The main process of marketing is buying. There are two aspects of exchange, i.e buying and selling. In the absence of buying, exchange or marketing becomes impossible. Without buying, selling cannot be done, similarly, without selling buying cannot be.

Buying and selling are the two functions to be performed at a time in marketing process. Buying goods for use or resale is called buying function. Taking goods by paying certain price to the seller is buying.

In marketing, the function of buying does not mean only buying something. It is used in broad sense. Buying function of marketing includes the functions such as determining necessary goods, finding out the supply sources, selecting quantity, quality, grade, size, deciding on price, discount, delivery date, means of transport and other agreement and finally transferring ownership.

So, producers/manufacturers, wholesalers, retailers or ultimate consumers buy goods. So, buyers can be divided in three classes as manufacturers, middlemen and ultimate consumers.

1. Manufacturers

Manufacturers buy goods to use in production. They may buy raw materials, semi-finished goods and parts etc. to use in producing certain goods. They may buy capital goods such as machines, tools, manufacturing plant, building etc. They also may buy necessary supplies and operating materials to facilitate production process. Such buyers are called industrial buyers.

2. Middlemen

Wholesalers and retailers also buy goods. They are called middlemen. Wholesalers buy bulk quantity of goods directly from manufacturers to sell to retailers or consumers. Similarly, retailers buy goods directly from manufacturers or wholesalers to sell to ultimate consumers. In this way wholesalers or retailers work both as buyers and sellers in marketing process.

3. Ultimate Consumers

Ultimate consumers buy goods to satisfy their need. They buy daily necessary goods such as food, grains. clothes, medicines, education materials, etc. to meet their needs and also buy luxury capital goods like motorcar, radio, TV, refrigerator, washing machine and so on. Ultimate consumers buy necessary goods in small quantity repeatedly and also may buy in bulk quantity use for longer time.

In this way, different buyers buy goods for different purposes. The buying function include the important activities such as taking decisions on what to buy, when to buy, where to buy from etc.

Category management is a retailing and purchasing concept in which the range of products purchased by a business organization or sold by a retailer is broken down into discrete groups of similar or related products; these groups are known as product categories (examples of grocery categories might be: tinned fish, washing detergent, toothpastes). It is a systematic, disciplined approach to managing a product category as a strategic business unit. The phrase “category management” was coined by Brian F. Harris.

Retail category management aims to meet consumer needs, by focusing on consumer-oriented marketing and merchandising practices. Partnerships between retailers and suppliers are the foundation for effective category management. Usually, a category captain is appointed to build the relationship between supplier and retailer to maintain healthy communication.

A category manager is a valuable resource, helping retailers make category management decisions, providing them guidance on merchandising questions, like what, how much and where. A category captain manages the retailer’s inventory and displays its products, enhancing their core performance, while achieving their goals – selling more of the products.

The collaborative partnership between retailer and supplier is a source of competitive advantage. Such a partnership improves customer service and asset utilisation while increasing profits and reducing costs.

Performance measurement >> Strategy >> Organizational Capabilities

Trading Partner Relationships >> Business Process >> Information Technology

The category management 8-step process (Retail)

The industry standard model for category management in retail is the 8-step process, or 8-step cycle developed by the Partnering Group.[10] The eight steps are shown in the adjacent diagram; they are:

• 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.
• The eighth step is one of review which takes us back to step 1.

Significance of Category Management:

• Increased sales, goodwill and market share
• Proper care and devotion to each item of merchandise
• Increased sales further lead to increased turnover
• Maximize shelf efficiencies
• Less inventory shrinkage
• Recognizes procurement opportunities
• Enhances customer knowledge level
• Improves return on investment (ROI)
• Decreases chances of out-of-stock positions
• Enhances return on money invested in marketing efforts
• Classifies the performance of brands as doing well, not doing well, problem brands, etc.
• Purchasing merchandise exercise becomes easy and cost effective.

Essentials / Prerequisite of Category Management:

• Category should be divided and arranged as per consumers’ ease not because of retailer’s convenience.
• CM should be based on differentiation and uniqueness.
• CM should drive multiple item purchases at the same time.
• It should result in better customers’ relations rather than relations with suppliers.
• Category division should be based on the basis of product response, space, time and profitability.

Components of merchandising planning

Merchandise or product is the most basic component of merchandising planning. The retailer has to provide products which are expected to be demanded by his consumers. He is required to keep enough inventory of each products category so that he never runs out of it and lose business.

Products can be classified in the following categories:

1) Seasonal products:

This type of products is in demand in a particular season. An adequate amount of this type of products has to be kept in inventory before the beginning of the season, and it should be maintained properly so that it can sustain the whole season.

2) Staple:

Products which are always in demand such as food, clothes, etc. irrespective of the season. Adequate inventory should be maintained for such products.

3) Fashions:

Products which will remain in demand until fashion prevails. The retailer has to buy an estimated quantity of such products to last the fashion without running short of it.

4) fads:

This type of products has a limited period of demand. Retailers have to buy such products carefully by rightly estimating the fads.

Importance of merchandise planning

Buying merchandise and placing them in store for selling is one of the biggest expenses a retailer makes. There are several additional expenses that come with merchandise are delivery costs, shipping costs, storing costs, etc. in case you order wrong merchandise, your expenses will be doubled easily.

However, having a merchandise plan is much more important than only saving money. You will often find yourself struggling to meet consumers’ demands if you don’t have a well-prepared merchandise plan and satisfy the consumers’ needs is one of the most important duties of a retailer.

You can use available the right product, at the right time, at the right place, and in the right quantities only if you plan everything ahead. You can think about the consequences in case you fail to plan properly.

There are chances that your shelves will be overflowing with the wrong type of merchandise, and then you will have to provide heavy discounts to get rid of the excessive undesired merchandise.

Moreover, if you fail to provide the right merchandise at the right time, then your customers will move to your competition.

Category Captains

It is commonplace for a particular supplier in a category to be nominated by the retailer as a category captain. The category captain will be expected to have the closest and most regular contact with the retailer and will also be expected to invest time, effort, and often financial assets into the strategic development of the category within the retailer. In return, the supplier will gain a more influential voice with the retailer. The category captain is often the supplier with the largest turnover in the category. Traditionally the job of category captain is given to a brand supplier, but in recent times the role has also gone to particularly switched-on private label suppliers.

In order to do the job effectively, the supplier may be granted access to a greater wealth of data-sharing, e.g. more access to an internal sales database such as Walmart’s Retail Link.

The Responsibilities of category captains

Category Captains drive retailer profits by the strategic development of a specific category, building upon their knowledge and expertise of how consumers think and act when they enter a store.

When an inconsistency occurs, like what happened during my Sunday shopping trip, some consumers will abandon the store in search of another one which offers fast and convenient product placement. The category manager aims to prevent this from happening.

Other responsibilities of Category Captains include:

• Deciding which products should be on the shelf of their category.
• Determining how much space each product deserves.
• Taking sales into consideration when allocating space to products, without exerting bias toward a particular product.
• Developing Planograms for their category on behalf of the retailer.
• Managing the relationship between retailer and category partners.
• Creating the product placement layout and sending the category partners for feedback.

Merchandising is defined as offering right kind of product at right place and in right price. A retailer has to plan to have in his store the product that is desired by the customer. Success of any retail organisation depends on its merchandise planning.

Merchandise planning is defined as “Planning and control of merchandise inventory of the retail firm, in a manner, which balances between the expectation of target customer and strategy of firm”.

Components:

Following are important components of merchandise planning:

(1) Product:

Product or merchandise is the basic component of marketing mix. Retailer has to cater to the products that are expected by his segments. He has to maintain adequate inventory of product category expected by his customer.

Products may be broadly classified into:

1. Staple: Like food and clothing that have regular demand. Adequate stock of that is to be maintained.
2. Seasonal products: that are in demand during the season. Adequate inventory of that is to be augmented before the season and the stock is to be maintained to sustain the season.
3. Fashions: Goods that are in demand until the fashion prevails. Retailer has to estimate the quantum of demand to last the fashion trend.
4. Fads: the kind of products that have limited period of demand. Retailer has to be careful to estimate the demand and buy the fad products.

(2) Price:

Another important component of marketing mix. Price is an important variable in a country like India, where people are price sensitive. Retailer has to determine his segment and the price range to which they belong. Broadly it can be classified as low, Medium and premium range.

Retailer has to offer the product that meets price range of his target customers. Apart from this retailer has to adopt different price strategies like Price Skimming, Mark down price, discounts price and offers like buy one and get one depending on demand for the goods and extent of stock. The planning should be to offer an attractive price package that can result in regular sale, stock clearance and assure adequate profits.

(3) Range:

Range refers to width, breadth and depth of products offered for sale. Customers should have opportunity to make choice or selection depending on the type of retail store i.e.-

Specially store specialises in limited width i.e., particular category (Bata, Raymond’s) But it must have depth i.e., different designs, number, color, price-range etc., so that customer can make choice. Departmental store which deals in long category of products must not only have width, but also must have breadth (different brands) and depth.

A wide range of product demands more investment in merchandise. Retailer has to evaluate that there is adequate return on investment made. Apart from this he has to ensure that merchandise is acceptable and saleable. Buy and store that range of merchandise that can be sold.

(4) Assortment:

It refers to combination of products made available to customer at retail outlet. Merchandise is assorted and presented category wise and department wise.

E.g. Cosmetics, Toiletries, Electronics, Staples, Vegetable, Furniture etc., each category further will have different products or different brands at different size and price level.

E.g. Toothpaste, Shampoo, Soaps, etc., are presented in one category of different brands companies and brands.

Retailer must make systematic assortment or classification. Goods of similar category must be made available at one place. Items of electronics should not be placed along with vegetables.

Apart from this retailer must keep adequate SKU (Stock Keeping Unit) of each item of products. He has to regularly monitor that enough number of merchandise is available for customer’s choice. He has to ensure that such assortment of merchandise is convenient for customers to select, and enough variety is available to choose from.

At the same time, he has to ensure that assortment stock is moving and there is better turnover. He has to ensure that each line of product is contributing towards profit. The product line that is not popular may be replaced with a new and more popular line.

(5) Space:

Products should visible to visiting customer. Retailer have limited floor space, he should provide adequate space for display of each product. Available space for display of each product is utilized to showcase and presents goods, through different types of fixtures, hangers, gondolas, mannequins, fridge depending on the nature, size, dimension of goods.

Retailer will also decide merchandise hierarchy as to how space is to be created for various category of products. E.g. Products may be classified as new arrivals, fads, fashions staples, vegetable, electronics, furniture’s, kids etc.

Retailer has to priorities the place for different products:

1. He has to ensure that the products are visible.
2. Customers have convenience and comfort in picking the products.

Merchandise planning is planning of product price, range and assortment.

It has following implications:

• Finance:

Finance large amount is invested in merchandise the planning regarding price, product, range etc., must ensure adequate return on investment.

• Marketing:

Retailer has to undertake, marketing measures like advertising sales promotion etc., to ensure that the merchandise is sold.

• Warehousing and Logistics:

This department has responsibility of receiving, taking account of stock, stock keeping and dispatching the goods, to stores to departments and stores.

• Store Operations:

Each store of department is to be informed regarding merchandise bought. The store has to initiate measures to clear the sale and to clear stock.

Merchandise planning buying right kind of product, fixing a right kind of price providing adequate range of products through an appropriate assortment, and ensure adequate space to showcase and sell the product.

Process of Merchandise Planning:

Success of any retail organisation depends on presenting the merchandise that is needed by the customer. Firms have to make meticulous planning regarding type of merchandise to be bought, its presentation, pricing etc., planning process has to be detailed and elaborate. It must cover every angle of merchandise management.

Success of organisation depends on buying what the customers wants and selling it to him in the manner desired by him.

Merchandise planning has to be:

• Time Based:

It must make annual budget of merchandise required. Budget has to be further broken into quarterly, weekly and daily on requirements.

• Location Based:

Merchandise for entire organisation covering each store under the company’s umbrella. It should be broken into demand for each individual store.

• Store Based:

Demand of store or each department, category wise, product wise etc.

Micro and macro estimation of merchandise needed that has to be acquired in right time, right quantity so that it can be sold in right time when demanded by customer. Planning should ensure optimum stock of each product, because shortage of stock is lost opportunity of sale. Excess stock is a burden on finance and cost.

Process of merchandise planning is as follows:

• Forecast of Sales:

Merchandise plan or budget is dependent on estimated sales. Forecast of sales for entire organisation, department and product wise is to be made. Further new products to be added, or deletion of product is to be considered. Estimate is made based on past records, present scenario, impact of fashion economic trend etc., Firm also has to determine pricing strategy in the sale of product.

• Merchandise Budget:

Estimate of merchandise required is made based on expected sales. Estimate is made at head office level that determines merchandise required for each store or department. Merchandise required for each department and likewise for each store and for entire organisation.

Along with this firm also makes financial implication of investment in merchandise. Plan ensures that investment on merchandise assures expected gross profit or return. Plan has to assure that each store and departments is given adequate stock support to avoid scarcity. At the same time it has to ensure that there is turn-over of merchandise, if not to adopt strategy like markdown sales to replenish the stock.

• Merchandise Control:

Retailer has to balance between purchase and sale of merchandise. It is necessary to avoid either over or under stocking of merchandise. Daily and weekly stock reports are taken to monitor the movement of stock. Fresh order of purchase is made before the stock reaches danger level.

Firms will have their own policy of maintaining stock levels. Control over inventory can be ensured by monitoring movement of merchandise from the godown to the store and from there to the department. Adequate control can minimise the problem of stock clearance, or discount or mark down sale.

• Assortment Planning:

Assortment is arrangement of products category wise. It is presentation of entire products range classified under categories, department or section. E.g. Food section, cosmetics, Garments etc., merchandiser has to ensure that there is proper assortment i.e., each assortment or section must have relevant or related items, every category must have adequate SKU (Stock keeping units) no shelf , rack, should be empty. At the same time it should be ensured no department or product category is overloaded.

Assorted merchandise need to be presented making optimum use of space and positioning the products in racks, hangers etc., so that it is visible, and comfortable for customer to select.

Sourcing may be defined as the process where retailers negotiate with the suppliers to buy quality merchandise at a reasonable price and sell to the customers at a reasonable profit. The following are the steps involved in sourcing

The process of merchandise planning takes the buyer through to the stage of determining the products that he needs to have in the store and the quantities that he needs of the same. A key decision to be taken by a buyer is to determine where he has to buy the merchandise from. Determining the source who would supply the products as required by the retailer, in the quantities needed by the retailer, as per the requirements of the retailer, is an integral part of the buyer’s function. Over the years, the importance of sourcing as a key element of merchandise management has increased. This has been largely due to the shrinking of world borders and the world becoming a global village. Global travel and the spread of mediums of mass communication have also made the consumer more conscious of global trends and products. For a retailer, this means that he has to be far more agile and competitive in his ability to meet consumer demands.

Having determined the sales that need to be generated the first decisions that need to be taken is one the type of merchandise that will be retailed. Typically, these may not be decisions that may be taken by the buyer or merchandiser as it is the retail model that the retailer chooses to operate which determines the merchandise mix. This may comprise of:

1) National / Regional Brands

2) Own label Merchandise popularly known as the Private label.

3) A combination of both.

Sourcing may be national or international, depending upon the decision of the retailer after considering various factors. It is clear that the retailer may go for the national source or international source for procuring the different types of products. While opting for international source for procuring branded products, the retailer must keep in mind some of the factors which affect the sourcing decision. Let us discuss them in brief:

Country of Origin: While sourcing international products, retailers must always keep in mind the reputation of the country of origin as well as the costs involved and expected perception by the consumer. For example, electronic goods sourced from China are considered superior in quality and technology. Swiss watches are very popular among the customers as they are a mark of technology and style.

Foreign Currency Fluctuations: As we know that currency exchange rates change from time to time. Therefore, while making global sourcing decision, a retailer has to be cautious of the foreign currency fluctuations. This is one aspect which makes the product expensive or cost effective depending upon the fluctuations in the market. Moreover, it will be in the interest of the retailer to enter into a deal wherein he is supposed to pay at a fixed rate of currency exchange.

Taxes: The tax policy is one of the important factors for taking the decision for international sourcing of the products. There are a host of taxes levied on export and import which makes the product expensive or reasonable depending upon the laws of the land. With the introduction of VAT there is an effort to prevent double taxation. However, this exists in various forms in different countries depending upon the legal necessities of respective nations.

Process

These steps are explained in detail below:

1. Collecting Information:

This is a very first step of merchandise buying and handling process. Once the firm’s overall merchandise plans are defined, exact information about current market needs and potential vendors is required.

This is essential as a retailer before buying merchandise would like to know:

(i) What consumers are looking for?

(ii) Where the vendors are located and what is their goodwill in the market?

(iii) What their competitors are offering. After understanding these aspects, retailer will be in a position to decide what he wants to buy and from whom.

For collecting information, a retailer/buyer has several possible sources defined as internal and external sources.

Internal and External Sources

It depends on the retailer (buyer) which source he would like to choose. Normally, global retailers rely on both internal and external sources to have the better picture of consumers’ requirements. Undoubtedly, the most valuable source is the ‘study of consumers’. Global retailers like Wall Mart, Spencer and Noodle Ki Doodle have proper consumer study divisions those continuously monitor the consumers’ lifestyles, living habits and their changing demographics in order to study the consumer demand directly.

Vendors (manufacturers and wholesalers), on the other hand, do their own projections about the future sales and market demand, while finalizing the ‘buying deal’ with retailers. Vendors present these projections through pie-charts, bar-diagrams and various two and/ or three dimensional charts.

They also inform the retailers how much promotional support will be provided to them which may have major impact on retailers’ buying decision. But retailers must understand one thing that they are the one who have to interact with the customers and are responsible for satisfying the needs of the target market. Therefore, they should not depend on vendors’ projections only, but may use them for reference.

As retailers are entirely responsible for complete sales projections and merchandise plans in their own category, they should direct their sales’ employees to get a view of customers’ potential demand by visiting suppliers, talking with sales’ experts and observing consumer behavior. Besides this data provided by trade associations, government bodies projects like ASSOCHAM, FICCI bulletins may be consulted. Internet has also become a vital source for collecting information and is also time saving.

Retailers may use collected information for making merchandise decisions about:

(i) Staple merchandise

(ii) Fashion merchandise

The above-mentioned sources are enough to have picture about staple merchandise but for frequently changing fashion merchandise, a mix of internal and external sources may be used.

2. Selecting Vendors:

After collecting the information about consumers’ demands, the next step is to select sources of merchandise and to interact with them to select the potential vendors.

For selecting vendors, the retailers usually have three alternatives:

(i) Company-owned vendors:

As the very name implies, these vendors are owned by the company themselves. Large retailers have their own manufacturing or wholesale operations. They work only for particular retailers and provide as per their requirements.

(ii) External, widely used supplier:

This type of supplier is not owned by the retailer but used frequently by him. The retailer is buying merchandise for long and is aware about the quality and services offered by him.

(iii) External, not used supplier:

This type of retailer has not been used by the retailer as he is either a new entrant or retailer has not purchased anything from him so far. Therefore, what quality he is offering cannot be known in advance. Retailers may use any one type of supplier as per their requirements, budget and area of operations or they can use a combination of them. Big retailers often deal with all types of suppliers. Therefore, after selecting the supplier category, a retailer should interact with them about the buying terms and conditions.

Following points must be considered while selecting the vendors:

(i) Goodwill of the vendor in the market.

(ii) Guarantee and/or warranty offerings.

(iii) Which vendor offers merchandise at the lowest total cost?

(iv) Quality offered by the vendor

(v) Will the vendor provide transport storing and other facilities?

(vi) Is vendor’s merchandise line conservative or innovative?

(vii) Is vendor offering credit purchase?

(viii) What promotional support is provided by the vendor?

(ix) Will markup be sufficient?

(x) Is vendor interested or will be available for long term relations?

(xi) Will vendor fulfil what he has agreed upon?

(xii) Will vendor provide conditional/exclusive selling rights?

(xiii) How quick will orders be delivered?

3. Evaluating Merchandise:

After deciding upon the source of merchandise, next step is to evaluate the vendor’s merchandise quality.

Here, a retailer is encountered with following situations:

(i) Whether the whole lot be examined, or

(ii) Purchasing be made only on vendor’s description.

Retailer after interacting with suppliers should evaluate merchandise under purchase consideration. Should each unit of merchandise be examined? Or items should be bought

only on the basis of description and demonstrations presented by the suppliers.

For evaluating merchandise items, retailer has three choices in hand:

1. Inspection
2. Sampling and
3. Description

Which method should be followed depends on the items’ features, cost and the frequency of purchase? Inspection is a process of examining each item of merchandise thoroughly before the merchandise procurement and also after delivery. Jewelry (diamond, gold, platinum and other precious stones) is one of the examples where retailer inspects all the items of purchase.

Sampling technique is used when retailer is buying items on regular basis in large quantity that is perishable, breakable or costly ones. Therefore, retailer uses Acceptance Sampling method. It is “the middle of the road” approach that exercises control over the incoming inventory without going through 100% inspection. It simply means accepting or rejecting the supplier’s merchandise assortment.

Here decision is taken without going through 100% inspection of the entire lot. It is a compromise between no inspection and 100% inspection. It has two key classifications of acceptance plans: firstly, by attributes (“go, no-go”) and secondly by variables.

Description buying is a process of merchandise purchase where a retailer orders the merchandise items after going through supplier’s pictorial catalogue mentioning the product features, price, size and other relevant details. For instance, a retailer can order food and clothing items from a catalogue or concerned company website. On receipt of items, they are only counted for matching order size.

4. Negotiation:

Once the retailer has evaluated the merchandise quality and other features, he negotiates with the vendor for its price and consequent terms and conditions. Both parties listen to each other carefully and ask questions wherever doubt arises. Terms and conditions are then decided and contract is made involving total amount to be paid by the retailer, delivery date, delivery conditions and other legal aspects. A retailer while negotiating also talk about the conditions for the re-order.

Under Negotiation stage, retailer bargains with the supplier for available discounts and conditions of purchase. A retailer would like to know what will be the additional discount if he goes for bulk buying. What is cash discount? What is trading discount etc? Is there some off-season discount? Once the merchandise is negotiated for its quality, quantity and price, retailer places the order and concludes the buying exercise by paying the amount due. The retailer takes the title of items immediately after the purchase.

5. Buying Merchandise:

After negotiating the terms and conditions and agreed upon price, a retailer after placing the size of the order (quantity and quality of each merchandise category), pays the initial money as per the agreement. Big retailers usually place the order and pay the bills online through electronic data interchange (EDI) and quick response (QR) Inventory planning, small retailers due to limited sources, conclude purchase manually.

They fill up the order form and deposit it personally or through postage. With the technological advancement and easy access to internet facility, retailers place their orders online. The small retailers who are associated with big vendors also pay their bills and process orders through EDI and QR systems as per policy matters.

6. Acquiring Merchandise:

It means after paying for the invoices, retailer should receive the merchandise and stock it properly. While acquiring the merchandise, retailer physically receive the items, counts the supplies, pays the invoices, marks the items, displays the items and stock in godowns/warehouses to avoid any pilferage and damage. In case of centralized buying, goods are received by regional office/central warehouse and then transferred to chain stores as per their requirements and order received from them.

After paying the suppliers’ bills, retailer makes provision how and where the items should be received and stocked. Items should directly supplied to store or warehouse, is mentioned at the time of negotiation and merchandise payments.

Once the items are received, retailer next step is to make ensure that the items are stocked properly. Sometimes it may take long time to reach from warehouse to store, therefore, when orders are received, they must be checked for its quantity and quality. Invoices must be carefully checked for its description and amount printed to avoid any confusion with supplier later on.

When the merchandise has been procured and stocked, it will be issued to store/s whenever demand pertains. Therefore, retailer should have an eye on merchandise issued and the items left in the stock. Whenever the level of inventory comes close to reorder level, goods are ordered for fresh supplies.

Once a merchandise plan is implemented, it should be re-evaluated at regular interval of time by close monitoring of implementation plan with the objective of satisfying consumers.

In case of central buying, distribution management is the key to store performance. Buyers/concerned staff should take care while shifting merchandise to chain stores or warehouses.

Following precautions must be taken under this stage:

(i) Inspect the invoices physically for its accuracy. Once the invoices are signed and paid, vendor will not be responsible for any loss in transit or in case of missing items. Therefore, when orders are received, they must be thoroughly checked for size of order placed and any breakage/pilferage during transit.

(ii) While unloading merchandise, take precautions that their packing should not spoil. Further, keep the items at distance and at proper place as unloading generally causes breakage and mixing of items with one another.

Sources for Merchandise

Work directly with manufacturers

For many retailers, working directly with the manufacturers (like factories) is ideal because it eliminates middlemen like wholesalers. However, establishing that working relationship isn’t always easy.

Make your own products

It’s rare for medium to large businesses to make their own products, as it’s hard to keep up with demand. But it’s totally doable if you’re in the right niche and have a small team behind you who can meet demand while producing high-quality products.

Work with wholesalers

A wholesaler is a firm (or sometimes an individual) who purchases large quantities of goods from manufacturers. They store those items and then sell them to retailers just like you.

Wholesalers can take care of all the stress that comes with importing and warehousing the items. You don’t need to travel anywhere, and there are no shipping customs to deal with. All you need to do is place your orders.

Product Source

Events

Expos, buying shows, and other industry events offer numerous opportunities to learn about upcoming trends in your industry. More importantly, they enable you to get essential face time with manufacturers, wholesalers, suppliers and their merchandise, so you can see and touch materials or products firsthand.

Online Directories

SaleHoo, ThomasNet.com and Alibaba.com are a some of the online directories you can head to when looking for products and suppliers. (There are many others, of course, but we suggest you start with these because you don’t want to overwhelm yourself by browsing too many marketplaces.)

Both of these sites give you access to thousands of supplier profiles and offer search and browsing features so you can easily zero in on the products or vendors you need. The main difference is that ThomasNet focuses on suppliers in the US and in Canada, while Alibaba can direct you to suppliers in other countries.

Industry Associations

Most trade associations provide networking and directory services to help you connect with vendors. And in some cases, you don’t even have to be a member of an organization to take advantage of certain benefits.

Trade Publications

Don’t have the time or budget to attend events? Try specialty or trade magazines instead. Like trade shows, industry publications are great sources for product ideas and supplier information.

Their content could give you insights on the products others are selling and who’s supplying them. What’s more, a lot of vendors advertise on trade publications, so perusing them could put some noteworthy suppliers in your radar.

The distinction between “strategic” and “managerial” decision-making is commonly used to distinguish “two phases having different goals and based on different conceptual tools. Strategic planning concerns the choice of policies aiming at improving the competitive position of the firm, taking account of challenges and opportunities proposed by the competitive environment. On the other hand, managerial decision-making is focused on the implementation of specific targets.”

In retailing, the strategic plan is designed to set out the vision and provide guidance for retail decision-makers and provide an outline of how the product and service mix will optimize customer satisfaction. As part of the strategic planning process, it is customary for strategic planners to carry out a detailed environmental scan which seeks to identify trends and opportunities in the competitive environment, market environment, economic environment and statutory-political environment. The retail strategy is normally devised or reviewed every 3– 5 years by the chief executive officer.

The retailer also considers the overall strategic position and retail image

Customer analysis: Market segmentation, demographic, geographic and psychographic profile, values and attitudes, shopping habits, brand preferences, analysis of needs and wants, media habits.

Market analysis: Market size, stage of market, market competitiveness, market attractiveness, market trends.

Competition analysis: Availability of substitutes, competitor’s strengths and weaknesses, perceptual mapping, competitive trends

Review of product mix: Sales per square foot, stock-turnover rates, profitability per product line.

Internal analysis: Other capabilities e.g. human resource capability, technological capability, financial capability, ability to generate scale economies or economies of scope, trade relations, reputation, positioning, past performance.

Review of distribution channels: Lead-times between placing order and delivery, cost of distribution, cost efficiency of intermediaries.

Evaluation of the economics of the strategy: Cost-benefit analysis of planned activities.

Factors in Retail Strategy

• Incentive structure followed
• Pricing/discounting of the product
• Promotions planned
• Display attractiveness
• Placing of the product
• Incentive structure for the retailers
• Overall Consumer Behavior

Steps in Developing Retail Strategy

Objective Setting

A firm might pursue any number of objectives for any number of reasons. For example, an objective around sales could be expressed by total revenue, total units, or YOY (year over year) growth.

Yet these objectives, though all focused on sales, are not all the same. There are clear difference between those measures and what they might mean for an organization. Further, the measure is only part of the consideration. The stated objective might be made with an eye ultimately on profitability or market share or operational efficiency. Objective setting is not just stating a goal, ambition or target.

Situational Analysis

Situational analysis helps decision-makers in the firm understand what to do and how to do it. At its most basic level, it’s a multi-dimensional consideration of the context (the environment in which we’ll compete), organizational capabilities, customer, and competition. These factors describe the business environment, how our own abilities can deliver value relative to consumer needs, and the likely actions/reactions of our competitive set.

Customer Analysis

Customer analysis is a critical activity that ultimately helps focus marketing and sales resources more efficiently. It includes research into and analysis of consumer behavior, the results of which inform segmentation, targeting, and positioning. Thus, rather than marketing a product or actively trying to sell it across a wide swath of the total population, customer analysis helps break the population into smaller homogenous segments. From these, marketers select the sub-population of potential customers who are the most attractive and most accessible for targeting.

Tactical Planning

Tactical plans are the short-term actions the firm takes to affect the controllable elements of the strategy. For example, if a firm has the objective to “grow category sales by 4% by increasing merchandising and promotional activity,” a relevant tactic might be to plan robust promotional activity in key seasons. For example, this might mean that merchants engage their vendors in the soft drink and salty snacks categories to support promotions and allocate in-store space for merchandisers or store associates to build displays in advance of the New Year’s holiday or the Super Bowl. It could also mean that the corporate marketing team develops in-store circulars or television commercials to promote sale items around Thanksgiving, asking store managers to bring in shippers and high backstock levels to ensure sufficient inventory is kept on-hand. Each of these examples illustrate how a short-term tactical execution supports the broader objective of growing category sales by 4% by increasing merchandising and promotional activity.

Implementation and Control

Implementation and control refer to how the firm puts its strategic plan into place, including how it organizes cross-functionally and communicates priorities. Further, it also includes how the firm tracks progress toward its objectives, measuring performance so that adjustments can be made, if necessary. Certainly, a firm is responsible for managing its controllable variables. But robust monitoring and control systems help firms react and adjust to uncontrollable variable like changes to the business environment or specific competitive activity.

Retail Value Chain

The retail value chain defines a series of actions that enable businesses to sell their products to customers. Each action in the chain brings a portion of value to the entire process. The four steps in the retail value chain are creating the product, storing the inventory, distributing the goods and making the product available for consumers. Small businesses that participate in the retail value chain must be aware of how each of these processes operate.

The retail value chain is a series of activities that make it possible for businesses to sell goods to consumers. Each activity provides a small part of value to the overall process. Four steps are common in the retail value chain: manufacturer, warehouse, carrier, and supplier. All parts are necessary for retail stores to stock their shelves with consumer goods. Though each activity adds a small portion of cost to the products flowing into the retail store, the costs are typically less than the retail store going directly to each manufacturer for goods.

Manufacturers are the businesses that produce goods. They are commonly referred to as conversion agents. They take raw materials and labor as inputs, using these items to produce goods valued by customers. Few manufacturers actually have the ability to ship goods directly to retail venues. This requires the need for partners in the retail chain to take goods from the manufacturer to warehouses via carriers.

Warehouses store a variety of retail goods in their facilities from several manufacturers. They contract with a number of different producers to stock goods for easy distribution to retail stores. Larger retailers may have their own warehouses. This allows the retailers to locate distribution centers in strategic areas to deliver goods easily to retail stores.

Carriers represent trucking companies that move goods from one point to another. They deliver goods from manufacturers to warehouses and warehouses to retail stores. Their sole purpose in the retail value chain is to work as a service for each company. Retailers rarely have trucking divisions as part of their retail businesses. They contract this service out to save costs on insurance, fuel, wages, and maintenance.

Suppliers are the final step in the retail value chain. Retailers may own their own supply chains as part of their retail companies. These are the localized distribution centers that deliver goods straight to retail stores. Not all retail value chains have suppliers as part of their processes. Retailers can avoid these businesses by working directly with warehouses to deliver goods into their retail outlets.

Technology allows retailers to shorten the ordering process within the retail value chain. Electronic ordering ensures that retail stores order goods in a real-time format. This helps avoid stock outs and reduces the possibility of losing sales from consumers. Electronic systems also remove human flaws from the ordering process. Employees do not need to write paperwork or make phone calls to suppliers, warehouses, or manufacturers.

A shopper profile is a description of a customer or set of customers. It usually describes a business’ target or ideal customer and can include demographic and geographic information as well as interests and purchasing patterns.

Essentially, everyone shops differently and thus has different shopper profiles. Maybe your customers enjoy browsing slowly or perhaps they stick to a list and are in and out. Shopper profiles identify different buying behaviors and what ultimately drives a customer’s decision to make purchases.

Understanding your shoppers’ profiles how they shop and what drives them to buy; will help you cater your store’s shopping experience to your unique shoppers’ needs and increase sales.

It is sometimes difficult to understand who is actually a decision maker while purchasing when a customer enters the shop accompanying someone else. Thus, everyone who enters the shop is considered as a customer. Still, it is necessary to identify composition and origin of the customers.

Composition of Customers: It includes customers of various gender, age, economic and educational status, religion, nationality, and occupation.

Origin of Customer: From where the customer comes to shop, how much the customer travels to reach the shop, and which type of area the customer lives in.

Objective of Customer: Shopping or Buying? Shopping is visiting the shops with the intention of looking for new products and may or may not necessarily include buying. Buying means actually purchasing a product. What does the customer’s body language depict?

Types:

The Loyal Customer

Loyal customers, or regular customers, are every retailer’s favorite. The loyal customer is someone who visits your shop often and makes regular purchases. You might even know them by name and have a rapport with them.

The loyal customer is a particularly important shopper profile subset due to their potential for profitability. In fact, loyal shoppers are the most valuable type of customer, with one frequently reported statistic indicating that loyal customers spend an average of 33% more than new shoppers at every visit.

Educated Consumer

With increasing access to product information, many of today’s shoppers fall into the educated or well-informed shopper profile. The educated shopper researches products or a store’s inventory online, reads customer reviews, and scans general pricing information before visiting the store. They also typically have an idea of what they want to buy by the time they make it in.

The Educated Consumer’s Needs

While the educated shopper can be tricky to help, they do have a few needs that you can use your marketing to address. The educated buyer wants to see the online products that you have in-store. Additionally, even though they have done research, the educated buyer will still want to ask questions to be sure that they really understand your products before making a purchase.

For example, at my boutique, we would often get customers who clearly had viewed our website or social media pages before coming into the store. In this case, they always had questions and wanted to see the exact pieces they had been eyeing. By furthering their product knowledge and giving them a chance to see the items in person, we were able to elevate their in-store experience and satisfy their need for understanding.

How to Market to the Educated Consumer

The biggest thing you need to provide the educated buyer is a cross-channel shopping experience that adds value to what they already know. This includes continuously updated websites and merchandising displays, in-store only products or services, and very knowledgeable sales staff.

When working with the educated customer, you should:

• Keep your website and store up to date: Most educated shoppers will check out your store online before coming in so they can see your stock and get an idea of what they want to see. To avoid disappointment, you want to be sure that the things you offer online are also available in-store and that your website is up-to-date with all your new offerings.
• Offer a great value: Since educated shoppers typically already know about pricing and features, these factors won’t wow them. Offer something extra like product customization, exclusive features, a special member price, or at least information that they wouldn’t have been able to find elsewhere.
• Provide a positive shopping experience: Many shoppers return to retailers not because of their product selection or even price point, but rather because of the overall experience they had shopping with you. Your customer service, loyalty program, and merchandising will make or break your shopper’s time in your store, so enhance those elements to create something memorable and positive for your shoppers.
• Equip your staff with product knowledge: Be sure that your associates are experts on your products and can answer any questions and provide a level of expertise not found through online research. At my store, for example, we had a binder with product information that included sizing, typical life cycle, styling suggestions, and compositions. Associates could reference and study the binder in their spare time so that they were ready to answer any customer concerns.

Indecisive Patron

Indecisive shoppers are looking to make a purchase but are reluctant or hesitant to do so because of price, information overload, or insufficient information. I know I ran into this type of shopper all the time at my store. They would try things on, but struggle to make a decision and constantly make excuses as to why they shouldn’t buy the piece.

When working with indecisive shoppers, retailers should:

• Ask questions: Determine the shopper’s buying needs by asking open-ended questions about who and what they are shopping for so that you can give precise recommendations. This will allow you to provide better solutions to their problems and calm any hesitations.
• Give honest advice: Shoppers who have a hard time making a final purchasing decision will appreciate honest advice, including personal experience or feedback from other customers. Telling someone that a piece is unflattering or giving them a piece of honest advice will build trust and result in more sales.
• Use visuals and/or data: Signage and marketing tools that display features and benefits of the products will help shoppers weigh their options and better understand your products. Feedback on bestsellers, product comparisons, pricing information, and expert reviews will all help make the indecisive shopper more assured and ready to purchase.
• Have a flexible return policy: Having a return policy or warranty can help assuage any fears of the product not living up to expectations.
• Offer product suggestions: As we know, the indecisive shopper has strong buying intent; they just might not know exactly what they want. Offering product suggestions will help your customer feel like they are getting the best products put in front of them and will help them find something they will feel secure about.

Mission-Driven Shopper

Mission-driven buyers are on the hunt for particular products or are shopping from a list. They are even sometimes called “list shoppers” because they so often come with a physical litany of things they want to buy. Others have termed them “need-based” and “reluctant” shoppers because, for them, buying is driven strictly by need and not because they necessarily enjoy shopping.

Retailers should do the following:

• Offer buy-online, pickup in-store (BOPIS): Time-crunched shoppers often choose to purchase from stores that let them place orders online and pick up the same day. Offering pickup services will also completely cut out all of the actual shopping for a mission-driven buyer.
• Have gift guides ready: Make shoppers’ lives easier by offering gift guides and other inspirational materials that will take the thinking out of shopping and make your customers’ shopping missions easier to accomplish.
• Utilize cross-merchandising: Shoppers in a hurry will appreciate items conveniently placed, such as bread by the deli counter or limes next to the beer display. Consider what items are typically purchased together and merchandise them near each other for convenient shopping.
• Have a clear store layout: Having an easy-to-navigate shop primarily comes down to the store layout that you choose. Be sure that you create good traffic flow and clear lines of sight so your store is easy to shop.

Impulse Buyer

Impulse shoppers make unplanned purchases based on items that appeal to them in the moment. I am sure that you have been in line at the grocery store or convenience shop and have grabbed a pack of chips at checkout. That is an impulse buy.

Retailers looking to cater to impulse buyers can:

• Tell the story behind the product: Small businesses have the advantage when it comes to selling products with a story; highlight local makers and other small businesses or products that have a specific tie to the local community so that shoppers experience an emotional connection with the products in your store.
• Make it easy to buy: Since impulse shoppers are buying on a whim, they want to make their purchases quickly and easily. Lines will turn the impulse buyer away, so ensure you have adequate registers or equip your staff with mobile checkout devices so that no impulse sale is lost due to traffic flow.
• Use labels, signs, and instructions: You can simplify the impulse buyer’s shopping experience through clear product labels and instructions. Make your store easy to navigate and engage with the impulse buyer isn’t going to be asking for help to make their purchase, so make sure they don’t have to.
• Train an attentive staff: An attentive staff will make all the difference for the big-ticket impulse buyer. By making product suggestions, helping with sizing, and overall accelerating and simplifying your customer’s experience, your staff will be able to better capitalize on the impulse shopper.
• Place small, inexpensive items by the register: The register is one of the top places the impulse buyers make their move. Line your register with small, inexpensive items that people can add to their carts on a whim.

Showrooming Customer’s Needs

The showrooming customer uses their in-store experience to get a feel for the product, scout out its price, and ensure that they are making the right decision. They then choose to purchase online to get an easier shipping and handling process and the best price. If you can give the showrooming customers peace of mind and simplify their shopping process, you will meet their needs and convert them into an in-store sale.

Retailers should:

• Sell specialized or unique products: The easiest way to ensure that customers don’t purchase online from a competitor is by selling products they can only get from your store. Merchandise such as private label products, custom-made items, or pieces from local suppliers are great options for creating exclusivity around your products.
• Start a loyalty program: A points-based rewards or loyalty program will incentivize shoppers to purchase from your business instead of a different online store because they can eventually earn discounts or free products.
• Offer product customization: Offer free in-store monograms or engravings on certain products or with a minimum purchase to incentivize shoppers to purchase in-store.
• Have a user-friendly website: Not every customer will buy in-store; make sure your online store and social media profiles are up-to-date and user-friendly so shoppers can still buy from you online.
• Offer warranties and price matching: Showroomers are often searching for the best deal and assurance that they are getting a good product. Show them that you can provide solutions to those apprehensions with product warranties and price matching.
• Streamline a hassle-free shipping and handling process: Make yourself competitive with online retailers by offering shipping and local delivery services so that customers don’t have to worry about transporting items themselves.
• Offer assembly services: Set yourself above the online big-box stores by offering assembly services for relevant products. Remember, showrooming shoppers are looking for ease, so cater to that need.

Browser’s Needs

Typically, the browsing customer is motivated to make a purchase based on an experience or a connection. For example, a browser might come across a candle with a smell that reminds them of their childhood. Or, they might talk with a sales associate for an hour about a fancy cheese and then buy it because they know its history and have formed an attachment. Ultimately, these emotional connections are what drives the browser to make purchases.

Browsing shoppers are especially common in gift and souvenir shops, boutiques and apparel stores, bookshops, and any kind of hobby shop. They also might just be killing time. Consider how you can foster an emotional or special experience in your store without interrupting your browsing shoppers.

Retailers should do:

• Provide a warm welcome: Browsing customers don’t respond well to pushy sales tactics, but that doesn’t mean you should ignore them. Even if a customer is “just looking,” say hello, offer assistance, and inform them of any sales or promotions.
• Have a comfortable environment: Retailers should pay close attention to the lighting, music, cleanliness, and overall presentation of their store; wandering shoppers are more likely to spend time (and possibly make a purchase) in a store that is neat and inviting, rather than harsh or unorganized.
• Design an effective store layout: Since browsing customers are not directly interacting with store associates, your store layout and signage serve as the primary guide; make sure popular, profitable, and bestselling items are prominently displayed.
• Offer small trinkets and easy-to-transport items: Even if shoppers are just browsing, small gifts or trendy items can still catch their attention; be sure to have an assortment of items that are eye-catching and easy to carry, as well as clear signage that illustrates product benefits. Browsers are often out and about, so small things that they can take with them will be an easier sell for this shopper.
• Create product stories: Market your products so they have a story and people see them as more than just goods. Use signage and create displays that show how your products can fulfill a need or want and fit into your customers’ lives.
• Allow for self-sufficient shopping: Allow browsers the space they need to explore and don’t interrupt their shopping experience by making sure that they can find all the answers to their questions without working with an associate. Write instructions and answers to frequently asked questions on flyers and signs, label everything, and ensure your store is navigable.

Bargain Hunter’s Needs

As you might have guessed, what bargain hunters need is sales and deals. If you find that you have a large bargain shopping demographic at your store, you will need to create a pricing strategy or rewards system that allows you to constantly provide offerings that will satisfy your shoppers’ quests for deals.

Retailers can do:

• Host sales on a predictable schedule: Many retailers have clearance sales on certain days of the week; for example, Express regularly has 40% off sales online from 6 p.m. to midnight on Sundays.
• Use promotional pricing strategies: Promotional pricing is a marketing strategy that uses bundles, gift-with-purchase, or discount pricing to drive more sales while also providing shoppers with a good value.
• Try anchor pricing: This is another pricing strategy where you display the original price and your own to demonstrate that your price is better without necessarily having to run a sale.
• Clear out end-of-season merchandise: Most retailers have some leftover inventory at the end of the season; appeal to bargain shoppers by hosting a heavily advertised end-of-season sale to help move old products and make room for new ones.
• Organize flash sales: Choose a typically slow or quiet time of day or day of the week to host a limited-time sale where shoppers can get a discount on their total purchase. This will draw your bargain shoppers in when you traditionally have low sales.
• Offer points and rewards: In addition to traditional sales, you can also create a loyalty or rewards program where customers automatically get rewarded for shopping and can use their points to get money off their purchases.

A CRM, or customer relationship management system, is a software system that organizes all your business’s customers and leads so that you can easily stay in touch with them in a trackable way. A good CRM tool is critical to any business, but most CRM software is geared toward a business-to-business (B2B) model, which revolves around a long-format sales cycle that typically requires a deal pipeline.

A retail CRM, on the other hand, is optimized to help support the high frequency, repeat purchasing of a business-to-consumer (B2C) model. A good retail CRM will provide insights on when it’s best to reach out to a specific customer again and what the customer is likely looking for. For example, Endear’s CRM solution informs its users about a customer’s lifetime spend and their average order value (AOV), along with a thorough omnichannel order history so that sales associates know what to focus on in their outreach.

CRM systems are capable of gathering and storing data about individual customers.

Such data can include:

• Shopping patterns
• Demographic information
• Purchase history
• Contact information
• Preferences
• Customer service notes

Role of CRM in Retail business

Segmenting

Collecting all the information about the customers allows it to put your customers in different section so you can attend them accordingly. This way you can segment your market. There might be families, youngsters, vegetarian, non vegetarian, new buyers, long term customers, heavy purchase customers, lighter purchase customers, etc. The segmentation in your market helps you in providing better strategy that suits your customers.

Customer history

CRM stores all the customer information and profile like their last purchase, business cards, phone numbers. This helps in recording all the history of a customer so you know each one of them individually and you know who are your regular customers and what are their needs. Which also helps you in for seeing the demands and getting better business and makes the customers”™ experience better at your store.

Tracking

CRM software helps you in tracking all the customers individually. This provides you the clear information as to which customers are beneficial for you and which are not. And which customers have proven to be loyal which have not. So you can also provide them better service and at times reward your loyal customers to keep up their loyalty and get more buyers indirectly.

Purchase tracking

CRM allows you to track each customer”™s purchase separately so you know their interests and if their product had any issue or any damage. This way you will be able to provide them better service by having their interests included in their sms and emails or newsletters. In case of damage or issue you will be able to provide them with the same item in lower price in their next purchase or even give free service, etc to provide them to gain more customer satisfaction.

Promotions

Promotions helps you target the right audience as it tracks each customer. Therefore, you can manage them putting in groups or even individually. This will help you provide them better service. And when a customer visits your website you can accordingly look into what they are looking for and include the promotion of that particular product in their newsletter. For example you have a sports related store and a customer looked into some fitness wear hence you can include the promotion of that product in their newsletter or emails, etc.

Loyalty

CRM allows you to focus on each customer individually hence you can pay attention to their needs more closely. This way you can also focus on your long term customers and provide them with points, bonuses and rewards which will help you gain customer loyalty. This way you can have better business as loyalty will bring you committed customers which will set the level of your sale and profit in the right track.

New buyers

CRM does not only manage your old customers or existing customers for you. It also has an intelligence that helps you identify potential buyers and convert them into leads which can turn into customers. CRM can help you get their attention by identifying them for your sales department who can then go ahead and deliver their interests to them from your business”™ side with sophistication so they show up at your door soon.

Cost effective

It allows you to manage the customers in the most cost-effective way. You can send out bulk sms and email easily updating them about the upcoming sale, offers and also allows you to take care of them individually by focusing on their individual needs. CRM implementation is a simple and cost-effective process it also saves you more income as you will have lesser staff and lesser resources to spend on.

Benefits of CRM in the Retail Sector

Once you understand the importance of CRM in the retail sector.

• Make your customers happier
• Strengthen customer loyalty
• Improve company performance
• Spend less money on ineffective marketing
• Create successful marketing campaigns with a higher ROI
• Increase customer retention rate
• Encourage repeat sales and return customers