LESSON 8MERCHANDISING

VIRTUAL BUSINESSRETAILING 3.0

In this unit, we will explore merchandising and its importance to store sales and profit

We will discuss merchandise plans, types of merchandise, and stock lists

Then we will learn how merchandising affects sales,

Lastly, we will review some merchandising math

After completing this lesson you will be able to: Give examples of the four main categories of

merchandise Explain the importance of stock lists and inventory

control on merchandising Describe how sales are affected by the strategic

placement of merchandise throughout a store—including the store entry, checkout lanes, and back of the store

Analyze the financial impact of rearranging products Calculate projected sales based on past sales data and

planned percentage increase

What Is Merchandising?

Involves the coordination of buying merchandise that customers want in the proper quantities & then selling that merchandise at a price that customers are willing to pay Customers want merchandise where they want to buy it Customers will often buy products where it is convenient Customers will occasionally overlook convenience when

the product is one that they want badly enoughA successful retailer will stock an assortment of

merchandise types that appeal to the customers’ various buying needs

Types of Merchandise

When planning the merchandise assortment for a store it is important to be aware of & understand the types of merchandise

Merchandise of all sorts can be grouped into 4 categories or types: Staple Fashion Seasonal Convenience

Staple MerchandiseThe basic stock of a storeStocked year roundComprises a good portion of store salesWhat customers need on an ongoing basis &

tend to sell well year after yearExamples:

Bread & eggs in a grocery store Socks & shoes in a department store

Fashion MerchandiseItems that are stocked for several years &

that have solid sales over that time periodExample:

Women’s capri pants – they have been selling well for several seasons & will probably continue to sell well for several more; eventually women will tire of them & will switch to buying a different style

Seasonal MerchandiseItems that sell well during particular times of

the year that are stocked only for that selling period

Once the selling period is over, unsold seasonal merchandise is marked down to encourage quick sales

Examples: Windshield wiper fluid in the fall & winter Sunscreen in the spring & summer

Convenience MerchandiseItems customer buy without thinking very

much about the purchasePurchased often or even on a daily basisExamples:

A cup of coffee A can of soda

Stock Lists

Itemized & detailed listings of the merchandise a store or department should have for sale

A tool that retailers use to help them keep a close eye on the inventory they stock

Assists retailers with the task of maintaining correct quantities of the 4 types of merchandise

Most retailers categorize their merchandise into 3 lists: A basic stock list A model stock list A never-out stock list

Basic Stock ListKeeps track of the staple merchandise that the

store should always keep in inventory (the items with regular customer demand)

Have a minimum quantity that should always be in inventory for each item on the list

Has the # of items to be reordered when needed

Benefits: Daily study of the list will help ensure that basic items

are always in stock & that no sales are lost

Model Stock ListUsed to keep track of items of fashion

merchandiseThese change more often than basic stock list

items so the list is not as detailedBenefits:

Gives valuable information about best-selling price points, styles, & colors

Never-out Stock ListCan be used for all 4 types of merchandisingUsed to keep track of the best-selling

merchandiseShould be monitored frequently to ensure

that these popular items are always available in sufficient quantities

List changes often as newly popular items are added & less popular ones are removed

Merchandising & Sales

Merchandising can have a decisive effect on sales in a store or department

Most retailers plan sales for their stores based on the sales for the same period in the previous year

The general rule in forecasting sales is to plan for a 10% increase over last year’s sales for the same time period Consider current business circumstances when

planning & act accordingly

To meet sales goals there must be merchandise for customers to buy There must be enough merchandise for customers to

feel that they are able to make a choice from an adequate selection

There must not be so much merchandise that customers are overwhelmed or unwilling to sort through very large quantities in order to make their merchandise selections

Merchandise for Profit

Retail selling space is a valuable commodity that retailers use to maximize store profits

The strategic placement of store merchandise within the selling space is a big factor in helping to generate merchandise sales & subsequent profits

Staple merchandise is generally placed in a permanent location & does not need to be placed in the heaviest customer traffic areas

Customers will seek out staple items, so placing them in a permanent location makes it easier for customers to locate them when making return visits to the store

Store EntrancePlacing the most appealing merchandise near

the front entrance of the store to get customers to come in is a basic merchandising principle

Benefits: Greatest customer exposure Best chance of producing the largest amount of sales

Impulse PurchasesUsually small items of merchandise that are

purchased with little or no thought on the part of the customer

Generally placed near the customer entrance, at the checkout area, & in areas of heaviest customer traffic so that customers can easily see them

Examples: Candy bars Breath mints

Point of purchase (POP) displays are sales promotional tools that are designed to encourage impulse purchasing & highlight special offers

Merchandise manufacturers usually supply these displays to retailers to promote the sale of their merchandise

Often used at the checkout area so that customers can easily add the item to their purchase

Related MerchandiseItems that are related to each other & that

usually sell togetherIf a customer buys one, they will usually buy

the otherShould be placed near each otherAdjacent placement reminds customers of a

possible need & makes it convenient for them to just pick up the other item & buy it

Examples: Razors & shaving cream

Key Math Concepts

Compute Planned Sales IncreaseMerchandising is a tool to help retailers

reach their sales goalsMost retailers plan sales goals as a

percentage increase of the previous year’s sales for the same time period

To compute planned sales increase, use this formula:

Planned Sales Increase=Quantity Ordered x Price Per Unit

Total Price Per ItemWhen placing reorders from the basic stock

list, the total price per item is computed using this formula:

Total Price Per Item=Quantity Ordered x Price Per Unit

Summary

In this unit we learned about merchandising & the types of merchandise stores stock

Next we learned about stock lists & how they can assist retailers in maintaining & monitoring stock inventory levels

We then discussed how merchandising affects store sales

Lastly, we reviewed some mathematics associated with merchandising