Merchandise Management
Unit 4
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Structure
 Concept of merchandise management
 Methods of determining inventory levels
 Role of merchandiser
 Characteristics of merchandiser
 Category management
 Range planning
 Space allocation
 Merchandise assortment and support
 Purchase negotiation
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Concept of Merchandise
Management
 A process of arranging goods in a proper way
 Focuses on the planning and controlling of the
retailer’s inventories
 As being key for retail store, need to make
competent decision balancing financial and
other resources
 The planning and implementation of the
acquisition, handling and monitoring of
merchandise categories
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Concept of Merchandise
Management
 The planning and control of merchandise
inventories to meet desired sales and
product-related objectives.
 Also includes the planning of the size and
composition of the merchandise
inventories, as well as a variety of
functions dealing with the purchase,
display, pricing, promotion, and sale of
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Key Points of Merchandise
Management
 Forward planning
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Link with suppliers
Investment decision
Goods well bought are half sold
Store layout and assortment
Availability range, quality, price
Inventory management/ turnover
Customer expectation
Monitoring and Controlling
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Methods of determining
inventory levels
 Basic stock method
 Percentage variation method
 Weeks’ supply method
 Stock-to-sales method
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Basic Stock Method (BSM)
Plan to have a basic level of stock all the time
Meet sales expectations
Allow for a margin of error
Better at sales is more then expected
Also better at problem with shipment
Doesn’t take into consideration stockholding
costs
Mostly prefer below inventory turnover rate 6.
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Basic Stock Method (BSM)
 Calculated working out with Beginning of Month
stock (BOM) = Planned monthly sales + Basic
stock
 Average stock for season = Total planned sales for
season/Estimated inventory turnover
 Inventory turnover = Net Sales/Average Inventory
 Average Monthly Sales = Total Planned Sales for
season/Number of Months
 Required inventory turnover rate, period, total and
periodic sales.
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Percentage Variation
Method (PVM)
 Alternative method of planned inventory
 Better to use when inventory turnover rate is
higher than 6 or more annually
 Refer when stock is stable
 Also refer at the time of sales fluctuation
 Assumes the monthly percentage fluctuation
from average stock should be half as great as
the percentage fluctuations in monthly sales
from average sales
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Percentage Variation
Method (PVM)
 Calculations
 BOM = Planned average monthly stock for
season * ½ [1 + (Estimated Monthly
Sales/Estimated Average Monthly Sales)]
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Weeks’ Supply Method
(WSM)
 Forecasting average sales on a weekly basis
 Assumes the inventory carried is in direct
proportion to sales
 Based upon a predetermined number of weeks’
supply
 Proportional link between the value of a stock
and the forecast of sales
 Calculations
 BOM = Average Weekly Sales * No. of stocks to be
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Stock-to-Sales method
 To maintain a specified ratio of goods on
hand to sales
 Stock-to-Sales ratio
 Based on historical result or external sources
 Calculate the ratio as amount of inventory
required in order to maintain month’s sales
 Not so difficult to calculate
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Methods of determining
inventory levels
 In all methods retailer need to be understood
level of shrinkage mark down and employee
discounts
 Shrinkage – difference between the amount of
merchandise that is reported on the inventory stock
system and what is available for sale
 Mark – downs – lowering of the prices of the
merchandise
 Employee discounts – part of planned reductions
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Role and Characteristics of
Merchandiser
 Entrepreneurial Role
 Managerial Role
 Informational
 Interpersonal
 Decisional
 Management functional role
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Planning
Organizing
Leading
Controlling
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Role and Characteristics of
Merchandiser
 Administrative Role
 Proactive Trading Role
 Bridge Role between Strategy and
Operational
 Researcher (Product, Customer and
Market)
 Quantitative Role
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Category Management
 Category: assortment of items that the
customer sees as reasonable substitutes for
each other
 Decision over groups of products
 Based upon strategic retailing principles
 A process of assorting & displaying to satisfy
 Concern with selling space, space, allocation,
profitability, rationalization, individual lines
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Category Management
 Reduces potential for conflict between
retailer and supplier/Partnership relation
 Often exercised within a supply chain
 Holistic view in planning promotion
 Conducted with the intention of meeting
customer expectations
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Range Planning
 Describes in terms of width & depth
 Also termed as assortment
 Width/Breadth
 Number of category
 Difference generic classes of product
 Depth
 Relates to size, styles, colors, prices etc
 Particular generic class of product
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Range Planning
 Need to be customer driven
 Variety of merchandise mix
 A retail strategy
 Category killer
 Things to be considered
 Space constraints
 Amount
 Sales record All rights reserved by
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Range Planning
 Quality
 Promotional support
 Reliability
 Assurance for supply
 Assortment profile
 Narrow and deep
 Square
 Broad & shallow
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Range Planning
 Developing the range planning requires:
 Understanding the selection process of consumers
 Deciding upon core and seasonal merchandise
 Agreeing the range – e.g. style, size and color mix –
depth and width
 Taking into consideration the sales-to-stock level
targets and calculating the optimum level of stock by
utilizing one of the stock inventory planning methods
 Relating the range plans to individual stores and
possible promotional plans
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 Briefing the buyer(s)
onreserved
agreed
source
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Merchandise Planning
 Ensure that both the customer’s merchandise needs
and the retailer’s financial requirements are satisfied by
creating an acceptable balance between merchandise
inventories and sales
 Involves those activities which are needed to ensure a
balance between inventories and sales.
 Marketing the right merchandise at the right place at
the right time in the right quantities at the right price.
 Management of the product component of the
marketing mix.
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Why plan stock levels?
 Meet sales expectations
 Avoid out-of-stock conditions
 Guard against overstock
 Keep inventory investment at acceptable
level
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Space Allocation
 Refers to separate & manage retail store area
for efficient movement of customer & visibility
of merchandize
 Decision regarding defining, segregating,
displaying, moving products in store
 Also term in-store presentation
 Yield management approach support space
allocation which focuses on establishing
relationship between space allocation, sale
volume & profitability
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Space Allocation
 Driven by competitive strategy
 Must know sales generation abilities of store
space
 improper space allocation is a source of
conflict between supplier and retailer
 A process of knowing value of a products &
placing it accordingly
 In-store layout is a part of it
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Space Allocation
 Objectives
 To shop efficiently
 To attract customer
 To increase level of sales
 To display products properly
 To position store/to build long-term retail
brand
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Merchandize Assortment
and Support
 Assortment: range of choices/selection in a given
product line (# of SKUs in a category)
 A collection of different product and assisting it for
arrangement
 To monitor actual sales performance against the
budget
 Two conditions arise
 Higher than anticipated sales volume
 Lower than anticipated sales volume-prospects of market hub
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Merchandize Assortment
and Support
 Require merchandiser’s skill and expertise, careful
monitoring of performance and proactive
 Support positioning strategy- strike the balance
between stimulating stock-turn with price reduction
 Width (Breadth): refers to assortment factors
necessary to meet needs of target market and
competition
 Support (Depth): Determination of how many units of
merchandise are needed to support expected sales of
each assortment factor (e.g. brand, type, size, color,
etc.)
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
Rely
on
customer
needs,
past sales trends, image of
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department and store, etc.
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Purchase Negotiation
 A final and essential aspect
 A process of dealing with suppliers and getting cost
benefit
 Ways of purchase negotiation can be centralized buying
and decentralize buying
 Must identify best supplier
 The cost, control of quality and delivery are necessary
starting point for any discussion
 Must perform with standard contract (negotiated and
uniform)
 Should involve clear All
documentations
of all related
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aspect
Any Questions ???
THANK YOU
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