Merchandise Management

  • Post last modified:16 May 2021
  • Reading time:5 mins read

What is Merchandise Management?

The merchandise management process allows the retail buyer to forecast with some degree of accuracy what to purchase and when to have it delivered. This will greatly assist the company in attaining its sales and gross margin goals. Buyers must rely heavily on historical sales data, coupled with personal experience and their own intuition about market trends.

What is Merchandising?

Merchandising is the sequence of various activities performed by the retailer such as planning, buying, and selling of products to the customers for their use. It is an integral part of handling store operations and e-commerce of retailing.


Types of Merchandise

Staple MerchandiseFashion Merchandise
It has predictable demandIt has unpredictable demand
History of past sales is availableLimited past sales history is available
It provides relatively accurate forecastsIt is difficult to forecast sales

Factors Influencing Merchandising

The following factors influencing merchandising are:

  1. Size of the Retail Operations
  2. Shopping Options
  3. Separation of Portfolios

Size of the Retail Operations

This includes issues such as how large is the retail business? What is the demographic scope of business: local, national, or international? What is the scope of operations: direct, online with multilingual option, television, telephonic? How large is the storage space? What is the daily number of customers the business is required to serve?

Shopping Options

Today’s customers have various shopping channels such as in-store, via electronic media such as Internet, television, or telephone, catalogue reference, to name a few. Every option demands different sets of merchandising tasks and experts.

Separation of Portfolios

Depending on the size of retail business, there are workforces for handling each stage of merchandising from planning, buying, and selling the product or service. The small retailers might employ a couple of persons to execute all duties of merchandising.


Functions of Merchandising Manager

A Merchandising manager is generally responsible to following:

  • Lead the promoting group.
  • Ensure the promoting procedure is smooth and auspicious.
  • Coordinate and speak with suppliers.
  • Participate in planning, setting and meeting deals objectives.
  • Train the representatives in the group.

Merchandise Planning

Merchandise planning is a strategic process in order to increase profits. This includes long-term planning of setting sales goals, margin goals, and stocks.

Step 1: Define merchandise policy. Get a bird’s eye view of existing and potential customers, retail store image, merchandise quality and customer service levels, marketing approach, and finally desired sales and profits.

Step 2: Collect historical information. Gather data about any carry-forward inventory, total merchandise purchases and sales figures.

Step 3: Identify Components of Planning.

  • Customers − Loyal customers, their buying behaviour and spending power.

  • Departments − What departments are there in the retail business, their subclasses?

  • Vendors − Who delivered the right product on time? Who gave discounts? Vendor’s overall performance with the business.

  • Current Trends − Finding trend information from sources including trade publications, merchandise suppliers, competition, other stores located in foreign lands, and from own experience.

  • Advertising − Pairing buying and advertising activities together, idea about last successful promotions, budget allocation for Ads.

Step 4: Create a long-term plan. Analyze historical information, predict forecast of sales, and create a long-term plan, say for six months.


Merchandise Buying

This activity includes the following

Step 1: Collect Information − Gather information on consumer demand, current trends, and market requirements. It can be received internally from employees, feedback/complaint boxes, demand slips, or externally by vendors, suppliers, competitors, or via the Internet.

Step 2: Determine Merchandise Sources − Know who all can satisfy the demand:


vendors, suppliers, and producers. Compare them on the basis of prices, timeliness, guarantee/warranty offerings, payment terms, and performance and selecting the best feasible resource(s).

Step 3: Evaluate the Merchandise Items − By going through sample products, or the complete lot of products, assess the products for quality.

Step 4: Negotiate the Prices − Realize a good deal of purchase by negotiating prices for bulk purchase.

Step 5: Finalize the Purchase − Finalizing the product prices and buying the merchandise by executing buying transaction.

Step 6: Handle and Store the Merchandise − Deciding on how the vendor will deliver the products, examining product packing, acquiring the product, and stocking a part of products in the storehouse.

Step 7: Record the Buying Figures − Recording details of transactions, number of unit pieces of products according to product categories and sub-classes, and respective unit prices in the inventory management system of the retail business.


Merchandise Performance

The following methods are commonly practiced to analyze merchandise performance:

ABC Analysis : It is a procedure of stock arrangement in which the aggregate stock is ordered into three classifications:

  • A: Extremely Important Items: Very significant stock control on request planning, security, brief investigation, utilization design, stock equalization, refill requests.

  • B: Moderately Important Items: Average consideration is paid to them.

  • C: Less vital Items: Inventory control is totally stretch free.

This methodology of isolation offers significance to everything in the stock. For instance, the telescope retailing organization may have little piece of the overall industry yet every telescope is a costly thing in its stock. Along these lines, an organization can choose its venture approach specifically things.

Sell-Through Analysis: In this technique, the real deals and gauge deals are contrasted and the distinction is examined with figure out if to apply markdown or to put a crisp solicitation for extra stock to fulfill current interest. This technique is exceptionally useful in assessing design stock execution.

Multi-Attribute Method: This technique depends on the idea that the clients consider a retailer or an item as an arrangement of components and characteristics. It is utilized to dissect different options accessible as to merchants and select the best one, which fulfills the store prerequisites.


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