Week 12 MAR3231 Retail Management: Merchandising Strategies and Philosophes

Introduction to Retail Merchandising

  • Definition of Merchandising: Merchandising is the comprehensive act of acquiring goods and ensuring they are available at the appropriate places, times, prices, and quantities. This practice is essential for a retailer to achieve its specific organizational goals.
  • Relationship to Marketing Mix: Within the traditional marketing mix, merchandising specifically focuses on the "Product" aspect.
  • Core Objectives: The primary aim is to align inventory with consumer demand to maximize satisfaction and profitability.

Merchandising Philosophy

  • Strategic Foundation: A merchandising philosophy sets the guiding principles for all merchandise-related decisions made by a retailer.
  • Influencing Factors: A retailer's philosophy should reflect several critical factors, including:
        * Target Market Desires: Understanding the specific needs and wants of the customer.
        * Retailer’s Institutional Type: The nature of the retail format (e.g., department store, specialty shop, discount retailer).
        * Market-place Positioning: How the retailer is perceived relative to competitors.
        * Defined Value Chain: The sequence of activities that add value to the product.
        * Supplier Capabilities: What the manufacturers and distributors are able to provide.
        * Costs: Financial constraints and expenditures involved in acquisition and sales.
        * Competitors: The strategies and offerings of rival businesses.
        * Product Trends: Current shifts in consumer preferences and industry innovations.
  • Demographic Segmentation Examples: Retailers may tailor their philosophy to specific archetypes, such as:
        * Young, contemporary women aged approximately 2525-to-3030 years old.
        * Grown-up women aged 2828-to-4545 years, described as having "a little more money in her pocketbook."
        * Young-adult lifestyle brands targeting the 1818-to-2828 year old demographic.

Scope of Merchandising

  • Operational Variation: Merchandising roles and responsibilities are not uniform; they vary significantly from company to company.
  • Buying versus All Merchandising Functions:
        * Buying Role: Specifically involves the selection and purchasing of goods to be sold by the retailer.
        * All Merchandising Functions Role: This broader scope encompasses both buying and selling activities.
  • Components of Comprehensive Merchandising:
        * Assortments: Determining the variety and depth of products. For example, a pet retailer like The Blue Buffalo Co. may offer specific categories such as:
            * Dry Dog Food: Includes specialized systems like two-part feeding systems.
            * Wet Dog Food: Available in various cuts, textures, and flavors.
            * Meat Rolls: Savory rolls used for shreds, toppers, or full meals.
            * Dog Treats: Including crunchy biscuits, soft-and-meaty treats, and chews.
        * Advertising and Pricing: Managing how products are promoted and at what price point. A direct comparison of pricing strategies might show:
            * Petco: $6.50\$6.50 for a 1 lb1\,lb quantity.
            * Chewy: $9.99\$9.99 for a 2.5 lb2.5\,lb quantity.
        * Point-of-Sale (POS) Displays: Strategic placement and visual presentation of items at the location of purchase.
        * Employee Utilization: Determining how staff can best support the merchandising strategy.
        * Personal Selling Approaches: Techniques used by staff to interact with and influence customers.

Micromerchandising

  • Definition: The practice where retailers adjust shelf-space allocations to respond to customer differences and unique characteristics of local markets.
  • Case Study: Women and Beer Consumption: In micromerchandising for the beverage industry, retailers observe that women often have different shopping preferences:
        * Customization: A preference for "build your own" 66-packs rather than pre-packaged sets.
        * "Wine-fication" of Beer: Beer is increasingly treated with the sophistication of wine, including beer pairings and location-specific preferences.
        * Organization: Women generally prefer a meaningful organization of items (e.g., organized by flavor profile or occasion) when shopping.
  • Implementation: This strategy requires granular data to ensure shelf space reflects local demand shifts.

Cross-merchandising

  • Definition: The strategy of carrying complementary goods and services together to encourage shoppers to increase their total purchase volume.
  • Functional Example: A "S'mores" display that groups together marshmallows, chocolate bars, and Graham crackers in one location (e.g., items priced at $2.34\$2.34 and $2.98\$2.98) to simplify the customer's goal-oriented shopping.
  • Strategic Focus: Effective cross-merchandising requires knowing "what" the customer is purchasing and why.
  • Product vs. Benefit: Successful firms often shift focus from the physical product to the benefit provided to the customer.
  • Organizational Identity Example: Southwest Airlines is cited as a success because the company understands it is a "customer service company" that simply "also happens to be an airline." This philosophy informs how they package and "merchandise" their transportation services.