Basics of Retail Merchandising

The biggest challenge in the competitive world of retail is to stay relevant to the customer. In order to stay relevant to the customer, a retailer would primarily require an understanding the changes occurring in the environment and the consumer and his lifestyle and develop an ability to adapt to them. While it is necessary to have the right location and communication for the store, the products to be sold occupy a position of primary importance. Imagine a situation where you visit a retail store to buy a product, maybe a T-shirt. The size that you need is Medium. In the store you see various colors and designs and select one design. If this design is not available in the size that you need it in, you may decide to buy another design or may decide to go to another store to buy. If you decide on the second course of action, the retail store loses a sale and a customer.

The success of any retail operation is to a great extent, based on the retailer’s ability tom provide the right goods to the consumer, at the right place, at the right time and at the right price. The entire process of creating or procuring a product or service needed by the consumer and ensuring that it reaches the place where a consumer can buy, it is integral to the existence of any retail organization. Simply stated, this is function of merchandising. Very often, merchandising is considered as a synonym, for the buying. It is an integrated end to end business process that runs from planning the merchandise assortment to sourcing, to distribution, to allocation of the goods, to stores, to promoting and selling the assortment to customers and finally, to replenishing inventory as necessary.

Till a decade ago, buyers could rely on their product knowledge and experience to make selections they felt would best satisfy their consumer’s needs. The advent of the global consumer, the spread of information technology and the availability of advanced merchandising techniques such as innovative product flow modeling, clustering and micro-merchandising, radio frequency inventory tracking and assortment rationalization have helped merchandising evolve to a science. Consumer tastes are now more fickle than ever before, and profitable product lifecycles are shorter. This has led retailers to change the focus of the merchandising function from being a purely product centric focus to being consumer centric. While the subject of merchandising has been discussed for years, the tenor of the subject has changed. The strategic importance of the function of merchandising cannot be undermined as it today serves as a critical factor which enables the creation of a competitive advantage.

We start understanding the concept of retail merchandising and its evolution. We then move on to examining the difference in the buying needs of various types of organizations and finally, we examine the roles played by a buyer and a merchandiser in a retail organization.

What is Merchandising?

If one were to ask a dozen retailers what is merchandising? One would get at least a dozen different answers. This is because it can be difficult to limit and therefore to define its scope. Put simply merchandising can be termed as the planning, buying and the selling of merchandise. The function of merchandising is an integral part of retailing and is also one of the most challenging functions as retailers often say goods well bought are half sold.

The American Marketing Association has defined merchandising as the planning involved in marketing the right merchandise at the right place at the right time in the right quantities at the right price.

The merchandising challenge of consistently having the right product in the right quantity available at the right place, at the right time and at the right price becomes increasingly difficult as more selling and fulfilling locations are added to a distributed retail model. Hundreds of stores, plus distribution centers fulfilling orders for multiple sales channels – including stores, e-commerce and catalog operations, increase the likelihood and magnitude of errors and sub-optimal allocations.