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A Comprehensive Guide of Merchandise Management in Retail
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February 8, 2021You have set up a beautifully designed retail store. After that, you have defined your target audience. Moreover, you have the inventory of products from the suppliers ready. With all these in place, you think you are ready. No, that is unfortunately not the case. Then what is the missing link? Merchandise management. To achieve the desired success with more customers and more sales, a retailer must decide the right merchandise mix. If you are interested in supermarket management visual merchandising, then have a look at this article related to visual merchandising.
What is Merchandise Planning?
However, first, we need to understand what merchandise planning is all about. Merchandise planning is the approach employed to ensure the right product’s availability in the right quantity at the right price kept at the right place as per the market demands. For this, retailers must strategize in the best way to ensure to plan, buy, and sell merchandise for achieving maximum return on investment with Retail POS Software.
A merchandising plan is to find the perfect balance between the
retail store’s strategy and targeted customers’ expectations. It is important to ensure proper merchandise management at all times to achieve your goal of increased sales. Furthermore, it must improve its market share. Retailers must adopt the merchandise planning process’s best practices to achieve a competitive advantage in the market.
Benefits of Merchandise Management:
The benefits that you can achieve with the right merchandising planning are as follows:
- Availability of the right products at the right time, thereby leading to increased revenues.
- Lesser number of instances when stock is in excess, unavailable, expired, or obsolete, thereby leading to satisfied customers always.
- Reduction in unwanted inventory with the help of Inventory Management Software, thereby reducing the storage and warehousing costs.
Those mentioned above are the three main reasons why merchandise management is important for any retailer to grow in the market. If you intend to stand out from the competition, employ the best merchandise management practices in your retail store. For this, you must focus on the following key components of merchandise planning:
Key Components of the Merchandise Mix:
1) Product:
Product is the elementary component of any merchandise mix, and you cannot get it wrong. A constant look and assessment of the changing customer demands is a key requirement to get the first component right in the merchandise mix.
Depending on the type of product, retailers can decide the right amount of product. For example, staples must always be in stock in the store. However, retailers must order the seasonal products in the right amounts before the season. Therefore, there is no excess left once the season ends.
In the case of products in fashion, retailers must be extra vigilant to gauge customer demand. Therefore, it’s important to order the right numbers because the products may suddenly get out of fashion.
2) Range:
The range of a product refers to the width, breadth, and depth of products available in the retail store. Breadth means different brands available in the store, depth means the different sizes, colors, prices for the product, while width means the number of product lines that the store offers.
For example, a fashion retail store offers shirts, t-shirts, trousers, and jeans; then the width is four. Breadth means brands such as Levi’s, Gap, Guess, Wrangler, or any other. Depth means the different sizes and colors in each brand and product line.
Retailers must make sure to keep a certain number of products of each breadth, depth, and width so that customers have multiple options to choose from and do not leave the store because of the non-availability of the appropriate product for their demand.
3) Price:
Retailers must be wise enough to determine the price range suitable for the customers they are targeting. Generally, the classification of price-based products comes under low, medium, and premium. However, retailers can categorize products based on prices such as regular prices, discounts, combo offers, and others depending on their objective – whether it is a normal sale, Stock Keeping Unit, or profit maximization.
4) Assortment:
Assortment means planning the presentation of the merchandise mix for the most effective results. Like products are placed together based on category. For example, toiletries will be placed separately from snack items, while both will be kept at a different place than the pulses and flours. Retailers must assort the product categories wisely and place them to make it easier for the customers to search for a product and find complementary products together.
5) Space:
The right placement of the products so that all are visible to the visiting customer is essential. Retailers must use the limited floor space to display different product categories for easy visibility, comfort in picking up the product, and convenience in putting it in their shopping basket. For better display, retailers can use mannequins, fixtures, hangers, window displays, and gondolas.
Best Tactics of Merchandise Management:
While retailers focus on these five components of the merchandise mix, it is also important to adopt the best practices of merchandise management:
1) Data of Sales Forecasts and Merchandise Budget from the Base for Merchandise Planning:
You must be aware of your sales forecasts before deciding on the merchandise plan. The sales forecasts must include estimations for the overall sales, department-wise sales, product category-wise sales, and sales per product. These estimates depend on past sales data, current economic situation, trends and challenges in the retailer industry, and customer behavior. You must also consider the brands’ activities, such as adding new products, scrapping old products, or any other changes that may affect customer demand.
The merchandise budget must be prepared at the company level, department level, and store level based on the sales forecasts. The merchandise budget will help you understand how much you have to develop and implement the best merchandise management practices. This includes the estimation of the ROI in merchandise management for each store. The merchandise planning must be such that there is adequate stock in every store to satisfy customers’ demands. There is no overstocking situation leading to expired products and hence, heavy discounts for stock clearance.
2) Understanding of Customer Demand Behavior Based on Data and Analytics Ensures an Appropriate Merchandise Mix:
In addition to the sales forecasts, it is equally important to have the data and insights from customer behavior. These insights help you design the merchandise mix so that customers are attracted to the store, enjoy their experience, and return for their next purchase transaction. The challenge is that customer behavior changes rapidly since they have more product and brand options, wide channels of shopping, and access to a continuous stream of reviews and feedback.
Retailers use software and systems that track their customers’ purchase activities and their feedback on products or discounts. These data provide a strong backdrop for making informed decisions on merchandise mix and merchandise management. For example, do the customers like the placement of jeans and t-shirts in the same section so that it is easier to match, or do they want them placed separately so that they have access to all the options of jeans to choose from? Similarly, other factors of customer behavior are assessed depending on the products the retailer is selling.
3) Defining and Using the Category Roles to Provide a Good Shopping Experience to Customers is an Important Ingredient of Merchandise Management:
Retailers define the product category roles for their stores. It may not be the same in other retail stores selling the same products since the story is different, and the art of storytelling is different for each. The category roles differ in different segments in a single product category. The most popular category roles used by retailers are destination, routine, convenience, seasonal, and complimentary.
For example, the destination category satisfies customers’ specific needs,
such as shops for buying wedding clothes. The routine category targets the routine requirements of customers such as pulses, sugar, salt, etc., for daily food needs. Similarly, retailers define their category roles to differentiate themselves, target the customers, and provide value to customers. Clarity on category roles helps them to do merchandise planning and decide the merchandise mix accordingly.
4) Communicating and Executing the Merchandise Plan Correctly Guarantees Successful Merchandise Management:
Now, the last step to success is executing the merchandise plan in the best possible way so that you and the customers derive value from it. The best action is to use planograms to display your strategy in visual representation so that everyone understands it and works towards getting it right. This ensures that the merchandise management happens at all levels, and continuous monitoring and control are maintained to ensure fruitful success.
Final Thoughts on Merchandise Management:
Follow the tactics mentioned above to attain an optimized merchandise mix for your store so that merchandise management is ensured with full success. Employ these merchandise mix tactics, collect their performance data, analyze and understand the impact, and then make adjustments, if required, to stay ahead of the competition. Therefore, hang in there with your properly planned merchandise management strategy.
Ari retail software provides merchandise management functionality where you can create items from the headquarters and then allocate them to the stores which deal with them. It also provides various reports and analytics, helping you in merchandise management.
