VIRTUAL BUSINESS RETAILING 3.0 Lesson 8 merchandising

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 enough A 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

The basic stock of a store Stocked year round Staple Merchandise The basic stock of a store Stocked year round Comprises a good portion of store sales What customers need on an ongoing basis & tend to sell well year after year Examples: Bread & eggs in a grocery store Socks & shoes in a department store

Fashion Merchandise Items that are stocked for several years & that have solid sales over that time period Example: 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 Merchandise Items 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 Merchandise Items customer buy without thinking very much about the purchase Purchased often or even on a daily basis Examples: 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

Has the # of items to be reordered when needed Benefits: Basic Stock List Keeps 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

Used to keep track of items of fashion merchandise Model Stock List Used to keep track of items of fashion merchandise These change more often than basic stock list items so the list is not as detailed Benefits: Gives valuable information about best-selling price points, styles, & colors

Never-out Stock List Can be used for all 4 types of merchandising Used to keep track of the best-selling merchandise Should 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 Entrance Placing 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 Purchases Usually 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

Items that are related to each other & that usually sell together Related Merchandise Items that are related to each other & that usually sell together If a customer buys one, they will usually buy the other Should be placed near each other Adjacent 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 Increase Merchandising is a tool to help retailers reach their sales goals Most 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 Item When 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