FUNDAMENTALS
OF
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.
FASHION
MERCHANDISE
Products that may have
cyclical sales due to changing
tastes 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 stock
Projected 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
etc
Employee 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 margin
Gross 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
The process of Merchandise Planning
Menswear
Shirts
Zodiac
Van Heusen
Style
Trousers
DEPARTMENT
accessories
Louis Phillippe
Color
Arrow
SIZE
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
Method of
packing and
presentation
Merchandising
strategy
Price to be
adopted
Vendor terms
and
conditions
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 supply
Manufacturers:
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