MERCHANDISING
Week 4
Chapter Objectives
To define merchandising and
merchandiser
To identify types of merchandises
To identify and develop
merchandise plans
To define category management
and the use of it
19-2
Retail Mgt. 11e (c) 2010 Pearson
Education, Inc. publishing as
Prentice Hall
DEFINITION
Merchandising: Activities involved in
acquiring particular goods/ services and
making them available at the places,
times, prices, and quantities that enable a
retailer to reach its goals.
Merchandiser: A merchandiser is the
person in a retail business who decides
which items and how many of each of
these items to keep in stock.
Merchandising Philosophy
Sets the guiding principles for all the
merchandise decisions that a retailer makes
It should reflect
14-6
Target market desires
Retailers institutional type
Market-place positioning
Defined value chain
Supplier capabilities
Costs
Competitors
Product trends
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Education, Inc. publishing as
Prentice Hall
Scope of Merchandising
Responsibility
Full array of merchandising
functions
Buying and selling
Selection, pricing, display, customer
transactions
OR
Focus on buying function only
14-7
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Education, Inc. publishing as
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The Buying Organization
Merchandise Group
Department
Classification
Category
SKU
Combination of merchandise departments.
Each merchandise group is managed by a
general merchandise manager (GMM)
Departments are managed by
a divisional merchandise manager (DMM),
A group of items targeting the same customer
type (example, girls sizes 4-6) . A buyer is
responsible for a merchandise classification
A category is made up of an assortment of
items the consumer sees as substitutes for
one another (example, size 4-6 dresses)
The smallest unit available for inventory control
Size, color, style, brand
12-8
Micromerchandising
Retailers adjust shelfspace allocations to
respond to customer
differences and other
differences among local
markets.
14-9
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Cross-Merchandising
Retailers carry
complementary goods and
services to encourage
shoppers to buy more.
14-10
Retail Mgt. 11e (c) 2010 Pearson
Education, Inc. publishing as
Prentice Hall
Figure 142:
Attributes
and
Functions
of
Buying
Organizati
ons
14-11
Retail Mgt. 11e (c) 2010 Pearson
Education, Inc. publishing as
Prentice Hall
Merchandising and Store Functions
Performed
Merchandising view
All buying and selling functions
Assortments
Advertising pricing
Point-of-sale displays
Employee utilization
Personal selling approaches
14-12
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Education, Inc. publishing as
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Merchandising and Store Functions
Performed (cont.)
Buying view
Buyers manage buying functions:
Buying
Advertising
Pricing
In-store personnel manage other tasks:
Assortments
Point-of-sale displays
Employee utilization
Personal selling approaches
14-13
Retail Mgt. 11e (c) 2010 Pearson
Education, Inc. publishing as
Prentice Hall
TYPES OF MERCHANDISE
Staple merchandise
Assortment merchandise
Fashion merchandise
Seasonal merchandise
Fad merchandise
TYPES OF MERCHANDISE
Staple Merchandise
Regular products carried by a
retailer
Grocery store examples: milk, bread,
canned soup
Basic stock lists specify
inventory level, color, brand, style,
category, size, package, etc.
TYPES OF MERCHANDISE
Assortment Merchandise
Apparel, furniture, automotive, and
other categories for which the retailer
must carry a variety of products in order
to give customers a proper selection
Decisions on assortment
Product lines, styles, designs, and colors are
projected
Model stock plan
TYPES OF MERCHANDISE
Fashion and Seasonal
Merchandise
Fashion Merchandise: Products
that may have cyclical sales due to
changing tastes and life-styles
Seasonal Merchandise: Products
that sell well over nonconsecutive
time periods
TYPES OF MERCHANDISE
Fads
Merchandise category that
generates a lot of sales for a
relatively short time
Often less than one season
Short life cycle
Must recognize fad in its
earliest stages, get distribution
rights, know when to bail out
CATEGORY MANAGEMENT
Category management is a merchandising
technique used to improve productivity.
It is a way to manage a retail business that
focuses on the performance of product
category results rather than individual
brands.
It arranges product groupings into strategic
business units to better meet consumer
needs and to achieve sales and profit goals.
Retail managers make merchandising
decisions that maximize the total return on
the assets assigned to them.
CATEGORY MANAGEMENT
Merchandise Plans
Merchandise Plans
FORECASTS
These are projections of
expected retail sales for given
periods
Components:
Overall company projections
Product category projections
Item-by-item projections
Store-by-store projections (if a
chain)
Forecasting Fashion Merchandise
Categories
Retailers develop fashion forecasts by
relying on:
Previous sales data
Personal awareness
Fashion and trend services
Vendors
Market research
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Personal Awareness
Must be aware of trends that
can affect the categorys sales.
How do fashion buyers know the
trends?
Internet chat rooms
Look in closets
Go to the movies
Go to rock concerts
SCAN
Go to nightclubs
Shop the retail stores, Web sites
and catalogs of competitors as a customer would
Converse with consumers, sales clerks, and neighbors
Act like your customer
Notice
Ryan McVay/Getty Images
12-24
Fashion and Trend Services
Buyers subscribe to forecasting services and fashion
publications
Trendzine ([Link])
Doneger Creative Services (
www. [Link]/web )
Fashion Snoops (www. [Link])
Womens Wear Daily (WWD)
Home Furnishings News (HFN)
12-25
Work with Vendors
Vendors have proprietary
information about their marketing
plans (i.e., new product launches,
special promotions
Can have a significant effect on
product sales.
12-26
Market Research
Ask customers about merchandise
offerings through surveys or focus
groups
Measure customer reactions through
sales tests (market testing)
Talk to retail sales people
Maintain a customer want list
12-27
Merchandise Plans
INNOVATIVENESS
FACTOR
RELEVANCE for PLANNING
Target
market(s)
Evaluate whether the target market is conservative or
innovative
Goods/
service
growth
potential
Consider each new offering on the basis of rapidity of
initial sales, maximum sales potential per time period,
and length of sales life
Fashion
trends
Understand vertical and horizontal fashion trends, if
appropriate
Retailer
image
Carry goods/services that reinforce the firms image
Merchandise Plans
INNOVATIVENESS
FACTOR
RELEVANCE for PLANNING
Competition
Lead or follow competition in the selection of new
goods/services
Customer
segments
Segment customers by dividing merchandise into
established-product displays and new-product
displays
Responsiveness
to consumers
Carry new offerings when requested by the target
market
Amount of
investment
Consider all possible investment for each new
good/service: product costs, new fixtures, and
additional personnel
Merchandise Plans
INNOVATIVENESS
FACTOR
RELEVANCE for PLANNING
Profitability
Assess each new offering for potential profits
Risk
Be aware of the possible tarnishing of the
retailers image, investment costs, and
opportunity costs
Constrained decision
making
Restrict franchisees and chain branches from
buying certain items
Declining goods/
services
Delete older goods/services if sales and/or
profits are too low
Merchandise Plans
ASSORTMENT
Width of assortment refers to the number of
distinct goods/service categories (product lines) a
retailer carries.
Depth of assortment refers to the variety in any
one goods/service category (product line) a retailer
carries.
An assortment can range from wide and deep
(department store) to narrow and shallow (box store).
Assortment Plan for Girls Jeans
12-32
Table 14-2a: Factors in Planning
Merchandise Quality
FACTOR
RELEVANCE for PLANNING
Target market(s)
Match merchandise quality to the wishes of
the desired target market(s)
Competition
Sell similar quality or different quality
Retailers image
Relate merchandise quality directly to the
perception that customers have of retailer
Store location
Consider the impact of location on the
retailers image and the number of
competitors, which, in turn, relate to quality
Retail Mgt. 11e (c) 2010 Pearson
Education, Inc. publishing as
Prentice Hall
14-33
Table 14-2b: Factors in Planning
Merchandise Quality
FACTOR
RELEVANCE for PLANNING
Profitability
Recognize that high quality goods generally
bring greater profit per unit than lesserquality goods; turnover may cause total
profits to be greater for the latter
Manufacturer
versus private
brands
Understand that, in the minds of many
consumers, manufacturer brands connote
higher quality than private brands
Customer services Know that high-quality goods require
offered
personal selling, alterations, delivery, etc.
Personnel
Employ skilled, knowledgeable personnel for
high-quality merchandise
Retail Mgt. 11e (c) 2010 Pearson
Education, Inc. publishing as
Prentice Hall
14-34
Table 14-2c: Factors in Planning
Merchandise Quality
FACTOR
RELEVANCE for PLANNING
Perceived goods/
service benefits
Analyze consumers. Lesser quality goods
attract customers who desire functional
product benefits; High-quality goods attract
customers who desire extended product
benefits
Constrained
decision making
Face reality. Franchises or chain store
managers have limited or no control over
products, so independent retailers that buy
from a few large wholesalers are limited to
the range of quality offered by those
wholesalers
Retail Mgt. 11e (c) 2010 Pearson
Education, Inc. publishing as
Prentice Hall
14-35
Merchandise Plans
BRANDS
Manufacturer
(national)
Private
(dealer or store)
Generic
Merchandise Plans
ALLOCATING
Decisions:
How much merchandise to allocate to
each store?
What type of merchandise to allocate?
When to allocate the merchandise to
different stores?
Merchandise Plans
TIMING
ease inventory turnover in the category, buyers need to recognize regional diffe
range for merchandise to be shipped to the appropriate regions when customers
to buy.
Merchandising Software
General Merchandise Planning
Software
Forecasting Software
Innovativeness Software
Assortment Software
Allocation Software
Category Management Software
Merchandisi
ng Career
Track at
Macys
Store
Manageme
nt Career
Track at
Macys
DISCUSSION QUESTIONS
Describe and evaluate the merchandising
philosophy of our supermarket.
What is the distinction between merchandising
functions and buying function?
What are the advantages and disadvantages of
a centralized buying organization?
Under what circumstances could a retailer carry
a wide range of merchandise quality without
hurting its image? When should the quality of
merchandise carried be quite narrow?
DISCUSSION QUESTIONS
What are the trade-offs in a retailers deciding
how much to emphasize private brands rather
than manufacturer brands?
Present a checklist of five factors for a chain
retailer to review in determining how to
allocate merchandise among its store
What is the basic premise of category
management? Why do you think that
supermarket have been at the front of the
movement to use category management?
