STREAM : MANAGEMENT
SUBJECT: RETAIL MANAGEMENT
TOPIC: BUYING AND HANDLING THE MERCHANDISE PLAN
SUB TOPIC : Developing and Implementing the Merchandise Plan
Prepared By
Dr. Poonam Puri
Professor
Institute of Management Studies
Bundelkhand University, Jhansi.
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BUYING AND HANDLING
MERCHANDISE
Developing And Implementing The
Merchandising Plan
MERCHANDISING BUYING & HANDLING
PROCESS
• “MERCHANDISING can be defined as the planning and
supervision involved in marketing particular goods
and/or services at the places, times , prices and quantities
which will best serve to realise the marketing objectives
of the business.”
Source:https://blogmickey.com/wp-content/uploads/2017/09/world-showcase-epcot-35-11.jpg
1. ESTABLISHING A FORMAL OR
INFORMAL BUYING ORGANISATION
a. FORMAL BUYING ORGANISATION
Merchandising is a distinct task
Separate department
Large retailers involving distinct buying personnel.
INFORMAL BUYING ORGANISATION
Existing personnel handle
No clear –cut responsibility and authority
b. CENTRALISED B.O.
All purchase decisions made centrally
DECENTRALISED B.O.
Purchase decisions made locally
C. INSIDE BUYING ORGANISATION
Staffed by retailer’s own personnel
OUTSIDE BUYING ORGANISATION
Personnel external to a retailer are hired, usually on fee basis.
d. COOPERATIVE BUYING
A group of independent retailers get together to make large purchases from a supplier. ( Volume
discounts)
CENTRALISED BUYING ORGANISATION
• ADVANTAGES • DISADVANTAGES
– Integration Of Effort – Inflexibility
– Strict Controls – Time delays
– Staff Support – Poor morale at the local
– Consistent Image stores
– Nearness To Top – Excessive uniformity
Management
DECENTRALISED BUYING ORGANISATION
• ADVANTAGES • DISADVANTAGES
– Adaptability To Local – Disjointed Planning
Conditions – Inconsistent Image
– Quick Order Process – Limited Management
– Improved Morale Control
– Little Staff Support
– Loss Of Volume Discount
2. OUTLINING THE MERCHANDISE PLANS
a. What to stock?
b. How much to stock?
c. When to stock the merchandise?
d. Where to stock the merchandise?
a. WHAT TO STOCK
• Attracting which customer class?
• QUALITY decisions will get affected by:
– Desired target market
– Competition
– Profitability
– Store image
– Store location
– Customer services to be offered
– National Vs. private brands
• GROWTH POTENTIAL ASSESSMENT For each new good or service
– 3 elements of Growth:
• Rapidity Of Initial Sales
• Maximum Sales Potential Per Year
• Length Of Sales Life
– Most effective tool to asses it is the PLC ( next slide)
• HOW INNOVATIVE MERCHANDISE?
– Store Image
– Target Market
– Responsiveness To Consumers
– Costs
– Profitability
Traditional Product Life Cycle
STRATEGY INTRODUCTION GROWTH MATURITY DECLINE
VARIABLE
TARGET High Income Middle Mass Low Income
MARKET Innovators Income Market laggards
Adopters
GOOD/ One Basic Some Greater Less Variety
SERVICE Offering Variety Variety
DISTRIBUTION Limited Or More More Fewer
INTENSITY Extensive Retailers Retailers Retailers
PROMOTION Informative Persuasive Competitive Limited
PRICE Penetration/ Wide Lower Lower Prices
Skimming Range Prices
SUPPLIER Monopoly/ Oligopoly Monopolistic Oligopoly
STRUCTURE Oligopoly Competition
DERIVATIONS OF PRODUCT LIFE CYCLE
• FAD: occurs when a good or service generates a lot of sales,
but only for a short time
• EXTENDED FAD: is like fad except that the residual sales
continue for a long period at a fraction of earlier sales.
• A SEASONAL OR FASHION CURVE : results when a
good or service sells well during non-consecutive time
period
• NOSTALGIA or REVIVAL curve happens when a
seemingly obsolete good or service is revived. An innovative
retailer will recognise the potential in this area and
merchandise accordingly.
• BUST product life cycle is one in which a good or service is
not successful at all and the retailer loses money and
sometimes status.
• TRICKLE DOWN THEORY
States that fashion passes from the upper to lower Social
class through vertical stages:
1. DISTINCTIVE : Original Designs, Designer Dress Shops,
Customer Made, Bought By High Society
2. EMULATION: Modification Of Original Designs, Few
Department Stores, Alterations, Passed To Middle Class
3. ECONOMIC EMULATION: Simple Copy Of Original
Designs, Discount & Bargain Stores, Mass Produced, Mass
Marketed
• TRICKLE ACROSS THEORY
– States that a fashion passes within any social class.
– There are innovative customers who act as opinion leaders.
– Fashion must be accepted by these leaders who convince other
members of the same social class.
• While planning innovations, the retailer
instead of removing old offerings intuitively,
should follow these structural designs:
1. Select items for possible Elimination on the basis
of declining sales, prices, profit, loss of usefulness
etc.
2. Gather And analyse Information about these
items including profits, financial considerations,
employee relations and marketing factors.
3. Consider non-Deletion Strategies such as cutting
costs, revising marketing efforts, adjusting prices
and cooperating with other retailers.
4. After A deletion Decision consider timing, parts
b. HOW MUCH TO STOCK ?
1. Assortment Strategies very widely
Width & Depth of assortment
2. Space Requirements
How much space required for each good category?
How much space is available?
More space to goods/ services that lead to greater customer
traffic and have a greater sales turnover
3. Careful distinction between
Scrambled Merchandising
Complementary Goods / Services
Substitute Goods / Services
“When Retailers and manufacturers compete for the shelf space allocated to various
brands and for control over the location of displays, this is known as Battle Of
Brands.”
MANUFACTURER’S BRANDS are produced and controlled by manufacturers.
Usually Well Known
Presold To Consumers
Require Little Retailer Investment
Represent Maximum Product Quality
Dominate Retail Sales For Most Product Categories
DEALER BRANDS contain name designated by wholesaler or retailer
More Profitable To Retailer
Better Controlled By Retailer
Less Expensive
Cant Be Sold By Competing Retailers
GENERICS
Unbranded ,No Frill Goods
Receive Secondary Shelf Space
Stocked By Some Retailers
Obtain Little Or No Advertising Support
Sometimes Of Lower Quality Than Others
Limited Assortment
Plain Packaging
MERCHANDISE ASSORTMENT PLANNING
Planning is done with any one of these:
• A BASIC STOCK LIST
– Specifies inventory level, colour, brand, size, style category, package
– Used for staple items
• A MODEL STOCK LIST
– For items such as fashion merchandise, Furniture and non-standardised
items
– FOR Non-Standardised items following steps may be followed:
– Linens, styles, designs, colours selected first
– A model stock plan then used to order specific item
• A NEVER-OUT-LIST
– Is utilized when a retailer plans the stock levels for best sellers.
– Items account for large sales volume
– Stocked well to ensure 100% availability
Items are added or deleted from this list as their popularity & importance to
the store varies.
c. WHEN MERCHANDISE IS STOCKED?
• Retailers should forecast annual sales keeping in
mind the following points:
– Peak Season
– Delivery Time
– Stock Turnover
– Discounts
– Order Time
– Routine Vs. Special Order
d. WHERE MERCHANDISE IS STOCKED?
• STOCKROOM ?
• WAREHOUSE ?
3. GATHERING INFORMATION ABOUT
CONSUMER DEMAND
• Marketing Research
• Sources of information
– Consumers
– Suppliers
– Retail personnel
– Competitors
– Retailers can have a tool for recording demand –
WANT BOOK( consumers request for out-of-stock
goods or unstocked merchandise)
4. DETERMINING MERCHANDISING
SOURCES
• Major sources to procure merchandise :
– Company Owned
– Outside, Regularly Used
– Outside, New
• While selecting merchandise sources a retailer should consider several
criteria
– Reliability
– Price – quality
– Credit
– Local advertising
– Order processing time
– Exclusive rights
– Ethics
– Re-order
– Mark-Up
– Risk
5. EVALUATING MERCHANDISE
• Should each item be examined or bought on
description
• 3 types of evaluation:
– INSPECTION
• Occurs when each individual unit is examined before
purchase and after delivery.
– SAMPLING
• Takes place when a large quantity of breakable, perishable,
or expensive items is regularly purchased.
– DESCRIPTION
• Buying takes place when a retailer purchases standardised
unbreakable merchandise. The items are not sampled or
inspected; they are ordered in quantity from a verbal or
pictorial description.
6. NEGOTIATING THE PURCHASE
• A New order or a special order will always result in a negotiated
contract. ( all terms & condition laid down)
• For regular orders, reorders a uniform contract is signed
– Terms already agreed upon
– Terms are standard
– Handled in routine manner
• Purchase terms specified in both negotiated or a uniform
contract may include;
– Date Of Delivery
– Quantity Purchased
– Price
– Discounts
– Form Of Delivery
– Point Of Transfer Of Title
7. CONCLUDING THE PURCHASE
• CONSIGNMENT OR MEMORANDUM purchases
are made when the supplier is in a a relatively weak
position and wants the retailer to carry the brand.
• The retailer pays only after the merchandise has
been sold.
• He may even return the unsold merchandise.
• With a memorandum deal risk is still low, but the
retailer takes title on delivery and is responsible for
damage.
8. HANDLING THE MERCHANDISE
• Physical handling of merchandise involves the following
functions:
– Receiving The Merchandise
– Marking Prices
– Setting Up Displays
– Determining On-floor Quantities & Assortment
– Completing Customer Transactions
– Arranging For Customer Delivery Or Pick-up
– Processing Returns And Damaged Goods
– Maintaining Pilferage
– Controlling Merchandise
• Evaluating Sales, Profits, turnover, Theft, Costs, etc,.
• CONTROL is generally achieved by developing and
maintaining book inventory data and then periodically
conducting a physical inventory count to check the accuracy
of the book figures
9. RE-ORDERING MERCHANDISE
• A reordering merchandise plan should
be developed. Four important factors for
devising such a plan are:
– Order & Delivery Time
– Inventory Turnover
– Financial Outlays
– Inventory Vs. Ordering Costs
• JIT (Just-In-Time)
– Is a technique for inventory planning aimed at
reducing both inventory and ordering costs
through closer retailer-supplier relationships
10. RE-EVALUATING ON A REGULAR BASIS
• Re-evaluation should be done on a regular
basis.
• Constant monitoring of buying and handling of
each product / service category should be
done.
REFERENCES
• Berman Barry, Evans R. Joel & Mathur Mini.(2011). Retail Management: A Strategic Approach, 11th edition. Pearson.
• Levy Michael, Weitz Barton and Grewal Dhruv (2019) Retailing Management, 10th edition. Mc Graw Hill.
