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Merchandise Category By, VINAY H N

Merchandise Category

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Page 1: Merchandise Category

Merchandise Category

By,

VINAY H N

Page 2: Merchandise Category

Category ManagementCategory Management (Merchandise Category) is a very

important concept / method of Merchandise Management.

A Category is a basic unit of analysis for making Merchandising decisions.

Category Management is a retailing concept in which the range of products 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).

Page 3: Merchandise Category

• Technique used by retailers• Product is sub-divided into categories that reflect purchasing behavior of target

customers.

Eg.: Supermarkets and Mass Merchandisers

Store assortments

Food

Perishables

Dairy Products Beef

Fruit / Vegetables

Fruit Vegetable

Non Food

Fashion

Men’s Clothing

Ladies Clothing

Household goods

Kitchenware DIY

Category Management

Each category is run as a "mini business" (Business Unit) in its own right, with its own set of turnover and/or profitability targets and strategies. Introduction of Category Management in a business tends to alter the relationship between retailer and supplier.

Page 4: Merchandise Category

Rationale for Category Management

One key reason for the introduction of Category Management was the retailers' desire for suppliers to add value to their (i.e. the retailer's) business rather than just the supplier's own.

For example, in a category containing brands A and B, the situation could arise such that every time brand A promoted its products, the sales of brand B would go down by the amount that brand A would increase, resulting in no net gain for the retailer.

Page 5: Merchandise Category

Components of Category Management

Strategy

Business Process

Performance Measurement

Organizational Capabilities

Information Technology

Trading Partner Relationships

These are six components which are key to the functioning of category management. Two of these are considered essential without which Category Management cannot be started and are therefore, called core components.

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The Category Management Business Process

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Does Category Management Really Work?The process of category management has been widely implemented by retailers

in the mature markets.Category Management is a tool that can be used by the retailer to attract their customer’s.

The successful adoption of this process by Pantaloon Retail (India) Limited.

In the year 2000-01, the company adopted the process of Category Management in order to meet the challenges of an ever-changing retail environment. The business was segregated into eight categories:Men’s Formal WearMen’s Casual WearMen’s Knits & AccessoriesLadies Western WearLadies Ethnic WearKids WearInfant Wear andHome Needs

Page 8: Merchandise Category

Communication between the category Mangers and the shop executive increased.

This helped reduce the gap between the understanding of the consumer’s needs and creating products to suit their needs.

The response time was reduced dramatically and the evolution of trends were spotted at an early stage.

Continue:

Another category which includes perfumes, jewellery, cosmetics, footwear, etc. has been introduced with the growth of the business.

This classification of categories was done on the basis of the volume of business generated by the products in the category and the profitability per square feet of retail space.

The empowering of the category manager brought about a large number of changes within the organization:

The successful adoption of category management at Pantaloon shows us how the returns on a particular product / category can be maximized by keeping the focus on the customer.

Page 9: Merchandise Category

Category Performance MeasuresCategory performance measures need to be established for measuring category performance.

Typical category performance measures include:1) Sales: The increase in sales in actual rupee terms, the growth over last year, the

sales per square foot of area allocated etc.

2) Profits: gross profits in Rupees, Gross Profit per square foot, Gross margins % etc.

3) Market Share: Market share achieved within the said market and the changes in the growth rates.

4) Inventory Turnover: The turnover of stock achieved in the warehouse and the retail stores.

5) Changes in the Assortment: This would cover the number of SKUs (stock-keeping units) carried, number of new products introduced etc.

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Visual merchandising

Page 11: Merchandise Category

Visual merchandising

Visual merchandising is the activity of promoting the sale of goods, especially by their presentation in retail outlets.

Visual merchandising is one of the final stages in trying to set out a store in a way that customers will find attractive and appealing and it should follow and reflect the principles that underpin the store’s image. Visual merchandising is the way one displays 'goods for sale' in the most attractive manner with the end purpose of making a sale. "If it does not sell, it is not visual merchandising."

Page 12: Merchandise Category

Visual merchandising starts with the store building itself. The management then decides on the store design to reflect the products the store is going to sell and how to create a warm, friendly, and approachable atmosphere for its potential customers.

Many elements can be used by visual merchandisers in creating displays, including colour, lighting, space, product information, sensory inputs such as smell, touch, and sound as well as technologies such as digital displays and interactive installations.

Page 13: Merchandise Category

Purpose of Visual MerchandisingRetail professionals display to make the shopping

experience more comfortable, convenient and customer friendly by:

a) Making it easier for the shopper to locate the desired category and merchandise.

b) Making it easier for the shopper to self-select.c) Making it possible for the shopper to co-ordinate &

accessorize.d) Informing about the latest fashion trends by highlighting them

at strategic locations.

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Fixtures

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Fixtures are used for storing and displaying merchandise. They may be floor fixtures or wall fixtures and are manufactured in various materials like wood, glass, steel and synthetic. Examples of fixtures include tables, racks, stands, shelves, gondolas, bins and other materials, which may be used to display merchandise. Ideally, fixtures should be flexible so that size can be varied to suit the merchandise being displayed.

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Global Sourcing

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MeaningIn general: Global sourcing is a term used to describe

practice of sourcing from the global market for goods and services across geopolitical boundaries.

In Retailing Management: Global sourcing nothing but introducing private labels to the market by large retailers.

For example: the Future Group’s has marked an investment of Rs.200 crore towards building its private labels like Dreamline, DJ&C, Tasty Treat and Fresh & Pure.

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Strategic Relationships with Vendor

Page 19: Merchandise Category

Strategic Relationships

A Strategic Relationship, also called a Partnering Relationship.

The maintaining strong vendor relationship is an important method of developing a sustainable competitive advantage.

For example, collaborative planning, forecasting, and replenishment (CPFR) systems cannot operate effectively without the vendor and retailer making a commitment to work together and invest in the relationship.

Page 20: Merchandise Category

Example for strong vendor relationshipProcter & Gamble and Wal-Mart Are Partners

Historically, Procter & Gamble (P&G) has had enormous leverage and dominated its relationship with retailers. Its brands are so popular that every retailer must carry them. But, with consolidation in the retail industry, large retailers such as Wall-Mart have the power to demand low prices and great service from their vendors.

Today, Wal-Mart and P&G have learned to work together and have good relationship.

This relationship benefits all parties. Customer gets lower prices and high product availability. P&G has reduced order-processing costs and inventory shrinkage. P&G produces according to demand. Wal-Mart needs less inventory as well.

Page 21: Merchandise Category

Some ways to maintain good vendor relationships are described below:

Dedicated ManagerProgress ReportPlan in AdvanceLoyaltyExplain Your Business GoalsAvoid the Blame GameTrainingAsk for ongoing responsibilityOffer to help

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THANK YOU