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The Five Steps Of Merchandise Management

Updated on June 8, 2014

The five steps of merchandise management are as follows; analysis, planning, acquisition, handling and control. Each step is important in retail and should be considered with equal effort.

Analysis: A company must first distinguish who are the potential customers in a market and which ones they want to target. Depending on saturation and the company’s personal product line, information must be examined to determine who the company is actually going to sell to. If the target market does not have enough consumers or the company chooses the wrong demographic to target, they can have lower profitability and even losses.

Planning: Planning is the second step of the merchandising process and a very important part of it. After the customer has been identified, a product mix must be decided. The company will also have to decide how much of each product they would like to have on hand to have enough to satisfy the consumers, but not too much that they have to end up doing deeper discounts that will cut into profits. If this step is not done correctly, a retailer can lose all profits and ever constitute losses. Since retailers are usually making plans in upwards of 6 months ahead of time, many elements can greatly change the demand of certain items. Since it is hard to predict weather, economic and trend changes, there are many conflicts that can arise in this particular step.

Acquisition: After the customer is identified and the plan is made, then the company must follow through and buy the merchandise. They will have to assure they buy enough, high quality items to have enough to sell for the season so they do not lose customers due to out-of-stock items. If this part is done wrong, the same issues will occur. There will be the wrong product, not enough or too much, all which will eat in to profits. Other problems can arise in the actual purchasing like the manufacture does not have enough, raises prices or certain items are no longer available. This is an important part because like the plan, it will make up the next 6 months of a retailer’s net income.

Handling: Once the items are purchased, they must then be sent to the different stores that are in need of it. The product will be handled many times, firstly in transport. Then the employees of the store will find appropriate places in the store to keep the product, as well as replenishing the stock when they run low. The idea of this step is to always put the product where it needs to be, out front where a customer can buy it. If this is not done correctly, the purchase will not occur and profits will be lost.

Control: While some retailers will have a large portion of their asset in inventory, it is important that the flow of these goods is well under the control of the company. Each season, each product should be investigated for its merit in the merchandising mix. There should also be controls and constant inspection of current handling, purchasing and planning options. Merchandise should be well accounted for and all discounts should be accounted for as well. Any waste must be accounted for to determine how much stock is being stolen or lost in transition.


Dunne, P., Lusch, R., & Carver, J. (2011) Retailing 7th Edition


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