ideal for supermarkets and value stores, enabling easy product
navigation.
2. Loop Layout
Guides customers through a predefined path, maximizing exposure to products.
3. Free-Flow Layout
Offers flexibility in product arrangement, often used in fashion or lifestyle stores.
4. Color Blocking
Products are grouped by color to create a strong visual appeal and organization.
5. Vertical Merchandising
Items are stacked vertically to guide the eye naturally from top to bottom.
6. Horizontal Merchandising
Products are arranged side-by-side, promoting choice within a category.
7. Thematic Presentation
Displays are based on events or stories—like “Back to School” or “Winter Essentials.”
 8. Mannequin Displays
Used to showcase full outfits and inspire customers to make complete purchases.
9. Table and Shelf Displays
Effective for folded apparel or accessories with clear visibility and accessibility.
10. Interactive Displays
Use of technology like touch screens, QR codes, or motion sensors to engage customers.

10.5 Space Efficiency

1. Planogram Usage
Detailed planograms help maximize shelf space and maintain category balance.
2. Product Density Optimization
Ensures the right number of items per shelf/rack to avoid clutter or emptiness.
3. Stock Rotation
Frequently rotate merchandise to keep displays fresh and relevant, using space wisely.
4. Vertical Space Utilization
Use wall fixtures, gondolas, and hanging displays to make use of height.
5. Fixture Flexibility
Use adjustable fixtures to accommodate products of varying sizes.
6. Category Zoning
Group similar items together to reduce customer confusion and improve space use.
7. Hotspot Management
Place high-margin or seasonal products in high-traffic areas to boost space ROI.
8. Storage vs. Display Balance
Maintain proper space for back stock while keeping the front area fully merchandised.
9. Cross-Merchandising
Use space creatively by combining related products (e.g., socks with shoes).
10. Traffic Flow Analysis
Design layout to prevent congestion and ensure easy navigation through merchandise zones.

10.6 Layout and Adjacencies

1. Store Layout Planning
Involves designing floor space to maximize customer journey efficiency and product visibility.
2. Product Adjacencies
Related products (e.g., shirts near trousers) are placed together to encourage bundle
purchases.
3. Departmental Flow
High-demand items are placed deeper in-store to draw customers through other
departments.
4. Zoning by Category
Dividing store space into clear categories helps with navigation and shopping ease.
5. Impulse Purchase Areas
Key placements near billing counters or entrances for small-ticket, high-margin products.
6. Feature Walls
Use prominent wall spaces to display key products or themes for maximum impact.
7. Trial and Fitting Room Proximity
Apparel and accessories are placed near trial rooms to encourage more try-ons.
 8. Checkout Queue Lines
Adjacencies around queues include snack items, small electronics, or accessories to drive
last-minute sales.
9. Visual Pathways
Design walkways and fixture placements to lead the customer toward key sections.
10. Strategic Cross-Linking
Intentionally place complementary items (e.g., bags near dresses) to increase basket size.

11.2 Understanding Various Parameters at the Store Level

1. Sales Performance Tracking
Tracks total sales daily, weekly, and monthly to measure how the store is performing.
2. Footfall Analysis
Measures the number of customers entering the store to assess customer traffic.
3. Conversion Rate
The percentage of visitors who make a purchase helps evaluate selling effectiveness.
4. Average Transaction Value (ATV)
Measures the average rupee value of each customer bill, useful for planning upselling.
5. Stock Turnover Ratio
Indicates how fast inventory is sold and replaced; higher ratios are usually better.
6. Sell-Through Rate
Measures how much of the stock is sold during a particular time period.
7. Customer Retention Rate
Tracks how many repeat customers visit the store over time.
8. Shrinkage Percentage
Calculates losses due to theft, damage, or errors in stock keeping.
9. Productivity Ratios
Includes metrics like sales per square foot and per employee to assess efficiency.
10. Profit Margins
Gross and net profit margins reveal how much the store earns after costs.

11.2.1 Sales Percentages – Comparative Analysis

1. Sales by Category
Shows percentage contribution of each product category to total sales.
2. Sales by Time Period
Compares sales across months, quarters, or years to identify growth trends.
3. Sales by Store vs Region
Compares a store's performance against other branches in the same region.
4. Sales Target Achievement %
Measures actual sales as a percentage of planned or forecasted sales.
5. Seasonal Comparison
Compares sales during festive or promotional periods year-over-year.
6. New vs Repeat Customer Sales
Analyzes how much sales come from first-time vs loyal customers.
7. Channel Comparison
Compares in-store sales with online or delivery platforms.
 8. Promotional vs Regular Sales
Measures how much revenue comes from discounted vs full-priced items.
9. Sales by Product Life Cycle
Tracks performance of new launches vs mature products.
10. Same-Store Sales Growth (SSSG)
Measures year-over-year growth of stores that have been open for at least one year.

11.2.2 Productivity Measures – Sales per Square Foot (SPF)

1. Definition of SPF
Sales per square foot (SPF) = Total sales ÷ Total store area; reflects space efficiency.
2. Benchmarking Store Performance
Used to compare stores of different sizes based on how efficiently they use space.
3. Helps Identify Underperforming Areas
Pinpoints departments or zones with lower SPF for layout or product changes.
4. Seasonal Analysis
Evaluates SPF during peak vs lean seasons to adjust inventory and staffing.
5. Fixture Utilization
Helps understand which fixtures generate the highest sales value.
6. Store Layout Decisions
SPF insights guide decisions about space allocation to different categories.
7. Rent-to-Revenue Ratio
Useful in evaluating if store revenue justifies rental costs.
8. Performance by Product Category
Category-wise SPF helps decide space allotment for better-performing items.
9. Setting Performance Standards
SPF benchmarks help set targets for new stores or expansions.
10. Forecasting Growth Potential
Higher SPF can signal potential for more investment or inventory allocation.

11.2.3 SPF as a Planning Measure

1. Strategic Space Allocation
High SPF categories are given more floor space for better revenue output.
2. Planning Store Expansions
Stores with consistently high SPF may be candidates for expansion or upscaling.
3. Assessing ROI on Fixtures
Determines if fixture investments yield corresponding sales.
4. Budgeting Visual Merchandising
Justifies visual display budgets in zones with higher SPF.
5. Improving Low Performing Areas
Helps management redesign low-SPF zones for better visibility and movement.
6. Sales Forecasting Tool
Helps predict future sales based on current SPF and expected traffic growth.
7. Product Mix Optimization
Ensures space is allocated to the most profitable or in-demand categories.
8. Location Comparison
Helps compare store locations within a region or city by normalized metrics.
 9. Monitoring New Launches
SPF helps track how effectively new products sell relative to floor space.
10. Setting Team Targets
SPF values help set realistic goals for store managers and staff.

11.2.4 Sales per Transaction

1. Definition
Average Sales per Transaction = Total Sales ÷ Number of Transactions.
2. Measures Purchase Value
Indicates how much each customer spends on average.
3. Upselling Effectiveness
Higher values suggest successful add-on selling by store staff.
4. Seasonal Campaign Impact
Monitors how promotions or festivals affect customer spending habits.
5. Customer Type Insight
Compares transactions from new vs returning customers for insights.
6. Aids in Target Setting
Used to set benchmarks for future sales campaigns.
7. Evaluating Discounts
Helps assess whether discounts lead to higher or lower average spend.
8. Staff Performance
Linked to staff efforts in influencing basket size.
9. Product Bundling
Helps track success of combo offers or bundled products.
10. Improves Merchandising Decisions
Encourages strategic placement of impulse items near billing areas.

11.2.5 Sales per Employee

1. Definition
Sales per Employee = Total Sales ÷ Number of Sales Staff.
2. Labor Productivity Indicator
Measures individual contribution to the store's revenue.
3. Staffing Decisions
Helps in planning manpower needs during peak and off-peak periods.
4. Training Evaluation
Low sales per employee may indicate need for training or coaching.
5. Store Comparison
Useful for comparing similar-sized stores based on staff efficiency.
6. Target Setting
Helps in setting performance benchmarks for sales staff.
7. Rewards & Incentives
Can form the basis for performance-based bonuses or incentives.
8. Identifying Top Performers
Highlights high-performing employees who may take on larger roles.
9. Labor Cost Analysis
Helps balance staff costs with productivity for profitability.
 10. Shift Optimization
Guides decisions on how many staff should be present per time slot.

12.1 Performance Reports

1. Definition
Performance reports are tools to measure, monitor, and evaluate various aspects of retail
operations.
2. Sales Report
Tracks revenue over time by product, department, or region.
3. Inventory Report
Shows stock levels, turnover, and aging inventory to guide replenishment.
4. Profitability Report
Measures gross profit, net profit, and contribution margin.
5. Employee Performance Report
Tracks sales per employee, attendance, and customer service ratings.
6. Customer Feedback Report
Captures customer satisfaction and complaints for service improvement.
7. Store Performance Report
Evaluates sales, expenses, footfall, and profitability per store.
8. Comparative Performance Report
Compares current period data with historical or planned figures.
9. Marketing Campaign Report
Evaluates success of promotions, discounts, or advertising efforts.
10. Exception Report
Highlights anomalies like high shrinkage, stockouts, or sales dips.

12.2 Gross Margin Return on Inventory (GMROI)

1. Definition
GMROI = Gross Margin ÷ Average Inventory Cost. It measures the return on money invested
in inventory.
2. Evaluates Inventory Efficiency
Shows how profitably inventory is managed.
3. Ideal Benchmark >1
A GMROI above 1 means you earn more than you spend on inventory.
4. Supports Buying Decisions
Helps in selecting profitable products and suppliers.
5. Measures Product Category Performance
Reveals which categories yield better margins per rupee invested.
6. Used in Vendor Evaluation
Helps assess supplier performance based on turnover and margin.
7. Drives Inventory Optimization
Encourages balancing between sales and stockholding.
8. Identifies Slow-Moving Items
Low GMROI signals overstocking or low demand.
9. Boosts Overall Profitability
Encourages selection of high-margin, fast-selling goods.
 10. Aids Assortment Planning
Helps plan the right mix of core and seasonal products.

12.3 Use of Sales Curves

1. Definition
Sales curves show the sales trend over time (daily, weekly, monthly, seasonal).
2. Forecasting Tool
Helps predict future sales patterns based on historical data.
3. Identifies Peak Periods
Visualizes periods of high demand to plan promotions and staffing.
4. Analyses Product Life Cycles
Tracks launch, growth, maturity, and decline stages of products.
5. Guides Inventory Planning
Helps allocate stock based on expected demand curves.
6. Assists in Sales Targeting
Breaks yearly or monthly targets into weekly/daily goals.
7. Seasonality Analysis
Shows seasonal spikes and helps plan festive or clearance stock.
8. Helps in Visual Merchandising
High-selling periods guide when to refresh displays and stock fronts.
9. Performance Comparison
Compares sales curves of different stores, brands, or products.
10. Supports Promotional Timing
Identifies the best times to run sales or discounts for maximum impact.

12.4 Calculation of Brand and Store Potential Index

1. Definition
Index scores compare a brand or store’s performance against benchmarks or peers.
2. Brand Potential Index (BPI)
Measures a brand’s performance across locations or customer segments.
3. Store Potential Index (SPI)
Evaluates a store's capability based on footfall, location, and past performance.
4. Index Formula
BPI or SPI = (Actual Performance ÷ Average or Expected Performance) × 100.
5. Benchmarking
Compares stores or brands in different regions or formats.
6. Resource Allocation Tool
Helps decide where to invest more inventory or marketing budget.
7. Identifies Growth Areas
High index values show stores/brands that are doing well and can grow further.
8. Spot Underperformers
Low scores signal issues in merchandising, staffing, or location.
9. Supports Strategic Decisions
Helps in deciding store closures, refurbishments, or brand exits.
10. Used for Target Setting
Future goals are aligned based on potential index analysis.
13.1 Application of Buying and Merchandising in a Grocery Retail Store
1. Understanding Customer Preferences
Buying decisions are guided by consumer needs, regional preferences, and consumption
patterns.
2. Product Assortment Planning
Merchandisers decide the right mix of staples, perishables, and packaged goods.
3. Vendor Selection
Reliable suppliers are chosen for consistent quality, timely delivery, and competitive pricing.
4. Inventory Management
Stock levels are optimized to reduce wastage of perishables and avoid stockouts.
5. Promotional Buying
Buying in bulk for festive seasons or promotional periods ensures availability at lower costs.
6. Private Label Sourcing
In-house brands help improve margins and brand loyalty among price-sensitive shoppers.
7. Shelf Management
Merchandisers ensure proper display, FIFO (First In, First Out), and visibility of key items.
8. Category Management
Categories like dairy, pulses, and beverages are managed separately for sales and
profitability.
9. Price Sensitivity
Competitive pricing and regular price comparisons are essential in the grocery segment.
10. Use of Technology
Buying and merchandising decisions are supported by POS data, ERP systems, and
automated reordering.

13.2 Retail Scenario in India

1. Organised vs. Unorganised Sector
India has a large unorganised retail sector, but organised formats are rapidly growing.
2. Rise of Supermarkets and Hypermarkets
Urban consumers prefer convenience, variety, and clean environments.
3. E-commerce Growth
Online grocery platforms are transforming buying behavior, especially post-pandemic.
4. Expansion into Tier II & III Cities
Retail chains are now penetrating smaller towns due to rising incomes.
5. Government Policies
FDI regulations and GST have impacted the retail structure and compliance.
6. Consumer Preferences Shifting
From price-focused to value-focused buying with demand for premium and organic goods.
7. Growth of Private Labels
Indian retailers are investing in private brands to improve profit margins.
8. Focus on Experiential Retailing
In-store experiences and services are being enhanced to attract footfall.
9. Supply Chain Modernization
Cold chains and logistics networks are improving to support retail growth.
10. Digital Payments and Loyalty Programs
Tech adoption is helping in tracking buying patterns and customer retention.
13.2.1 Food and Grocery Scenario in the International Market
1. Dominance of Organised Retail
In countries like the US and UK, most grocery shopping happens through organised retail.
2. Omni-Channel Integration
Integration of online and offline channels is the norm.
3. Focus on Health and Sustainability
Demand for organic, non-GMO, and eco-friendly packaged products is rising.
4. Global Sourcing
Retailers procure products globally for variety and competitive pricing.
5. Private Labels Are Strong
Supermarkets like Walmart and Tesco rely heavily on private brands.
6. Automated Replenishment Systems
Inventory and reordering are managed through AI and data analytics.
7. Large Format Stores
Hypermarkets and warehouse clubs are common for bulk buying.
8. Retail Tech Use
Use of self-checkout, mobile apps, and smart carts is widespread.
9. Focus on Freshness
International retailers invest in cold chains for freshness in produce and meat.
10. Sustainability Commitments
Packaging reduction and waste management are key retail goals globally.

13.2.2 Big Bazaar – The Hypermarket Chain

1. Introduction
Big Bazaar was a major Indian retail chain offering value shopping.
2. Product Range
Included groceries, apparel, electronics, and home needs under one roof.
3. Promotional Strategy
Known for deals like “Sabse Saste Din” and combo offers.
4. Private Labels
Brands like Tasty Treat and Clean Mate offered value alternatives.
5. Store Layout
Category-based zones and wide aisles enhanced customer experience.
6. Target Audience
Middle-class families seeking value-for-money purchases.
7. Store Locations
Present in malls, standalone outlets, and urban neighbourhoods.
8. In-store Experience
Staff-assisted counters, trial rooms, and quick checkout counters.
9. Supply Chain Challenges
Faced issues with inventory management and logistics.
10. Acquisition and Closure
The chain was acquired by Reliance Retail after Future Group’s financial issues.

13.3 Case Study: Savla Store

1. Background
A small family-run grocery store in an urban neighbourhood.
 2. Challenges
Faced competition from supermarkets and online delivery apps.
3. Product Assortment
Offered both local and branded goods based on community preferences.
4. Customer Loyalty
Maintained a loyal customer base through personal relationships.
5. Stock Management
Used manual methods for ordering and inventory tracking.
6. Pricing Strategy
Competitive pricing and occasional discounts kept customers engaged.
7. Store Layout
Space-constrained but neatly arranged to display high-demand items.
8. Adaptation to Change
Started offering home delivery and phone-based ordering.
9. Learning Point
Demonstrates the power of personalization and community trust in retail.
10. Scope for Growth
Could benefit from POS systems, better display, and local marketing.

13.4 Guidelines for Finding Answers to the Questions

1. Read the Case Thoroughly
Understand the store context, challenges, and actions taken.
2. Identify Core Issues
Focus on main problems such as inventory, customer service, or competition.
3. Link Theory to Practice
Apply merchandising concepts like layout, planning, and pricing.
4. Use Data, If Given
Interpret numerical or descriptive data to support answers.
5. Be Specific
Give clear examples instead of generalizations.
6. Compare Alternatives
Suggest options and evaluate pros and cons where applicable.
7. Use Frameworks
Apply models like SWOT, 4Ps, or Buying Process if relevant.
8. Provide Realistic Solutions
Suggestions must be practical given the store size and type.
9. Structure Your Answer
Use headings or points to organize your response clearly.
10. Review Before Submitting
Ensure all parts of the question are answered with relevance and clarity.
14.1 Application of Buying and Merchandising to Apparel Retail Operations
1. Seasonal Buying
Apparel buying is based on seasons—summer, winter, festive—which influences assortment.
2. Trend Forecasting
Merchandisers follow fashion trends to decide colors, fabrics, and styles.
3. Size Planning
Proper size breakdowns (S, M, L, XL) are essential for meeting diverse customer needs.
4. Vendor Management
Selecting the right suppliers ensures timely delivery, quality, and price compliance.
5. Inventory Turnover
Apparel must move quickly; slow sellers are marked down to reduce holding costs.
6. Category Management
Merchandisers divide apparel into categories like men’s wear, women’s wear, and kids’ wear.
7. Visual Merchandising Integration
Merchandising decisions are aligned with visual presentation on the floor.
8. Markdown Strategy
Seasonal merchandise requires timely markdowns to clear stock before trends change.
9. Private Label Development
In-house brands give higher profit margins and help in differentiation.
10. Customer Preferences
Data from past sales and customer feedback helps in refining the product mix.

14.2 Retail Industry – Organised versus Traditional Sectors

1. Definition
Organised retail includes chain stores, malls, and e-commerce; traditional involves small
family-owned shops.
2. Scale and Scope
Organised sector operates at large scale with standardisation; traditional is localised and
informal.
3. Technology Use
Organised retail uses billing software, inventory tools; traditional retailers rely on manual
methods.
4. Customer Experience
Better store layout, service, and ambience in organised retail vs. personal touch in
traditional.
5. Product Range
Organised stores offer broader assortments; traditional retailers may have limited stock.
6. Pricing Strategy
Organised players may use promotions, while traditional shops offer flexible bargaining.
7. Supply Chain
Efficient and system-driven in organised retail; informal and fragmented in traditional setups.
8. Workforce Training
Staff in organised retail are trained for service; traditional rely on owner/family
management.
9. Expansion Opportunities
Organised players expand through chains or franchises; traditional shops have limited
scalability.
 10. Compliance and Regulation
Organised retail complies with legal and tax systems; traditional may operate outside formal
regulations.

14.3 Shopper’s Stop

1. Introduction
Shopper’s Stop is a premium department store chain in India offering branded apparel and
lifestyle products.
2. Target Segment
It focuses on middle to upper-income urban consumers looking for quality and fashion.
3. Merchandise Mix
Offers apparel, cosmetics, accessories, and home goods across national and international
brands.
4. Private Labels
Brands like Stop and Life give the company control over quality and better margins.
5. Store Layout and Design
Uses attractive visual merchandising and segment-wise zoning for easy shopping.
6. Omni-channel Retailing
Offers online and offline integration through website and in-store experiences.
7. Loyalty Program
First Citizen Loyalty Program encourages repeat purchases and customer retention.
8. Seasonal Promotions
Participates in end-of-season sales and festive discounts to boost volume.
9. Customer Service
Trained staff and a customer-centric approach are central to its strategy.
10. Sustainability Initiatives
Focus on reducing carbon footprint and promoting ethical sourcing in some product lines.

14.4 Case Study: Cutie – The Kids Wear Brand

1. Brand Overview
‘Cutie’ focuses on fashionable, comfortable, and affordable clothing for kids aged 0–12.
2. Target Market
Middle-class parents seeking value and trendy clothes for their children.
3. Product Design
Bright colours, cartoon themes, and comfort fabrics are key USPs of the brand.
4. Sales Channels
Sold through multi-brand outlets, retail chains, and select online platforms.
5. Challenges
Competition from large brands, seasonal unsold stock, and sizing issues.
6. Visual Merchandising
Emphasis on fun, child-friendly displays in stores to attract both kids and parents.
7. Marketing Strategy
Relies on in-store promotions, parent-targeted campaigns, and festival season discounts.
8. Buying Process
Merchandisers plan stock 3–4 months in advance based on previous sales and trends.
9. Inventory Control
High focus on controlling excess inventory due to rapid size obsolescence in kids wear.
 10. Future Opportunities
Scope to expand into e-commerce and diversify into accessories or school wear.

14.5 Guidelines for Solving the Questions

1. Understand the Case Details
Read thoroughly to capture product type, market, customer base, and brand position.
2. Define the Problems Clearly
Identify key issues like inventory mismatch, pricing, or branding gaps.
3. Use Relevant Concepts
Link with merchandising theories—product planning, markups, or inventory turnover.
4. Be Structured
Answer with headings or bullet points to make your solution clear and concise.
5. Support with Data
Use any numbers provided in the case (sales, markups, margins) for calculations.
6. Suggest Practical Solutions
Your ideas should be realistic and suitable for the company’s scale and segment.
7. Apply Comparative Thinking
Refer to similar brands or formats to suggest improvements or alternatives.
8. Stay Customer-Centric
Ensure that recommendations keep the end consumer in focus.
9. Use Visual Aids if Needed
Draw a range board, buying plan, or inventory chart to support your explanation.
10. Review and Refine
Before submission, check clarity, completeness, and relevance of each answer.