To achieve maximum success in retailing, merchandising strategies and promotional plans must be highly integrated. Moreover, because promotion and merchandising are interdependent entities, retailers pay a great deal of attention to coordinating, scheduling and integrating the two.
Merchandising encompasses the buying, selling and control of merchandise. Specific merchandising tasks include estimating demand, buying merchandise, planning inventories, designing floor layout, pricing merchandise, supervising merchandising budgets, advertising and promoting merchandise, creating displays and signage, designing window dressings and establishing external as well as internal store ambience.
"Retail operations," in contrast, typically include such activities as building maintenance, receiving goods, fulfillment and delivery, stocking and purchasing non-merchandise goods and services.
Merchandise strategy sets goals and objectives for merchandising activities, determining the types, quality and other characteristics of goods and services bought and sold.
The choice of merchandise and suppliers has far-reaching implications for retail operations. Higher-quality goods, for example, generally require higher levels of customer service, advertising, visual merchandising and more highly trained sales clerks.
Retailers also make decisions regarding width and depth of assortment. Width of assortment refers to the number of different goods and service lines that the retailer elects to offer; depth of assortment refers to the variety of merchandise in each distinct line of goods and services.
Once those types of decisions are ironed out, buyers evaluate and select merchandise. They identify and evaluate suppliers, negotiate prices and terms, select suppliers and purchase merchandise.
Merchandising also involves pricing strategy, price, price adjustments and consumer deals, a form of sales promotion that tends to attract deal-prone segments through price-based incentives. One recent trend in retail pricing and merchandising is a movement toward "everyday low prices."
Started by manufacturers, everyday low prices attempted to forestall forward buying by retailers (i.e., stocking up on goods when manufacturers offer trade sales, holding the acquisitions in inventory and selling them at full price to patrons at a later date). A number of retailers embraced the everyday low pricing strategy as a way to stabilize sales at an acceptable level, establish a consistent store image and manage consumer expectations.
Visual merchandising concerns the design of the exterior of the store and the layout of its interior, including displays and window dressings, colors, lighting, textures, flooring, props, signage, store layout and floor plans. Customers' perceptions of ambience and merchandise derive, in significant part, from their judgments concerning the exterior and interior designs.
Exterior design communicates at a glance the type and quality of a store. Interior store layout starts with the allocation of floor space. Selling space refers to the area allotted to displaying and demonstrating merchandise and conducting transactions. Merchandise space is the area set aside for holding inventory. And customer space includes public bathroom and lounge facilities, seating arrangements, dressing and waiting room facilities, restaurants, elevators and people-moving devices, gift wrapping and other customer service areas, parking and aisles.
Once the floor plan is mapped and implemented, retailers focus on achieving the desired image and sales goals through "atmospherics" or store ambience and merchandise display. The internal backdrop for atmospherics and visual merchandising includes such interior design choices as flooring, fixtures, lighting, walls and ceilings, textures and windows.
Merchandise display, a critical facet of visual merchandising, involves the selection, organization and arrangement of displays and merchandise. The major function of display is to entice and inform shoppers, leading them toward the purchase decision.
Several guidelines for planning and arranging merchandise displays have been advanced:
- Develop a powerful, unique selling proposition.
- Use accepted design principles to direct the shopper to the dominant element of the display, thus reinforcing the selling proposition.
- Keep the display as simple as possible.
- Avoid clutter.
- Limit visual tension by reducing the number of competing elements in a display.
- Eliminate any cue or element that distracts from the sales message.
- Use displays that, when visible to the customer, relate to the selling proposition and merchandise being displayed.
- Make the merchandise, not the props and displays themselves, take up the bulk of display space.
- Use lighting, color, movement and music that are appropriate to the season and selling message.
- Avoid mixing styles unless there is an exceptional justification.
- Consider the "pop culture" surrounding the merchandise when designing a display.
The creative message strategy
Rather than being strategically oriented, as is advertising, promotion assumes a tactical or temporal orientation. The bulk of retail sales promotions targets opportunities expected to arise during the current, short-term planning period, generally one year or less.
In its "Dictionary of Marketing Terms," the American Marketing Association defines sales promotion as "the media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer or wholesaler in order to stimulate trial, increase consumer demand or improve product availability."
Other commonly used sales promotion tools are special events, samples, contests, sweepstakes, continuity programs, product and service literature, premiums, bonus packs, coupons, N-fors (e.g., offering one shirt for $35 and a second shirt for $20), rebates and other consumer price deals and point-of-purchase materials.
Once merchandisers identify a promotional opportunity, a target audience is identified in terms of product-usage patterns, preferences for sales promotion and other relevant behavioral characteristics. Dates and times for implementation of the promotion are then identified and scheduled, taking into account the promotional programs of competitors.
Sales promotion tools
Savvy merchandisers identify the sales promotion tools best suited to accomplish their varied promotional objectives over the course of the planning period. For example, retailers faced with the task of launching a new product into a category marked by a high degree of brand switching are best served by demonstrations linked to price savings or favorable finance terms, displays offering deals on prices and other consumer price deals.
Conversely, retailers need to consider free samples, trial-size packages, demonstrations, consumer shows and point-of-purchase literature when their objective is to launch a new family brand into a category characterized by high brand loyalty.
When the goal entails the need to explain, magnify and promote a brand's determinant attribute (the benefit or function of a brand or service that is most desired by buyers), retailers generally use POP displays, product literature, demonstrations, contests or sweepstakes. To associate specific feelings with a store or brand, retailers use special events, premiums and prizes.
Sales promotion in the U.S. is a huge business, and is used heavily by retailers and manufactures alike. Manufacturers aim trade sales promotions at retailers to influence their product selection decisions. Likewise, retailers receive from manufacturers a good deal of assistance with consumer sales promotions as part of their retail support and assistance programs.
Manufacturers and retailers frequently join forces with one another to influence consumers through joint consumer sales promotion. Joint sales promotions entail special deals offered to consumers by two or more brands, manufacturers or retailers. They combine resources to capitalize on opportunities for sales growth and profits or to reach other key marketing objectives.
As the cost of promotions increases, joint sales promotions make sense. Sales promotions can backfire, however. An over-reliance on consumer price deals, for example, can condition shoppers to buy only when a brand is on sale or the store is having a special promotion.
As retailers spend more and more on sales promotions, competitive pressures are likely to increase. However, it is important to remain mindful of the strategic retail plan, environmental conditions and the goals of merchandising as resources are allocated to promotion.