RETAIL MERCHANDISING

Session vii
RETAIL MERCHANDISING
Merchandising Philosophy
Buying organization format and process
Devising Merchandising plans
Category Management
Merchandising Software.
RIFD Technology
 OBJECTIVES

To Demonstrate Importance of Sound

Merchandising Philosophy
To Study Buying Organization Formats and Their
Processes
To Outline Devising Merchandise Plans
To Discuss Category Management and
Merchandising Software
 MERCHANDISING PHILOSOPHY
Set the guiding Principles for all the
merchandise decisions that a retailer makes
Scope of Responsibilities
Merchandising Function
Target market desires
Retailers institutional type
Market-place positioning
Supplier capabilities
Costs/ Price
Competitors
Product Trends
Sell
Display and customer Transactions
Buying Function
Focus on buying function only
MERCHANDISING DISPLAYS
GES OF MERCHANDISING-ORIENTED PHILO
Smooth Chain of Command
Expertise
Responsibility and Authority Clear
Buyer Involved with Display
Reduced Costs
Buyer Closer to Consumers
ANTAGES OF SEPARATE BUYING & SELLING

Similar Skills Not Needed for Each Task

Higher Morale
Selling Not Secondary
Specialists
Merchandisers Not Always Good Supervisors
MERCHANDISING CONSIDERATIONS

Micro merchandising
Retailer adjusts shelf-space allocations to
respond to customer and other differences
among local markets

Cross-Merchandising
Retailers carry complementary goods and
services to encourage shoppers to buy more
BUYINNG ORGANIZATION
FORMATS AND PROCESS
Merchandise mangement means offering the
right product at the right time and place, the
buying organization and its processes are
defined in terms of formality, degree of
centralization, organizational breadth,
personnel resources , functions etc
AND FUNCTIONS OF BUYING ORGANIZATIO
Formal
Level of Formality
Informal

Centralized
Degree of Centralization
Decentralized

General
Breadth
Specialized

Internal
Source of Personnel External
Resident Buying Office
Cooperative Buying

Merchandising
Philosophy
Buying

Buyer
Staffing Sales Manager
Merchandising Buyer
MERCHANDISING VIEW

All buying and selling functions

Assortments
Advertising pricing
Point-of-sale displays
Employee utilization
Personal selling approaches
IN BUYING VIEW
Buying view
Buyers manage buying functions
Buying
Advertising
Pricing
In-store personnel manage other functions
Assortments
Point-of-sale displays
Employee utilization
Personal selling approaches
DEVISING A MERCHANDISE PLAN

Merchandise plan is one which is used to design a retail

store, includes forecasts,
innovativeness,
assortment,
brands,
timing, and
allocation.
A typical plan starts with the forecasts which are projections
of expected retail sales. Staple merchandise consists of the
regular products while basic stock list specifies the inventory
level, color, brand, and so on for every staple item carried.
Assortment merchandise consists of products for which there
must be a variety so customers have a proper choice. A
model stock plan projects specific assortment merchandise.
TYPES OF MERCHANDISE
Staple merchandise
Regular products carried by a retailer
Grocery store staple examples
Milk, Bread, Canned soup
Basic stock lists specify inventory level, color, brand, style, category, size,
package, etc.

Assortment merchandise
Apparel, furniture, auto, and other products for which the retailer must carry a
variety of products in order to give customers a proper selection
Decisions on Assortment
Product lines, styles, designs, and colors are projected
Model stock plan

Fashion merchandise
Products that may have cyclical sales due to changing tastes and
life-styles
Seasonal merchandise
Products that sell well over nonconsecutive time periods
What Makes Retail Shoppers Tick

Innovativeness

Forecasts Assortments

Merchandise
Plan

Allocation Brands

Timing
 Forecasts

Staple Merchandise
Assortment Merchandise
Product Lines etc.
Model Stock Plan
Fashion Merchandise
Seasonal Merchandise
Fad Merchandise
 Innovativeness
Target Market(s)
Goods/Service Growth Potential
Fashion Trends and Theories
Retailers Image
Competition
Customer Segments
Responsiveness to Consumers
Investment Costs
Profitability
Risk
Constrained Decision Making
Declining Goods/Services
Total Retail Sales Product Life Cycle

Introduction Growth Maturity Decline

Time
 Product Life Cycle

Life Cycle Stage

Strategy
Variable Introduction Growth Maturity Decline

Target Market High-Income Middle-Income Mass Market Low-Income

Innovators Adopters and Laggards

Good or Service One Basic Some Variety Greater Less Variety

Offering Variety

Distribution Intensity Limited or More More Fewer

Extensive Retailers Retailers Retailers

Price Penetration or Wide Range Lower Prices Lower Prices

Skimming

Promotion Informative Persuasive Competitive Limited

Supplier Structure Monopoly- Oligopoly- Competition Oligopoly

Oligopoly Competition
Fashion Trends

Vertical
Horizontal
 Assortment

Product Quality
Width
Depth
Planning Merchandise Quality

Target Market(s)

Competition

Retailers Image

Store Location

Stock Turnover

Profitability
Manufacturer versus Private
Brands
Customer Services Offered

Personnel
Perceived Goods/Service
Benefits
Constrained Decision Making
Assortment Considerations

Impact on Sales and Profit

Space Requirements
Inventory Turnover
Cannibalization
 Brands

Manufacturer (National)
BATA
SERVICE
MICTHCHILES

Private Label (Dealer)

STONEAGE
NIKE
OUTFITTER
CATEGORY MANGEMENT
Category Management is an important part of
Merchandise Management. It is a method of
managing retail operations. It is an organizational
approach in which the products purchased by
retailers are grouped into category of similar
products says detergents, toothpastes, cold drinks
etc. So, it is a systematic approach to manage these
Product categories, where a group of specific
products are treated as a strategic business unit. A
category is a distinct and manageable grouping of
products that consumers perceive as interrelated
and possibly interchangeable. Category
management has some key assumptions
 Category Management
Arrange The Way Customers Would
Configuration Function of Time, Space, and Product
Utilitization
See to Drive Multiple Item Purchases
Management is Fluid, Dynamic, Proprietary Set of
Decisions
Create Unique Consumer Value
Based on Overall Trading-Area Scenarios
Management an Exclusionary Process
Data from Pre-Customer Interface Analysis of Trading-
Area Needs
Supplier and Retailer have Different Goals
Management Strategy of Differentiation
 Category Management Application
Unit Sales
Few Many

High Potential Winners --

Promote more, better position, Promote more, better position,

High more facings, display more, more facings, display more
sample, back with store coupons

Direct
Product
Profitability Underachievers Traffic Builders --

Raise prices, lower position, Review prices, lower position,

Low cut promotions, consider delisting. expand space, mix with sleepers,
display.
 Software

General Merchandising
Forecasting
Innovativeness
Assortment
Allocation
Category Management
A SHELF LOGIC: SOFTWARE FOR
CATEGORY MANAGEMENT PLANNING
SHELF LOGIC: SOFTWARE FOR
CATEGORY MANAGEMENT PLANNING
 What You Should Know

The Importance of a Sound Merchandising

Philosophy
The Various Buying Organization Formats and
Their Processes
Considerations in Devising Merchandise Plans:
Forecasts
Innovativeness
Assortment
Brand Timing
Allocation

Category Management and Merchandising

Software
 RFID
Radio Frequency Identification System
WHAT IS RFID?
Radio Frequency
Identification
A small chip or tag that
reads radio waves used for
identification purposes
Does not have to be in line
of vision
Can be attached
to/implanted in products,
animals, or even human
beings
HOW DOES RFID
WORK?
Tags (or chips) consist
of two parts:
1) Antennae
2) Processor/ storage
Receives signal from
reader and gives a
return signal with ID
number
Reader sends number
to database or server
TYPES OF RFID TAGS
ACTIVE: Tag signal availability of 100ft.
HIGH signal strength
VERY LOW required signal strength from the reader
EX) Railway cars on a track
SEMI- PASSIVE: Tag signal availability only within field of reader
LOW signal strength
LOW required signal strength from the reader
PASSIVE: Tag signal availability < 10 ft.
VERY LOW signal strength
VERY HIGH signal strength required from reader
EX) Retail Checkout
** Widely used because very cheap to make
 RADIO FREQUENCY
IDENTIFICATION (RFID)
Short for radio frequency identification, a technology
similar in theory to bar code identification.

With RFID, the electromagnetic or electrostatic coupling

in the RF portion of the electromagnetic spectrum is
used to transmit signals.

An RFID system consists of an antenna and a

transceiver, which read the radio frequency and
transfer the information to a processing device, and a
transponder, or tag, which is an integrated circuit
containing the RF circuitry and information to be
transmitted.

Used for inventory management, IT asset tracking, race

timing, passports, mobile payments, transportation and
logistics, animal identification, museums, libraries etc.
DIFFERENCES BETWEEN RFID AND BARCODE
It has for each individual product a
unique number, whereas barcode labels
have the same serial number for all
identical items.

More than one RFID tag can be read at

a time and can be read from quite long
distance from the reader, whereas
barcodes can be read just one time for
each item and have a low reading
distance from the reader.

Barcodes have fixed numbers and each

figure does not necessarily write to the
computer when scanned if the computer
loses this figure. Silicon chips make the
RFID system much more flexible to be
re-programmed when necessary
BENEFITS OF RFID
For instance, Wal-Mart stores manage to save $600 million
annually by applying an RFID system.

A recent study at Wal-Mart stores shows that the RFID

system is more successful in replenishing out-of-stocks by
63% than stores without RFID . Furthermore, it is emphases
the fact that there was a reduction in out-of-stock by 16
percent in this period. Also, the study shows important profit
on investment by increasing the sales made.
Increased focus on selling.

It can reduce the waiting time of the shoppers inside a

shopping queue and allow goods to be checked
immediately and automatically
BENEFITS OF RFID
RFID tags can also be used to fight counterfeiting (Traditional
production devices such as holograms and chemical tags are now
being copied by counterfeiters.). The counterfeiting business makes up
5-7% of world trade and costs retailers more than 500 billion Euros a
year. GlaxoSmith, is tagging some drugs like Trizivir to reduce fraud

The smart tags allow retailers to monitor products availability on the

retail shelf especially during high selling seasons/perishable products.
Because the retail shelf space is limited, RFID tags assist the retailers
by enabling smart inventory management between the retail shelf and
backroom stock

In addition, RFID tags are useful for retailers with smart shelves that
have inbuilt RFID scanners to organize the products that are placed on
the wrong shelf as well as satisfy customers demand
RFID- CHALLENGES
The cost of tags can be a barrier to retailers in adopting RFID technology,
particularly at the individual item level but the cost are coming down . For
example, in 2000, the price of tags cost from $1 to $100 based on the type of
the tag, but in 2006 they cost from 20 cents to $20

Lack of internationally agreed RFID standards-However, in June 2004 EPC

global developed agreed protocols on the type of tag that concentrated on
the read rate and the frequency of tags.

Privacy concerns from civil liberties groups - RFID could be used to allow
retailers to gather information from customers. This kind of information
allows the retailers to control the consumers behaviour

A security concern : For example, when the RFID tag is designed to read at a
distance of one foot, attackers have the ability to read this signal in the
region of 100 feet with the use of this special equipment. Solution for this is
in attempting to kill the tag. A simple solution can be making a small change
in the information that is on the tag.

Wrong billing of some previously purchased item

RFID TODAY
Its Everywhere!
RFID tags in:
CREDIT CARDS
CAR & HOME KEYS
PASSPORTS
CLOTHING
PACKAGED FOODS
EVERYDAY PRODUCTS