 Retail merchandising requires management

of the merchandise mix.

 Developing the merchandise mix allows the

retailer to segment the market and appeal to
a select group of consumers.
 Merchandise Variety (Number of product lines)

 Merchandise Assortment (Number of product

items)

 Merchandise Support (Number of product units)

 Planning & Controlling Merchandise Variety

 Planning & Controlling Merchandise

Assortment/Support

 Planning Merchandise Mix Strategies

 Planning Merchandise Variety Involves
Planning And Controlling Product Lines.
The compatibility among product lines.
 Product substitutes
 Product complements
 unrelated products

The physical attributes of each product line.

 Product bulk
 Product standardization
 Product service levels
 Product selling methods
 The product lines’ potential profitability.
Direct and indirect contribution to
profitability
Calculations of gross margin %

 The role branding plays in the success of the

product line.
 How brands can distinguish a retailer from
competitors.

 How brands can build store loyalty.

the advantages and disadvantages of offering
different types of brands – no names, vendor
brands, store brands (private labels) and
licensed merchandise
 The age of each product within the product lifecycle
 What stage a product is in to judge future sales
potential
 The number of products offered at different stages

The fashionable nature of each product line.

 Use of unique designer fashions as part of the store’s
strategy
 The above average risk of fashion merchandise ( But
also note: high margin items with above average
profitability)
 How well the product matches consumption patterns and
buying needs of targeted consumers.

Market trends– provide products the market wants.

 The impact of lifestyle on product line acceptance.
 Targeted customers’ activities, interests, and opinions
 The match between consumers’ lifestyle and retailer’s
image
 Usefulness of trade shows to identify product lines for
targeted consumers’ lifestyles
 Is the product line available to direct (intra
type) competitors or indirect (inter type)
competitors, or both
 The conditions under which each product line will be
procurable
 Availability and reliability of various suppliers
Terms and conditions under which the product will be
made available
 Controlling merchandise variety is an art and a science.
There are no rules for what should be included in the
merchandise mix and what should be excluded. However
two useful management methods used are-
 Category Management: each product managed as a business
unit at the store level
 ABC Analysis: each product line is ranked based on
performance levels
 While organizing the merchandise mix as to the number of different
product lines carried,
 retailer must decide on Brands, Sizes, Colors, Material, Style, &
Price points.
 Objective is to ensure that product choice meets targeted
consumer needs
 Retailer must also carefully plan the number of units to have on
hand to meet the expected sales for the brand, size, and color
combinations.
 Retailer must develop merchandise lists like-
Basic Stock List (staple items)
Model Stock List (fashion items)
Never out List (key items and best sellers)
 Involves monitoring and adjusting the types of product
lines that are added and dropped from the
merchandise mix
 Two widely used methods to control assortment and
support:
 1. Inventory turnover: rate at which the retailer
depletes and replenishes stock
 2. Open-to-buy: amount of new merchandise a retailer
can buy during a specific time period without
exceeding planned purchases for the period.
An assortment is the selection of merchandise;
a retailer carries at a particular time.

It includes both- the breadth of product

categories and the variety within each
category.
 Having on demand, the type of merchandise
in the form of S K U, sought by a customer at
a particular time.
 Classifying merchandise is the process of
arranging the merchandise mix into groups
based on Criteria of end use like Usage,
Quality, and Price etc.
 Total Merchandising Mix: Complete
merchandise on offer by a retailer. For e.g. a
men’s specialty retailer may deal in goods meant
for men.

 Merchandising categories: Groups within overall

merchandising mix. For e.g. Suits, casual wear
and accessories.

 Merchandise classes: Merchandise categories

are broken down into classes.
 Merchandise subclasses: Merchandise classes
are further broken down into sub classes.
 Merchandise group: Merchandise subclasses
are further divided into groups .For e.g. Solid
colour suits may be divided into Small, medium
and large sizes.
 Assortment Factors: Groups are further
described by assortment factors that together
make up an S K U. Colour, style and sizes may be
some of the assortment factors.
 SKU: A unique combination of assortment factors. For example, a
small sized, striped will form one SKU.
An S K U or a stock keeping unit is determined by a particular
combination of style, size, and colour or the unique combination of
assortment factors embodied in a single product determines an S K
U.
An S K U is therefore a unique piece of merchandise distinct from
other similar merchandise because of its particular combination of
assortment factors
 Units: Total volume per SKU .
 NOTE: Terms described above reflect a simple system. A detailed
classification system must be learned in the context of a particular
company because each term is unique to an organization.
 Balanced Assortment: A balanced assortment is the one that has a well-
planned variety of colors, styles, and sizes for special appeal to a specific
market with a minimum investment in inventory.
 Factors influencing assortment-planning decisions
Adequate variety to attract customer and inventory to prevent stock outs.
Minimum investment in slow moving stock as well as in total inventory
Maximum gross margin, return on inventory and stock turn.
 Category management is a practice of classifying the assortment into
categories based on consumer needs. Product assortment is determined
from customer’s perspective such as product forms, price options, sizes,
and brands and store’s perspective like customer flow, display, and stock
filling.
 For e.g. some pharmacists define the category according to manufacturer
whereas others alphabetically by the name of medicine.
Assortment Dimensions
 Width: Assortment width refers to the number
of distinct goods or service categories (product
lines), a retailer carries.
 Depth: Assortment depth refers to the variety
within a goods or service category.
 Consistency: Consistency refers to the
compatibility of product lines in terms of
consumer purchasing habits and end use.
 A firm’s assortment strategy is formulated By
using a mix of various assortment
dimensions.

 Following strategies are possible:

 Wide and Deep
 Wide and shallow
 Narrow and Deep
 Narrow and Shallow
 Advantages Disadvantages

• Broad market • High inventory

• Full selection of items investment
• High level of customer • General image
traffic • Many items with low
• Customer loyalty turnover
• One stop shopping • Some old-fashioned
• No disappointed merchandise
customer

Example: Full-line Department Stores

 Advantages Disadvantages

• Broad market • Low variety within

• High level of customer product lines
traffic • Some disappointed
• Emphasis on customers
convenience customer • Weak image
• One stop shopping • Many items with low
• Less costly than wide turnover
and deep • Reduced customer
loyalty

Example: Variety Stores, General Stores, Discount Stores

 Advantages
• Specialist image
• Good customer choice in
categories
• Specialized personnel
• Customer loyalty
• No disappointed
customers
• Less costly than wide and
deep
Example: Specialty Stores
Disadvantages
• Too much emphasis on one
category
• No one stop shopping
• More receptive to trends
and cycles
• Greater effort required to
increase the store size
• Little/no scrambled
merchandizing
 Advantages Disadvantages

• Aimed at convenience • Little width and depth

customers • No one stop shopping
• Least costly • Some disappointed
• High turnover of items customers
• Weak image
• Limited customer loyalty
• Small trading area
• Little/no scrambled
merchandising

Example: Vending machines, Newsstands, Door-to-door

 MENSWEAR DEPARTMENT

PRODUCT LINE TROUSERS ACCESSORIES

SHIRTS

BREADTH
ZODIAC VAN HEUSEN LOUIS PHILLIPPE ARROW

DEPTH
STYLES COLOURS SIZES
 Scrambled merchandising: Unrelated items added to
generate more revenue and lift profit margins (Like
florist carrying umbrella or Cyber café offering Cold
drinks)
 Complementary goods and services: Retailer sells
related offerings along with basic items. For e.g.
Cassettes along with Stereos.
 Substitute goods and services: Retailer keeps
competing brands of a product. In this case, sales may
keep shifting from one brand to other but have little
or no impact on overall sales
 Brand Mix A mixture of different types of
brands included in merchandise mix of a
retailer like - Manufacturer’s Brands, Private
labels/Store Brands and Generic Brands.
 Advantages:
Produced and controlled by manufacturers
Pre-sold –Supported by manufacturer’s
advertising.
Provides credibility to retailer.
Advantageous for Small Retailer.
 Disadvantages: Low margins for retailer.
 : Pantaloon -Bare, Honey, Ajile, UMM,Rig,
Biba,Anokhi , West Side-Nuon
 Advantages:
More profits for retailer;
No competition;
Less expensive to customers;
Leads to customer loyalty.
 Disadvantages:
Retailer has to: line up suppliers, Arrange for
warehousing, Bear marketing expenses and
absorb losses from unsold items
 Generic Brands
Product’s generic name is used as brands. For
e.g. Basmati Rice, Battery Water, and
Eucalyptus oil etc.