Merchandise Matters in Retail

Pradeep Salgaonkar

The writer explains the concept of Retail Merchandise Management and its importance to the retail business

Availability of what the customers require at a retail outlet is critical to its success, and thus managing merchandise of a retail store calls for discipline, astuteness and strong gut feel. Retail Merchandise Management (RMM) is a tedious and continuous process that ensures you carry optimum merchandise that the customers want, with due care taken to be sure that you neither understock nor overstock goods. In retail, it so happens that if a customer does not find the desired product at a retail store, s/he will move away to a competitor and sometimes never to return to your business. Non-availability of merchandise and empty shelves leave a negative impression on the customers’ mind and they become reluctant to visit the store in the near future. Importantly, a retailer cannot afford to lose even a single customer, but will have to guarantee that, every one leaves the store with a smile. Proper merchandise management facilitates retailers to meet customer demand without running out of stock or carrying excess products thereby preventing revenue losses to business.

Some key issues in RMM
Lead time: In managing merchandise, one must realise that it takes reasonable time for goods to reach the store from the supplier’s unit owing to various reasons. Depending on the lead time to fulfil orders, a retailer must hold sufficient stock to offer to the customers during this period. ‘Just-In-Time’ is a wonderful technique if circumstances are amenable for it to work; but most times this system does not work efficiently due to poor logistics issues. Thus, holding safety stock is the best option for a retailer to ensure that customer requirements are fulfilled during lead time. Alternately, retailers will have to be a party to cultivate and develop suppliers for required merchandise within arm’s reach so as to fulfil its requirements just-in-time. The number of items that a store is required to stock, in order to meet customer requirements, is huge with large number of suppliers in chain, and this complicates the merchandise management task. Streamlining and minimising number of suppliers would be a logical solution in this case.

Centralised Merchandise Record: It makes great sense to maintain centralised records of purchases, in-hand stock and also future requirements, for easy and quick review and decision making. Irrespective of the inventory control method followed by the store, having updated records in one centralised place for overall control is critical for smooth merchandise management. This calls for a high degree of self-discipline on part of the employees involved in this activity to ensure that records are updated on a daily basis or instantly as and when stock is received or issued. Even a slight lethargy in updating this record would later cascade to shortfalls in merchandise on the shelves very soon. It is best to maintain and monitor merchandise records centrally and regularly.

Inventory figures to hold: Equally important decision in merchandise management is to decide on the number of units of each product to hold, both in store and on shelves. As a thumb rule, every retailer must see that there are no empty shelves; at the same time there is no overcrowding or dumping of goods on the shelves. Both these situations put the customers off and contributes to displeasure of shopping. Realistic estimates on inventory figures may be worked out based on past sales for a specific period and/or gut feel – the best companion of a retailer.

Regular stock checking: A sure way not to fall short of stock is regular stock checking – both on software and physical stock. There are instances where the software shows the product, while physically the item is missing, and if it happens in front of a customer, it is an embarrassing situation. Some disciplined retailers continuously take review of merchandise and maintain a ‘to be ordered list’ that facilitates placing repurchase orders easily.
Re-order time and quantity: ‘When to order’ and ‘how much to order’ are two major decisions in purchasing of stock for refill. While lead time (time taken by supplier to fill the order) is critical, knowing the quantity to order is equally important. A retailer friend of mine dealing in stationary items narrated an incident whereby he had bought 500 units of a puzzle game because the company said its price is going to increase by `50 from the next month. My friend was waiting to encash on the forth- coming school season after two months when the schools would reopen and he would get bulk orders for this puzzle from various schools. However, the company did not send the revised price list to him even after two months, and as such he had to sell the stock at the same old rates with no benefits but loses owing to blocked funds and storage space plus the regular discount that he offered to schools from his side.

Traffic flow analysis within store and sales value: Keeping check on the customers’ movements within the store to various counters and calculating the sales value generated per customer per counter, helps in figuring out the dead spots or non performing counters within the store. Such non performing counters should either be discarded or changed and stocked with fast moving goods or items those are most sought after. One needs to identify and take an immediate call on the goods that are slow moving or not moving, as it leads to blocked money. If need be, minor changes in the store layout could be carried out based on the information from traffic flow analysis. It is essential to have every counter within the store as an active counter with high sales value generation.

Markdowns, promotions & returns on time: Handling non-moving merchandise, near to expiry goods, old items, wrong orders received etc. is very critical in smooth merchandise management. Instant decision making on these categories of merchandise is required. It makes no business sense for sitting on non-moving merchandise, or old items or out of fashion items for long. Rather, it makes better sense to clear off these type of goods as early as possible, even at a partial loss via markdowns, discounts or schemes to customers. What can be returned to the supplier as per returns policy, should be returned well in time.

Pilferages and losses: One of the major reasons for revenue loss of a retail store is reduction in inventory due to pilferages and losses. They can happen through various sources like store employees, customers, rodents, expiry, breakages/damages, theft etc. In retail business, the biggest amount of pilferages happen at the entry point where the goods are received from the supplier. The software and the bills would reflect the exact number of units as ordered, but the physical units in stock would be short. Goods are accounted for, but instead of being in the store stock they are missing. This is one area that needs to be managed very critically by retailers. The second most common is shoplifting by customers. But this can be controlled to a large extent with proper surveillance system. Continuous monitoring and visual inspection and stock taking would help to reduce pilferages and loses to a large extent.

Merchandise is the backbone of a retail business and needs to be upright and updated every moment, catering to the changing needs of modern digitised, informed, time pressed customers. Hence, making available what the customer requires at the right time in the right quantity and quality is the primary responsibility of a retailer.
And, self-discipline coupled with quick action on merchandise management issues would certainly help to reap better benefits. Remember, merchandise matters in retail

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