The importance of Merchandising is as under
(1) Nucleus of retail : Merchandising is the core of the retail operations. It is the heart of the retailing activity. Merchandising gives retailers more variety and assorted products keeping the SKUs full and also fulfilling the customer’s needs. It also helps in deciding the pricing of the products and increases the profitability of the outlet.
(2) Differentiation : With every retailer trying to get a large share of customers, merchandising creates a differentiating factor from retailers. The assortment of products will decide the retailer’s success. For example, Westside keeps only private labels, thereby differentiating itself from Shoppers Stop or Pantaloons where all brands are available. In the same way, Fabindia sells only ethnic Khadi clothes which no other retailer sells.
(3) Cutting-edge Competition : Competition has led many retailers to offer wafer thin margin profits and to stay afloat in order to attract the Indian customers using low prices. For this, many merchandisers have introduced private labels and priced them below the national brands in order to earn higher profits. For example, Shoppers Stop has considerable sale from their private label ‘STOP’, enabling the merchandisers and retailers to earn better profit. In Big Bazaar, Tasty Treat is their private label.
(4) Better merchandise means better profits : As better marketing of products leads to better profits, in the same way better merchandise means better profits. The better is the merchandise in the store, the higher is the number of customers that will walk into the store. For example, Ikea, which is the world’s best store for furniture, offers a wide range of well-designed, functional home furnishing products at prices so low that many people can afford.
(5) Efficient merchandise management practices : Efficient merchandising practices involves the effective use of technology, resulting in building bonds and fostering relationships with vendors since they play a major role in the world of retailing. For example, Spencer’s and Hindustan UniLever Limited (HUL) have greater ties with each other. Fabindia has over the years build strong ties with rural villagers for sourcing their raw material that is khadi and cotton.
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