Achieving these Rights is the key successful merchandising and many a times, remains an elusive goal for most retailers. To improve service levels and decrease stock outs, inventory is increased and profitability suffers due to excessive mark downs. To reduce markdown inventory is reduced and profitability suffers due to lost sales. Many a times, both these situations typically occur simultaneously.
Grace Kunz has defined merchandising as the planning developing and presenting of product lines for identified target markets regard to pricing, assorting, styling and timing.
Merchandise Management can be termed as the analysis, planning, acquisition, handling and control of the merchandise investments of a retail operation.
1) Analysis—because retailers must be able to correctly identify their customers before they can ascertain consumer desires and their needs / requirements to make a good buying decision.
2) Planning – is important because merchandise to be sold in the future must be bought now.
3) Acquisition – because the merchandise needs to be procured from others – either distributors or manufacturers.
4) Handling – involves seeing that the merchandise is where it is needed and in the proper condition to be sold.
5) Control – As the function of merchandising involves spending money for acquiring products, it is necessary to control the amount of money spent on buying.
The process of merchandise management includes developing strategies to ensure that the right product is bought at the right price and is available at the right place at the right time in the right amount to satisfy the needs of the target customer. No one in retail can completely avoid contact with merchandising activities. Merchandising is the day to day business of all retailers. As inventory is sold, new stock needs to be purchased, displayed and sold. Hence, merchandising is often said to be the core of retail.
The evolution of Merchandising:
This function traces its growth to the rise of organized retail in the world. Initially, as the retailers operated one or two stores, the function of buying the merchandise, pricing it etc was much simpler. In many cases, the retailer himself did it. However, when retailer started adding stores and categories the workload on the buyers increased significantly. Often, buyers had little information or time and they ended using approximations based on sales volumes to allocate merchandise between stores. This sometimes resulted in stores exchanging merchandise among them.
In order to overcome this, the function of a planner came into being; the planner’s job was to act as a link between stores and the buyer. The de-linking of the functions allowed better interactions with the stores. Planners were able to devote more time to collecting and studying tore level data, the buyers on the other hand, were able to spend more time with the vendors.
Factors affecting the buying function:
Rarely are any two stores organized in the same way, hence, the function of merchandising will also vary from one organization to another. Thus, the type of retail business model dictates the needs of the function of merchandising. The needs of an independent retailer will differ from those of a large chain store operation. As in every retailing endeavor, no matter what size, the most fundamental activities are buying merchandise and re-selling it to its customers. The owner or the manager who may be assisted by sales persons may perform the buying functions in case of a single store. As the single, store grows in terms of business, it may add departments. Functional departmentalization may occur and the number of persons involved in the buying process may increase.