Regardless of how new you are to retail, there are some things that you have started learning about your business. One of the things that you must have noticed by now is that there are some goods which are more popular with your customers than others. As a result, maybe you have started ordering for more units of the popular and increasing their share in the inventory. If you have done this, you have started your own little manual merchandising management system. As your business grows, however, you will need to do more than just handle your merchandise through word of mouth, and you may need to invest in an elaborate software to help you make it possible. Here is that you need to know about the merchandising management.

1. Merchandise categories

Merchandise categories are the basic foundation that is used to manage goods sold in the retail environment. As a retailer, it is your responsibility to categorize everything that you are selling into groups which will make it easier to manage. The categories depend on the following factors:

  • How customers approach the buying process
  • The needs of the customer
  • How they actually buy different things

For instance, if you are running a supermarket, there will be two major categories, food items and non-food items. Everything else that you need to buy will fall into either one of these two categories at any given time.

2. Merchandise Hierarchy

The second important thing to note about merchandise management is that there is always a hierarchy to deal with. For instance, in the case of the supermarket, when the manager has categorized everything they are selling into the food and the non-food categories, they will then have to create smaller subsets from the original categories. The number of levels that will be part of the hierarchy depends in the extent of goods that the store wants to carry for their consumers. The regular retail hierarchy will have units such as:

  • Groups
  • Departments
  • Stock keeping units
  • Product classifications

Here is what you need to know about each of the retail hierarchies listed above:


When you place your merchandise in groups, you make it easier to manage activities such as inventory taking, promotions and purchasing. For instance, going back to the food category mentioned for a supermarket, it could be grouped into different types depending on the type of handling that is needed. A simple grouping could be perishable and non-perishable foods. On the other hand, the non-food items could be classified into groups such as cleaning, healthcare and a number of others.


This is what comes directly below the groups in the hierarchy. You set your departments depending on the different relationships which exist between the goods. The relationships could include things such as how you handle the food, how the goods are stored and many other inventory relationships. For instance, referring back to the food example, if you have perishable foods such as meat and dairy categorized together as perishable foods, they would have to go into different departments because they are handled differently.

These departments, therefore, are the ones that determine how each of the goods are displayed to the consumers and the shelf-life of the goods. For instance, while meat and dairy are both perishable, meat will probably be displayed in freezers while dairy could take a number of display options depending on the processing and the shelf life. On the other hand, if the non-food items were to be put into categories, they would have to be made into groups such as house cleaning products, goods made of paper among others.

Product classification

This is the next level in the merchandising management system. If you have already come up with departments for your retail goods, you will have to further classify them into product categories. Staying with the supermarket example, your product classification units could be based on:

  • The inventory turnover
  • Markup goals
  • Common end use

For instance, if you had a category such as canned goods, you could further classify them into soups, juices, fruit and vegetables. On the other hand, in the non-food category, you could have the health and beauty department products further classifies into eyecare, skincare and medicines and so on.

In short, the hierarchy helps you break everything down in such a way that when a customer comes to the supermarket looking for something, they know exactly where to get it, your attendants know where it is located and everything about the product is pretty easy to predict.

Why you need a Merchandising Management System

There are a number of reasons why retailers invest in the best merchandising management systems. Here are some of the benefits of these systems.

Efficient customer service and customer experience

One of the best benefits which come from having an elaborate system that classifies everything you are selling is that it becomes very easy to serve customers when you can locate what they are looking for as fast as possible. For instance, if a customer comes enquiring on whether you carry a certain product, or maybe they had seen a few pieces a while back and they are wondering if it is out of stock, you will tell them whether it is available or not without having to go to the back of the store to rummage among other inventory items.

Less work for management

Imagine a store where every three seconds, the attendants had to run to the managers to ask about the price, availability or location of this or that item; the whole day would just be chaos and the management would never have time to focus on business growth. The system improves the productivity by removing some of the activities from the responsibility list of the managers.

Other benefits that come with investing in a robust management system is that you could avoid spending money to hire data management specialist, your ability to cross-sell and upsell will be enhanced, and you will eliminate the need for IT maintenance and integration costs. The benefits of the system are endless, especially when well-implemented.

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