Unit01MerchandisingTheory 1.1Introduction RetailindustryinIndiaisexperiencingphenomenalgrowth.IthasbeenrankedasNo1intherecentA.T. Kearneysannualglobalretailindex1.RetailindustryisexpectedtoreachRs160,000croresbytheyear 2010.Interestingly,organizedretailingwhichisinintroductionstage,iscontributingsignificantly.Many corporatehousesjumpedintothismarkettoexploittheuntappedpotential.Tatasenteredthismarket withWestside,TrentandTanishqandA.V.Birlagroupputtheirfootholdthroughmore.Reliance industries,anotherbigconglomeratehavedifferentformatsofretailing.Futuregroupredefinedthe retailingthroughtheirsizeandaggression. Theunprecedentedgrowthfuelledbycustomeraffordabilityandprofessionalapproachofcorporatein thissectordemandedbettercustomerservice.Tomeettherequirementsretailersinitiatedvalue additionintheirprocesses.Thesupplychainisstreamlinedandofferingsarecustomized.Ultimately,all theseactivitiesareaimingatprovidingtherightproductattherightplaceandinrighttimeinaffordable andconvenientwaytothecustomer.Inshort,theyareworkingontheirmerchandisingfunctions.

Objectives Afterstudyingthisunityouwillbeableto 1.Definemerchandisinganditsroleinretailing. 2.Understandthemarketingphilosophy. 3.Statetheobjectivesandfunctionsofmerchandising. 4.Distinguishtypesofmerchandising. 1.2WhatisMerchandising? Merchandisingaretheactivitiesinvolvedinacquiringparticulargoodsand/orservicesandmakingthem availableattheplaces,timesandpricesinthequantitythatenableretailerstoreachitsgoals2. Interpretationofthedefinition:Merchandisingfunctionenablesretailertoreachhisstoreorretail organizationgoals.Whentheproductrequiredisavailableinthequantitysought,customeriseither satisfiedordelighted.AssumeacustomerwalksintotheSubhiksharetailstoreneartohishouseto purchase50gDaburredtoothpaste.Aftersearchinginthestorecategoryhefoundthatvarietyof

toothpastesavailableincludingDaburRedbutcouldnotlocate50gsize.Hedoesntwanttobuy100gor 200gtoothpaste.ThereforeSubhikshalostacustomer.Ifthesamequantityoftoothpasteisofferedto thecustomerthenstorewouldhaveabusiness.Thisshowstheimportanceofprovidingtheright productattherightplaceatrighttime. AnotherdefinitionofmerchandisingisTheplanninginvolvedinmarketingtherightmerchandiseatthe rightplaceattherighttimeintherightquantitiesattherightprice3 Interpretationofthedefinition:customerneedsvarywithinaparticularsegment.Inyouthcustomer segmentoftoothpastesomemaylikegelbasedandothersmaylikenongelbased.Ingelbased toothpastecategoryitselfcustomerwantsdifferentflavorsandingredientsinit.Therefore manufacturerproducesvarietyoftoothpastelikesaltbased,calciumbased,andicecoolbasedetcin thegeltoothpastecategory.Aretailstoreneedstostoreallthisvarietiestosatisfyalltypesoftarget customers.Theallocationrequireshugeamountofefforttoidentifyandoffertherightproductinthe rightplaceatarighttime. SelfAssessmentQuestions1 Q.1.Theplanninginvolvedinmarketingtherightmerchandiseattherightplaceattherighttimeinthe rightquantitiesattherightpriceThismerchandisingdefinitioniscoinedby a.BermanandEvans b.LevyandWeitz c.AmericanMarketingassociation d.Rosemary Q.2.fillintheblanks Merchandisingaretheactivitiesinvolvedinacquiringparticulargoodsand/orservicesandmakingthem availableatthe,andinthequantitythatenableretailerstoreachitsgoals. 1.3MerchandisingPhilosophy Merchandisingphilosophyworksasguidingprinciplesforretailersbeforeheorshetakesthe merchandiserelateddecisions.Merchandisephilosophyshouldbebasedon Targetmarket:AretailerwouldliketoopenanapparelstoreinthesemiurbanareaofBihar.Heorshe shouldunderstandthetargetmarketcharacteristicsbeforestoringtheclothes.Iftheretailerstores premiumbrandedshirtsandtrousers,willhebeabletosucceed?Hemaynot.Thereforeunderstanding thetargetmarketisveryessentialbeforetakinganydecisionontargetmarket.

Retailersinstitutionstype:Thereisbigdifferencebetweenthemerchandisepresentinthe hypermarketandspecialtystore.Hypermarketmaybeinterestedinstoringalltypesofmerchandisebut specialtystorefocusesontheniche.Thereforehypermarketwillhavelargeassortmentandspecialty storewillhavesmallassortment. Marketplacepositioning:Positioningisthestrategyofcreatingtheproductimageinthemindsofthe consumers.Thepositioningstrategydependsontheproduct,quality,price,service,distributionand packaging.Whichoftheseattributesshallbeusedtohighlightthemerchandiseinthestore?Howthis positioningstrategycanbecommunicated.Allthesequestionsneedtobeaddressed. Definedvaluechain:Valuechainistheseriesofdepartmentsthatcarryoutvaluecreatingactivitiesto designproduce,market,deliver,andsupportafirmsproducts.Thegoaloftheorganizationisnotjust howwellthedepartmentsfunctionsandalsohowwelltheyarecoordinated.Marketingdepartmentin theretailstoremaylookforthehelpofinformationdepartmentforthecustomerdatabase.Ifthe purchasingdepartmentunabletohavebettervendornegotiationstoremanagercannotcompetewith thecompetitors. Suppliercapabilities:Merchandisingstrategiessuccessdependsonsupplychainstrategiesofthe organization.Aretailstoremayaskthesuppliertosupply10varietiesofshoeswith10differentsizes butthesuppliermaynothavethecapabilitytosupplytheorder.Retailstorewantsflexibilityinthe ordersizebutthesuppliermaynothaveadequateproductionanddistributioncapacitytoexecutelarge orders. Costs:Merchandisinginvolvesinventorycosts,carryingcostsandothercosts.CustomerwhoentersPai retailstoremaywanttoseeallrangesofIFBwashingmachines.Purchasingallrangeofwashing machinemaynotsuitthetargetmarketrequirementandwillescalatethepurchasingcost.Assumethat allthevarietyofwashingmachinesarepurchasedbyretailer,stilltheymaynotbeboughtinsame quantity.Thereforemerchandisemanagershouldhavecleardescriptionofcostsassociatedwitheach buyingdecision. Competitors:Asdiscussedintheintroductionstageofthischapter,theentryofcorporateintensified thebattleamongtheretailers.Bigbazaarsellsthecheaperproductswhereasshoppersstoplooksfor premiumproducts.Bigbazaaralsostartedintroducingfashionproductsatlesserprice.Ifashopperstop doesntrealizethis,somepercentofcustomerswilldefinitelyleavethemandbuythemerchandisefrom theBigbazaar.Thereforemerchandisemanagerintheshoppersstopshouldassessthecompetition beforetakinganydecisiononmerchandising.

Producttrends:Consumerattitudetowardstheproductisdynamic.Aconsumerwhopurchasesone designofapparelmaynotbebuyingforfourtofiveyears.Customerlooksfornewstyleanddesign.Bell bottomtrouserswerehugehitinthe1970sbutsamecannotbestorednow.Retailerwhounderstood thisproducttrendissurvivedandothersvanishedfromthebusiness.Thereforeretailershoulddo completeanalysisofthemarkettounderstandtheproducttrendsbeforetaskingmerchandising decisions. Themerchandisingphilosophyactsasthebasistoidentifytheproductstobeallottedintheshelfspace meantforproductcategory.Italsogivesthedirectiontomaintainproperinventoryturnoverandprice relatedinformationofmerchandise.Merchandisephilosophydeterminesthebreadthanddepthof assortmenttobepresentintheretailstore.Thesethingsarediscussedindetailinthemerchandise planningchapter.Merchandisingphilosophyprovidesframeworkfordefiningtherolesand responsibilitiesofvariouspersonsinvolvedinthemerchandisingpersons. 1.4ObjectivesofMerchandising Retailorganizationssurvivaldependsonthemerchandising.Themerchandisedepartmentofaretail storeshouldachievefollowingfourobjectivestomeetorganizationgoals.Theyare a.Toprovidetherequiredproducttothecustomeraccordingtohis/heraffordability. b.Tomakeaproductavailabletotheconsumerasandwhererequired. c.Toprovideproductsatarighttimetoaconsumer. d.Tomeetthequantityrequirementoftheconsumer. 1.5Functionsofmerchandising Assortmentplanning. Buyingthemerchandise. Allocatingthemerchandise. Communicatingthemerchandisetoconsumer. Managingthesupplychainofmerchandising. 1.6TypesofMerchandise 1.Staplemerchandise: Typesofmerchandisecarriedoutbyaretailerpermanentlyandhaverelativelystablesalesoverthe period Goodslikeshampoos,soapsanddetergentsareseenthroughouttheyear.Theseproductshavealmost stabledemandforallthetwelvemonthswhetherJanuaryorDecember.

2.Seasonalmerchandise: Productssoldforadefiniteperiodoftheyearonly.Icecreams,winterclothes,umbrellas,fansetcare soldduringtheparticularperiodoftheyear.WinterclothesaresoldinNovembertoJanuaryperiod 3.Fadmerchandise ThisMerchandiseishavinghighsalesforaparticularperiod.Moviemerchandisingisclassicexamples forthistype.Bondmoviesusuallycarryoutsuchtypeofmerchandise.RecentmovieQuantumofsolace isalsousingsuchtechnique.Peoplewhoarefondofbondmoviesbuythismerchandise.Therefore retailerexperiencesthehighsaleforthismerchandisebeforeandafterthereleaseofthemovie. 4.FashionMerchandise Productsthathavecyclicalsalesduetochangingtastesandlifestyles Design,colorsandclothcompositionvariesinthefashionmerchandisequiteoften.Thefashion merchandisegoodforaparticularyearwillbecomeoutdatedforthenextyear.Retailershould emphasisoncurrenttrendsinthismerchandise.Henceaseparatemerchandiseplanispreparedfor suchtypeofgoods. 5.AssortmentMerchandise Apparel,furniture,auto,andotherproductsforwhichtheretailermustcarryavarietyofproductsin ordertogivecustomersaproperselection DecisionsonAssortment Productlines,styles,designs,andcolorsareprojected,Modelstockplanisused SelfAssessmentQuestions2: 1.Productsthathavecyclicalsalesduetochangingtastesandlifestylesare a.Staplemerchandise b.Seasonalmerchandise c.Fadmerchandise d.Fashionmerchandise 2.Fadmerchandisesare a.Permanentlycarriedoutbyretailerwithstablesales b.Productssoldforthedefiniteperiodofyearonly c.Merchandisehavinghighsalesforaparticularperiod. d.Cyclicalsalesduetochanginglifestylesandtastes

 1.7MerchandisingGroup Merchandisegroupisthelargestclassificationofaretailstoreandisusuallymanagedbytheseniorvice presidentsofmerchandise,arecalledgeneralmerchandisemanagers. Apparelretailstorewillhavedepartmentslikewomenapparel,mensapparel,cosmetics,shoes, jewelries,accessories,furnitureandkitchen.Womenapparelbusinessismanagedbytheseniorvice presidentsofmerchandise.Thisbusinessconsideredasmerchandisegroup. AMerchandisegrouphasfourhierarchicaldivisions.Theyare Department:APartofmerchandisegroupusuallymanagedbytheDivisionalmerchandisingmanager. Anapparelretailstoremayhavemenssuit,menssportswear,boysapparelandchildrensapparel divisions.Thesedivisionsareknownasdepartment.Eachdepartmentwillhaveadivisionalmerchandise manager. Classification:Continuingwithapparelstoreexplanationanapparelretailerschildrenapparel departmentshouldfurtherdividetheirmerchandiseresponsibilityintobuyerjustborn,infants,little boys.Thisfurtherdivisioniscalledasclassification. Category:Thetotalrangeofproductssoldbyaretailerisbrokendownintodiscretegroupsofsimilaror relatedproducts;thesegroupsareknownasproductcategories.Foranapparelretailersportswear, dresses,swimwearandoutwearwillbecomecategories SKU:Astockkeepingunitisthesmallestunitavailableforkeepinginventorycontrol.Ex:justbornsize5 jeanspant Schematicdiagramofmerchandiseclassificationandorganizationalchart 1.8Summary Merchandisingaretheactivitiesinvolvedinacquiringparticulargoodsand/orservicesandmaking themavailableattheplaces,timesandpricesinthequantitythatenableretailerstoreachitsgoals. Merchandisingphilosophyworksasguidingprinciplesforretailersbeforeheorshetakesthe merchandiserelateddecisions

Objectivesofmerchandisingaretoprovidetherequiredproducttothecustomeraccordingtohis/her affordability,tomakeaproductavailabletotheconsumerasandwhererequired,toprovideproducts atarighttimetoaconsumer,andtomeetthequantityrequirementoftheconsumer Astockkeepingunitisthesmallestunitavailableforkeepinginventorycontrol.Ex:justbornsize5 jeanspant 1.9TerminalQuestions 1.Whatismerchandising? 2.Explaintheobjectivesandfunctionsofmerchandising. 3.Writeanoteontypesofmerchandising 4.Explainthevariouscomponentsofmerchandisegroup. 1.10AnswerstoSAQs SAQ1 1.AmericanmarketingAssociation 2.Place,timeandprice SAQ2 1.d.fashionMerchandise 2.c.Merchandisehavinghighsalesforaparticularperiod. AnswerstoTQs 1.Refer1.2 2.Refer1.4and1.5 3.Refer1.6 4.Refer1.7 References 1.A.T.Kearneyannualglobalretailreport 2.BermanandEvansRetailManagement 3.AmericanMarketingAssociation