KV INSTITUTE OF MANAGEMENT AND INFORMATION STUDIES
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UNIT III
Choice of retail locations - internal and external atmospherics- Positioning of retail shopsBuilding retail store Image - Retail service quality management - Retail Supply Chain
Management- Retail Pricing Decisions. Merchandising management- Category managementbuying.
Contents
3.1 Importance of Location in Retail Business ............................................................................................. 3
Trade Area: Types of Business Locations............................................................................................................. 3
Solitary Sites ......................................................................................................................................... 3
Unplanned Shopping Areas .................................................................................................................. 3
Planned Shopping Areas ....................................................................................................................... 4
3.2 Factors Determining Retail Locations .................................................................................................... 4
Steps to Choose the Right Retail Location .......................................................................................................... 5
3.3 Measuring the Success of Location ......................................................................................................... 5
Macro Location Evaluation................................................................................................................... 5
Micro Location Evaluation ................................................................................................................... 6
3.4 Internal and External Atmospherics ....................................................................................................... 6
3.6 Retail Supply Chain Management ......................................................................................................... 15
3.7 Retail Pricing Decisions ......................................................................................................................... 18
A Simple Formula ................................................................................................................................... 19
Manufacturer Suggested Retail Price (MSRP) .................................................................................. 20
Keystone Pricing ................................................................................................................................... 21
Multiple Pricing .................................................................................................................................... 21
Discount Pricing .................................................................................................................................... 21
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Loss-leading Pricing.............................................................................................................................. 22
Psychological Pricing ............................................................................................................................ 22
Below Competition ................................................................................................................................ 23
Above Competition ............................................................................................................................... 23
Anchor Pricing ...................................................................................................................................... 24
3.7.1 Factors Affecting Pricing Decision .................................................................................................. 25
A. Internal Factors: ............................................................................................................................. 25
B. External Factors: ............................................................................................................................ 26
3.8 Merchandising management .............................................................................................................. 28
Promotional Merchandising ................................................................................................................ 28
Attractive packaging ........................................................................................................................... 28
Impressive presentation of the Product ............................................................................................... 29
3.9 Category management.......................................................................................................................... 30
Category .............................................................................................................................................. 31
Why Separate Categories ? ................................................................................................................. 32
Eight Step Process of the Category Management ............................................................................... 32
Category Captains ............................................................................................................................... 33
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3.1 Importance of Location in Retail Business
Retail store location is also an important factor for the marketing team to consider while setting
retail marketing strategy. Here are some reasons −

Business location is a unique factor which the competitors cannot imitate. Hence, it can give a strong
competitive advantage.

Selection of retail location is a long-term decision.

It requires long-term capital investment.

Good location is the key element for attracting customers to the outlet.

A well-located store makes supply and distribution easier.

Locations can help to change customers’ buying habits
Trade Area: Types of Business Locations
A trade area is an area where the retailer attracts customers. It is also calledcatchment area.
There are three basic types of trade areas −
Solitary Sites
These are single, free standing shops/outlets, which are isolated from other retailers. They are
positioned on roads or near other retailers or shopping centers. They are mainly used for food
and non-food retailing, or as convenience shops. For example, kiosks, mom-andpop stores
(similar to kiranastores in India).
Advantages − Less occupancy cost, away from competition, less operation restrictions.
Disadvantages − No pedestrian traffic, low visibility.
Unplanned Shopping Areas
These are retail locations that have evolved over time and have multiple outlets in close
proximity. They are further divided as −

Central business districts such as traditional “downtown” areas in cities/towns.
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
Secondary business districts in larger cities and main street or high street locations.

Neighborhood districts.

Locations along a street or motorway (Strip locations).

Advantages − High pedestrian traffic during business hours, high resident traffic, nearby
transport hub.

Disadvantages − High security required, threat of shoplifting, Poor parking facilities.
Planned Shopping Areas

These are retail locations that are architecturally well-planned to provide a number of
outlets preferably under a theme. These sites have large, key retail brand stores (also
called “anchor stores”) and a few small stores to add diversity and elevate customers’
interest. There are various types of planned shopping centers such as neighborhood or
strip/community centers, malls, lifestyle centers, specialty centers, outlet centers.

Advantages − High visibility, high customer traffic, excellent parking facilities.

Disadvantages − High security required, high cost of occupancy.
3.2 Factors Determining Retail Locations
The marketing team must analyze retail location with respect to the following issues −

Size of Catchment Area − Primary (with 60 to 80% customers),Secondary (15 to 25%
customers), and Tertiary (with remaining customers who shop occasionally).

Occupancy Costs − Costs of lease/owning are different in different areas, property
taxes, location maintenance costs.

Customer Traffic − Number of customers visiting the location, number of private
vehicles passing through the location, number of pedestrians visiting the location.

Restrictions Placed on Store Operations − Restrictions on working hours, noise
intensity during media promotion events.
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

Location Convenience − Proximity to residential areas, proximity to public transport
facility.
Steps to Choose the Right Retail Location
A retail company needs to follow the given steps for choosing the right location −




Step 1 - Analyze the market in terms of industry, product, and competitors − How
old is the company in this business? How many similar businesses are there in this
location? What the new location is supposed to provide: new products or new market?
How far is the competitor’s location from the company’s prospective location?
Step 2 – Understand the Demographics − Literacy of customers in the prospective
location, age groups, profession, income groups, lifestyles, religion.
Step 3 – Evaluate the Market Potential − Density of population in the prospective
location, anticipation of competition impact, estimation of product demand, knowledge
of laws and regulations in operations.

Step 4 - Identify Alternative Locations − Is there any other potential location? What is
its cost of occupancy? Which factors can be compromised if there is a better location
around?

Step 5 – Finalize the best and most suitable Location for the retail outlet.
3.3 Measuring the Success of Location
Once the retail outlet is opened at the selected location, it is important to keep track of how
feasible was the choice of the location. To understand this, the retail company carries out two
types of location assessments −
Macro Location Evaluation
It is conducted at a national level when the company wants to start a retail business
internationally. Under this assessment, the following steps are carried out −

Detailed external audit of the market by analyzing locations as macro environment such
as political, social, economic, and technical.
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
Most important factors are listed such as customer’s level of spending, degree of
competition, Personal Disposable Income (PDI), availability of locations, etc., and
minimum acceptable level for each factor is defined and the countries are ranked.

The same factors listed above are considered for local regions within the selected
countries to find a reliable location.
Micro Location Evaluation
At this level of evaluation, the location is assessed against four factors namely −

Population − Desirable number of suitable customers who will shop.

Infrastructure − The degree to which the store is accessible to the potential customers.

Store Outlet − Identifying the level of competing stores (those which the decrease
attractiveness of a location) as well as complementary stores (which increase
attractiveness of a location).

Cost − Costs of development and operation. High startup and ongoing costs affect the
performance of retail business.
3.4 Internal and External Atmospherics
The term “atmospherics” coined by Kotler , that consumers interact with during their shopping
experience is a matter of concern for retailers due to the bourgeoning retailing conditions in
India. Evaluating consumers' perception of atmospheric cues can craft retail store image, enhance
customer value, increase performance and patronage intention by minimizing cost, time, and
effort in retaining or attracting new customers.
Retail Atmospherics: The retail store atmospherics is an array of tangible and intangible
dispositions interwoven into a web of meanings that touches the social, psychological, economic,
cultural, and religious life style of consumers, due to concordance with current fad, fashion, and
trends. Retail atmospheric cues may generate sets-and-subsets of associations related to
attributes, benefits, emotions of pleasure-displeasure, attraction ,distraction, high-low
confidence, self actualization, and basic human desires. The retail atmospherics as shown in
Figure consisting of environmental elements such as bright or dim lighting, classical or familiar
music, attractive window dressing and layouts, magnificent architectural design, freshness and
fragrance, appropriate temperature to make it cosy and comfortable, soothing and trendy color,
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attractive logo, and gentle crowding are ideal conditions that can affect the current and future
behavior of consumers (Smith and Burns, 1996). The entire retail environment that includes
brand design consistently throws brand messages that the consumer experiences throughout the
shopping endeavor. The retail environment is harmoniously designed in order to communicate
brand personality and image of the store. In order to add depth to the perceptions encapsulated in
the atmospherics and communicate the retailer's brand value, each element of the retail
environment is transformed so that it is differentiated from the competitors, standardized, and
stimulate consumers' purchasing activity.
A store's environment is comprised of a vast array of separate elements (e.g. music, color,
illumination, aroma windows display,) which are highly interrelated and work together
synergistically to affect consumers. Thus, atmospherics can be considered as an emotionally
oriented design of space which can affect the customers as well as the employees. Therefore, the
critical dimensions of the store atmospherics range from tactile, sensory, gustatory, olfactory,
and visual to social factors.
The four dimensions of atmosphere are therefore:
 Visual (sight) dimensions - colour, brightness, size and shape;
 Aural (sound) dimensions - volume, pitch, tempo;
 Olfactory (smell) dimensions - scent and freshness;
 Tactile (touch) dimensions - softness, smoothness and temperature.
According toBaker (1986;1994) the three dimensions:
 ambient;
 design;
 social
This typology takes into account the social dimension, but does not include the facility exteriorexterior design of the retail store.
According to Berman and Evans(1995) the four dimensions:
 exterior;
 genral interior;
 store layout;
 interior displays
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This framework does not include human component and the ambient factors dimension is
considered among
According to Turley and Milliman (2000) the five dimensions:
 general exterior;
 general interior;
 layout and design;
 point of purchase and decoration;
 human variables
This framework is built on Berman and Evans's (1995) typology. It includes the human
variables. And we believe is the most complete one.
Berman and Evans (1995) identified four key elements which defined store atmosphere
(atmospherics):
 Exterior - storefront which include marquee, entrances, windows, lighting, and
construction materials;
 General interior - flooring, bright, color, scents, sounds, store fixtures, wall textures,
dressing facilities;
 Store layout - allocation of floor space (selling space, merchandise space, personnel
space, customer space), classification of store origins, determination of a traffic-flow
pattern, mapping out in-store locations, arrangement of individual products;
 Interior (Point-Of-Purchase) Displays - the princpial type of displays are: assortment
display, theme-setting display, ensemble display, rack siplay, a cute case.
Positioning of retail shops
Store brands are the only brands for which the retailer is responsible not only for promotion,
shelf placement, and pricing, but also for defining the very nature of the product. In particular,
retailers decide on the exact positioning of store brands in product space. This includes the size,
shape, color, lettering, and art of a store brand’s packaging as well as precise quality and taste
specifications. For national brands, in contrast, these core strategic decisions are made by their
respective manufacturers, not by the retailer.
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3.6 Retail Supply Chain Management
It is the process of managing the entire supply chain of retail organisations. The differentiating
factor of retail supply chain management from other supply chain management is in the volume
of product movement and the fast moving nature of the products of the retail industry. Retail
supply chain has to be monitored very closely and has to be free from defects as the products are
always on the move and the cycle time is very low. Further the continuous movement of
materials across the supply chain is crucial to the success of any organisation in the retail
industry. Hence retail management is very crucial to any organisation in the retail industry and
has to be monitored closely and maintained properly
Supply Chain Best Practices and Their Benefits:
According to Supply Chain Quarterly, these are the 10 Best Practices that companies in the retail
industry (and any industry) need to ensure that their supply chain management is as effective as
possible and contributing as much as possible to the company's bottom line.
1. Identify supply chain stakeholders and establish a committee to engage stakeholders in
supply chain issuesengaged and Establish a work group comprised of departments
2. Make sure the supply chain itself has appropriate staffing
3. Technology is your friend.
4. Establish synergistic relationships with key suppliers
5. Engage in collaborative strategic sourcing
6. Don't just consider price when making supply chain decisions. Consider the "total cost of
ownership."
7. Supply chain leaders should have some contribution and control with contracts.
8. Inventory optimization is essential.
9. Establish appropriate controls throughout the supply chain system in order to minimize
risk
10. Keep the supply chain sustainable with social responsibility and green initiatives.
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3.7 Retail Pricing Decisions
There are many outside influences that affect profitability and a retailer's bottom line. Setting the
right price is a crucial step toward achieving that profit. Retailers are in business to make a
profit, but figuring out what and how to price products may not come easily.
Before we can determine which retail pricing strategy to use in setting the right price, we must
know the costs associated with the products.
Two key elements in factoring product cost is the cost of goods and the amount of operating
expense.
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The cost of goods includes the amount paid for the product, plus any shipping or handling
expenses. The cost of operating the business, or operating expense, includes overhead, payroll,
marketing and office supplies.
Regardless of the pricing strategy used, the retail price of the products should more than cover
the cost of obtaining the goods plus the expenses related to operating the business. A retailer
simply cannot succeed in business if they continue to sell their products below cost.
One of the most exciting and nerve-wracking aspects of retail is determining what price to sell
your products at. Pricing is both an art and a science that requires an experimental attitude
coupled with an intuitive feel for how you want your brand and by extension your products to be
perceived.
Price your products too low and you might get a ton of sales but you might find yourself going
under when you tally up your expenses at the end of the month.
When you price your products too high, you might give off an aura of luxury, prestige, and
exclusivity thereby attracting a more well-off clientele which is smaller in number but makes up
for volume by purchasing your products at the higher price. However, what if you're in an area
where the demographic is especially price-sensitive, then what will you do?
Ultimately, you'll have to decide whether you want higher prices for your products and a lower
volume sold or lower priced products and higher volumes sold, and which direction will enable
you to achieve profitability.Keep in mind though that when you have a range of products, you
can sometimes risk lowering prices for one as long as you also sell products that are marked up
higher.
A Simple Formula
Most retailers benchmark their pricing decisions using keystone pricing (explained below),
which is essentially doubling the cost of the product to arrive at a 50% markup. However, in
many instances you'll want to mark-up your products lower or higher depending on your specific
situation.
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Here is an easy formula to help you calculate your retail selling price:
Retail Price = [(cost of item) ÷ (100 - markup percentage)] x 100
example, say you wanted to price a product that costs you $15 at a 45% markup instead of the
usual 50%, here's how you would calculate your retail price.
Retail Price = [(15.00) ÷ (100 - 45)] x 100
Retail Price = [(15.00 ÷ 55)] x 100 = $27.00
Now that we've covered how to successfully markup your products, below you'll find nine
pricing strategies that are traditionally deployed by retailers to stay afloat and one step ahead of
their competitors.
Manufacturer Suggested Retail Price (MSRP)
As the name suggests (no pun intended), this is the price the manufacturer recommends that you
as a retailer use to sell their products to the general consumer. The reason manufacturers first
started doing this was to help standardize prices of products across multiple locations and
retailers.
However, a lot of factors go into the end retailer going along with the MSRP, such as the
bargaining power of the manufacturer and exclusivity of the product, but for the most part, you’ll
find the more mainstream or conventional the product, the more you can expect the prices to be
standardized.

Pros: As a retailer, you can save yourself some serious headache by taking yourself out
of the decision-making process and going with the flow.

Cons: You’re unable to carve out or sustain an advantage over any of your competitors
by being able to compete on price or availability.
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Keystone Pricing
This is a pricing philosophy that retailers use as an easy rule of thumb. Essentially, it’s when a
retailer would simply double the wholesale cost they paid for the product to determine the
price. Now, there are a number of scenarios in which keystone pricing may be too low, too high,
or just right for your business.
If you have products that have a slow inventory turnover, have substantial shipping and handling
costs, and are unique and scarce in some sense then you might be selling yourself short with
keystone pricing and could possibly get away with an even higher markup. But, if your products
are highly commoditized and easily available elsewhere, using keystone pricing can be harder to
pull off.


Pros: Works as a quick-and-easy rule of thumb that ensures an ample profitability margin
Cons: Chances are that depending on the availability and how competitive a product is,
it’s usually unreasonable for a retailer to mark up a product that high
Multiple Pricing
We’ve all seen this one in groceries stores but it’s pretty common for apparel as well, especially
socks, underwear, and t-shirts. Not to mention its usage in the software and electronics
industries. This tactic is where a merchants sells more than one product for a single price, a tactic
alternatively known as product bundling pricing.
For example, a study looking at the effect of bundling products found in the early days of
Nintendo's Game Boy hand-held console, it sold the most products when the devices were
bundled with a game rather than individual products alone.

Pros: Traditionally, retailers using this strategy to create a higher perceived value for a
lower cost which can ultimately lead to driving larger volume purchases.

Cons: When you bundle products up for a low-cost, you'll have trouble trying to sell
them individually at a higher cost creating cognitive dissonance for consumers.
Discount Pricing
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It’s no secret that consumers love sales, coupons, rebates, seasonal pricing among other
promotion related markdowns, and that’s exactly what this refers to. There are several scenarios
in you might consider going down this road. The more obvious ones being to increase foot traffic
to your store, offloading unsold inventory, and attracting a more price-sensitive group of
consumers.

Pros: Great for attracting a larger amount of foot traffic to your store and getting rid of
out-of-season or old inventory.

Cons: If used too often, it could give you a reputation of being a bargain retailer and
could hinder consumers from purchasing your products for regular prices.
Loss-leading Pricing
Did you ever walk into a store knowing they were having a sale on a hot-ticket item only to buy
not just that one item but several others while you were at it?
If so, you’ve gotten a taste of what loss-leading pricing is, luring in customers with a product
they want at a lower price than competitors and benefiting from the additional products they’ll
purchase while in your store.

Pros: This tactic can work wonders, especially, when you consider complementary or
additional purchases a consumer will make when their in your store, resulting in a boost in
overall sales per customer.

Cons: Similar to the effect of using discount pricing too often, when you overdo lossleading prices, people will become trained to expect bargains from you.
Psychological Pricing
Retail is a numbers game and surprising things happen when merchants take advantage of the
different ways customers perceive their pricing, giving way to the term psychological pricing.
Studies have shown that when merchants spend money, they're experiencing a pain or loss, but if
you help minimize the pain experienced it's possible to increase the likelihood of customers
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making the purchase. Traditionally, merchants will do this with ending the price with an odd
number like 5, 7, or 9. For example, using $8.99 instead of $9.00.
However, when it comes to deciding which odd number to go to at the end of the day, the
number 9 reigns supreme. How do we know? Well researchers at MIT and the University of
Chicago ran an experiment on a standard women's clothing item with the following prices $34,
$39, and $44. Guess which one sold the most?
That's right, pricing the item at $39 even outsold its cheaper counterpart price of $34.

Pros: You tap into the irrational part of a consumer’s brain and trigger impulse
purchasing through perception of a bargain deal or steal.

Cons: When you're selling luxury goods, stepping down your price from a whole number
like $1,000 to $999.99 will actually hurt the brand perception of what it is you're selling
Below Competition
As the name of this pricing strategy suggests, it refers to using competitor pricing data as a
benchmark and consciously pricing products below them to lure consumers into your store over
theirs.

Pros: This strategy can be killer if you can manage to negotiate with your suppliers to
obtain a lower cost per unit while at the same time focusing on cutting costs and actively
promoting your special pricing.

Cons: This can be difficult to sustain when you’re a smaller retailer given the lower
margins you’ll be making.
Above Competition
Carrying on from the strategy above, this is where you benchmark your competition but
consciously price your products above theirs and brand yourself as being more luxurious,
prestigious, or exclusive. This works for Starbucks when people pick them over Dunkin' Donuts
and it's a scientifically proven fact as well.
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Economist Richard Thaler's study looked at people hanging out on a beach looking for a beer to
cool off with the option of purchasing it at either at a run-down grocery store or a nearby resort
hotel, and found that people were far more willing to pay higher prices at the hotel for the same
beer. Sounds crazy right? Well, that's the power of context.

Pros: This pricing strategy can work its “halo effect” on your business and products by
giving consumers the perception that your products are of better quality and more premium due
to the amount they’ll be paying for them.

Cons: It may be difficult to pull off if the location and surrounding demographic are too
price-sensitive and have several other options to purchase similar products.
Anchor Pricing
This is another psychological tactic where you list both a sale price and the original price to
establish the amount of savings a consumer perceives to gain from making the purchase by
taking advantage of the cognitive bias of anchoring.
A study by Dan Ariely found that when students were first asked to write the last two digits of
their social security number and then asked to consider whether they would pay this number of
dollars for items that they didn't know the value of like wine, chocolate, and computer
equipment. Next, they were then asked to bid for those items, and Dr. Ariely found that students
with a higher two-digit number submitted bids that were 60-120% higher than those with lower
security numbers.
The original price establishes it self as a reference point in the minds of consumers which they
then anchor onto and then form their opinion of the listed marked down price. The other way you
can take advantage of this principle is to intentionally place a higher priced item next to a
cheaper one to draw customer's attention to it.

Pros: If you happen to list your original price as being much “higher” than the sale price,
it’ll automatically trigger a response in the consumer of having found a great deal, pushing them
to act on their impulsive buying habits.
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
Cons: If you’re anchor price is perceivably unrealistic it can lead to distrust and customer
outrage given the age of information, where consumers can readily research pricing anywhere
they happen to be thanks to their mobile devices.
3.7.1 Factors Affecting Pricing Decision
Internal Factors - When setting price, marketers must take into consideration several factors
which are the result of company decisions and actions. To a large extent these factors are
controllable by the company and, if necessary, can be altered. However, while the organization
may have control over these factors making a quick change is not always realistic. For instance,
product pricing may depend heavily on the productivity of a manufacturing facility (e.g., how
much can be produced within a certain period of time). The marketer knows that increasing
productivity can reduce the cost of producing each product and thus allow the marketer to
potentially lower the product’s price. But increasing productivity may require major changes at
the manufacturing facility that will take time (not to mention be costly) and will not translate into
lower price products for a considerable period of time.
External Factors - There are a number of influencing factors which are not controlled by the
company but will impact pricing decisions. Understanding these factors requires the marketer
conduct research to monitor what is happening in each market the company serves since the
effect of these factors can vary by market.
A. Internal Factors:
1. Cost:
While fixing the prices of a product, the firm should consider the cost involved in producing the
product. This cost includes both the variable and fixed costs. Thus, while fixing the prices, the
firm must be able to recover both the variable and fixed costs.
2. The predetermined objectives:
While fixing the prices of the product, the marketer should consider the objectives of the firm.
For instance, if the objective of a firm is to increase return on investment, then it may charge a
higher price, and if the objective is to capture a large market share, then it may charge a lower
price.
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3. Image of the firm:
The price of the product may also be determined on the basis of the image of the firm in the
market. For instance, HUL and Procter & Gamble can demand a higher price for their brands, as
they enjoy goodwill in the market.
4. Product life cycle:
The stage at which the product is in its product life cycle also affects its price. For instance,
during the introductory stage the firm may charge lower price to attract the customers, and
during the growth stage, a firm may increase the price.
5. Credit period offered:
The pricing of the product is also affected by the credit period offered by the company. Longer
the credit period, higher may be the price, and shorter the credit period, lower may be the price
of the product.
6. Promotional activity:
The promotional activity undertaken by the firm also determines the price. If the firm incurs
heavy advertising and sales promotion costs, then the pricing of the product shall be kept high in
order to recover the cost.
B. External Factors:
1. Competition:
While fixing the price of the product, the firm needs to study the degree of competition in the
market. If there is high competition, the prices may be kept low to effectively face the
competition, and if competition is low, the prices may be kept high.
2. Consumers:
The marketer should consider various consumer factors while fixing the prices. The consumer
factors that must be considered includes the price sensitivity of the buyer, purchasing power, and
so on.
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3. Government control:
Government rules and regulation must be considered while fixing the prices. In certain products,
government may announce administered prices, and therefore the marketer has to consider such
regulation while fixing the prices.
4. Economic conditions:
The marketer may also have to consider the economic condition prevailing in the market while
fixing the prices. At the time of recession, the consumer may have less money to spend, so the
marketer may reduce the prices in order to influence the buying decision of the consumers.
5. Channel intermediaries:
The marketer must consider a number of channel intermediaries and their expectations. The
longer the chain of intermediaries, the higher would be the prices of the goods
Pricing Techniques for Increasing Sales
■ Leader Pricing
 Certain items are priced lower than normal to increase customers traffic flow and/or
boost sales of complementary products
 Best items: purchased frequently, primarily by price-sensitive shoppers
 Examples: bread, eggs, milk, disposable diapers
■ Price Lining
 A limited number of predetermined price points.
 Ex: $59.99 (good), $89.99 (better), and 129.99 (best)
■ Benefits:
o Eliminates confusion of many prices
o Merchandising task is simplified
o Gives buyers flexibility
o Can get customers to “trade up”
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Odd Pricing
■ A price that ends in an odd number (.9) $2.99
 Assumption:
 Consumers perceive as $2 without noticing the digits
 9 endings signal low prices
 Retailers believe the practice increases sales, but probably doesn’t
■ Does delineate:
 Type of store (downscale store might use it.)
 Sale
3.8 Merchandising management
Retail Merchandising refers to the various activities which contribute to the sale of products to
the consumers for their end use. Every retail store has its own line of merchandise to offer to the
customers. The display of the merchandise plays an important role in attracting the customers
into the store and prompting them to purchase as well. Merchandising helps in the attractive
display of the products at the store in order to increase their sale and generate revenues for the
retail store. Merchandising helps in the sensible presentation of the products available for sale to
entice the customers and make them a brand loyalist.
Promotional Merchandising
The ways the products are displayed and stocked on the shelves play an important role in
influencing the buying behavior of the individuals.
A merchandiser maximizes the sale of the products by:
Attractive packaging
The packaging of the merchandise goes a long way in improving the brand value of the product.
A product kept in a nice box would definitely catch the attention of the customers.
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Impressive presentation of the Product
The display of the products at the retail store must entice the customers. The merchandiser in
coordination with the store manager must ensure that the products are according to the season as
well as latest trends.
The merchandiser must:



Source something which is unique and not available at any other retail store.
Never compromise on quality of the merchandise. Compromising on quality costs later.
Source merchandise as per the season and climate.
By mid of August and early September, the summer merchandise is generally on a close out and
stores begin stocking merchandise for the winter season. Warm clothing, full sleeves apparels,
jackets, pullovers start replacing cut sleeves, capris, ankle length dresses, shorts and so on.
Colourful clothes dominate the shelves as compared to the subtle colours in summers.
The type of product sourced also depends on the climatic conditions of the place.
A Reebok store in Central India or Southern India would stock summer merchandise between
April to September whereas a retail store under the same brand somewhere in a cold area would
source woollen merchandise along with summer clothing as per the demand of the season.
Unique Pricing (Discounts)
Attractive prices, discounts, rebates also bring customers to the store.
Promotional schemes, gifts
Coupons and attractive gifts make shopping a pleasurable experience for the customers.
Merchandising Tips



The merchandiser must source products according to the latest trends and season.
The merchandise should be as per the age, sex and taste of the target market.
Merchandise for children should be in line with cartoon characters (like Barbie, Pokemon
etc) to excite them.
Creative Portico Pvt Ltd sources bed sheets, curtains specially inspired from characters (Disney,
Harry Porter, Hannah Montana) - a hit amongst kids.
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Youngsters prefer funky clothes (colourful T Shirts, faded denims) as compared to professionals
who would go for subtle colours.
The target market of Zodiac Clothing Company Limited mainly comprises of office goers and
professionals. The merchandise (shirts, trousers, neck ties, belts) is as per the taste of the
professionals. Beach house shirts would have no takers in such a store.
The merchandiser ideally works on the “invariant right” principle:
 Since most of us are right handed, it is a common tendency that customers entering into retail
store would first go towards the right side of the store. The merchandiser should display the
unique and expensive collections on the right side of the store to entice the customers.
 The set up of the store should be such that once a customer enters into a store, he has to walk through
each and every department.
 The shelves should be stocked with the latest trends. The merchandise should be well organized on
the racks according to their size and pattern.
 It is the key responsibility of the merchandiser to create an attractive display to pull the customers
into the store. Once the customer steps into the store, he would definitely buy something or the other.
3.9 Category management
Category Management is a collaborative continuous process between manufacturers and retailers
to manage a shopper need state which we refer to as a ‘category’. The purpose of this process is
to optimize shopper satisfaction and fulfill the role chosen by the retailer for that category within
the overall portfolio of categories in the retail format. The end state of the category management
process is that combination of assortment, price, shelf presentation and promotion which
optimizes the category role over time.
Category management is data intensive and analytical in character. Category management is
about understanding data. By contrast, shopper marketing is more about understanding emotions
or motivations.
The mechanism of selling merchandise in small quantities from a fixed location directly to the
individuals for their end use is called as retailing. The fixed location can be anything like super
market, hyper market, department stores and so on.
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Merchandise - Merchandise refers to the various products available at the store for sale to the
end-users. It is the display of the merchandise which actually attracts the customers into the
store.
Let us suppose all the products available at the store are stocked at one place only. Would such a
display impress the customers ?The answer is NO. Presentation of products is essential.
As a solution to the above problem, the retailers came out with the concept of category
management.
The concept of segregating similar products into separate groups is called as category
management. The complete range of merchandise available at the retail store is divided into
separate product categories consisting of related products.
Categories in a retail store refer to the various groups which consist of products belonging to a
similar family. The retailer smartly displays all the related products together as distinct
categories for his as well as the end-user’s convenience.
Example
Toothpaste, Tooth Brush, Mouth wash, Tongue cleaner, soap, shampoo, body wash, cosmetics
etc, can be displayed together under a single category called personal care section.
Vegetables, Fruits, Tinned Food, Juice, meat, dairy products form a single category.
Certain retail stores also classify their merchandise into women, men as well as kids category.
Department stores also have separate categories like:
Apparels, Footwear, Jewellery, Electronic appliances, Mobiles, Watches, Home furnishings,
house hold appliances and so on.
Category
 The complete range of merchandise at the store is divided into separate groups consisting
of related products. Such groups are called as categories.

Each category is treated as a separate business entity.

The retailer calculates the profit and loss of each category separately.

Each category contributes in its own way to the profitability of the store.

The retailer does not promote a single brand but the complete category.
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
The concept of categories has gone a long way in developing a strong bond between the
retailer and the supplier.
Why Separate Categories ?


The classification of products into separate category benefits the customers and makes
their shopping a pleasurable experience.
The customers as per their interest, pocket and need can walk up to the respective
categories, check out the various options and decide what to buy and what not to buy.
Eight Step Process of the Category Management
The retailer must sort out the similar products which can be included in a single category. He
must make sure that the products bear a strong connection with each other.
1.
2.
3.
4.
5.
6.
7.
8.
Define the category (i.e. what products are included/excluded).
Define the role of the category within the retailer.
Assess the current performance.
Set objectives and targets for the category.
Devise an overall Strategy.
Devise specific tactics.
Implementation.
The eighth step is one of review which takes us back to step 1.
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However some retailers find the above process cumbersome and only follow the below five
steps:





Form and Review the category.
Decide the target consumers of the particular category.
Planning and formulating strategies for the category.
Implementation of the above strategies
Results Evaluation
Category Captains
The retailer generally appoints one individual who supplies all the products of a single category.
This individual also called as supplier is known as a category captain.The suppliers are equally
responsible for the category and contribute their level best to maximize the revenue of the
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particular category. He works in close coordination with the retailer and is responsible for the
profit and loss of his assigned category.
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