Special Session by MR. P. K. Mohapatra- President & CEO, Technology Business Sector, RPG
& Chairman- Retail Varsity & Governing Council Member, CBS
Merchandising is a key aspect of modern day multi-product, multi-city, organised retailing. We could hear about it in detail from the horse's mouth when none other than Mr. Mohapatra, the pioneer of modern retailing in India, was giving the students the introductory session to the third module of the retail varsity called THE BRAIN OF RETAIL. The session showed the importance of merchandising in the retail scheme of things. Speaking on the same subject, he added that another main function of merchandising was to integrate the suppliers and customers; which could actually prove critical in the larger business canvas! Identifying the needs of the customer and ensuring that those needs are fulfilled within the defined boundaries has to be the main focus on the retailer's mind. Speaking on defined boundaries, Mr. Mohapatra said that general merchandise items and other products must be given special care and divided into broad categories based on the target customers and the pricing philosophy in the mind of the retailer.
After identifying the needs of the customer the next main step is to organize the sourcing and this involves the critical 'make or buy' decision. In this step, either the retailer decides whether to source the products from the manufacturer or to create private label brands. Again, private labeling is something that needs to be handled with a lot of care and analysis. Every aspect of private labeling- the pricing, branding, market share and most important positioning tends to lend a certain amount of credibility to the brand. Another important thing is that the pricing of the products must be done below than that of the manufacturer's brand. The product must also be placed in the near vicinity of the manufacturer's label. This is done so that the customer sees the products and is aware of their existence! Smart indeed…in this way the retailer is also saved of advertising costs of the products!!!
Branding – another critical aspect of any retail store, comprises of many choices that the retailer needs to make. One- to decide how many brands and subsequently SKUs will he keep in the store and how does he represent them to the consumers at large. Secondly- what would be the order size of the brands in terms of volumes and this would correspond to forecasting of the product and its effectiveness among the consumers. In the entire process of ordering, there would be a MOL- short for Minimum Order Level- which would identify how much the buyer must order with the given amount of quantity that he has. The various ordering cycles money blocked in this chain contribute significantly to the same.
However, Mr. Mohapatra said that this chain that seems so efficient and methodical on paper is not all that easy to execute; especially in the Indian scenario. This is primarily due to the suppliers' inability to constantly supply in India; which is why most of the stores in India face a constant stock out. The stores over order and with the money stuck in the pipeline, realize that the products are not selling well. On the other hand, products that move fast are under ordered and this leads to a lack of judgment and thought in the entire process!!! So, the next time you walk into a retail outlet, and do not find the product that you need… don't get puzzled!!! It may be one of these reasons after all!!!
Having given the students a comprehensive introduction to the world of merchandising and its process, Mr. Mohapatra proceeded to explain the importance of pricing and how it stood as an important driver in a purchase process. Once the retailer sets his mind on the price of the product, he places the order from the suppliers. Subsequently, the goods arrive at the warehouse and are dispatched to the various stores according to their MOLs. It is here that the tricky part of placing the products in the store begins. Deciding the planogram of the store and placing the products in various categories and gondolas, based upon what the retailer feels the customer would find simple and attractive, is an integral part of visual merchandising. Once this is done and the products are ready to be sold, the effect of the pricing on the products and their power over the customers has to be noted. This will give the retailer a significant view of how his products are selling, the effectiveness of the store layout, the inventory turnover and also his future order levels.
Finally to conclude, Mr. Mohapatra with his usual good humor and charisma, told the students that merchandising was not as easy as it seemed!!! A lot of thought and detail goes into the entire process. A single mistake in forecasting and it could result in the magnitude of a six car pile up on the highway!!! Thus analyzing what is to be done and doing it carefully is the most essential part of the entire process. It is correctly said that merchandising is the brain of retailing. It entirely controls the functioning of the store and supply chains and is interlinked to every process in the chain.
Mr. Mohapatra's sessions were always interesting & insightful and this one especially was an eye opener to the backstage of the world of retailing.
Contributed by: Neha Arora, Retail Varsity