Importance of Retail Merchandising

For a business to make sales, its products and services should be visible and displayed in an appealing manner, a process referred to as merchandising. Merchandising includes product display and packaging, as well as all the advertising techniques used to promote and sell goods to consumers.

Increases Traffic

Good merchandising drives visitors to your store. An attractive exterior influences a customer's decision to come inside and do business. Brightly colored sales signs, a well-kept structure and a clean, well-organized parking lot are some factors that encourage customers to come into your store.

Increases Sales

Effective merchandising has a significant positive impact on sales. Pricing, proper product display, packaging, promotional marketing and sales signs can shoot sales upwards and give the customers a memorable shopping experience. Customers are more likely to return in the future if they find your store attractive and well organized.

Builds Loyalty

Customers are more likely to return to a store that offers top quality products in a customer-friendly and easy-to-access setting. Offering fresh product arrangements in appealing displays entices shoppers to return frequently, building long-term loyal customer relationships.

Better Space Management

Good merchandising involves the proper arrangement of aisles, display fixtures, shelves and the entire layout of the retail space. Efficient space management creates usable space that accommodates more people and makes the whole shopping process a pleasant experience. If space is efficiently managed, there may not be need to renovate or expand the existing retail space.

Retailers, Consumer, Big Data Transforming Category Management

For the past 20 years, category management has been embraced by consumer packaged goods (CPG) brand owners and retailers alike for its ability to increase profitability. The discipline provides the primary platform for CPG companies to communicate strategic and tactical category recommendations to retailers. Real Results magazine spoke with Gordon Wade, managing partner and director of best practices of the Category Management Association (CMA), about some of the recent trends that have the potential to transform the category management discipline.

What trends are causing CPG brand owners to focus more on the category management process as a means to drive growth?

There are several trends in the CPG marketing ecosystem that are increasing the importance of category-based thinking. First, the retailer's control of the shopper's experience at the shelf is growing, while traditional brandbuilding tools and brand equity is declining. Retail buyers want to hear how a CPG brand is going to help grow the category or its margins. Second, it is becoming more important to market directly to the shopper. Just as retail buyers think in terms of categories, shoppers think in terms of need satisfaction at the category level. For instance, a consumer's shopping list is more likely to include category needs (e.g., detergent or cookies) instead of brands (e.g., Tide or Nabisco). Today's consumers are less brand loyal, and instead use e-commerce and mobile technology to find the best deal. Finally, big data — gathered from sources such as loyalty cards, social media interactions and shopping-related apps — offers promising results for those who can harness insights from it and apply it to the category management process.

Shoppers are more empowered today than ever before. Modern retailing offers them a myriad of ways to purchase a product — whether it's online, through a brick-and-mortar store, or via a mobile device. How is this affecting the traditional approach to category management?

With more choices than ever before, shoppers no longer rely on one retail format to meet all of their disparate needs. As such, retailers are seeing volume and profit leak from their categories. One way retailers are gaining insight into which categories are being impacted is by analyzing their loyalty card data. Given these category disruptions, CPG companies can add a lot of value to retailers by presenting shopper insights about how they can help drive category growth. It also opens the door for CPG manufacturers to collaborate with retailers on multi-category solutions to recapture some of the lost volume. For example, a food retailer might leverage its strength in healthy foods to sell volume in other categories such as foot care, blood monitoring devices and skincare by creating a multi-category solution for diabetic care.

How is big data impacting category management?

Big data is often used to describe the gigabytes of disparate data that can be gathered from multiple sources — such as point of sale, loyalty cards, customer feedback and social media interaction — that if analyzed properly could reveal valuable insights into shopper attitudes and behaviors. Yet, most CPG companies lack the analytical approach, software with predictive analytics, and trained analysts to extract meaningful conclusions and actionable insights from the data. Marketers that can determine how to harness disparate data sets of behavior — such as buying behavior, social media behavior, mass media consumption behavior and lifestyle behavior — to learn more about need states and behavior at the household level will be most successful. Data at the household level could then be rolled up into shopper segment insights and then into geographic store clusters. Those insights could also be applied to the supply chain to enhance forecasting and replenishment capabilities. It will take the collaboration of software designers, social media gurus, retailers and marketers to extract these types of shopper insights from big data, and then the marketers will need to determine how to leverage those insights to alter buying behaviors. Mastering big data is quite possibly the greatest marketing opportunity of this decade.

How can CPG companies determine where they fall on the category management curve?

The CMA has identified five stages on the category management maturity curve — embryonic, adopting, advancing, excelling and aspiring — based on a company's approach to data, analytics and software, organizational skills, and process and culture. For instance, a company in the embryonic stage may share limited geographic data with its retail partners, and work only with Microsoft tools, without using any analytics. A company in this stage of the maturity curve tends to view the retailer as the adversary and focuses on sales and trade-dollar analysis. However, companies in the advancing stage are more likely to leverage retail optimization tools to analyze data at the household level. For companies at this stage, at least half of their category management staff will have completed certification, and the company will be recognized as a captain in major accounts. The aspiring stage is what we envision as the realistic future of the category management discipline, where big data and predictive analytics are integrated across the value chain, driving planning and executional excellence. We are not there yet, but we believe it is possible.

For companies that want to get serious about category management, what resources should they consider?

First off, achieving category management mastery will require investments in personnel and software. A larger, better trained staff with access to advanced planning and analytics technology will be necessary to mine gigabytes of household-level data for insights, respond to retailers' demand for individual store assortments and manage a more complex supply chain.

Given that category management is dependent on other corporate functions such as marketing, product development and sales for its success, how can CPG companies calculate the return on investment (ROI) of their category management investments?

While calculating the cost of category management programs is simple, determining the sales revenue that can be directly attributable to the category management function is more challenging. Some companies try to capture the ROI based on calculating the value of attaining category captaincy, or the profitability of an account that has accepted a new item. Others attempt to quantify the value of a specific planogram option, or incremental account activity that can be attributed to insights derived from category management analysis. The CMA offers two additional alternatives — certification and benchmarking — as ways for companies to measure their category management functions against industry standards.

Online Web Merchandising

There is a growing community online especially on the daily use of social media such as twitter, facebook, google+, linkedin, instagram, and many other social networking sites than ever before.  We are seeing more and more people interacting with one another, truly a world without borders.

Selling products online allows you to automate your business process and potentially bring in sales, regardless of the time of day. Web merchandising is the process of marketing products on your website for sale. If you have a website, improving your Web merchandising has the potential to increase your sales and help you make more money.

Web Merchandising

In the retail world, merchandising is a major part of the success of businesses. How the product is displayed and shown to the customer has an impact on sales. In the online world, the way products and goods are displayed is just as important. Web merchandising deals with the way a product is laid out on your website. The area of merchandising could include the layout of the website, the pictures you use and the features you choose to highlight.

Navigation

In the area of Web merchandising, the navigation of your website is important. Customers need to be able to get around and see the various products that you have. For example, having a "View all" link so that your customers can easily see all of the products that you have for sale could be helpful. You also need to allow your customers to click on specific products and get more information. Dividing your products into different categories can help your customers easily find what they are looking for as well.

Features and Benefits

In Web merchandising, you also need to pay attention to how you list the features and benefits. Instead of only showing a picture of the item or device, also include prominent features and benefits that could be attractive to your target customer. For example, you may want to list one or two benefits of the product in bold with a different font or with highlighting around the words. This gets the attention of your customers and helps you increase sales.

Make It Easy to Buy

If you want to move merchandise online, you also need to focus on making it easy to buy. This typically includes putting a link to buy the product up near the top of the page and then once again after the description. For those who do not want to read all the details, put a buy link at the beginning. If a customer wants more information, the second link allows him to read about the product and then make a buying decision. Offer a payment processor that allows for a variety of payments to be accepted.

Merchandising and Retail Techniques

Merchandising is the arrangement of products in a physical or online store to maximize sales. The objective of merchandising is to close the sale after advertising campaigns bring customers into the store. Good merchandising frees up time, makes the selling process simpler, enhances the buying experience for consumers and drives sales growth.

Basic Techniques

Basic merchandising techniques include displaying related merchandise together, simple and clean displays, ample aisle space, well-stocked shelves and prominent featuring of promotional items. For example, a furniture store may create a mock living room with different pieces of furniture items and fixtures to generate sales in these products. Attractive floor displays of seasonal goods in high-traffic areas also drive higher sales and profits. The National Retail Hardware Association recommends storing slow-moving and low-priced items away from customers to encourage sales of high-margin items.

Enhancing the Appeal

The first impression is usually the most important one, which is why window displays in brick-and-mortar stores and landing-page layouts in e-commerce stores are so important. They grab customers' attention and bring them into the store, which is not a simple matter in a mall with dozens of retailers. A bakery may highlight its attractive cakes and chocolate creations, while a clothing retailer may display the most recent fashions in its window display. Proper use of lighting creates a mood and illuminates the merchandise, especially during peak holiday selling seasons.

Store Layout

The type of store usually dictates the floor and shelf layout. For example, grocery stores should have enough aisle space for shoppers to move their carts and accompanying toddlers around when they are doing their shopping. Retailers may often move items to the front of the shelves to avoid giving the impression of not having enough items on stock. Retail managers may use the sales-per-square-foot metric, which is the ratio of sales to total shelf and floor display space, to assess the effectiveness of a merchandising strategy and make the necessary adjustments.

Online Merchandising

E-commerce stores should have a simple layout and an effective search tool for customers to browse through the store effortlessly. Software has advanced to the point where a simple mouse rollover of an item activates a pop-up window displaying the product details and even multimedia demonstrations of how to use the product. Online merchandising techniques include cross-selling, which is the highlighting of related products in search results, making special promotions appear on every page and offering user-friendly electronic checkout facilities.

Other Techniques

End caps, which are the ends of store shelves, and power islands, which are free-standing displays strategically placed in high-traffic store areas, may draw attention to new and high-margin products. Taste testing, product demonstrations and how-to training sessions also highlight certain items and make the customer buying experience more enjoyable.

Modern Category Management

Traditional category management is an old concept in a brave new world. Retailers need a new solution as they enable the level of differentiation necessary to attract consumers with an ever-grow­ing number of shopping alternatives.

Merchants need a better way to create differenti­ated customer experiences, build solid category strategies, design compelling assortments, plan productive planograms, and efficiently price and promote to the market—and they need it now. Enabling all this will, in most of today’s retailers, require changes to processes tools and organiza­tional structures. It also means better connecting existing processes, and bringing together disparate parts of an organization like never before to deliver a seamless customer experience.

Today, successful category management encom­passes a broader set of capabilities than in the past, including: category role and strategy, macro space allocation, financial budgeting, assortment plan­ning, planogramming, price optimization, private brand development, promotion and event plan­ning, and joint business planning with vendors. In addition to an expanded functional footprint, the beginning and end of the processes a category manager needs to manage have expanded. Many are now defining this work as spanning from the initial development of the category strategy and role, through to the completed reset of the store shelf and online assortment. This is a much wider view of the world than what category management traditionally included, and creates a big part of the challenge.

Leading retailers are already planning for the changes and tools needed to integrate these capabilities and define new ways of planning and managing categories, and these efforts are paying dividends. Retailers such as Target, Kroger and Walmart have seen impressive results from re­vamping category management, including a 2% to 4% increase in sales, a 2% to 3% increase in margin and a 10% to 15% increase in inventory productivity.

But despite these positive efforts, most retailers remain stuck in the past, partially due to fatigue from traditional category management. And even those who have addressed parts of the issue would benefit from a more sophisticated approach. Leading retailers will invest in holistic changes to their processes, tools, organization and culture to enable a necessary shift in the way they plan and manage categories.

Tackling these historical inefficiencies and problems requires addressing seven key facets.

1. Real customer centricity—walk a mile in your customer’s shoes

Today, many retail organizations are far less customer-centric than they claim to be. But in the modern retailer-customer relationship, the customer holds all the cards, and the retailer can’t afford to be anything but hyper-attentive to her expectations. As a result, everyone throughout the organiza­tion—including everyone involved in the category management process—needs to have a laser focus on the consumer and her needs and wants at all times. Creating truly compelling products and customer experiences should be the common thread linking all parts of the organization and category management process.

Leading organizations are going about this in several ways. Some, like Hy-Vee and Lowe’s, are creating the position of chief customer officer to drive customer-focused improvements across channels and functional groups. Others are taking a closer look at loyalty and social media data to understand how their core customers shop their stores and identify opportunities to capture share by satisfying unmet needs. For example, consider a retailer who found that a key customer segment shopped only 20% of their basket with that retailer across four categories. By taking a customer-centric approach, the retailer was able to identify catego­ries in which the needs of that customer were going unmet and exploit that gap to increase basket ownership to 40% across 10 categories.

2. True integration—you’re probably not as integrated as you think

Highly siloed organizations—within functional groups and across channels—have led to processes choked by a series of handoffs and put category management, and ultimately the customer experi­ence, at risk of falling victim to a game of telephone. Given the breadth of processes that need to be successfully orchestrated to improve category management, handoffs must be effective and efficient. In other words, integration is key. This means removing handoffs wherever possible, and when not possible, ensuring everything is done to make them as smooth as possible. Process and organizational design can provide some relief here by carefully considering what can be lost in translation.

However, integrated systems are providing the biggest benefits in tackling these challenges. Software plat­forms have made significant gains in the past 10 years to expand the functionality required to span the gaps between planning, execution and functional areas. Traditional supply chain solutions now offer tools to plan space, assortments and financials, and conversely, planning suites are expanding into supply manage­ment. These tools have fundamentally changed how processes are executed and have made syncing data, timing and weighing tradeoffs much simpler. But they’re big, expensive and can stress organizations ill-equipped to manage this magnitude of change. Adoption is picking up, but slowly.

3. Strong category strategies—if it’s not strategic, it’s not a strategy

Today, many category strategies are lacking neces­sary consumer insights and are ultimately not linked back into the category management process in an efficient way. Developing a strong category strategy takes a well-crafted process in which a wide array of data inputs drive unique insights, which narrow in on a set of opportunities and thereby define required initiatives and potential benefits. The process should culmi­nate in a game plan for the category that defines the steps, required investments, and expected finan­cial or operational benefits. As category manage­ment has grown in breadth and sophistication, it has driven up the need for a robust go-to-market strategy the team can rally around and cascade across support teams. Successfully cascading category strategies starts with defining each category’s role within the portfo­lio. It’s also important to coordinate strategies and tactics related to assortment, pricing, promotions and placement across channels, and categories and functions and financial plans should be tied to category-level targets, providing a means for measuring success.

Throughout this wide array of processes—from financial budgeting to planogramming, in-store execution and marketing—it’s critical that the consumer can identify the strategy as it was intend­ed. For example, the value presented in a pricing strategy—competitiveness, brand consistency and value—needs to be aligned with the products that make up that product line—good, better, best. If these are disjointed, the value proposition is muddled, the customer will be confused, and the experience falls flat.

4. Clean, accurate data—it’s true what they say about garbage in

Retailers are awash in an ever-growing flood of data and information, but many are not positioned to use it to its fullest. For example, while most organizations have a data quality strategy in place, 94% suspect the data is inaccurate in some way, according to Experian. Accuracy is clearly a signifi­cant hurdle to many organizations’ abilities to harness analytics to drive decision making and improve the customer experience.

Getting the most out of all this data also means integrating it across the business, providing one version of the truth across integrated planning processes and connecting the dots across channels, categories and competitors to develop a true picture of the consumer’s needs and behavior. This includes a better understanding of past perfor­mance and consumer needs than currently exists for most retailers. Retailers who can achieve this soon will hold a tremendous competitive advantage, as only 37% of retailers currently have a contact data quality strategy in place that supports a single view of the customer, according to Experian.

5. Actionable insights—in the end, you have to do something

Ensuring the data is accurate and integrated is only half the battle—retailers are also challenged to derive actionable insights from that data and use it to drive smart decision making. Many organi­zations don’t devote enough time to this important exercise. As a rule of thumb, category manage­ment teams spend 80% of their time gathering and organizing data and only 20% of their time using it to develop actionable insights. Plus, insights are often supplier focused—as they provide much of the data—at the expense of the retailer’s customer experience and loyalty.

To really unlock value from their data, retailers first need to create a centralized analytics team that can identify and develop core insights for category teams. Secondly, these insights should be organized into three key categories—customers, clusters and channel; we call these lenses. The first lens, customers, prioritizes using data to figure out how to influence key customer segments. The second lens, clusters, focuses on harnessing demographic and consumer data to develop store clusters that require similar go-to-market strategies. Finally, the channel lens helps address the growing omnichannel challenge as click-and-collect and delivery models expand.

The key is to derive insights with an eye toward decision making and action. Organizing, funneling and interpreting data requires the correct structure and people to make it work efficiently.

6. Localization and personalization—how will you manage expanding complexity?

One of the industry’s biggest mandates is develop­ing personalized and pervasive relationships with customers across channels—one-to-one retailing. Consumers expect to be recognized and treated as individuals, and those expectations are spurring significant changes to all aspects of retail opera­tions. Modern category management is tasked with “assorting to the individual,” whether that’s an individual consumer or an individual store. Localized and customized pricing is the first push for many retailers, including Target, Kroger and Staples, which recently made news with its sophisticated pricing system that changes online pricing based on a customer’s proximity to competitors’ stores.

But this focus on granularity will also drive other changes. In assortment planning it will mean a continued evolution from national to regional to store-level, and finally, to individually curated assortments and experiences across channels. In space management, retailers will need to switch from a “one-size-fits-all” standardized approach to a store-level approach that’s flexible enough to allow localized adjacencies and shelf and product arrangements. And of course, marketing, promo­tions and pricing will change as well, as all move from a market-based approach to one that’s highly dynamic and individualized. These shifts will mean an exponential increase in complexity as increas­ingly granular decisions need to be made across more and more stores, customers, channels, func­tional areas and processes. While tools and systems will relieve the burden of computational work and coordinating decisions, this increasing granularity will require a significant redesign of key processes and organizations.

7. Clear roadmap—manage and measure progress

Of course, fixing so many problems won’t be a cinch, and benefits require investment. The neces­sary changes span many processes and organiza­tional silos—and we’ve seen that one cannot be optimized without making improvements to another. Additionally, modern category management can add operational complexity that will need to be supported by enablers such as new process, tools and organizational structures. (See Exhibit 1.)

Organizations that are able to successfully trans­form their category management processes will start with a clear vision, multiyear roadmap, and consensus and commitment among key leaders across functions. The new approach to category management will also require new tools—with considerable data needs—and new processes and organizational change, both of which come with significant cultural implications. Starting small will help prove out the value opportunities, while a focus on change management will ensure that new ways of thinking take root. Finally, focusing on set­ting and measuring key metrics helps demonstrate benefits and build accountability and ownership.

Although it’s not easy, transforming category man­agement is quickly becoming necessary. As more and more retailers start to address bits and pieces of the issue—78% of retailers plan to revamp their category management processes, according to RSR— those who pull it off now will be well positioned for what the future holds. Meanwhile, those who stand still run the risk of watching their customers jump ship for retailers who are proactively improving their category management capabilities to be more cus­tomer-focused, integrated and analytically driven.

CASE STUDY: HOLISTIC CATEGORY MANAGEMENT

Issue: A large, multiregional North American grocer struggled with flat or declining sales for several years—the result of a hypercompetitive market, rising supply chain costs and intense margin pressure from a heavy reliance on discounts and promotions.

Solution: The grocer built customer-centric clusters based on key demographic data to inform localized assortments and implemented leading assortment planning capabilities to build these assortments. They also established a robust and easily repeatable category strategy development process supported by robust analytics. Finally, a new space planning organization and tools helped the retailer build better planograms optimized to inventory turns.

Result: Sales increased 2% to 4% for pilot categories across stores, and that was with only 10% to 15% of each cluster’s assortment differentiated from the core assortment.

Branding and Packaging

Ever wonder why some products sells higher than others? Does it make sense to buy the more expensive ones with the perceived notion that its because of quality that is why they cost more?

This may hold true in some cases but the secret lies in the brand identity and the package that can give rise to companies to ask for better premium on their pricing.

In my years of working for some major retailers, I learned that quality is important but the real driver for a companies growth is their willingness to spend on developing their brands and invest on the packaging.  One company I've worked for develops and imports beauty products, though we can simply import as what the factories would be churning out but we know we can only mark-up those products so much, so eventually we have to conceptualize our own brand name, repackage the products and in this way we are able to mark up our products at a comfortable margin profit.

In one instance I was visiting a factory in China and I was surprised at what the manufacturing company has been producing, quality, sturdy toy merchandise from childrens gift sets to cookware to educational toys and dolls.  Knowing the price all the more surprised me as these are so low-priced that I had this idea of wanting to purchase and sell at a higher margin and yet with the kind of packaging the manufacturer is churning out their factory, I don't think it will give us much premium for pricing it higher.

I then came to the factory owner and discussed options on how to improve their packaging, I submitted several possible brand names I would like these to be produced for us exclusively.  After five months of package development, we finally had our first repackage-re-branded products in our store-shelves and it was a hefty margin we have put into these products, with not much fanfare or local advertising, we had these sold like hotcakes.  It boosted our store facade, we gained new customer followings and what is important, we have consistently grew our sales year on year.

Understanding what will tickle the consumer, and seeing a beautifully packaged products in your store shelves will entice buyers to take out those precious pocket to spend on a well developed products.  Initially it doesn't cost much so long as you have a quality-produced merchandise, but in the long term that investment will even raked in a hefty profit with a very good margin not to mention the brand loyalty it will reaped for your company.

On another point, the mere conceptualizing of a brand must also come with a long term vision, it must not be just sheer personal bias and instinct.  I met an importer and he came to me to ask how come, the recently produced product I managed to put on the shelves sells more, while his company does the same, I told him to show me his brand, and I when I had seen the brand, I asked him, who gave the brand name, he said, He came up with the name, I asked him, where he got the name for the products, he mentioned to me that its his wife's name.

I have to honestly advice him that the name does not connote any class to have it as a product brand, he was startled and angrily said, that it does not have anything to do with the name of his wife and explained alot of his take why that brand name should remain and even to some extent tell me that his wife has class.

It was funny but I wasn't telling him his wife doesn't have class.  You see even if one has so much money to squander on a trial and error, one must never take things to an emotional level and be sentimental about it.

I bumped into the same businessman several years later in a Canton Fair, and while we were having lunch together, he told me that he should have listened to my advice several years ago, he has shelved his "wife's brand of merchandise" since he loss a lot of money and not being able to sell the voluminous inventories of the "brand" he so wanted.  This time I was more wary to comment, so I just kept mum about it and just listened to what he has to say.

Retail Merchandising vs Retail Buying

Retail stores in the fashion industry depend on keeping the latest styles in stock. Fashion buying and merchandising are two primary roles in establishing a store full of clothing and accessories that meet the demands of customers. The jobs are related with some similar duties, and some employers may combine the duties into one position, but there are subtle differences in the jobs.

Merchandising Purpose

A fashion merchandiser aims to create a store experience that appeals to customers. She is sometimes involved in selecting the items that are available in the store, but she also focuses on how to set up those items within the store. The way the store is set up affects the flow of customers through the space as well as which pieces are highlighted through prominent display. The goal of a fashion merchandiser is to meet the needs of the customers while increasing sales for the business.

Buying Purpose

The primary focus of the fashion buyer is to choose the clothing and accessories that will go into the store. This duty is sometimes incorporated into the merchandising position, or the two may collaborate to make buying decisions. The buyer stays current on the latest fashion trends to decide what customers might want to buy next. She wades through the various upcoming trends to decide which ones are ideal for that specific store. She orders and tracks the merchandise as it is shipped from the supplier.

Merchandising Skills

Merchandisers need both fashion and business skills to succeed. They need a sense of the target demographic and what they want to see when they walk into the store. He/she needs an understanding of how to display items to make them more appealing to increase sales. Her fashion knowledge enables her to decide which pieces to highlight through displays. He/she must have the skills and physical ability to set up store displays for the merchandise. Some aspects of marketing are possibly included in the job description.

Buying Skills

A fashion buyer needs a clear understanding of what type of merchandise the store wants. This requires the analysis of the typical customer, as well as fashion trends. She needs the mathematical skills to buy within the target budget to supply the store with products that fit the customers' desired price range. He/she works with a variety of people, including store management, merchandisers and the clothing suppliers. Dealing with the suppliers requires the business knowledge to negotiate prices, communicate and ensure the items are shipped on time.

Retailing and Social Media

The Philippines has been named the social media capital of the world in 2011 for the most sign up in the biggest social networking site Facebook. according to research from 24/7 Wall Street after topping the social penetration scale rate of 93.9% ahead of the world's #2 - Israel that posted 91%, #3-Turkey 90.9%, and world's #4 - Chile 90.2%.

In 2012, The Philippines ranked #10 as a 9.5M strong Twitter users, who exchange tweets, information, conversation and news feeds to fellow twitter users.

Not to mention the other social media platforms such as Instagram, Google+, Linkedin and other social networking sites.  Yet if we look at the social media presence of local and international brands in the Philippines, there is still a huge vacuum and most are absent from reaching out the dynamic changing market behavior. Many traditional retailers still haven't foreseen the future of doing business in the fast-growing netizen community.

Some may have place their names on a Facebook Page, but if you will carefully look at their corporate or brand pages, there's really not much value to it.  Sometimes, to some point, they are not even being updated of their latest trends, products, mostly indicating their sale events or after-event photos.

What the digital and social media consumers need is an interactive, up-to-date and the latest information about the company or brands, information that may prove useful in the social media community to have a better judgement to spend on the given brand or products.  The new way of doing shopping is a well-informed consumer, its no longer the same as a shopper walking into a department store or supermarkets and pick up anything through impulse behavior.  People these days in the age of digital commerce have become more sophisticated.

The number of online social media users has been growing leaps and bounds from the time Facebook first came to be recognize  for use by many Filipinos in 2009 and Twitter in 2008.  But the traditional retailers have never catched up with the growing dominance of people staying longer in these social media sites and are still lurking expenditures on traditional forms of advertising.

With the growing commercial value of these social networking platforms, that has taken the mobile use by storm either through their Iphones, smartphones and tablets beyond their desktop or laptap usage, there is the likelihood of the those traditional retailers who has not taken advantage of the power of social networking sites to be left behind and gradually become obsolete towards the new generation of digital natives, online netizens.

Why has this been happening? Perhaps because most traditional even international product brands are owned, franchised, by traditional thinking businessmen and entrepreneurs, who are just looking at one side of the retail sales, especially the local chinese businessmen who perhaps in their traditional way of making their sales, are not aware of the growing social interactions since they themselves wouldn't have tried signing up for a facebook or twitter account.  Sometimes its having the first hand use of these networking sites, and in their daily interaction, can they truly grasp the power of the purse of these so-called social networking consumers.

Examples of Merchandising

Merchandising is a way for companies or individuals to create a revenue stream out of a significant event or person. For example, the newest catchphrase made famous on the Internet can spawn a line of T-shirts. Merchandising is often planned as part of a way to gain exposure for an event or person. Common examples of merchandising will help you to better understand how merchandising is used to generate revenue.

Movies

Movie merchandising was almost non-existent until George Lucas pitched the first "Star Wars" movie to Twentieth Century Fox Film Corp. Lucas managed to secure a deal where he would have complete control, and be the sole beneficiary of, all of the merchandising for the film. When the film and the merchandise became a financial success, movies began to focus on merchandising as part of their revenue creation. Merchandising in movies includes toys based on buildings or vehicles in the movie, action figures based on movie characters, prints of the movie poster and T-shirts with catchphrases and images from the movie. The real money for George didn't come from box office receipts.  Between 1977 and 1978, Star Wars sold $100 million worth of toys.  35 years later and Star Wars themed toys have generated $12 billion worth of revenues. And keep in mind, after the first film George owned 100% of the rights to the entire franchise.The next five Star Wars movies would go on to earn an additional $3.5 billion at the box office.In total, the Star Wars empire has sold $4 billion worth of DVD's and VHS, $3 billion worth of video games, $2 billion worth of books and another $1.3 billion through various other licensing deals.The brings the grand revenue total after 35 years worth of Star Wars licensing to $27 billion. After expenses, taxes, fees, George Lucas had earned himself an impressive $3.3 billion net worth by 2012. Then Disney came calling and gave him another $4 billion to purchase the entire franchise outright.

Political Campaigns

Political campaigns tend to generate a great deal of merchandise that includes T-shirts, hats, coffee mugs and buttons. Some of the merchandise is given away for free while some is sold to help finance the campaign. Presidential political campaign merchandise tends to be sought by collectors.

Sports Merchandising

Professional sports leagues are big business in North America and around the world. The merchandise associated with sports teams generates a significant amount of revenue. The leagues license the images and names of their teams to companies that then put them on replica jerseys, keychains, a wide range of clothing, sports equipment, posters and wall plaques, just to name a few items. In 2009, sports merchandising in the U.S. and Canada totaled $12.5 billion. Worldwide retail sales of sports merchandise was approximately $17.5 billion.

Advertising Icons

Companies rely on the success of their advertising to drive revenue and keep the product names in consumers' minds. Marketing firms sometimes come up with characters and images that become part of popular culture. These advertising icons wind up being featured on merchandising that ranges from T-shirts to collectible product packaging. Coca-Cola is one of the most collected brands of product advertising in the world, according to the Cartoons and Icons website. Other famous icons that wind up on various forms of merchandise are the Pillsbury Dough Boy, the Campbell's Soup Kids and the talking M&Ms.

Merchandising and Sales

If you're thinking of starting a retail business, two prominent terms you'll likely come across are sales and merchandising. Both functions are part of the marketing mix, which includes product, pricing, promotion and place, also known as channels of distribution. While the two functions are closely related, there are some key differences to be aware of.

Merchandising

Merchandising is the process of presenting products for sale in a retail environment in ways that influence shoppers' buying decisions. This includes determining the optimal shelf location for each product, building eye-catching displays that attract potential buyers, and using signage to provide pricing and other product information. Merchandising also involves the selection of the proper product mix to carry in the store. Special pricing and promotions are another part of the merchandising process.

Sales

Sales occur when the consumer actually selects the product and completes the purchasing transaction. In a retail environment, stores often employ salespeople to service customers and to facilitate the sales process. Retail salespeople help implement the store's merchandising program by performing tasks such as executing current sales promotions. In many stores, salespeople also perform merchandising functions like building displays and arranging products on shelves to conform to predetermined layouts called planograms.

Relationship

Although sales and merchandising are two different functions, they are closely related. Effective merchandising leads to sales, even without the aid of a salesperson, as it induces customers to make purchases. For example, a prominently displayed mannequin attractively adorned in the latest fashions can entice customers to try on and possibly purchase the clothing. The technique of cross-merchandising, where two compatible items are displayed together, can lead to additional purchases.

Skill Differences

While workers in a retail environment may be required to perform sales and merchandising functions, there are some differences in the skills needed for each. The sales function requires strong verbal presentation skills to persuade customers to make a purchase, as well as customer service skills. Merchandising typically requires more creative skills, such as the ability to come up with ideas for interesting displays and to make merchandise appear as attractive as possible.

Catching Retail Pilferage

Every year, retailers, businesses has to conduct an annual audit and inventory check of all their merchandise on hand.  To ensure that whatever inventory information they have in their computer system are accurate, to know if they have excess inventories or there has been losses, and more often there are alot of losses due to pilferage, wrong encoding of quantities of stocks, typographical error in inputs sometime in the past several months.

Its a tedious process, more often being done manually.  I have worked for a major footwear brand in the past that after conducting the inventories, we discovered a huge discrepancy in the quantity indicated by our system as against the actual stocks on hand of each stores and after carefully reviewing inventories, deliveries, actual counts, we conducted a thorough investigation on the matter.

I have to personally review input data, financial data, stock records and when I couldn't seem to actually find any probable explanation, I decided to look into our importation records, bill of lading yet still did not significantly gave me an answer, so I have to request records of all past cash register receipts from the accounting department. A tedious, prolonged hours of checking, auditing, analyzing the receipts, Lo and behold, I got my answer, there were several transactions that does not match the actual record.

I was curious why the receipts has shown several transactions that have suspicious void cash transactions, yet several credit card transactions and later also being voided.  This made me delve deeper into the matter and requested top management to do reassignments of staffs, Previous cashiers and store managers has to be transferred to other outlet stores, the old sales staff has to learn cash registering, I hired new staffs to fill the vacancy due to the "promotion" of previous sales and inventory staffs.

I have to observe the behavioral pattern amongst those I have to move to other stores, especially the store managers and the cashiers, and whenever I frequently visit them on a regular basis, gets to hear some complaints of their reassignments, ranting their dissatisfaction and grievances.  They not having a single clue that the very person who had them reassigned was me.

I have to pacify, explain managements decision was for their benefit of future promotions to be area managers, I have to come up with several valid reasoning to show them that their job movement was for their benefit in the long run.

And those that complaint the most, gets my attention and after the investigation was over in 3 months, I found out that those who have shown grievance over their area reassignment were involved in a unilateral intent to defraud the company of stocks, even cash from the coffer of their store sales.

After going through all the due process that I have requested HR to conduct, and the admittance of three of the co-conspirators to defraud the company and pinpointing each and every store managers and cashiers involved, the company filed criminal charges against the accused, for which summing it up, in 4 years, we had been defrauded of over 5 million pesos, in inventory pilferage and cash pilferage.

So bottom line, the saying that its always an insider most often holds true, and to be complacent and too trusting in delegating tasks does not mean well at times.  Though this experience and instance may be a case-in study for us, I have to make new changes in merchandising, inventory management policies within the company to avoid the same from happening.  I also have to institute new policies on rewarding best employees, honest staffs, gave a lot of "carrot on stick" benefits to operational staffs and management.