FUNDAMENTAL S OF MERCHANDISIN G. Concept The word ‘merchandise’ means goods bought and sold for a profit. It originates from the French word ‘merchant’

FUNDAMENTALSOF

MERCHANDISING

Concept

• The word ‘merchandise’ means goods bought and sold for a profit. It originates from the French word ‘merchant’ which lead to merchandise—meaning ‘goods’ derived from the old French marchat

• According to business dictionary, ‘merchandise’ refers to goods and commodities sold at the retail level.

• ‘Merchandising’ is the buying, presenting and selling of merchandise. This includes all related activities such as advertising, display, and promotion of merchandise involving the retail customers

Principles of merchandising Understand the target market

Build the right assortment

Be consistent

Offer value

Share information

Accept that mistakes happen

Seek to surprise the customer

5 RIGHTS IN MERCHANDISING

Have the Right ITEM

At the Right TIME

In the Right PLACE

In the Right QUANTITY

At the Right PRICE

TYPES OF MERCHANDISE

1. Staple merchandise

2. Assortment merchandise

3. Fashion merchandise

4. Seasonal merchandise

5. Fad merchandise

STAPLE MERCHANDISE:Regular products/basic items carried by a retailer.

Example:Grocery Store Milk, Bread, etc.

Book Store Writing book, pencil, pen, etc.

Automotive Oil, Lamp, etc.

ASSORTMENT MERCHANDISE:A variety of products which the retailer must carry in order to give

customers a proper selection

Example:Apparel Store Shirt in red colour, black colour, white colour, etc.Bicycle Store Kids bike, BMX, MTB, Road bike, etc.

Shoes Store Sport shoes, Formal shoes, Canvas shoes, etc.

FASHIONMERCHANDISE

Products that may havecyclical sales due to changingtastes and life-styles.

SEASONAL MERCHANDISE:

Products that sell well over non consecutive time periods.

FADS MERCHANDISE:

Products which are generated by trend of technology, artist, movie, icon, event, etc..

High sales are generated for a short time. It is hard to forecast whether such products will reach specific sales targets and how long they will be popular.

Merchandise CONTROL – open to buy

Adjusts merchandise buying • Sales • Reductions

Maintains stock and sale relation. OTB = Planned EOM stock - projected EOM stockProjected EOM stock = actual BOM stock + actual additions to stock + actual on

order - planned monthly sale – planned reductions for the month.

The concept of Merchandise planning

• Merchandising Planning • planning and control of the merchandise inventory while

balancing the customer’s expectation and retailer’s strategy.• Right assortment of goods.• Substantial depth - availability.• Choice available to customer increases.• Required goods always available.

Process of merchandise planning

Planned sales: Projected sales for the period

Planned purchases: Projected purchases for the period

Planned reductions:Markdowns: Reduction in prices for Bad quality, Competition, Trend change

etcEmployee discounts: Inventory shrinkage: Theft, pilferage

Planned markups: Planned difference in selling and cost (It is not a gross profit)Markup% = (Selling price – Cost price)/ Selling price

Gross marginGross margin = (Selling price – Cost price - Reductions)

Process of merchandising planning.

• Developing a sales forecast –

• Determining the Merchandise Requirement

• Merchandise Control

• Assortment Planning

Merchandise hierarchy

• Company • Department • Merchandise classification• Merchandise category • Merchandise sub category • Stock keeping unit

Menswear

The process of Merchandise Planning

Shirts Trousers accessories

Zodiac Van Heusen Louis Phillippe Arrow

SIZEColor Style

DEPARTMENT

PRODUCT LINE

BREADTH

DEPTH

Merchandising strategy

• Fundamentally, a strategy defines a company’s position; Merchandising on the other hand refers to the basic product-mix that the retailer offers to the final consumer

• Thus a merchandising strategy is defined as a company’s position with respect to given product mix—aimed at ensuring optimization of resources, achieving target sales and margins.

Areas influenced by merchandising strategy

Products to be

sourced

Vendor terms and conditions

Price to be adopted

Method of packing and presentation

Merchandising strategy

sourcing• First step after determining the products and quantities that are required across

various stores is to determine the various sources of supply

• Sourcing refers to a number of procurement practices, aimed at finding, evaluating and engaging suppliers of goods and services.

• Process of merchandising sourcing starts with the identification of the sources of supply

• first decision, which has to be faced is whether the merchandise that is going to be sourced from domestic or international markets

• The importance of sourcing in a retail environment can be understood from the fact that sourcing of merchandising is a key element of cost.

Sources of supplyManufacturers: who directly manufactures the the product which he

wishes to retail

Wholesalers: According to the United nations statistics division,

“wholesale” is the resale of new and used goods to retailers, or involves acting as an agent in buying merchandise for or selling to such person or companies

• Wholesalers frequently physically assemble, sort and grade goods In large lots, break bulk, repack and redistribute in smaller lots

• Wholesalers of most products usually operate from independent premises.

Arranging and displaying