Chapter I Merchandising –Introduction, role, functions, types Mrs. Manju is on a visit to the neighborhood store. It sells a variety of daily essentials. She asked for jam. The merchant in the store brought it to her from the shelf at the back of the counter. She paid the bill and left the store with the bottle of jam. We notice that the merchant sold merchandise – “jam” to Mrs. Manju. If the jam is in the store, Mrs. Manju will not know of its existence. She is aware of it only when the merchant showed it personally. Consider also that as the bottle of jam is on display on the shelf at the back of the counter, when Mrs.
Manju entered the store she saw it from a distance. When she asked for it, the merchant readily brought the bottle to her. Sometimes, even this will not help sell. Because Mrs. Manju wants, apple fruit jam but what the merchant showed is mixed fruit. She does not need it. There is no stock of apple jam in the store. We see in this example the sale process. First, it is only jam and sale. However, when it is specified as apple jam, no sale took place. All other acts of the process of sale took place. The bottle is on display and the merchant attended to the customer.
He showed the bottle (merchandise) to the customer. The merchant did not have the right product at the right time when the customer wanted it. Let us consider another scenario. The merchant showed apple jam bottle to Mrs. Manju. It is a 200 gms container but, she wants a 500 gms bottle. It is not available in the store. Mrs. Manju is unable to get the right quantity she wanted. Also, consider that Mrs. Manju wants to buy Kissan brand jam. But in the store other brands John & Smith, Maggie, and Rex are available. So the right choice is not available. Lastly, the price she wants to pay is Rs 60.
The prices of the other brands available in the store are Rs 70, Rs 75 and Rs 68. The price is not right which the customer is willing to pay. In this example, the products are on display, the merchant offered service, but the right product, right quantity, right choice and right price are not available. The process of retailing as described here is called merchandising. There is more to it in the apparel world, like color, size, style, shape, fit, fabric, season and fashion play a major role in the process of retailing over and above the above described conditions.
Hence apparel retailing and merchandising is described by the Fashion Technology Institute, New York as “No matter how eye-catching, glamorous, or fashionable, clothes and accessories don’t sell themselves. They’ve got to be in the right location at the right time and right price, where the customers most interested in that particular style will get to see them and make a purchase. That’s where merchandising comes in. ” It means no product sells by itself. Even at an Auto show, each automobile on display is exhibited by a glamorous model. Of course, the display matters sometimes.
At a shopping mall, a dress made of silk satin with real mother-of-pearl and gold and silver thread was on display. However, of the three thousand visitors over a week, only twenty five happened to see the dress. The reason – it was located among other dresses. The store manager realized the problem, and displayed the dress on a mannequin and placed it in the center of the store. The same day it was sold for Rs. 52, 800. It’s not only the right product but displaying it at the right place is equally important. Take the case of a pair of trousers.
A leading national brand has a price tag that reads Rs. 1, 800. A brand not so popular is priced at Rs. 1, 200. If they are on display together, the customer who is not brand conscious will pick up the less expensive of the two. However, if they are displayed at different locations, chances are the popular brand will sell more despite the price for its brand name. The right product offered at the right place and at the right price sells better. Consider the case of a woolen jacket on display at a store in the month of September in Delhi. Customers don’t even look at it.
Why? September is a moderate but sultry month when every body wears cotton clothes. In Delhi woolens come on for display in the month of November in stores. Merchandising is finding the right product to display at the right time and right place with right price. We considered above merchandising situations in retail stores. But how are the products brought to the store? What do we call the activities before they reach the store? Who buys them for the store? Where do the products come from? What did they cost? How are they made and moved to the store location?
And, finally who prices these products? All these activities are called merchandising. If you look in the Merriam – Webster dictionary, it tells us that the word was coined in 1932, and defines it as, “sales promotion as a comprehensive function including market research, development of new products, coordination of manufacture and marketing, and effective advertising and selling. ” Merchandising as an activity starts with market research and ends with sale of merchandise. The chain of intermediate activities between these forms the functions of merchandising.
Some of these activities are store space – buy – price – display – sale, while others are source – sample – cost – production – quality – packing – delivery. We can thus attribute these activities to two segments of the chain. The Retail segment and the Vendor segment. We have thus two functions of merchandising – Retail – Vendor (Production) – that we will discuss in the chapters to follow. The retail functions that a merchandiser carries on are assortment planning, sourcing, buying, pricing, logistics, space and display, sales and inventory. The vendor or manufacturer functions a merchandiser deals with are distinctly separate.
These functions are communication with retail buyer, developing samples, quoting prices, sourcing raw materials, confirming quality standards, production planning, packaging and delivery. The areas of activity in both the segments are extensive. Consider this example. Mr. Ramesh gives his wife Mrs. Manju Rs. 2000 to buy a new dress for their daughter Ms. Renuka. Mrs. Manju takes along Ms. Renuka to buy cloth for a new dress. They will visit a few textile show rooms in the business center at Commercial Street in Bangalore, and enquire cloth prices, designs and quality.
Finally, Mrs. Manju decides to buy cloth in a distinct design that her daughter selects. They visit a neighborhood tailor in their residential area in Vivek Nagar and place the order to stitch the dress and make it ready by a date before the daughter’s birthday. The tailor requests them to visit two days before the date of delivery to fit the dress. On the appointed day, both mother and daughter visit the tailor for the fitting. After a day, the dress is ready and Mrs. Manju goes to collect. Notice the sequence of events. Providing finance is the first event.
Mrs. Manju then planned the buy. As a result, she decided to take her daughter to Commercial Street where a large number of textile show rooms are located. Visiting many show rooms will help her daughter make the right selection of design, colour and material and she will get the right price. A display in one of the stores clinched the deal for Renuka. She liked the colour that was pastel lavender with floral embroidery all over in turquoise blue and the fabric silk chiffon. Once the dress material is bought, Mrs. Manju proceeded with her next task.
The material has to be converted into dress. How did she do it? What are the considerations? We know that Renuka lives with her parents in Vivek nagar. Mrs. Manju evaluated the processes involved in conversion. First right measurements have to be taken to make right dress. Right product. The dress has to be fitted to check for any flaws that need to be corrected. After all, its expensive fabric. This means both mother and daughter need to visit the tailoring shop more than once. Therefore, it’s both convenient and economical if the tailoring shop is in their neighborhood.
Moreover, the tailor is known for quality and on time delivery. Her daughter will wear the dress on her birthday! All the activities accomplished by Mrs. Manju in the example illustrate tasks of a merchandiser. From finance – buy plan – raw material sourcing – raw material quality – raw material pricing – quantity buying – manufacturer selection – sample making – sample fitting – garment finishing – finished product delivery. Continuing with our example, consider Mrs. Manju as a merchandiser. The various activities that she accomplished are the core functions of a merchandiser.
These functions also highlight the role of merchandiser in an organization, be it retailing or manufacturing. Merchandiser is a critical player like the captain of a cricket team. The person must have the ability to lead the team of various players with different capabilities. Like bowling fast, medium pace, leg-spin and off-spin; fielding, wicket keeping, and batting. Put differently, the merchandiser must have the basic knowledge of the role and functions to co-ordinate and work along with other members in the team. You must understand that merchandising is team work. Merchandising is a management function.
It means as a merchandiser, one has to manage several functions that are described above. Start with finance & budgeting. In any organization a merchandiser needs to set a target that will allow maximize the unit numbers to buy in a given budget. Let me explain it differently. For example you have Rs. 100. You need to buy few pairs of socks. The branded socks cost Rs. 200 per pair. They are ruled out. In a store the unbranded cost Rs. 36 per pair. Same quality socks cost Rs. 32 in another store. A third store sells a different quality at Rs. 25 a pair. You can get 2 pairs and hange in the first store, 3 pairs and change in the second store, 4 pairs in the third store. Which quality will you buy? Without compromising quality, you will buy from the second store since you will get 3 pairs and receive Rs. 4. Put it differently, in a given budget you have maximized your inventory and saved some investment. The next step after finance and budget is sourcing raw materials. A good knowledge of the raw material is important to distinguish good and bad. When Mr. Manju decided to go to Commercial Street, it is obvious that she has knowledge of the material and its availability.
This of course is over simplified. In a typical industry situation in India, knowledge of fabric such as cotton, synthetic, silk and wool; woven and knit; processes such as fabric and yarn dyeing, printing; and the centers of manufacture are some of the essentials for a merchandiser. Knowledge of other raw materials such as zippers, buttons, threads, needles, washes, embellishments their quality, cost and availability are equally important. Recognition of raw material qualities is equally important, lest the finished product will suffer returns.
A merchandiser needs to know the methods to assess the quality of raw materials that he must order. Knowledge of the type of tests required and the standards to follow will help in assessing the vendors and their supplies, be it raw material or finished product. Knowledge of the independent material testing laboratories that undertake desired tests at a cost come in handy to a merchandiser to refer the material for tests before committing the organization financially. Process, quality, and quantity determine the cost of the product. Negotiating the cost of raw materials is easier with the help of the test results.
To determine the cost of material, knowledge of methods and volume of packing, cost of transport, and mode of transport are important elements. The merchandiser will perform better with the knowledge of production planning to schedule raw material delivery. It is an essential aspect of merchandise planning that will assist in financial planning and fund flow. Terms of raw material delivery and mode of payment are necessary in the fund flow management. Knowledge of time required for manufacturing and transport of raw materials helps in planning production and finished product delivery.
Product inventory, pricing and display are aspects that a retail merchandiser is expected to be conversant. Space management and space allocation by product are important in retail merchandising. So are interior designing, aesthetics, and information technology. We now have a good idea of what is merchandising is all about? But, isn’t it blurring? We talk of planning but here is a concept, if we can call it, which is not clear. Don’t you feel so? I started with store, price, sale, planning, manufacture, sourcing, logistics, raw material, product knowledge. In fact, the list is endless as you must have realized.
Why? Because, merchandising is a management science that is evolving continuously as the business of retailing is progressing from brick & mortar stores to virtual stores on the internet. From a branch of marketing, today merchandising has evolved to into a full subject. In the present day “avatar”, I will call a merchandiser as a generalist who knows about a product, where to get it, how to get it, how much to get. He also knows how to price it, how to sell, where to sell and whom to sell. In other words, a merchandiser plays a vital role in the retail industry, more so in the textile and apparel industry.
Let us now give a structure to the process of merchandising. Typically, the retail and manufacturing industry has an organogram that describes various activities and functions. For a starter we will list all the functions of a retail merchandiser as a simple chart so it is easy to remember and discuss further: In an apparel retail store, remember that the merchandise is divided into divisions as men’s wear, ladies wear, children’s wear. These are again divided based on products like trousers, shirts, skirts etc. Each of these products is handled by a merchandiser.
In the further topics we will discuss and analyze each of these operations and the issues concerned. The functions of a merchandiser in a manufacturing organization can be represented as: [pic] A merchandiser in the apparel manufacturing organization has as much a role to play as a retail merchandiser. He has to work with his retail counterpart for utilizing the installed production capacity. Each style, the fabric to be used and its characteristics, complexity of construction, productivity, finishing and packing are all the various functions to be performed.
We have seen the functions of a merchandiser in retail and manufacturing. Now let us find out the position of a merchandiser in each of these organizations. In the retail industry, the position of merchandising in the organization may be as below: [pic] In the organizational hierarchy, merchandising is a key function. The head of the function is a director who works closely with a team of sales merchants, who are assigned tasks at department level in the store under the supervision of a store manager, and a corporate or central merchandising team which is best described in the chart below: [pic]
The central merchandising team in some apparel stores is further structured as below: [pic] Each buyer is assisted by an assistant buyer, and a planner. On the store operations a visual merchandiser, store manager, store planner, customer service manager share the merchandising activities. [pic] Merchandising activities in the apparel manufacturing industry as described earlier are management of supply chain related issues. The merchandiser although responsible to the management for a customer account has to lead a team from the supporting departments.
The organizational structure in a typical apparel manufacturing industry can be described as below: The organogram of the production functions is explained in another chart. Sourcing organizational structure is similar to the example below: [pic] The merchandiser works alone or with a team from related functional areas such as sample making, material sourcing, production, finance and logistics. Generally, small exporters in India expect a merchandiser to perform all the functions listed above. Therefore, the merchandiser in the manufacturing industry has to be a generalist who can perform the various functions.
It is important that a merchandiser while specializing in the supply chain management aspects of the industry, needs to attain knowledge of the various aspects of the industry. Since any deficiency in his / her knowledge will be the cause for infectiveness. To elaborate further on this scenario, the following diagrammatic representation will help us identify the functions in production. [pic] The various operations in production, sourcing, quality, human relations will be described in the following topics. ———————– Delivery Packing Quality Inspection Production Planning Sourcing raw materials Director
Merchandising Manager Merchandising Manager Merchandise Planning Manager Marketing Merchandiser Planning & Budgeting Sourcing Buying Pricing Display Service Sale Inventory Costing Sample making Communicate with Retail Buyer Merchandiser Top Management CEO / MD Finance Merchandising Operations Administration Buyers Planners Assistant Buyer Planner Assistant CEO / Director Merchandising GM Merchandising Women’s Wear GM Merchandising Men’s Wear GM Merchandising Children’s Wear Manager Merchandising Young Men’s / Boys suits, trousers, shirts Manager Merchandising Men’s suits, trousers, shirts Manager Merchandising
Men’s casual wear, sportswear Manager Merchandising Young Men’s / Boys casual wear, sportswear Buyer Men’s suits Buyer Men’s Trousers Buyer Men’s Shirts GM Human Resources Manager Store Planning GM Stores Director Operations Manager Visual Merchandising Store Manager GM Finance GM Customer Service GM Merchandising Owner / MD / CEO GM Production GM Finance GM HR / Administration GM Sourcing Manager Merchandising Men’s Wear Merchandiser / Jr. Merchandiser Team Leader (Buyer) Manager Fabrics Manager Merchandising Ladies Wear GM Production Manager Sample Room Manager Production Manager Store Sr. Sample Supervisor Pattern Maker
Sample Maker Production Supervisor Supervisor Line Cutting Supervisor Sewing Room Operators Cutters Lay / Bundling / Marking Helpers Helpers Checkers Helpers Finishing Supervisor Ironers Trimmers Packing Supervisor Packing Assistant Packing Helpers / Writers Fabric Supervisor Trims Supervisor Fabric Checkers Trims Checkers Loaders / Helpers Helpers GM Quality Manager Trims GM Sourcing Asst. Manager Wovens Asst. Manager Knits Asst. Manager Non-Wovens / Elastics / Cords etc Asst. Manager Zippers / Butons / Snaps / Threads etc. GM Logistics / Imports & Exports Team Leader (Buyer) Team Leader (Buyer) Senior Merchandiser