Advantages & Disadvantages of Merchandising
Merchandising is the process of managing the movement, marketing, presentation and sales of resale products to your customers. It includes all facets of sales forecasting, buying and displaying merchandise in store to appeal to customers. Merchandising is necessary for resale companies, but it does have some pros and cons as a business function.
Effective merchandising contributes to marketing and sales optimization, which in turn aids in gross profit maximization. Understanding the entire process of acquiring the right amount of products at the right price and right time, allocating the products to stores in the right quantities, and displaying them appropriately in stores are critical strengths of retail merchandising. Those companies that merchandise well are able to establish a low cost basis and sell at high price points by accurately meeting customer demand.
Merchandising can also contribute to the acquisition and development of loyal customer relationships. By providing good value to customers and product assortments they want, you entice them to return. Part of merchandising is awareness of when demand for one product ends and demand for another begins. Keeping fresh assortments and attractive displays motivates buyers to return more often and to buy more stuff. Loyal customer relationships are key to long-term success.
As with any significant business function, merchandising has costs. First, retailers normally pay salaries to merchandise managers, planners and buyers. Large chains often have full- or part-time merchandisers in each store. While buying is a distinct and inherent resale function, the planning, forecasting and display elements go above and beyond buying and take time, money and other resources. Paying associates to set displays, stock shelves, move products around and sell to customers is an expensive part of the merchandising system as well.
Merchandising is a never-ending, always-in-progress business process. This means it requires constant oversight, review, goal-setting, planning, software upgrades and inventory management. Any major miscalculation in forecasting, buying, pricing, marketing or sales can severely affect your company's bottom line. Company leaders must fully recognize the impact of merchandise and give it consideration during strategic planning processes. Constant time and attention given to merchandise management is time away from other management activities.