1. VIRTUAL BUSINESS RETAILING 3.0
Lesson 8
merchandising

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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