As the concept of large retail stores gains ground in India, the practice and concept of merchandising is likely to grow exponentially. In the western countries merchandising receives highest priority in commercial planning of a product. As seasons change, the merchandise collections / planograms too change in a retail store. When such changes take place the store too undergoes a transformation in decor and visual presentation to appeal to the consumers while announcing new arrivals in merchandise collection. There is so much more to merchandising than just a subject to study. The entirety of a retail outlet or a store depends on merchandising.
The merchandise purchasing process consists of five steps: identifying the sources of supply, contacting the sources of supply, evaluating the sources of supply, negotiating with the sources of supply, and purchasing from the sources of supply. The first step in the merchandise purchasing process deals with determining the type of channel to be used for purchasing each line of merchandise. The retailer can consider different sources of supply: raw-resource producers, manufacturers, wholesalers and resident purchasing offices.
The second step in the merchandise purchasing process involves contacting the various sources of supply. Both the vendor and the retailer can initiate the contact process. Contacts initiated by vendors involve store visits by vendors’ sales personnel or mail or telephone inquiries. Contacts initiated by retailer include visiting central markets, resident purchasing offices, and merchandise trade shows, and making telephone and mail inquiries.
The third step in the merchandise purchasing process deals with the evaluation of several prospective vendors. Retailers evaluate vendors on the basis of a) suitability, availability and the adaptability of the merchandise being offered, b) the exclusiveness of the merchandise offered and the vendor’s distribution policies, c) the appropriateness of the vendor’s price, d) the type and amount of promotional support offered by the vendor, and e) the type and amount of additional services provided by the vendor. Retailers can use a weighted rating method to evaluate vendors.
The fourth step in the merchandise purchasing process involves negotiating with the sources of supply. Retailers usually negotiate on price and service issues. Retailers should also consider the various transportation and handling issues that influence the cost of sourcing new merchandise.
In the fifth and final step of the merchandise purchasing process, the actual purchasing takes place. Retailers can purchase all the merchandise from a few vendors or from a number of different suppliers. They can also choose from different purchasing methods like regular, consignment, memorandum, approval or specification.
The merchandise handling process is as important as the merchandise purchasing process. This process involves developing a plan to get the merchandise carefully into the store and place it on the shelves for sale. Merchandise handling includes processing, receiving and storing merchandise, pricing and marking the inventory, arranging displays and on-floor assortments, customer transactions, delivering the goods, handling the goods that are returned by customers, taking decisions regarding damaged merchandise, and finally, controlling and monitoring losses due to merchandise pilferage.
Once a retailer develops a strategy for handling merchandise, a reorder procedure must be developed. This procedure depends on various factors like the time taken by the retailer to process the order, the time taken by the vendor to fulfill the order, the inventory turnover rate, the financial expenditure and the cost of holding inventory versus the cost of ordering merchandise. The retailer should re-evaluate the complete merchandising process periodically.
The hundreds of transactions that take place between retailers and vendors can give rise to a number of ethical and legal issues. These issues must be addressed by both retailers and vendors.
Therefore it is of prime importance that the merchandising is brought out to the real gleam.
A new model for merchandising and supply chain management is emerging; it is about to transform the way in which retailers do business and deliver the customer experience. This new operating model will enable retailers to cater to different customer segments, make their product/service offerings more novel and appealing, display those offerings more effectively, and help ensure that they are available in the right amounts and the right channels at the right times.
To be successful, retailers must build networks in which the various merchandising and supply chain functions are fully integrated and supported by systematic business intelligence, including a much deeper understanding of target customers. They must also tailor their operations to suit different products, customer segments, markets and timeframes. It is the complete integration and optimization of the merchandising-supply network that makes it one of the key levers in delivering a customer-centric shopping experience.
We help retailers enhance their stock returns, prevent losses and markdowns while improving demand forecasts. Our insight in tailoring the assortment to each of the stores in different geographical areas for different times of the year can solve retailer problems. Our solutions help in collaborating with suppliers on planning, forecasting replenishment and assortment and our framework helps in optimizing on markdowns and promotion campaigns.
Technical experts have knowledge of retail industry standards like UCCnet and XML and are constantly contributing in enhancing the ARTS standard framework. There are also works on to build reusable assortment models based on demographics and economic trends, data analytics and price alignment with vendors along with competitive shopping. The models provide support in developing supplier relationship by working in conjunction on category plans and by building retail exchanges. There are implemented applications to take care of out of stock, identification techniques, space planning and open to buy and products like Retek(Wipro). Integration has already taken a leap hold to using technology like SAP. All the major technological providers of the country have evolved their own models and software solutions to assist merchandising systems. There is a huge focus to integrate all systems to make is more accurate and effective.
Merchandising issues
The question of how best to merchandise the category was a major bone of contention for many of our panel members. Ultimately, all agreed that it all boils down to eliminating confusion by assembling a more customer-friendly presentation, one which invites incremental sales by alerting consumers to health concerns they may not have been aware of when they walked into the department.
One chain is conducting a series of consumer focus groups to try to understand what their customer wants and expects when shopping the natural care category.
In the meantime, some chains are breaking down their natural care sets according to brand, others by segment, and some others are going with an alphabetic presentation. Some were considering the possibility of segmenting the set according to structure/function, stating that “bone/joint health” and “mood/memory” departments might help eliminate the guesswork for the consumer. One retailer questioned if structure/function categories removed much of the confusion, suggesting that perhaps the breakdown should be by lifestyle instead (i.e., women’s health, men’s health, etc.).
The question of how is it best to present the category to the customer gave way to discussion of the financial impact of either merchandising strategy. On the one hand, one retailer posed, if a chain does a lot of advertising and promotion of national brands, does it hurt its business to break up a brand-blocked planogram?
Sudip
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Rajeev Damani 
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