Anyone who works in the retail industry knows how complicated even the smallest process can be. From managing the budget to planning the merchandise to setting the price, there is so much that goes on in a retail business that it is easy to become overwhelmed. Having an excellent merchandise management strategy in place can help you streamline your inventory and reach the top in no time. But what is merchandise management? Let's take a look.
What Is Merchandise Management?
Merchandise management is the process that every retailer uses to plan and control their retail store's inventory. It is the process through which a retailer decides which items they should keep in their store, how much of the item they should have available to meet customer demand, where the products should be put on display in the store to boost sales, and how to price these items to achieve maximum sales and profits.
It is essential for retailers to realise that the ultimate goal is not just to ensure that what you carry in your store meets the needs of the customers. As a retailer, it is also essential to have the ability to organise and manage your inventory. Retailers have to track their inventories right from the time they place the other from a manufacturer to the time the item is purchased by a customer. A good retailer has to ensure that all the merchandise is handled and stored properly, that it is organised in the store to enable customers to find what they want easily, and it is also easy to know when it is time to re-order specific merchandise. All these processes and considerations come under merchandise management. With excellent merchandise management, retailers can reach the top of their business quickly.
Can Merchandising Really Impact Your Brand Value?
Many retailers often underestimate the value of proper merchandise management. The merchandising techniques employed by companies have a significant influence on brand recognition and perception and also contribute to the value of your brand from the customer's perspective. This includes your brand's recognition, customer loyalty, perceived values, and many such factors. In retail, this is known as your brand equity, which is the brand's value perceived by customers based on its representation in the retail stores. Retail companies have to ensure that their merchandise is able to uphold their brand's value and image.
So it can be said that broadly speaking, merchandise management has two objectives:
1) To buy and store the inventory expected or required by the customers.
2) To achieve the objectives of the business, including profit, growth, etc., which can only be possible when the inventory is sold. This means that retailers must store or buy the product that is to be sold, which is good for both the consumer and the business owner. The customer gets pleased after getting the product of their desire, and the retailer makes a profit as the merchandise is sold.
How to Reach the Top Game in Merchandise Management?
If you want to improve your merchandise management, it is a great idea to follow the 5 R's of merchandising. The 5 R's are:
1. Right Product: The right products have to be allocated to the stores depending on the store profile.
2. Right Place: The product has to be placed in the right place depending on the seasonal plan and overall strategy.
3. Right Time: Make sure that the products arrive at the stores at the right time for seasonal launches and to pay attention to continuous replenishments before the product sells out.
4. Right Quantity: Allocating and replenishing the needed quantities of the product to maximise sales without disrupting display.
5. Right Price: Setting the right price and markdown strategy and ensuring the plan is followed by the entire system.
Now, it's a good idea to let us look at a couple of ways in which merchandise management can positively impact your retail business.
1. Fine Tune the Forecasting Process
Accurately forecasting when you will run out of a product is critical for any retail business. This is where your expected or forecasted sales calculations come into play. These calculations should depend on characteristics like forecasted growth, market and trends, promotions, sales efforts, and most importantly, your historical sales figures.
2. Implement the FIFO System (First In, First Out)
When you sell goods, they should be sold in the same order as they were bought or made. This is particularly necessary for those retailers who sell products that can spoil quickly, like food, flowers, and other such items. Applying the FIFO system to your inventory will promptly help you move out the perishable goods. The FIFO system also works well for non-perishable items since products that remain are on the shelves for a long time may get damaged, expire, and ultimately become unsellable. So the ideal manner in which to follow the FIFIO system is to apply it in your warehouse. Start by adding the newly purchased items from the warehouse to ensure that older products are kept towards the front.
3. Identify What the Low-Turn Stock Is
If you have some stock that has not been sold at all in the last six months to a year, it is a good indication that you should probably stop stocking that particular item. You may also want to consider using various strategies to get that stock moving, including offering certain promotions or special discounts. Remember that excess stock or stock that is not moving is going to be a waste of both space and capital.
4. Take an Audit of Your Stock
Many retailers make the mistake of not taking an audit of their stock. It is important to realise that even if you have good software for inventory management, you still have to take a physical count of your whole inventory to ensure that what is there in stock really matches up to what you believe is there. Even the best software can make a mistake.
Many retail businesses use various techniques to carry this out. This may include the yearly, end-of-the-year inventory check that is done physically to take stock of each and every item and an ongoing on-the-spot inspection system, which is usually more helpful for fast-moving products.
At the same time, you should have a functional system that works for keeping track of the level of your stock. This should ideally prioritise your costlier products to ensure all is as it should be.
5. Pay Close Attention to What Customers Want
A retailer must be aware of what the customer wants and offer those products in their store. If you have a retail store, you have already selected the segment of customers you want to target, for example, ladies, youngsters, children, etc. It is necessary that you assemble the goods that your target customers expect and offer them at a price that will make the product desirable for them.
To do this, a merchandiser must have a good merchandise plan in place. Such a plan is typically designed on the demands and speciality of each store or department. Make sure to account for small details like the product types, brands, price category, product styles, and other such factors while planning.
To succeed at such merchandise planning, you should also check out your past sales records, keep in mind the likely changes in fashion and consumer consumption trends, and also consult the store manager before finalising your merchandising plan. Remember that it is always important to analyse the financial implication of investing in merchandise while meeting your profit targets as well.
6. Look for Consistency and Change
There must be a certain level of consistency in your merchandise assortment. Remember that your regular customers are used to a particular lifestyle, price, products, etc. This is why retailers should continue to offer specific merchandise regularly as to their customer's desires. Along with this, it is also necessary to bring in some change from time to time. Retailers should introduce an element of novelty to bring in a gradual change in certain products, their overall style of operation, and also to meet the changing trend and demands of their customers.
7. Don't Neglect Quality Control
This is the most important factor of merchandise management. No matter what your speciality is, it is essential to make sure that all your products maintain a certain level of quality. Your products should look great and also work well. You can employ a simple process of having employees do a quick check during stock audits to accomplish this. This should include a checklist for potential damage signs and reviews for correct product labelling.
The team at FASHINZA closely understands the need to have the perfect merchandise management in place to make a retail business successful. Skilled merchandise planning can be a valuable resource for any retail business. The suite of online merchandising planning tools offered by FASHiNZA can prove invaluable in implementing the right merchandise management strategy in your retail business.