Retail merchandising comprises the activities, policies and procedures that are intended to help a business sell goods and products directly to consumers. Merchandising activities are important for a retail business whether that business has a brick-and-mortar store or an online one. Far from being an unnecessary expense, appropriate merchandising of retail items can help shape the image of the store and influence the customers' decision to purchase not only a given item, but related items as well. To be effective, however, merchandising activities need to be based on marketing data of the customers' wants and needs.
Keywords: E-Business; Inventory Management; Just-in-Time (JIT) Inventory; Merchandising Cues; Retail Merchandising; Return on Investment (ROI); Supply Chain; Visual Merchandising
A Real Life Illustration
A few years ago, a long-standing and popular supermarket chain in my area was bought out by another firm. Although the chain had been doing poorly for some time, local residents had mixed feelings about the takeover. On the one hand, if an influx of new money and new ideas was not found quickly, the chain would soon cease to exist. On the other hand, many customers wondered at the wisdom of selling the chain to a firm that was located in an area that was used to much higher grocery prices and very different ways of doing things. After the takeover, one of the first changes to be observed was the renovation of some of the key stores across the area. One such store was not very old, having been built only a few years before as part of a new shopping plaza at the center of a planned community. However, after the takeover, the store soon became a confusing mess as not only stock but the physical shelving were rearranged all for the "convenience" of the shopper. Every morning, the store published a new store directory so that customers could more easily find where the items on the shopping lists happened to be that day. To say the least, it was a time of great confusion, but the local customers had a great deal of loyalty to the original chain and continued to shop there in the hope that as soon as the renovation was complete, all would be better.
Eventually, the renovation was completed, and the store once again took on a bright, shiny new look that welcomed customers. The area near the front door had been rearranged to include most of the items that many people need on quick trips to the grocery store. One entered the store to be greeted by a coffee bar where one could pick up a drink or a snack to make the grocery shopping experience more pleasant. Near the coffee bar was located the bakery, where the aroma of fresh baked goods enticed one to that corner. Along the wall was a very large deli counter that included not only meats and cheeses sliced to one's specifications, but an assortment of salads, desserts, and even entrees that could be taken home and popped in the microwave for dinner. In the adjoining space was a newly designed produce area with wide aisles, attractive displays, and both salad and olive bars. Then came aisle after aisle of stock, a seemingly virtual paradise for the shopper.
At first, of course, even though the stock was no longer moved every day and signs labeling what was found on each aisle were hung over each aisle, it was still somewhat difficult to locate many items as shoppers learned the new system. Unfortunately, this confusion persisted even several years later for a number of reasons.
- First, the store is no longer laid out as it has been in the past, but is patterned after another American chain owned by the same parent company. This makes some items difficult to find because other local stores — even of different chains — carry them in another place. As a result, on almost every shopping trip, one can find a conversation between shoppers asking each other where one might find X since it was not where it would be logically (at least to the shoppers) located. Store personnel seem to not only be restocking but reshelving the aisles every week in an effort to better display merchandise. The customers, however, do not find this helpful and the chain's revenues continue to drop.
- Second, the signs designating what types of items are kept on each aisle contain different information on each side, which means that if one missed an item as one went through the store, a quick glance at the aisle signs has a 50 percent chance of giving the information needed to locate the item.
- Third, stock keeps moving according to the dictates of the remote corporate headquarters. For example, one might find a national brand of frozen "sliders" next to the frozen hamburgers one week and next to the frozen snack foods another week.
As part of their strategy to recoup some of their losses, the chain next decided to focus on carrying more store brand items and reducing the number of national brand items. As a result, customers with brand loyalty to various items were required to make the decision as to whether or not to continue to shop at the chain or go to another chain that carries the brands for which they are looking. Some customers solve this problem by shopping at other stores for certain items. However, this can often lead to a situation in which an entire grocery list is purchased at a different chain for the sake of convenience. Whether or not the shopper switches to the other store on a more permanent basis, the sales for the chain will decrease to some extent.
Another change that was instituted by the chain after the take over was the concept of "everyday low prices" rather than sales prices. As a result, the weekly flyer for the chain has become much smaller and advertises the regular price (with the implication that it is lower than the competition's or the chain's regular price). This means that those people who sit down with their weekly sales flyer to plan the week's meals based on sales have much fewer options. The concept of low prices is furthered by shelf talkers in the stores, but the higher prices that are used for comparison often come from stores halfway across the county rather than local stores. As a result of these and other problems with merchandising, several years later, the chain is again in trouble, and newer stores with approaches more in tune with the needs of contemporary shoppers are moving into the area.
This case provides a cautionary tale regarding the implications of a number of business concepts. One of the most obvious of these is the effectiveness of the merchandising efforts of a store. In general, retail merchandising can be defined as the activities, policies and procedures of an organization that are intended to help a business sell goods and products directly to consumers. According to American Marketing Association, merchandising encompasses the "planning involved in marketing the right merchandise or service at the right place, at the right time, in the right quantities, and at the right price." Merchandising includes the placement of products (including the layout of the store, where the products are displayed, and how the visual display is designed), promotions (including trial offers, bundling, and coupons), and pricing to appeal to the target market. Closely related are the concepts of inventory management (including ordering sufficient stock in time to meet customer demand and how problems of overstock — i.e., having too much of an item on hand so that it needs to be reduced to sell — and understock — having too little of an item on hand so that customers cannot buy their desired items — are handled), warehousing (where the stock will be physically located), and the decision of what categories of products to carry and what range to carry within each category.
As this case study illustrates, there is more to retail merchandising that just arranging goods and products in a retail store in a manner that is pleasing to the eye. In particular, the case study illustrates the importance of both having the appropriate data and having the correct decision makers determining what products are offered in the store, employing appropriate category and product range management, properly allocating space to products, and designing the merchandise displays in ways that are not only eye-catching but appropriate and memorable.
Frequently, decisions regarding what to carry in a retail store that is part of a chain is made at a level higher than the individual store. This approach has the advantage of allowing the chain to negotiate better prices with manufacturers, giving marketers consistent data for better forecasting, and allowing for better quality control across all stores (Varley, 2000). However, as illustrated above, centralized buying is not without its disadvantages as well. In this case, the decision on what brands and items are to be carried is made by corporate decision-makers living in another area of the country where different products and brands are popular. The local manager — who at least in theory has greater understanding of what customers at that particular store or in that particular area of the country want — is allowed little to no input into what is carried in the store.
Buying decisions are typically not made based on individual items. For example, a grocery store is unlikely to decide to buy strawberries, lettuce, potatoes, and cabbage in isolation of other factors. Rather, the category of produce would more than likely be broken into the subcategories of vegetables and fruits, which might further be broken down into seasonal, prepackaged, or any one of a number of other categories. Category management is a marketing strategy in which a full line of products is managed together as a strategic business unit. One way to do this is through efficient consumer response, which starts with consumer demand and then organizes the supply chain to meet that demand. In the case above, however, regional differences between consumer purchasing habits was not taken into account, ending in a situation in which some regions...
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