Retail Product Management

Buying and Merchandising

MET Institute of Management

PGDM - Marketing

Group 7
Yash Shah (104), Palak Lata (113), Sylvia Charles
(119)

Group 8
Sanika Nigudkar (34), Divya Keswani (78),

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Aditya Sangamnerkar (120)

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Chapter One: Product Management in Retail Business
 STORY

Buying - led
The role of Product Management in Retailing

Rise of Retail Industry in the UK – 1964

Buyer - merchandiser
The Strategic Role of Product Range

Evolution of Product Management

Consumer - led

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 KEY SHARING

 The scope of Product Management

Product Management

Strategic Operational Within the Outlet

• Objectives • Sales • Implement

• Sales & forecasting promotions
Profits • Space allocation • Allocating Space
• Category • Visual • Preparing Stock
Management merchandising
 KEY INSIGHTS

 Product Scrambling

- Case Study: Boots The Chemist

 How retailers add value!

 PRACTICAL IMPLEMENTATION

 Case Study: Holmbridge and Lockfield Post offices

Holm bridge Lock field

 180 sq.m yet 1200 products  Asian sweets such as barfi
 Strategically placed near payment counter
seasonal items near  Different section for
counter (E.g.: wrapping vegetables (Chilli peppers,
paper at X-mas) bhindi, coriander etc.) & Dry
 Attractive cards for every goods (rice, spices etc.)
occasion  Invite for Video Rental
Club, films and
programmes.
Chapter Two: The Decision Makers In Retail Product Management

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 STORY

 Centralised retail buying organisation v/s Decentralised buying

 Desirable attributes in buying and merchandising personnel

 Analytical Skills

 Communication Skills

 Objectivity

 Product Knowledge

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KEY SHARING

R RE ETA
TAI LI LP PR ROODDUUC CT TMMA ANNA AGGE E M
MEENNTT
 KEY INSIGHTS

 For meeting the end goals, it is very important to have an organisational

structure that supports:

a) Personnel who possess a unique combination of high calibre skills

b) Attributes

c) Who can work in highly responsive and deadline oriented working environment

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PRACTICAL IMPLEMENTATION

 Case Study: Associated Independent Stores

 Non- food buying voluntary group (250 independent retailers)

 550 outlets with a combined turnover of £1.2 million

 Four main product classification: Fashion, Housewares, Furniture & Floor

coverings

 40 samples shows a year & they market their own AIS brand

 Share analytics & reports which can be used to find the gaps
Chapter Three: Category Management

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 STORY

 Efficient Consumer Response (ECR)

• Starts with consumer demand and then gears the whole supply chain

 Objective: a) Maximising Customer Satisfaction b) Minimising total costs

 Category management & its drawback

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 KEY SHARING

 Category Management Process

Define Plan Implement

• Determine the • Determine the promotion)

products and ways to measure
SKUs the performance
• Develop strategic • Develop marketing
plans for the & Supply Plan
category considering • Develop tactics
long term trends (e.g.:
 KEY SHARING
• Assign responsibilities for
category
management
• Measure – Monitor - Modify
 KEY INSIGHTS

“The intersection of buying and merchandising and marketing is the heart of retail
brand management, and its focus is CATEGORY MANAGEMENT”

- Wileman and Jary

 PRACTICAL IMPLEMENTATION

 Case Study: SAGIT – UNILEVER

 Leading frozen food supplier in Italy

 Involved in number of category management projects with retail trading partners

 Retailer: GS, Objective:To improve performance of whole category (win-win for

both)

 Carried out market research and implemented steps of process of category

management

 Result: Annual sales increased by 5%, Sales of GS & Sagit increased by 40% and 1/3rd
PRACTICAL IMPLEMENTATION
respectively
Chapter Four: Selecting Products

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 STORY

 Examining the procedures buyers go through in

order to minimize the late pile ups

 Retail organisations break the buying task into-

 Qualitative
 Quantitative

RETAILPRODUCTMANAGEME
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 KEY SHARING

 Influence of consumer trends on retail offer-

Demographics

Consumer Economics

Social Trends

Influence of Technology

Legal Requirements
 KEY INSIGHTS

 Product Selection Criteria-

 Physical properties
 Packaging
 Utility
 Quality
 Quality Control
PRACTICAL IMPLEMENTATION

 Products that suit the changing needs of the buyers

 Online services plays an important role in tracking trends

Chapter Five: Supply Sources

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 STORY

This chapter explores the various supply sources

It establishes the way in which suppliers are

selected by retailers and what goes into a supplier
evaluation

RETAILPRODUCTMANAGEME
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 KEY SHARING

 Types of Suppliers-
Power

Manufacturers

Agents

Wholesalers and Distributors

Grey Market Sourcing

 KEY INSIGHTS

 Supplier’s Assessment Criteria-

Product range and Quality

Price

Delivery

Service

RETAILPRODUCTMANAGEME
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PRACTICAL IMPLEMENTATION

The threat from wholesalers to small retail shops is

increasing
Many retailers have started outsourcing the process
of assessment
 Suppliers can into new product range with the support of
the retailer
Chapter Six: Product Quantity Decisions

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 STORY

The story of this chapter gives an overview of the principles and

practices retailers use to control product quantities.

It reviews the traditional periodic review approach to stock control,

before moving on to exploring more contemporary methods such as
sales based ordering and automatic replenishment, efficient consumer
response (ECR) and quick response (QR)
 KEY SHARING

 Terminologies like

Stock control Seasonality

Stock management for Sales-based ordering
staple items Supplier-managed inventory
Economic order quantity Promotional product planning
Service level
Service forecasting
 KEY INSIGHTS

 The development of integrated information and distribution systems that allow

retailers immediate access to the knowledge of where and how much of any
product is available at any point in the supply chain has made a really important
contribution to the process of effective stock management

 Any activity taken on by a retail organization that is likely to affect a products

sales performance should be built into the forecast, because a retailer cannot
generate sales without stock, and stock bought for sales that do not happen
constitutes a retailers nightmare.
 PRACTICAL IMPLEMENTATION

 Case: Benetton and Oasis

Benetton Oasis
 To keep updated with  Also uses quick response
the swiftly changing systems in fashion supply
consumer sales pattern chain
 Introduced a quick  Ordering fabric as late
response system of as possible
Garment-dyed process  Then finalizing the style
 Whereby uncolored yarn of garment to be cut
can be colored as per the out 2-3 weeks before
changing trends the delivery
PRACTICAL IMPLEMENTATION

 Use multiple suppliers for

one product to prevent
gaps
Chapter Seven: Product Range Management
 STORY

The chapter provides some guiding principles and management aids

that will help retailers to achieve the balanced stock position
that they are looking for
 KEY SHARING

 The merchandise budget plan

 The assortment plan

 KEY INSIGHTS

 Establishingthe detail of the product range offered by a retailer is part of the

strategic product management process involving a balancing act between the need
to meet financial objectives and the need to present an inspiring product offer to
the consumers

 Productranges on offer have to reflect the changing requirements of

consumers and should offer customers added value so that they do not
choose to shop with a competitor

 The merchandise budget plan helps the retailer plan ahead for seasonal merchandise
 KEY INSIGHTS
and the dangers of over-investing in stock are minimized.
 PRACTICAL IMPLEMENTATION

 Practical considerations for the assortment plan

• Store size and characteristics: the buyer must have an idea of how much space should be devoted to
each category. E.g. a buyer might feel strongly about a trend for full-length evening dresses for the
Christmas party season, however the no. of fixtures available for full-length garments may be limited
because the store usually concentrates on separates

• Complementary merchandise: in creating an assortment plan the buyer must consider the balance
of merchandise, so that transaction values can be raised as high as possible. E.g. balance between suits
and shirts or blouses, foliage and flowers in a florists, or pasta and pasta sauces in a grocery store

• Profitability of merchandise: the anticipated profit margins may be a valid consideration for the retailer
when drawing up the assortment plan, but consumer is not interested in retailers profitability, so profit
expenditure should be balanced alongside with other balanced offers
Chapter Eight: Profitable Product Management
 KEY
SHARING
• Constantly strive to understand your consumers
• Define your value proposition and ensure it stays
relevant: Drive your exclusivity
• Make the experience seamless, fast and efficient
across your channels
• Build a clear risk strategy and hold yourself to
standards higher than those demanded currently
 STORY

1. In an era of retail saturation, trading profitability becomes

an increasingly important strategic goal for retailers

2. Setting retail prices based on various approaches-

uniform mark-up pricing, demand-led pricing ,
premium pricing, high-low pricing, EDLP and
discounting

3. Measuring product profitability through gross-margin

return on investment, DPP and activity based costing
 KEY
INSIGHT
• 51% retailers agreed that creating differentiation is a
major concern for them. Given the ‘discount’ based
business models, differentiation through other means such
as product, service, brand, etc., becomes a critical
imperative for retailers focussed on a profitable growth as
opposed to only top-line growth.

• A number of retailers have discovered that customers

respond better to deep price cuts applied on an occasional
basis than to smaller cuts on a frequent or on-going basis
 IMPLEMENTATION

• Indian consumers are looking beyond the product and are

expecting organisations to understand their needs and offer
end to end solutions.

• One of the key drivers in the growth of online retail is going

to be the onset of ‘services’ which will bring in a whole new
arena of business that was not perceived as retail into the
purview of this business.

• Players like Thumbtak, Urban Clap or QyK are changing

perceptions on service retail
Chapter Nine: Allocating Spaces to Products
 KEY
SHARING
• The productivity of retail space will be dependent on
the levels of sales and the profitability of the products
located within that space and the value of the space
• Ground level space is more valuable because it is
convenient to the buyer
• The value of space reduces from front to back of the store
and also depends on the ‘Hot spots’
• A retailer can manipulate customer flow in an attempt to
maximize space productivity by allocating poorer retail
space to ‘destination’ products and services and locate
plenty of impulse items in between.
 STORY

1. Space is an expensive commodity for retailers and

so it must be used for maximum return for the
retailer
2. Maintaining or increasing the levels of sales
and profits of products sold from existing
space has become a priority in retail
management
3. Decisions about how much space to devote to each
product line and its location in the store play an
important role in the pursuit of merchandising success
 KEY
INSIGHT
• If our attention is grabbed by a tonnage (high volume) display
of a product such as cereal or wine we may succumb to an
impulse purchase, but we are unlikely to respond as positively to
an increase in display space of a staple store cupboard item such
as salt or sugar.

• Cross-elasticity - The sale of one product can be influenced by the

sales of other products in a number of ways.

• Allocating space according to sales and, in particular,

product profitability is to work with the interests of the retailer
 KEY
INSIGHT
and not the customer in mind
 IMPLEMENTATION
• When shopping, customers browse through and around
fixtures in a way that is similar to how they read a
magazine. They will scan the product offer until they find
a product category of interest, and then they will focus
their attention so that they can choose between the
product offerings within that category.
• A retailer that is experiencing slow-selling products,
high levels of mark-downs and that ends up doing a high
number of in-store transfers could be good candidate
for a micro- merchandising strategy.
• For example – Big Bazar
Chapter Ten: Store Design
 KEY
SHARING
Customer's interaction with the outlet and the value that a product holds for them
is most important

The interior design of the store must be distinctive, sturdy - in order to withstand
customers and creative

The components of store design :

Materials
Atmospherics
Lighting
Signage

Combination of these components can very much affect the customer's mood and the
perception about the retail brand
 STORY

• Muji - No brand Goods started as a supplier to supermarkets in response to excessive

premium being charged for branded products

• The wide range of products offered by Muji is an example of lifestyle

concept - stationery, clothes , bicycles, home accessories , furniture
and toiletries

The strength of the Muji concept emanates from the principles on

which the company operates, stated in their company catalogue:
• good value for money;
• simple and functional design;
• basic and understated colour;
 STORY
• complete lifestyle range.
 KEY
INSIGHT
• The way customers gain access to stores has to satisfy both functional and aesthetic criteria
.Even though an open entrance is wide and accessible it might not establish a retail
identity
• The actual location of a store often has a strong bearing on the store design in
general, and in particular may impinge on a design strategy quite significantly

• Long term design adds value to the retailer by increasing brand awareness, confirming
brand values and developing new markets
• When entering new international markets, retailers often begin with a flagship store
 KEY
incorporating INSIGHT
the latest store design, to test the reaction to the retail concept
Chapter Eleven: Visual Merchandising
 KEY
SHARING
• Visual merchandising is a commonly used term for the
aspect of product
management that is concerned with presenting the
product within the store to its best advantage

• Visual merchandising is a support for positioning strategy

• Components of visual merchandising include furniture

and fittings , product presentation, store layouts and
displays
 STORY

• Morrisons’ stores offer a wide product range in both

foods and non-food items, half of which are sold
under the Morrisons brand. The stores are supported
by modern retail operations and a central buying
organisation.

• The stores are themed as per the layout of

supermarkets and various sections in the store have
theme as per the product offering

• This concept distinguishes Morrison’s from other regional

supermarkets and and is a visual treat for the consumers
 STORY
to interact
 KEY
INSIGHT
• Visual merchandising can increase footfalls in a retail store
• The products displayed in a certain way, gives out the
right message to the consumer a brand wants to
communicate
• It is an important component where the positioning of
the product tries to match with consumer’s perception
about the brand
Chapter Twelve: Product Management in Non Store Retailing
 STORY
• New methods of retailing will emerge and shopping
process will evolve but the interaction of the customers
with “real” product will not disappear.
• Retail stores is still the main channel for majority sales
even when there is an increasing proportion of goods
being sold to consumers through distribution channels
that does not include a store.
• The shopping medium may change but the principles of
retail product management will remain the same.
• The key principles for both store and non-store
retailing is product presentation, selling environment,
pricing, service, convenience, order fulfilment.
RETAIL INFRASTRUCTURE
 KEY
SHARING
• The principles behind a store design and that of a
non- store format design are the same.
• Non-store retail can offer goods at competitive prices
as compared to those at the traditional stores
because
they don’t have the expense of running a portfolio store.
• Customer service and stock service is equally
important in both the traditional store as well as in
the non-store retail.
• Retail businesses are viewing the multi-channel
approach as a strategic necessity rather than a novelty.
 KEY
INSIGHT
• Store retailing accounts for more than 80% of the
retail sales in UK(estimate based on various
sources).
• Non-store retail has to accept return of products
and make adequate provision for this service.
• Retailers are more keen to adopt multi-channel retailing.
Chapter Thirteen: International Aspects of Retail Product Management
 STORY
• In this era the opportunities for international
retail expansion are becoming attractive as new
markets open.
• Product sourcing can help a retailer using
global approach.
• Product management on international scale and
ethical issues are key aspects.
• Adaptation of product range to a new
geographic market needs some product
modifications which are unavoidable.
 KEY
SHARING
• International strategy and approach for very
few retailers has the reason of success in global
market.
• International retailers are keen on adapting to the
local market and combining their strategy for
success.
• Challenging a domestic market becomes difficult
on international scale due to difference in
consumer behavior.
• Retailers are under pressure as the consumers
and human rights organizations are concerned
 KEY
SHARING
about the way they conduct trade.
 KEY
INSIGHT
• Local sourcing can help an international retailer
to understand local tastes and preferences.
• Retailer has a choice to adopt centralized approach to
its international activities or decentralized approach.
Thank You

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