In this article we will discuss about:- 1. Definitions of Merchandising 2. Types of Merchandise 3. Merchandise Management 4. Principles 5. Functions (Task).


  1. Definitions of Merchandising
  2. Types of Merchandise
  3. Merchandise Management
  4. Principles of Merchandising
  5. Functions (Task) of Merchandising

1. Definitions of Merchandising:

Merchandise is a broader concept than a product. It include various features with which a product is offered at the store. Merchandising is the process and function of designing and delivering the product to ensure customers satisfaction and meet the objective of profit making to the organization. There are different opinions and definitions on merchandising.


AMA – American Marketing Association has defined merchandising as “Planning involved in marketing right merchandise, at right place at right time in the right quantities at the right price”. E.g. – Amazon(dot)com, promises to deliver around 1 crore products within 24 hours and payment after delivery.

Quicker(dot)com promises to sell anytime for a right price quickly. Similarly Big Bazar Easy day, ‘More’ etc. Make ‘attractive’ offer of wide variety of the product that are categorised and displayed in their store. They are offered with attractive price and other benefits that all can be summarized as merchandising.

Merchandising can be defined as “Planning, Buying, Assorting, Promoting Placing, Setting and Replenishing the Goods”. Goods bought must be sold or replenished the unsold stock will be a burden on finance. So planning need to be made what kind of product is to be brought and how it should be priced, promoted and placed so that customer is attracted towards the product.

Grace Kunz has defined it as the planning developing and presenting of product lines for identified target markets with regard to pricing, assorting, styling and timing. Identify the customers, understand their need, buy those goods, categorise and place them in a style that appeals to visiting customer.


It is said a customer makes his final decision of buying or going for alternative when he visits the shop. If the “offer” at the counter pleases he may decide to buy, that is what is merchandising such ‘offer’ is a bundle of expectations that a customer expects to be delivered to him.

It is basically product itself that should be of customers liking. Along with this display of product, it price, discount, service and other features are taken as ‘offer’ that must appeal and attract a customer.

What you buy must be sold the offer or the package i.e., product, price, place and promotion must appeal the visitor, to ensure sale.

Merchandising is planning and control of merchandise inventory of the retail form in a manner which balances between expectation of target customer and strategy of the firm.


Merchandising has two broad objectives:

1. Buy and store the inventory or product that is expected or needed by the people.

2. Achieve the objective of the business i.e., Growth, profit etc., that is possible when inventory is sold. It means store or buy that product that be sold is the basic philosophy of merchandising, which benefits both the customer and also the businessmen. That is customer is pleased as he gets product of his desire and retailer gets profit as merchandise is sold.

2. Types of Merchandise:


Merchandise can be broadly classified under following heads:

1. Staple:

These are necessaries of life that are used everyday. E.g. – Food, Clothing, Stationery, Cosmetics, toiletries etc.

They have regular and stable demand. Fluctuation in demand supply and price is minimum.


2. Fashion:

Consumption of these goods is dependent on current fashion. Demand lasts until its fashion. Depending on nature of goods, fashion may be for seasons or years. Retailer has to stocks the product until the fashion lasts. If the stock remains unsold as goods become out of fashion, has he has to adopt marketing strategy like discount, ‘buy one get one offer’ to clear stock.

3. Fads:

Goods that are in demand for a very short period of time. It can be said as fashion which lasts for a very short period of time. It is risky to store such goods in bulk quantity as there is no guarantee regarding duration of demand.


4. Seasonal:

Goods that are demand in particular seasons. Based on weather features, we can classify seasons as Monsoon, Summer, Winter accordingly specific products like, Umbrella, Sweaters, Cool Goggles, soft drinks, Ice creams etc., are demanded accordingly the product is to be stored. Similarly season of festivals, marriage have its own demand for sweets, Jewellery, Clothing, etc.

3. Merchandise Management:

Merchandise management is planning and controlling of retailers inventories and investment in that. It ensures optimum investment and ensure adequate ROI keeping in objectives of organisation. David Gilbert has defined it as, Planning and implementation of the acquisition, handling and monitoring of merchandise categories for an identified retail organisation.


Merchandise management is concerned with:

(1) Merchandise planning what to buy.

(2) Acquisition – from whom to buy – source of supply

(3) Handling – Placing merchandise in store.

(4) Monitoring the stock levels and inventory and merchandise movement.

Merchandise management is necessary to:


i. Identify segment of customer to be served and category of product to be served to them

ii. Studying the demand, taste fashion that has impact on stock levels.

Based on that study make adequate planning as to what to buy and how to promote its sale.

Ensuring optimum investment in each category of product without allowing for either-

(1) Shortage of stock that will harm sales and reduce, returns.

(2) Excess of stock that may force a firm to undertake acts like discount, bargain sale that will have impact on profitability.


Merchandise being basic element of current asset a large amount of investment is tied up in that. It has to be ensured that such investment is not wasted (unsold stock) blocked (No adequate turn over) and it must ensure adequate ROI i.e., Return an Investment.

4. Principles of Merchandising:

Merchandising is delivery of right product at right place and right time to the targeted customer. Successful operation of merchandising is dependent on following principles.

1. Offer What Customer Wants:

Retailer must offer in his store what the customer wants or desires. He must select the segment of customer to whom he has to serve (like rich, middle class, Youngsters, kids, ladies) assemble the goods that they expect, assort and Offer them at a price, style and content etc., that is liked by them.

2. Prepare Merchandise Plan:


Merchandiser has to finalise the merchandise plan. Such plan must be based on demands and specialty of each store and department. Micro details like types of products, brands, price category etc., have to be planned.

Such planning must be based on past records, consider the likely changes in fashion, consumption habits. Merchandise has to consult store manager in finalising merchandise plan. He has also to analyse financial implication of investment on merchandise to meet the profit targets.

3. Selection of Sources of Supply:

It is said goods well bought are half sold. Merchandiser has to select vendors or suppliers who meet his requirements in terms price, quality, delivery and reliability. He has to search the list of suppliers available locally or at regional or international level depending on his need and select the supplies who meets his demands. Merchandiser has to negotiate with the vendor the terms of buying price, terms of delivery, payment base.

4. Consistency and Change:

There should be consistency in merchandise assortment. Regular customers are habituated to particular lifestyle, products, price etc. Retailers should be capable of offering regularly as to what his customer’s desire. Along with this he has to introduce an element of novelty, bringing the gradual change in product, style of operation etc. to match the changing trend and demand of his customers.


5. Present Right Assortment:

Retailers has to present right assortments of merchandise, i.e., types of product, brand, price range, and other features that the regular customers expects. Products must be presented category wise offering convenience and comfort to the customer in selection of product.

6. CRM:

Sale to a customer is not a once day affair or a single transaction. A customer who visits a store must repeatedly visit the store. Retailer has to develop relationship with the customers.

This is possible when:

i. Retailer understands need of each particulars customer. Pay personal attention to visiting customer.


ii. Attend any problems faced by customer through after sale service.

iii. Offer courteous service and make shopping a pleasing experience.

This is called CRM that is necessary to attract and retain customers.

7. Customer Delight:

A successful retailer not just satisfies visiting customer by offering the product he wants, he surprises him with much more. Retailer should ensure customers delight through new products, offers, discounts, installment, returns and other facility something that is unique, which may please and delight a customer and make him to loyal be organisation.

5. Functions (Task) of Merchandising:

The task of merchandising is to select the merchandise to be sold by the organisation. Buy it and ensure its replenishment, by adopting different sales or price strategies. The main function of merchandising is buying which may be centralized or decentralised.

In case of centralized buying, merchandise required for all the stores is purchased by Head office. In case decentralized buying each individual stores will buy its merchandise on its own subject to approval by Head office. Organisations like Specialty Stores, Discount houses Mail order business will practice centralized system.

A Department store will have decentralized system. Factors like bulk purchase, discount facility, economy in transportation warehousing facilities determine the purchase policy.

Merchandiser plays an important role in the success of any retail organization. It is he who selects the goods to be sold. If his selection is right, retail outlets will not have difficulty in selling the goods. Firm may have team of merchandisers, either a merchandiser for each store or for each line of product depending on size and resources of organisation.

Merchandiser and merchandise departments have following functions:

1. Planning:

Merchandiser has to prepare purchase budget. Purchase of merchandise is based on estimated sales, objectives of organisation and expected returns. Merchandise plan is prepared for the entire organization i.e., store wise, department and also product wise. Plan also determines new products to be added and old products to be deleted based on prospects of sales.

2. Directing:

Firm may have specialized buyers who are expert in finding suppliers and negotiate with them. Merchandise department gives guidelines and directions to buying department regarding quantity and budget of purchase. They may also direct the terms of purchase. As per the broad guidelines and directions, buyers make timely purchase of merchandise to match the needs of organisation.

3. Co-Ordinating:

Merchandiser undertakes balancing, timing and synchronizing the activities of buying and selling. He takes periodic stock report from each stores, monitors stock level, and determines purchases to be made. He also co-ordinates buying efforts of different buyers of the organisation.

4. Controlling:

He controls entire operations of merchandising i.e., (a) buying (b) issue of merchandise to stores, (c) visual display (d) pricing of sale, (e) sales promotion activities. He periodically takes stock reports determine financial implication of investment on merchandise. Ascertains return on investment store wise, category wise and product wise to determine which product contributing to the profits of the organisation.

Cost cutting measures are adopted to increase profitable lines. Sections and products that have no future may be eliminated. He controls the entire functioning to ensure that merchandising operations are profitable.

The task of merchandising is broadly classified into:

(a) Planners:

A planner acts as link between stores and buyer. He prepares merchandise plan and gives direction to purchase issue to stores. Whenever there is demand. He undertakes stock taking and determines merchandise stock levels based on objectives and profitability.

(b) Buyers:

A buyers acts as link between vendors (suppliers of merchandise) and the organisation. He functions under supervision and control of merchandise manager. Following are his roles and responsibilities.

Function of Buyers:

A merchandise buyer performs following activities:

1. Planning and selecting the merchandise as per the orders and direction of the organisation.

2. Ordering and procuring the merchandise on behalf of entire organisation.

3. Selection of vendors, development and management of vendors list.

4. Negotiation with vendors like price, discount, delivery and other terms relating to merchandise buying.

5. Monitoring the inventory levels at stores and delivering the merchandise.

6. Ensure that the stores have adequate stock levels.

7. Inform the merchandise manager regarding new trends, fashions, technology in the area of merchandise.

A merchandise buyer is described as:

1. Change Agent:

As he influences buying habits and behaviour of customers. Customer will buy the products that are bought by in buyer. He brings in novelty by introducing new products, in the stores and there by brings in change in consumption habits of customers.

2. Gatekeeper:

He procures goods from suppliers and delivers them to stores for sale, which are ultimately sold the customers.