MERCHANDISING Process involved in marketing : Right Product Right Place Right time Right Price MERCHANDISE

Understanding the Lifecycle Introduction Trials Growth Stagnancy Decline Death

WHO IS A MERCHANDISER? Understands the customer Product Knowledge High levels of integrity Analytical and Organising skills Negotiating Skills Understanding of the Financials

Terms to Remember Merchandise Category Assortment Variety Backupstock/Safety stock/Bufferstock Base stock or Cycle stock Fill rate

Terms to Remember Order level = Sales per day*( leadtime + Review time)+ buffer stock Order qty = Order level-Avl qty Inventory Turnover = Net cost/Avg Cost Stock to sales ratio = (SP)/Net Sales to stock ratio = Net Sales/ Avg cost GMROII = Gross margin ratio * Sales to stock ratio Sales per Sq ft Mark ups Markdowns

Merchandise A group of items that customers seek to fulfill their needs. Can be managed brand wise or categorized and managed at category level. Best from a retailer point of view is to manage it at a category level

Merchandise Management What product to buy When to buy, how much to buy How to buy-credit terms,logistics,imports,domestic How to display-planogram How to promote-tactical schemes

Category Management Strategy for product Tactical plans for product placement/offtake Inventory management Planograms- Display plans

Category Group of items which customer see as substitutes, which cater to a similar need. Apparel (Merchandise level) –Women’s wear (Dept) –Women’s ethnic/western/formals/mix n match(Sub-Dept ) –Blouses/skirts(Category) –Full sleeves/half sleeves(Sub category) –Cotton,Silk(Class) –Styles and collars( Sub class) –Size 32,Size 34 (SKU)

Category management Caters to customers needs for products not brands Retailer aims at maximizing customer service levels with an optimum inventory level so as to achieve maximum profit possible. Aims at a product assortment which achieves the above.

It involves Strategic Define a category and its product assortment Define its role in the strategy Define Strategies based on growth /share matrix Tactical Tactics of (Pricing,promotion,place,prod uct) Managing assortment mix Assessment and feedback

Defining a Category -Factors Category fit to the format Profitability and market share in the category and targets Image fit with the format Legal issues Internal competition Variety and Depth Brands to keep ;SKUs to keep (Both from customers perspec and retailers perspec) Define complementary categories

Scheme of Categorization Staples grains, Niche Diapers, Pet food, Variety Biscuits, Beverages Fill ins Batteries, apparel, plastic items Freq of purchase High Low Market Penetration HighLow

Filling in a category COMPETITION MANUFACTURING COMPANIES CUSTOMER DATA INFERENCES CUSTOMER FEEDBACK USE OF THE PRODUCT LAWS OF THE COUNTRY

DATABASE DEVELOPMENT SKU – DEFINITION BARCODING FORM /SIZE PACK WEIGHT USES VENDOR

Assigning a role to a category Compare categories from the customers,retailers and competition’s perspective Helps in targeting the category to specific customers Efficient management of resources Better at tackling competition

Strategy:Role of a Category Destination: 5-7% of categories Unmatched value,USP of retailer, Objective: Increase cust satisfaction, achieve and retain market share manufacturer aided promotion Preferred: Categories used to entice customers from competition 55-60% of categories in this role Build volume, generate cash, Ret on assets Lot of promotion, displays, feature ads Convenience Provide convenience, enhance retail stores image 15-20% High profit margins Occasional/Seasonal Meet customer needs Enhance stores value offering and image Profit margins and volume building

Developing category strategies

Growth Share based Strategies Sleepers Strategy:Try to convert them to winners by inc usage Review prodt mix Review space allocated and margins Link them to the winning cat if possible WINNERS Strategy:Maintain and Defend Increase to full range Add new items not stocked Review pricing and gross margin Increase promotional spend Questionmarks Phase them out Morning Stars Strategy:create excitement, earn mre margins Is the category dieing or is it only your store Create excitement, or skim the market High Growth Low Low Market ShareHigh

Role based decisions Each of the strategies reflect in decision making in areas of –Procurement –Placement –Pricing –Promotion –Inventory management –Performance measurement –Purchase behavior of customers

Category Tactics

Tactics and Cat. Roles RoleAssortmentPricingShelf Presentation Promotion DestinationComplete variety All sub cats, skus,all brands, all segments Leadership pricing best value Prime area, high exposure to high traffic High level of activity Multiple vehicles PreferredBroad variety Major brands, major SKUs, major sub cat Competitor consistent, equal to comp Average location, but high cube allocation Average freq of activity, selected media vehicles SeasonalTime variety Ltd sub categories Competitive seasonally Good store location, high traffic, but average cube allocation Seasonal, multiple vehicles ConveinienceSelected varietiesAcceptable within 15% (+or-) of competition Low cube allocation Low level of activity

Tactical On Pricing On Promotions On Shelf Presentation Managing category Mix Assessment and Feedback

Pricing Influenced by –Customer perception of price elasticity –Govt – min procurement price, price cabals –Suppliers –Competition

Basic Strategies Demand Oriented –Price –value proposition –Prestige pricing Eg:Swarovski,Benz,Hidesign Cost oriented –Mark up pricing –Direct Product Profitability –Per unit costs are added, then desired margin to get sales Competition Based pricing

DPP Retail Selling PriceRs.20 Product CostRs.10 Disc allowances Re.1 Adj Gross MarginRs.9 Warehouse costRe.1 Transport costRe.1 Re packing costRe.1 Direct selling costRe.1 Other direct operating costRe.1 DOCRs.5 DPPRs.4.00 Useful for assessing competitiveness

Implementing strategies Flexible pricing –EDLP –Seasonal pricing –Auction/Bid Price Fixed pricing –Customary pricing –Odd pricing –One price policy (Dollar store)

Implementing Strategies… Multiple pricing –Volume based pricing –Bundled Pricing/offer –Unbundled pricing in case of complementary price –tv/set top box; bed spread,pillow case Price lining –Range of prices to diff qlty –Rs.250 tshirt, Rs.450 tshirt, Rs.600 tshirts

Based on Basis of pricing –Demand –Supply –Cost –Competition Policy is also based on intention to –Build volume, Build image or Balance price and value

Promotion Feature Advt (Product based) Displays,Kiosks,Sampling (Usage based) Discounting,Coupons,Freebies(Price/value based)

Promoting a product can lead to Brand Switching (Pantene to Dove hair care) Purchase time acceleration(Pre budget durables offer) Stockpiling ( typical in cat like toiletries) –Dangerous as post promos sale falls. –So time your promotions well enough –Manage inventory pre and post promos

Planograms Visual or graphical representation of space allocated for selling,merchandise, personnel,display,customer as well as product categories.

Planograms Gondolas Aisle space Classification of store offerings Where to place the destination categories Special handling products – flowers, bakery,freeze Traffic flow.. Customer walk through

Planograms… Straight grid pattern Curving or Free flow pattern Designing customer service areas –Cash tills –Packing and Bagging –Allocation of space for rest and comfort –Allocation of space for communication

Product display Which categories to place next to each other Which SKUs to take prominence What height to stock products at Ease of access Allocation of sales staff

Shelf Presentation Size and position of shelf (Top or midlevel (Visibility or bottom shelf for value offered) Placement –context of the product –Mixed display structure –Precedence given to one brand gives it a quality image edge –Unfamilar context

Some guidelines Transaction buildingDirect attention to higher priced SKUS Traffic buildingAttarctive shelves to attract more customers and also to make them repeat purchase Turf protectingAttract attention to higher margin skus, private labels,impulse items in destination category Cash generatingHighlight new high profile SKUs /Segments /high margin items