Five Rights to Merchandising

Your success as a retailer depends almost entirely on the five rights to merchandising as espoused by the Fashion Institute of Technology. These rights are not entitlements, rather each represents the correct way to ensure that your products are sold. Inventory that stays on your shelves costs you money. However, high demand inventory can maximize your profits, helping to ensure retailing success.

To ensure supply chain success, having the right product on the market is the first right to merchandising. The Boston Consulting Group in cooperation with the Wharton School of Business notes that collaboration and coordination are essential elements to making this happen. Extensive research is required to ensure that demand for the product exists and that all departments are focused on successfully bringing this product to market.

Merchandisers need to have a place to put their items on display for consumer review. This may include a store window, a retail floor display and online through the company's website. Product placement in movies and on television is another way for you to market your wares. In the movie, “I Robot,” Will Smith opened up a box of Converse All-Stars sneakers, a scene that some critics had difficulty relating to the plot.

Fashion merchandisers introduce their product lines many months in advance to gauge buyer interest and to expedite orders. Extensive lead time is needed to work with suppliers who will take existing designers and develop output based on anticipated demand. Products are placed on display at stores several months before demand reaches its peak. For example, stores will often have seasonal merchandise on display months ahead of a holiday, such as Christmas. This allows retailers to increase its orders if early demand proves strong or limit future demand if inventory languishes.

Finding the right price point can spell the difference between making a profit on an item or taking a loss. One of the easiest ways to seat a price is to employ a cost-plus pricing strategy. Under this arrangement, the merchandiser considers her cost for the item and then adds a profit margin or mark up to determine the selling price. Variations of this strategy can also include fixed and variable costs with some flexibility to adjust pricing if demand is not strong enough to support a higher, initial price.

Having enough product on hand can ensure that supply meets demand. Supply can be affected by the amount of storage space available, how fast these products can be manufactured and supplier availability. Demand is based largely on consumer appeal for the product and the price. A lower price can increase demand, while a higher price can restrict demand. Developing a linear equation can help the retailer find the right price point to coincide with demand.