Introduction To Merchandising

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University of South Africa
Muckleneuk, Pretoria
MNM1506/1/2018–2020
70508178
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IMPORTANT INFORMATION
Please register on myUnisa, activate your myLife e-mail address and ensure that you have regular
access to the myUnisa module site.
Note: As this is an online module, the learning material is available on myUnisa. However, to
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support you with your studies, you will also receive certain learning material in printed format.
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CONTENTS
Page
Introduction and purpose of the module (v)
Learning outcomes and assessment criteria (v)
Use of icons (viii)
Critical success factors (ix)
Framework (x)
TOPIC 1: FUNDAMENTALS OF MERCHANDISING 1

Learning unit 1: The basics of retailing 2
Learning unit 2: The nature of retail merchandising 23
TOPIC 2: MERCHANDISE PLANNING AND SOURCING 41
Learning unit 3: Merchandise management 42
Learning unit 4: Category management 78
Learning unit 5: Merchandise logistics and supply chain management 95
TOPIC 3: THE STORE ENVIRONMENT 121
Learning unit 6: Visual merchandising 122
Learning unit 7: Retail store atmospherics 158
TOPIC 4: COMMUNICATING THE RETAILER’S MERCHANDISE 183
Learning unit 8: Merchandise promotions and communication strategies 184
Learning unit 9: Pricing merchandise 203
TOPIC 5: MERCHANDISE EVALUATION 223
Learning unit 10: Evaluating merchandise performance 224
List of references 239
Appendix A: Glossary 248
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(iv)
INTRODUCTION AND PURPOSE
OF THE MODULE
4 Dear Student
It is a great pleasure to welcome you to this module on Introduction to Merchandising (MNM1506).

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We hope that you will find this module interesting, meaningful and enriching. The field of
merchandising is extremely dynamic and challenging. The learning units, activities, additional
reading and self-evaluation exercises contained in this study guide will give you the opportunity to
explore the latest developments in this field and help you discover the field of retail management
and merchandising as it is practised.
The aim of this module is to enable you to gain a better understanding of and skills related to retail
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merchandising. In this module, you will learn the basics of the retailing environment, the nature
of merchandising, and the processes and procedures involved in planning, sourcing, selecting
and supplying products and services to customers on a daily basis. The module also includes
inventory and stock management procedures, the fascinating field of visual merchandising,
and how retailers can price and communicate their product/service offerings to customers. This
module will also teach you how to evaluate the success of your merchandising principles. As a
marketing student, a retailer, entrepreneur or marketer, this module will provide the knowledge,
understanding and skills to practically apply merchandising in practice.
The MNM1506 module is offered by the Department of Marketing and Retail Management.
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Please do not hesitate to contact us by means of myUnisa, via e-mail or by visiting our offices at
the Muckleneuk Campus in Pretoria. Should you wish to visit us on campus, please remember
to arrange an appointment beforehand (office hours: 08:00–16:00).
We trust that you will enjoy this module. We would like to wish you all the best with your studies
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at Unisa!
LEARNING OUTCOMES AND ASSESSMENT CRITERIA

To succeed in this module, you have to comply with certain outcomes that we will test you on in
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the assignments and the formal examination. The table below lists the learning outcomes and
assessment criteria for this module:
Outcomes Assessment criteria

Demonstrate an under- • The scope and concepts of retailing and merchandising can
standing of retailing be accurately defined and explained according to the latest
and merchandising as scientific thinking in this field of study.
well as its role in the • The scope and essential aspects of retailing and merchandising
South African retail and are understood, explained and applied practically in accordance
marketing environment. with the relevant literature.
(v)
• The retailing environment can be explained, discussed and
applied in accordance with the latest scientific thinking in this
field of study.
• The importance of retail locations and selecting the correct
location can be discussed and applied practically.
• The role and responsibility of the merchandiser, as well as
the merchandising function and principles can be accurately
defined and discussed according to the latest scientific thinking
in this field of study.
• The evolution of the retailing environment can be explained
in relation to the latest developments and scientific thinking
in this field of study.
• Factors influencing the merchandising function and the
merchandising function can be discussed and applied
practically.
Demonstrate an under- • The full scope of merchandise management (e.g. merchandise
standing of merchandise planning, sourcing, supply and logistics, category management)
planning and sourcing is understood and explained in detail with the aid of relevant
in accordance with the and practical examples.
relevant literature and • The importance and relevance of assortment planning
with the aid of practical is discussed comprehensively with the aid of relevant and
and relevant examples as practical examples.
applied by modern-day • The merchandise planning process is discussed in detail with
retailers. relevant and practical examples.
• Category management is critically discussed and understood
in accordance with the relevant literature and with the aid of
practical and relevant examples as applied by modern-day
retailers.
• An understanding of merchandise logistics and supply chain
management is shown and applied.
• Supply chain management, the process and the various types
of supply chains are discussed critically and illustrated with the
aid of relevant and practical examples.
• Inventory management is discussed comprehensively in
accordance with the relevant literature and with the aid of
practical examples.
• An understanding of retail logistics is show by discussing the
activities of retail logistics and integrated logistics.
• The retailer supply chain, in relation to the various
channels of distribution and the types of supply chains, is
discussed comprehensively and applied practically.
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Understand, design and • The scope of visual merchandising and store atmospherics is
evaluate the retail store explained and practically illustrated.
environment in a practical • The role and responsibility of the retail merchandiser are
and relevant manner as explained and understood.
applied by modern-day • The role of store design and design aspects are discussed and
retailers. highlighted using relevant practical examples.
• The essential aspects of visual merchandising are explained
and applied practically to a given retailer and target market.
• The various types of fixtures and fittings are discussed in
detail and can be applied practically in modern-day retailing
environments.
• The importance of displays is understood by critically discussing
and applying the objectives and role, functions, elements and
types of displays in relation to merchandising and the retailing
environment.
• The importance and use of store atmospheric elements, such
as sight, touch, sound, scent and taste, are understood and
applied in a practical and relevant manner.
Demonstrate an under- • The contribution of communicating the retailer’s product or
standing of merchandise service offering is explained and highlighted using appropriate
promotions/communica- practical examples.
tion and pricing in • The communication process is understood, explained and
accordance with the applied practically.
relevant literature and • The retail promotional mix elements in a retailing environment
with the aid of practical are discussed and applied practically.
and relevant examples. • The essential aspects of pricing merchandise and the objectives
of pricing are explained and highlighted using relevant practical
examples.
• The various pricing strategies, tactics and pricing adjustment
tactics are discussed and applied to a practical scenario.
• The factors influencing the pricing strategy used by retailers
are understood and applied practically.
• The various formulas are understood and calculations can be
done based on the practical information provided
Demonstrate an under- • The importance of evaluating a merchandise strategy is
standing of the various explained and the relevant measurement tools for this purpose
means of evaluating are described and applied.
the performance of
merchandise in a retailing
environment in a practical
and relevant manner.
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(vii)
USE OF ICONS
As you work through the study guide, you will see that we use a number of icons. We have
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provided a list of these icons and a brief explanation of each – keep this in mind when working
through the workbooks.
13 Learning objectives
The learning outcomes indicate what aspects of the particular chapter you
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have to master and demonstrate.

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16 Key concepts
The key concepts icon draws your attention to certain keywords or concepts
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that you will come across in the chapter concerned

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19 Internet sources
This icon indicates that you are required to obtain information by accessing a
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suggested website. Website links are provided as additional reading or videos

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to help you understand concepts or theory better.
22 Activities
This icon refers to activities that you must do to develop a deeper understanding
23
of the learning material.

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25 Feedback
This icon indicates that you will receive feedback on your answers to the
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activities throughout the study guide.

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28 Reflection
The reflection icon requires you to reflect on the important issues or problems
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dealt with in the learning unit.

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31 Self-assessment
When you see this icon, you are required to test your knowledge, understanding
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and application of the material you have just studied in a learning unit.
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CRITICAL SUCCESS FACTORS

To ensure that you deliver the quality of work required to pass this module successfully, we
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suggest that you do the following:
• study the prescribed tutorial matter conscientiously according to the guidelines provided
• relate what you are learning to your work situation, if applicable
• plan your studies according to the time available and develop your own study plan
• accept responsibility to ask assistance if you struggle with certain concepts, principles or
processes
• submit the assignments on or before the due dates and study the feedback on assignments
carefully to ensure that you understand the work properly
• complete the activities and assessment questions in the learning units
• develop more than a superficial understanding of the concepts and principles in this module
• assess your own progress continuously by completing the activities and assessment questions
and carefully study the feedback and guidelines on them
• apply your knowledge in practice
• make sure that you master each of the learning outcomes for this module
34 You can expect us to do the following:

• provide you with updated and relevant learning material that is regularly compared with
and benchmarked against similar local and international modules
• ensure that the learning material is in line with the needs of industry and commerce by
consulting regularly with the profession, industry leaders and government officials
• provide you with opportunities to develop competencies and skills at a certain level. The
outcomes correspond with the National Qualifications Framework (NQF) level 5, and you
will be assessed according to the level descriptors of the NQF.
• support you whenever you require assistance. You may contact your lecturers by making
personal appointments, telephoning them or sending them e-mails.
• provide inputs on the Discussion Forums where applicable – we understand that studying
through distance education is more challenging than attending a residential university.
Remember to use myUnisa (http://my.unisa.ac.za).
• give you timeous feedback on assignments. We will return an assignment to you within
three weeks after the due date if you submitted the assignment on or before the due date.
If at all possible, we would like to encourage you to use myUnisa (http://my.unisa.ac.za) to
submit your assignments and gain access to the study material.
35 As lecturers, we expect you to do the following:
• read all the tutorial letters and correspondence that we send you and act upon these where
required
• submit assignments on/before the due dates as communicated in Tutorial Letter 101
• spend enough time on this module
• use myUnisa regularly
• prepare detailed notes/summaries/mind maps for each learning unit that you will be
examined on well in advance
• prepare well in advance for the examination
• master the learning outcomes for this module and understand the content of the module
well so that you can apply the knowledge that you have learnt
• contact your lecturers if you need academic assistance
(ix)
FRAMEWORK
We present the study material for this module in five broad topics and ten learning units. The
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framework for this module is as follows:
37 TOPIC 1: FUNDAMENTALS OF MERCHANDISING

39 Learning unit 1: The basics of retailing
40 Learning unit 2: The nature of retail merchandising
41 TOPIC 2: MERCHANDISE PLANNING AND SOURCING

43 Learning unit 3: Merchandise management
44 Learning unit 4: Category management
45 Learning unit 5: Merchandise logistics and supply chain management
46 TOPIC 3: THE RETAIL STORE ENVIRONMENT

48 Learning unit 6: Visual merchandising
49 Learning unit 7: Retail store atmospherics
50 TOPIC 4: COMMUNICATING THE RETAILER’S MERCHANDISE

52 Learning unit 8: Merchandise promotions and communication strategies
53 Learning unit 9: Pricing merchandise
54 TOPIC 5: MERCHANDISE EVALUATION

56 Learning unit 10: Evaluating merchandise performance
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(x)
TOPIC 1
Fundamentals of merchandising
AIM
To demonstrate an understanding of retailing and merchandising as well as its role in the South
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African retail and marketing environment.
LEARNING OUTCOMES
59 After studying this topic, you should be able to
• define and explain the scope and concepts of retailing and merchandising according to the
latest scientific thinking in this field of study
• understand, explain and practically apply the scope and essential aspects of retailing and
merchandising
• explain, discuss and apply the retailing environment in accordance with the latest scientific
thinking in this field of study
• discuss the importance of retail locations and selecting the correct location, and apply the
theory practically
• define and discuss the role and responsibility of the merchandiser, as well as the merchandising
function and principles according to the latest scientific thinking in this field of study
• explain the evolution of the retailing environment in relation to the latest developments
and scientific thinking in this field of study
• discuss and practically apply the factors influencing the merchandising function
TOPIC CONTENT
60 Learning unit 1: The basics of retailing
61 Learning unit 2: The nature of retail merchandising
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Learning unit 1
The basics of retailing
Contents
Overview of this learning unit

Learning outcomes
Key concepts
1.1 Introduction
1.2 Nature of retailing
1.2.1 Characteristics of retailers
1.2.2 Types of retailers
1.3 The retailing industry
1.3.1 The African retail industry
1.3.2 The South African retail industry
1.4 The retail environment
1.5 Location of retailers
1.6 Evolution of retailing
1.7 Summary
1.8 Case study with questions
1.9 Reflection
1.10 Self-assessment questions
OVERVIEW OF THIS LEARNING UNIT

This learning unit sets the foundation for the module by discussing the basics of retailing and
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the direct and indirect influences of the retailing environment. The unit sets the scene for the
discussion of the remainder of the module of Introduction to Merchandising. To understand the
importance of merchandising, as well as the various processes, procedures, strategies and tactics
involved in merchandising, you need to understand the basics of retailing and what it entails.
This learning unit therefore introduces the nature of retailing by focusing on various aspects
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that influence retailers in their operations and decision-making. We firstly look at the definition
of retailing, followed by characteristics and different types of retailers. Next, we briefly discuss
the nature of retailing by looking at the African and South African retailing context. In the
section that follows, we briefly discuss the macro-, market and micro-environment as well as the
factors of each of these environments, and how they affect retailing activities. We next discuss
important considerations when choosing the retail location, retail innovation and retail evolution.
It is important that while studying this learning unit, you are able to discuss the concepts in a
theoretical and practical manner. The learning unit concludes with a summary of the learning
unit accompanied by a case study with questions, reflection and self-assessment questions.
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64 This learning unit unfolds as follows:
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LEARNING OBJECTIVES
After completing this learning unit, you should be able to
• define the concept of retailing

• identify and discuss the characteristics of retailers
• identify, critically discuss and practically apply the various types of retailers
• differentiate between store retailers and non-store retailers
• differentiate between general store retailers and speciality store retailers, and classify
these types of retailers
• briefly discuss retailing in the African and South African context
• discuss the retailing environment by identifying, discussing and applying the various
factors influencing the retailing environment
• explain the importance of location and selecting the correct location in retailing
• understand and explain the evolution of retailing
KEY CONCEPTS
You need to master the following key concepts to meet the learning outcomes for this topic:
• Retailer • Convenience store

• Retailing • Discount store
• Store retailers • Warehouse showroom
• General retailers • Specialist retailer
• Supermarkets • Traditional specialist retailer
• Department store • Off-price retailers
• Hypermarket • Category killers
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• Non-store retailing • Social showrooming
• Direct marketing • Beacons
• Direct selling • Retail apps
• Vending machines • Interactive displays
• Markets, stalls and carts • Augmented reality (AR)
• Online retailing • Market environment
• Retail environment • Micro-environment
• Macro-environment
1.1 INTRODUCTION
As customers we purchase various products and services to satisfy our needs. We buy food to
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satisfy our hunger and clothes to keep us warm, and use transportation to get where we want
to be. When customers buy these products and/or services, they deal with retailers. We can find
retailers around every corner and we use them to satisfy our needs in a convenient way on a
daily basis. These retailers have to make sure that they offer the right products and services to
customers when and where they want them, at the right price and in the right quantities. To do
this, retailers engage in a series of merchandising activities to source the best products, obtain
these products and ensure that there is sufficient stock available in their stores. We discuss
the fundamental principles of merchandising in detail throughout this study guide. However,
to understand the planning and processes involved in ensuring that products are available to
customers in-store, when they want them, in the right quantities, and at the right price, we first
need to understand where merchandising fits into the bigger scheme of retailing. In this learning
unit, we therefore discuss the basics of retailing, the retailing environment and the evolution
in retailing.
Retailing is an important part of the economy and ultimately links you, as the customer, with the
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manufacturers (those who make the products). However, retailers do not operate in isolation – all
retailers are influenced by several variables that affect their daily operations. For instance, major
retail stores in South Africa, such as Game, Edgars, Checkers and Pick n Pay, need to evaluate
economic conditions, political factors, consumer trends, sustainable development, internal and
external resources, competitors and suppliers – to name just a few. These factors in the retail
environment may have short or long-term consequences and may have a direct or indirect
impact on the retailer. The retail environment is in a constant state of change, which may affect
the retailer in a positive or negative light, and therefore the retail environment should constantly
be monitored.
In this learning unit, we briefly discuss the various direct and indirect factors that influence the
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daily functioning and operations of retailers. However, we first contextualise retailing and explore
the African and South African retailing industry. We then discuss the characteristics of retailing
as well as the various types of retailers by focusing on store retailers and non-store retailers.
Thereafter, we briefly discuss the retail environment and look at the various macro-, market and
micro-environmental factors, and how these factors affect the daily operations and activities
of retailers. We also address the importance of the retailer’s location and conclude with a brief
overview of the evolution of retailing.
After studying this unit, you should have a clear understanding of the retailing industry and
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environment and the various factors that affect retailers on a daily basis. Knowing the basics of
retailing, will help you understand where merchandising fits in and how the decision retailers
make in their merchandise planning are influenced by the factors in the retail environment.
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1.2 NATURE OF RETAILING

As a marketing student, and a customer, what do you think retailing entails? What do you think
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the role of a retailer is in society? Retailing involves a lot more than simply offering customers a
variety of products and/or services to choose from in one central location. Retailing entails all
the activities, processes and procedures directly related to the sale of products and services to
the end consumer for personal use or reuse (Seiders, ND).
The word “retail” is derived from the French word retaillier, which literally means “to cut off a
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piece” or “to break bulk”. We can therefore assume that a retailer is a dealer or trader who sells
products in smaller quantities (Pradhan, 2009:4). Retailing can therefore be understood as the
final step in the distribution of merchandise, for consumption by the final consumer (Pradhan,
2009:4). In other words, retailing involves the selling of products or services to the final consumer.
There are many definitions of retailing, all with their own core characteristics. We look at the two
formal definitions of retailing we use for the purpose of this module:
“Retailing refers to a set of business activities carried on to accomplish the exchange of goods
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and services for purposes of personal, family, or household use, whether performed in a store
or by some form of non-store retailing” (AMA, 2016).
“Retailing refers to a commercial transaction in which a buyer intends to consume the goods
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or service through personal, family or household use” (Business Dictionary, 2016).
These two definitions make it clear that retailing refers to any organisation that sells a product or
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service to the final consumer. Retailers usually purchase goods in bulk, repackage the products,
and then resell the products in smaller quantities to consumers for personal, family or household
use. Retailers therefore serve as a link between producers or manufacturers and end consumers
as they create the environment in which exchanges between producers or manufacturers and
consumers take place (Erdis & Cant, 2015:3).
To understand retailers and the concept of retailing better, we discuss the characteristics and
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types of retailers next.
1.2.1 Characteristics of retailers

Retailers can be classified as middlemen or intermediaries who act as a link between the
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manufacturer and the end consumer. Retailers can therefore be classified according to various
characteristics, namely (Fourie, 2014a:5; Career Ride, 2016):
• Small average sale – A retailer is often only able to sell single units of different products to
multiple consumers, whereas a manufacturer is able to sell multiple bulk products to various
consumers. As a result, customers may be frequent shoppers and visit the retail store often.
• Type of retailer – Retailers can be categorised by the type of retail outlet they are or the
types of products/services they sell. There are two types of retailers, namely store retailers
and non-store retailers. Store retailers (also known as brick-and-mortar retailers) refer to
the physical store, while non-store retailers refer to retailers that sell their products via the
internet, vending machines and direct selling. We discuss the different types of retailers in
detail in the next section.
• Interaction with customers – Retailers act as the final link between the organisation and its
customers, therefore, retailers can make suggestions to what customers purchase and may
allow credit facilities to encourage frequent buying behaviour.
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Instrument of marketing communication – The retailer can provide integrated marketing com-
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munication about the products and services it offers and disseminate this information to
customers. The integration of different marketing communication channels (e.g. advertising,
direct marketing and social media) should form one unified message to the customer.
80 We now look at the different types of retailers.
1.2.2 Types of retailers

Retailers can broadly be classified as either a store retailer (brick-and-mortar) or a non-store
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retailer. Store retailers refer to physical brick-and-mortar shops, while non-store retailers are those
retailers that do not sell their products or services in an actual, physical store in one location.
Non-store retailers sell their products via the internet and vending machines, and include direct
selling, direct marketing or markets, stalls and carts. We now look at each classification.
1.2.2.1 Store retailers

Store retailing refers to retail outlets that are housed in actual, physical stores known as brick-and-
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mortar retailers. These physical retail stores come in different sizes and are classified according to
the extent of the service they provide to the customer, the variety of product assortment they
sell and the pricing structure that they implement (Erdis & Cant, 2015:5).
An example of a South African retail store, based on the pricing structure that it implements,
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is Ackermans. Ackermans, which is part of the Pepkor Group, sells a variety of fashion for
women, men, children and babies, as well as homeware, cellular and key financial products
to customers. Ackermans prides itself in offering customers great products at low prices and
setting the standard for affordability (www.ackermans.co.za).
Store retailers can further be classified as general retailers or speciality retailers (Pride et al.,
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2012:344). General retailers are differentiated according to the product assortment or range they
offer – they offer a variety of products and variations to choose from. A speciality retailer, on the
other hand, offers a much smaller product assortment, but provides the customer with a lot
more choice in a particular category (Varley, 2014:12). For instance, a jewellery store only offers
jewellery products; however, it offers a variety of options, sizes, shapes, metals and price ranges
in this category (jewellery). It can be said that speciality retailers have a narrow but deep product
assortment (Varley, 2014:12). Figure 1.1 below further classifies general retailers into sub-groups.
We briefly discuss each of these below.
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Figure 1.1: Type of general retailers
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87 We first look at the various general retail stores:
88 • Supermarkets
Supermarkets are large, self-service retail outlets that offer a complete range of food and beverage
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products, as well as general household items, such as cosmetics, linen or non-prescription drugs
(Pride et al., 2015:380). For instance, certain Checkers stores offer a variety of food items, cosmetics,
outdoor items, and have a pharmacy section usually at the back of the store. Supermarkets arrange
merchandise in different departments to maximise efficiency in stocking and handling products,
for instance, supermarkets generally have a meat, dairy, bakery and non-perishable department.
They also offer lower prices than smaller competing grocery stores (Pride et al., 2015:380).
Supermarkets generally have a wide and shallow product assortment – although they offer a
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wide variety of products, they do not offer a variety of brands, sizes or flavours. For instance, Pick
n Pay may only stock 2 kg and 3 kg bags of Omo and Skip washing powder, but do not offer 5
kg bags or any Sunlight washing powder.
91 • Department stores
Department stores are large retail organisations characterised by wide product mixes that are
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organised into separate departments, such as houseware, furniture, appliances, and apparel
(Pride et al., 2012:345). All these departments are housed under the same roof to facilitate
buying, customer service, merchandising and control (Business Dictionary, 2017). Retailers group
merchandise into different departments to enable sales and administrative tasks to be handled
more effectively and efficiently (Pride et al., 2012:345).
93 • Hypermarkets
Hypermarkets are very large self-service retail stores offering a wide range of products, such
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as groceries, clothing, appliances, houseware, linen, electronics and furniture. However, most
of the floor space of a hypermarket is allocated to the groceries, and the remainder to general
merchandise. A hypermarket is generally a combination of a department store and a supermarket
(Investopedia, 2017). Hypermarkets normally focus on low prices and offer a variety of product
options – they therefore have a wide and deep product assortment. An example of a hypermarket
in South Africa is Pick n Pay Hypermarket or Checkers Hyper – they offer a vast array of different
products and assortment.
95 • Convenience stores
A convenience store is a small self-service retail outlet that is generally open for long hours and
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carries a narrow assortment of products (Pride et al., 2012:345). Convenience stores usually carry
convenience or staple merchandise, such as milk, bread, soft drinks, snacks and newspapers.
This type of retailer is often located at a petrol garage that is open 24 hours a day and enables
customers to make purchases quickly and at any time of the day (Ferree, ND:46). Because
convenience stores carry limited stock and are open 24 hours, they generally charge a higher
price for the merchandise than supermarkets do (Ferree, ND:46).
97 • Discount stores
As the name suggests, discount stores sell their products at lower prices than other retailers do. A
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discount store is a self-service, general merchandise retail store that regularly offers brand name
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and private brand products at lower prices (Pride et al., 2012:345). To keep their inventory turnover
high, they carry a wide, but carefully selected assortment of products (Pride et al., 2012:345). An
example of a discount store in South Africa is the Meltz Clothing Store.
99• Warehouse showrooms

Warehouse showrooms are retail facilities in large, low-cost buildings with large on-premises
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inventories and minimal services (Pride et al., 2015:381). An example of a warehouse showroom
is IKEA, which displays its appliances in a large open retail store.
In contrast to general retailers, speciality retailers emphasise a narrow and deep assortment
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– they offer a limited number of products, but have a large variety and options from which
to choose. We now look at the three types of speciality retail stores, as summarised in
figure 1.2.
102
Figure 1.2: Type of speciality retailers
103 • Traditional speciality stores

Traditional speciality stores are commonly retail outlets that offer a narrow product mix with deep
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product lines (Pride et al., 2012:348). For instance, a retailer selling cellular products have a narrow
product mix (it only sells cellular items) with a deep product line (it offers a variety of different
cellphones and accessories). Traditional speciality stores typically sell shopping products, such
as jewellery, sporting goods, shoes, computers and electronics, toys, books and pet supplies.
Speciality stores in South Africa include ToysRUs, Animal Kingdom, American Swiss, Exclusive
Books and Sportsman’s Warehouse.
Traditional speciality stores are sometimes referred to as limited-line retailers. Alternatively, if

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retailers carry unusual depth in one main product category, they are referred to as single-line
retailers. In other words, when a retailer only offers customers one product category, such as
sunglasses, but it offers a large variety of sunglasses. For instance, the Sunglass Hut only sells
sunglasses, but the variety of options available is very deep.
Because these retailers are generally small, they may incur high operating expenses in proportion
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to their sales, and satisfying their customers may require products that do not sell often. However,
these stores can sometimes obtain lower prices from their suppliers by purchasing larger quantities
(Pride et al., 2015:382).
107 • Off-price retailers

Off-price retailers or stores are speciality retailers that provide high-quality products at lower
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prices than those typically charged by retail businesses (Economic Times, ND). These retailers
normally purchase overstocked products or products for which demand is low, such as seasonal
products, to lower expenses enough to sustain lower average prices (Business Dictionary, 2017).
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Off-price retailers therefore purchase those items that were sent back to the manufacturer due to
off-season production and sell them at a cheaper price than they would normally have sold for
(Pride et al., 2015:382). Off-price retailers are different from normal discount stores as they offer
limited lines of national brands and designer merchandise. These retailers charge up to 50% less
for merchandise than department stores would for comparable merchandise; however, they do
offer limited customer services (Pride et al., 2015:382).
109 • Category killers

Category killers are large speciality retail stores that concentrate on a major product category
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and compete with low prices and enormous product availability (Pride & Ferrell, 2017:386). Because
these retailers expand rapidly, gain sizeable market share and take away business from smaller,
high-cost retail outlets, they are called category killers (Pride et al., 2015:382).
Now that you have a better understanding of the various store retailers that are available, we
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look at the non-store retailer classification.
1.2.2.2 Non-store retailers

Non-store retailing refers to retailing that does not take place in an actual store – there is no
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physical location for the retail activities being performed. Non-store retailing, which we discuss
next, includes direct marketing; direct selling; vending machines; markets, stalls and carts; and
online retailing (Erdis & Cant; 2015:6; Fourie, 2014a:27).
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Figure 1.3: Type of non-store retailers
114 • Direct marketing

Direct marketing is a form of marketing communication that allows retailers to communicate
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their products and services to customers by means of various media, including catalogues,
direct mail, telemarketing or the internet. Direct marketing is therefore a form of advertising
that entails selling products and services directly to the public. It involves direct communication
with a customer or business participant to elicit a response, request or visit to the physical store
(Poloian, 2013:162). Databases with information about consumers, including their demographic
profile, purchase behaviour and contact details are often used in direct marketing efforts – this
is also known as database marketing. Examples of retailers that use direct marketing, include
Verimark and Glomail that use telemarketing and catalogue marketing.
116 • Direct selling

In contrast with direct marketing, direct selling is a personal form of selling that involves meeting
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with the customer face-to-face (Poloian, 2013:162). Direct selling therefore refers to the door-to-
door selling activity undertaken by the retailer and involves personal contact with consumers in
their homes and/or telephone or mobile solicitations. Direct selling take place away from a fixed
retail location and typically involves products being sold primarily through in-home product
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demonstrations, parties and one-on-one selling (Ellsworth, 2015:7; Poloian, 2013:162). For example,
items such as Tupperware, books and household equipment are often sold at parties hosted
by the retailer. This form of retailing offers a personalised and convenient shopping experience.
There are two types of direct selling situations, namely person-to-person and group direct selling.
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As the name suggests, with person-to-person direct selling a salesperson calls on a customer at
home or work and makes an appointment to meet face-to-face. With group direct selling, the
party-plan salesperson enlists the aid of one customer to assist in selling to others in a community
(Poloian, 2013:178).
119 • Vending machines

Vending machines are cash or card-operated retailing formats, which offer a 24-hour, impersonal
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and convenient method of selling convenience products. Today, vending machines are used
for a variety of products, from cigarettes, snacks and airtime, to pantyhose and coffee (Poloian,
2013:180). The advantages of using vending machines are that they are accessible 24 hours a day,
eliminate the need for sales personnel and can be placed indoors or outside. The disadvantages
of vending machines include high levels of theft, vandalism, the high cost of acquiring machines
and maintaining them, stock-out situations, the low-quality image of the brand and breakdown
of the machine (Poloian, 2013:180–181).
121 • Markets, stalls and carts

Non-store retailers can also include indoor and outdoor flea markets, stalls, carts or kiosks,
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temporary retail sites and mobile retailing. Flea markets are usually outdoor areas used by
vendors to sell handmade or second-hand products (Business Dictionary, 2017). Carts or kiosks
are typically found in tourist-rich areas and shopping malls, but are also visible at terminals,
train stations, movie theatres, sport arenas and museums. Carts or kiosks are also referred to as
retail merchandising units (RMU) and are typically open vehicles with two or four wheels. These
carts and kiosks are movable, adaptable and compact allowing retailers to move around and
access different locations easily (Pegler, 2012:328). These carts and kiosks are commonly found
at the V&A Waterfront in Cape Town. Temporary retail sites refer to retailers setting up temporary
shops in the form of a makeshift booth, a patch of grass or a normal table (Poloian, 2013:183).
Temporary retail sites are, for instance, street vendors on the side of the road in Johannesburg
or in Pretoria’s central business district (CBD). Lastly, mobile retailing generally entails moveable
and transportable food trucks, such as ice-cream trucks, or Chip-n-Dip, boerewors or pancake
food trucks or vans, and are usually found at sporting events, carnivals and markets. Recently,
more mobile retailing businesses have popped up, such as mobile dog parlours.
123 • Online retailing

The last non-store retailer that we look at is the online retailer (or e-tailer). Online retailing or
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electronic retailing (e-tailing) refers to the sale of goods and services through the internet.
Takealot.com, iTunes, Spree, Amazon and Zando are all examples of online retailers. They encourage
customers to order products from their website and deliver these products to the customer’s door.
E-tailing allows retailers and companies to reach more customers and ultimately increase their
sales volumes (Investopedia, 2017). E-tailing therefore efficiently and effectively captures a large
and geographically dispersed market by making products available online. E-tailing also allows
businesses to track the purchasing behaviour of customers and send personalised marketing
material to customers. Online shopping allows customers to shop in their own time, 24 hours
a day, from the comfort of their own home. The downside of online retailing, however, is that it
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can become expensive – infrastructure costs for order fulfilment, the warehousing of products,
handling returns and refunds and other issues that may arise (Investopedia, 2017).
By now, you should have a better understanding of the retailing environment and the various
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forms, classifications and types of retailers and stores. We now briefly look at the African and
South African retailing industry and the factors influencing this environment.
1.3 THE RETAILING INDUSTRY

Retailing has an enormous impact on society and the economy of a country. The large number
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of undertakings as well as the high number of people involved in everyday retailing activities
(employees and consumers) indicate the importance of retailing in society. However, these
retailing activities are influenced by various macro-, market and micro-environmental factors.
Before we discuss these factors, we briefly look at the current state of retailing in Africa and
specifically South Africa.
1.3.1 The African retail industry

The African market is diverse, complex, interesting and characterised by approximately 90%
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informal retailing. Informal retailing can be defined as small retail businesses that operate from a
residential stand or home, such as spaza shops or tuck shops (Ligthelm, 2005:199). Most of these
economic retail activities have been overlooked or have not been captured by conventional
market analysis and research, due to their nature. The Deloitte Consumer Review highlights the
following retail opportunities in Africa (Deloitte Consumer Review, 2016):
• the rise of the middle class
• exponential population growth
• the dominance of the youth
• rapid urbanisation – more customers are moving to city centres making it easier for companies
to target consumer groups
• the fast adoption of digital technologies
Africa is regarded as an experimentation field in the mobile and e-commerce industry and
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represents many opportunities for retailers. International retailers are increasing their interest,
presence and competitiveness on the African continent. Retail development in Africa also
represents significant potential as retail chains are developing and gaining economies of scale,
and food safety and higher store standards are becoming embedded in customer shopper
expectations. African retailers have competitive advantages in established supply chain operations
and clear understanding of local cultures, languages and tastes (Deloitte Consumer Review, 2016).
Do some research of your own to further understand the retailing environment in Africa as it is
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changing constantly and rapidly.
1.3.2 The South African retail industry

The retail industry in South Africa has changed significantly over the past ten years, as can be
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seen by the improvement in infrastructure. An improved network of roads have benefited the
retail industry as townships and rural areas can now benefit from efficient distribution (Gauteng
Province, Quarterly Bulletin, 2012). South Africa has seen an increase in mall development in the
inner cities, suburbs as well as township areas. An environmental change in South Africa is that
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more consumers are moving to the cities, much like in the rest of Africa. The rapid increase in
urban living has therefore led to the development of high-density living that, in turn, has led to
the increase in the development of malls in residential areas (Chibaya, 2016).
South African retail companies compare well with other retailers globally. Major industry players
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in the country include Edcon Pty (Ltd), Pick n Pay Holdings Ltd, Shoprite Holdings Ltd, Spar Group
Ltd, Woolworths Holdings Ltd and Massmart Holdings Ltd (Gauteng Province, Quarterly Bulletin,
2012). These major retailers are adopting omni-channel approaches in an effort to supplement
brick-and-mortar sales with online stores, including Mr Price Group, Massmart Holdings and
Woolworths Holdings (Deloitte Consumer Review, 2016). Omni-channel retailing refers to “the
ability to deliver a seamless and consistent experience across channels, while factoring in the
different devices that consumers are using to interact with the organisation” (Big Commerce, 2016).
In other words, retailers are combining technology, the mobile and physical experience, as well as
the digital shopping environment in their marketing efforts to reach their multi-faceted audiences.
Today’s South African consumer are much more informed and less predictable than in the past.
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Consumers are looking for convenience and variety in their shopping experience. New trends
are that the youth of today have more spending power, there is a need for longer shopping
hours, there are more women in the workforce and a stronger tendency to have fewer children
(Prinsloo, 2016). Major retailers in South Africa are looking to omni-channel development to
supplement traditional store sales (Dennis & Piatti, 2015:5). With all the changes occurring in the
environment, retailers constantly have to find or develop new strategies to compete effectively
in the marketplace. Therefore, it is important that retailers monitor the retail environment when
developing operational strategies. We now look at the various macro-, market, and micro-
environmental factors that influence the daily operations of retailers.
1.4 THE RETAIL ENVIRONMENT

To monitor changes in the retail environment, which may have direct or indirect influences or
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short or long-term consequences, it is necessary to understand what the retail environment

contains. The retail environment can be defined as all the forces and variables within and outside
a business that have an influence on how the business makes its operational decisions (Fourie,
2014a:33). Three components form part of the retailing environment, namely the macro-, market
and micro-environment.
The macro-environment, otherwise known as the external environment, consists of all the
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variables and factors on a national and international level that affect retailers. Retailers have
little effect on and no control over the macro-environment (Avon College Press, 2015:34; Cant,
2016:37; Strydom, 2014:36). The macro-environment is forever changing and can be seen to affect
retailers’ decision-making, strategies and performance. It is therefore an incredibly important
environment for retailers to monitor (Business Dictionary, 2017; Cant, 2016:37). The factors that
retailers cannot control are found in the macro-environment and consist of the political and
legal, economic, socio-cultural, technological, physical and international environment (Erdis &
Cant, 2015:3). We briefly look at each of these factors:
• Political and legal (governmental) environment – The political and legal

environment comprises government agencies, political parties, laws and legislation all of
which have an impact on individuals and organisations in a country (Armstrong & Kotler,
2015:112; Grewal & Levy, 2014:165). The government makes the “laws of the land” and defines
the political and legal parameters within which businesses must operate (Wiid, 2012:9).
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• Economic environment – The economic environment is one of the most important variables
in the retailer’s macro-environment as it is in a state of constant change and comprises
factors that have an effect on how much consumers spend and what they buy (Armstrong
& Kotler 2015:107; Kurtz, 2012:74). The economic environment can be defined as such factors
as unemployment, monetary and fiscal policy, consumer income, wealth, inflation rates,
balance of payments, pricing, poverty, interest and exchange rates, credit, transportation
and the business cycle; it is the totality of the economic surroundings that affect a company’s
markets and its opportunities (AMA, 2016).
• Socio-cultural environment – The socio-cultural environment comprises influencing
variables in a society and its culture that bring about changes in norms, attitudes, customs,
lifestyles and beliefs (Hult et al., 2013:79). Variables in this environment include the growth rate
of the population, the family lifecycle, geographic location and population shift, education,
health consciousness, disposable income of families, demographic changes, changes in ethnic
make-up or culture and even attitudinal changes (Eagle et al., 2015:76; Hult et al., 2013:79).
• Physical environment – The physical or natural environment refers to factors such as
the weather, global warming, pollution, the ozone layer, the greenhouse effect and lack
or depletion of natural resources that affect the behaviour of consumers. The natural
environment comprises the natural resources (e.g. raw materials) that organisations require
to manufacture their products and services, as well as the physical environment (e.g. the
climate, weather conditions and unforeseen happenings such as volcanos, earthquakes,
tornados, droughts, floods and tsunamis) that can affect a retailer in its marketing decisions
and strategies (Armstrong & Kotler, 2015:109).
• International environment–Advances in technology have made the world a global
marketplace – when an event occurs in a country it is reported almost immediately and
markets and people react instantaneously (Cant, 2016:38). Distance is no longer a problem
– other countries can affect retailers quickly, especially in the import and export of products
(Wiid, 2014:23). In essence, the international environment refers to events that occur in other
countries that affect business and retailing activities (Strydom, 2014:42). Retailers who intend
selling products overseas and those who intend importing products need to understand
the laws and regulations of both countries and the socio-cultural differences that may have
an impact on trade (Cant, 2016:9).
• Technological environment – The technological environment is perhaps the most intense
and exciting environment shaping the retail industry today and is based on discoveries,
innovation and inventions. Advances in technology lead to the development of new products
and services, improved production and distribution methods and enhanced customer
service – advances in technology essentially manifest in all business activities (Boone &
Kurtz, 2014:76–77; Cant, 2016:39–40). In the retail industry, specifically, it means better and
new ways of performing standard retail functions (Dunne et al., 2014:72), and the creation
of new retail markets such as online stores and home shopping networks, which offer retail
customers other platforms for shopping (Erdis & Cant, 2015:16; Treadwell, 2017). We now
look at some of the technology retailers use today:
- Radio-frequency identification device (RFID) – This device uniquely identifies a product
and allows a firm to monitor the movement of a product through the value chain in
real time. This means that items are tracked from production, through all intermediaries
and distributors all the way to the final consumer (Grewal & Levy, 2014:163; Goller, 2016).
- Social showrooming – Retailers have begun to integrate social media into their traditional
brick-and-mortar stores by encouraging customers to follow the store on social media
and even to pin their favourite products on Pinterest. Retailers use these platforms to
gain insight into the popularity of items, and then display these popular items in fun
and interactive displays in their stores (Business Insider, 2015).
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- Beacons – A beacon is a piece of hardware that communicates with a consumer’s
smartphone using Bluetooth. Beacons initially alerted customers to coupons and
discounts, and are now starting to transform the shopping experience. Beacon
technology allows a shopper who has never been in a store to download an app, opt
into the beacon and easily navigate the merchandise in the store (Goller, 2016, Business
Insider, 2015).
- Retail apps – There are many benefits to using a retailer’s app beyond just scrolling
through a list of products that a store offers. Certain apps offer the benefit of allowing
the user to check stock availability – if the user’s preferred store is out of stock the app
recommends an alternative location. Another app allows users to pay for items in-store
without the presence of their wallet (Business Insider, 2015). Other retailing apps work
on the click-and-collect principle where customers can buy products on an app and
then just collect their order at a physical store after receiving a message from the app
that the order is ready (VendHQ, 2016).
- Interactive displays – Interactive displays are gaining popularity in the market as they
offer brands the chance to communicate visually with consumers. They allow consumers
to touch, smell, taste, hear and see products before they decide to purchase them
(Handshake, 2015). This approach further enhances the customer and retail experience
by offering customers various options to engage with a wide variety of products and
their unique features, thereby stimulating purchase intentions.
- Augmented reality – Augmented reality (AR) is a technology that allows virtual images
to mix seamlessly with the real world (Arseculeratne & Yazdanifard, 2014:130). AR offers
consumers a memorable experience that they can share with their friends and family
in the process increasing purchase intention and brand recall.
- Mobile payments – Mobile payment wallets are becoming a friendlier and more
acceptable option of buying products online. For instance, mobile payment applications
such as Zapper and SnapScan allow consumers to pay for purchases using their phones
or wearable devices. A major objective of this payment wallet is to make the buying
process more seamless.
Activity 1.1:
Click on the link below and read the article named “#BeyondRetail2016: Can retail save the SA
economy?” The YouTube video on the link accompanies the article.
http://www.bizcommunity.com/Article/196/87/152275.html
After reading the article, answer the following question:

Referencing the article, highlight why Dr Azar Jammine, chief economist at Econometrix, had
a positive attitude about retailers’ role in the economic conditions of South Africa for 2016.
Feedback
1
In your answer to this question, you can firstly highlight the characteristics and importance of the
economic environment. Also, highlight specific issues that Dr Azar Jammine, chief economist at
Econometrix, discussed, which positively influenced South Africa for 2016.
The economic environment can be defined as such factors as productivity, income, wealth,
inflation, pricing, poverty, interest rates, inflation rates, petrol prices and employment. Certain
economic indicators have a direct influence on consumer income, which, in turn, has an influence
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on consumers’ retail spending habits. Dr Azar highlighted the following retail powers to save the
South African economy (which you can discuss):
− The growth in consumer spending sparked economic expansion.
− Retail sales grew 3% for 2016.
− The urbanisation of China and Africa equates with good long-term economic growth potential.
− Inflation for 2016 was lower than expected.
− The petrol price was lower in 2016 than in 2015.
− South Africa has seen increased tourism from across the globe.
− Businesses still have solid balance sheets.
− The rand allows for export opportunities.
Unlike the macro-environment, the market environment consists of factors that may or may
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not be influenced by the retail organisation. The market environment, also known as the task
or operating environment, is where retailers conduct their business, and refers to those factors
and variables that cannot be controlled by retailers but can be partially influenced by their
strategies (Cant, 2016:34; Varley & Rafiq, 2014:81). The market environment has two sides, namely
a demand side and a supply side. The demand side includes all the potential consumers who wish
to purchase the goods and services the organisation offers, whereas the supply side refers to all
the organisations that offer related products (competitors) (Fourie, 2014a:35). This environment
further includes aspects such as suppliers and intermediaries who are necessary to get the
product to consumers. The four market environmental variables include:
• Suppliers – Suppliers play a critical role in the overall customer value delivery system by
providing the retailer with the merchandise they sell to customers (Armstrong & Kotler,
2015:95). A supplier should be viewed as both a partner and a competitor to the retailer
(Dunne et al., 2014:145). Suppliers refer to the official provider of goods and services in
exchange for designated recognition. A supplier may be distinguished from a contractor
or subcontractor, who commonly adds specialisation input into deliverables. Suppliers are
also called vendors (Business Dictionary, 2016).
• Customers – Customers are essentially the reason why the organisation exists and will
continue to exist in the future – customers can be described as an individual or company
that purchases the goods or services from a business (Investopedia, 2017). Customers behave
differently – it is important for retailers to be aware of their customers’ specific behaviour,
needs, wants and perceptions. If they have a thorough customer knowledge database,
retailers can make effective decisions (Fourie, 2016:35). The following are the five main
groups of customer markets (Erdis & Cant, 2015:21):
- Consumer markets – Consumer markets refer to the actual end consumers who purchase
products and services for personal use. For example, James buys a pair of jeans from
Woolworths; Woolworths is a retailer that serves the consumer market.
- Industrial markets – Industrial markets refer to consumer groups composed of
organisations that purchase goods and services for use in the production of other
goods and service that are sold, rented or supplied to others.
- Government markets – Government markets refer to the purchases made by the general
government and the nine provinces and local authorities in South Africa to produce
goods/services to the public.
- Reseller markets – Reseller markets refer to businesses that purchase products and
services to resell them at a profit. For example, Checkers purchases apples from Pink
Lady apples and resells them in its stores nationwide.
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- International markets – International markets refer to foreign buyers, and include
consumers, manufacturers, resellers and the government. For example, the exporting
of Granny Smith apples to foreign retailers.
• Competition – Competition is a fact for any retailer offering products and services, and in
most instances determines the selling price of products (Blythe, 2013:46; Cant et al., 2013:42).
Competitors are a major factor in a retailer’s success. The strengths, weaknesses and strategies
of competitors should constantly be taken into account as these areas are likely to lead, not
just to a less than optimal performance, but also to an unnecessarily greater exposure to
aggressive and unexpected competitive moves (Fourie, 2016:43). The types of competitors
a retailer faces include:
- Intra-type competition occurs among retailers in the same type of business that compete
directly with each other for the same customer; this is the most common type
of competitor retailers face (Business Dictionary, 2017; Dunne et al., 2013:146). However,
retailers do not necessarily compete with each other if one retailer is selling more
premium-based products and the other less expensive products (Dunne et al., 2014:146).
- Inter-type competition occurs among retailers that have different types of retail set-ups
that sell the same type of products.
- Divertive competition occurs when a retailer intercepts customers from a competing
retailer.
• Intermediaries – An intermediary, also known as a middleman, plays an incredibly important

role in getting a producer’s products through to the final consumer, and includes wholesalers,
distributors, financial intermediaries such as banks and insurers, agents, brokers and retailers
(Erdis & Cant, 2015:24).
- Wholesalers are independently owned organisations that take ownership of the products
they handle. Wholesalers purchase products in bulk and store them until there is a
demand; this demand usually comes from other intermediaries such as retailers who
then sell it on to the consumer for a further profit (Hammond, 2017). Some retailers
purchase the products they sell in their stores from wholesalers. For example, spaza
shops often buy products in bulk at wholesalers such as Makro and sell the products
to their consumers for a profit
- Distributors often have exclusive buying agreements with a manufacturer for a product.
This agreement limits the amount of firms that can carry a product or enables the
distributor to cover specific areas. A distributor is the manufacturer of that particular
product or product line’s direct contact with prospective buyers. While distributors rarely
sell to end consumers, wholesalers and retailers generally purchase from distributors
to sell these products on to the final consumers (Cole, 2017).
- Financial intermediaries can be a financial institution such as a bank, investment bank,
insurer, pension fund or building society that offers a service to assist a company or
individual to borrow or save money (Pettinger, 2016).
The micro-environment refers to the controllable factors and the inspection of the internal
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characteristics and internal resources of an organisation (time, money, expertise) to optimise the
organisation (Jooste et al., 2012). The variables of the micro-environment include:
• Mission and vision – The mission statement describes the fundamental reason why the
organisation exists, identifies its products, services and customers and indicates to employees
and customers the direction in which the enterprise is heading (Cant, 2016:29; Grewal &
Levy, 2014:36). A mission statement should essentially be a summary of what the retailer
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hopes to achieve through its operations (Goworek & McGoldrick, 2015:38). A vision statement
is a detailed future-thinking piece that indicates an organisation’s intentions. For example,
it could include how an organisation intends to treat its customers and what its ethical
standpoint would be for a five-year period (Poloian, 2013:69).
• Goals and objectives – The strategic goals and objectives a retailer sets are the guidelines of
how the company intends to accomplish its mission. Goals essentially provide an overview
of what the organisation wants to achieve in the future, while objectives provide the retailer
with a more specific framework to follow, thereby empowering it to implement its strategies
(Goworek & McGoldrick, 2015:38). Objectives can either be set for the long term or for the
short term.
• The marketing mix – The marketing mix is directly controlled by the retailer and includes the
product (the goods and services the company offers), price (the value of the goods and services),
place (where the goods and services are sold) and promotion (the marketing communication
mix used to inform the target market). For example, Pick n Pay offers clothing, baby and
wellness, food and wine and elaborated services to its consumers.
• Resources, skills and abilities – Resources refer to capital, both monetary and human, that
the organisation has available. When organisations structure and manage their available
capital in the correct way it allows employees to operate to the best of their abilities.
Furthermore, with the correct structure in place, the organisation can deal with market threats
and opportunities effectively (Cant, van Heerden & Ngambi, 2013:40). Many organisational
structures arrange employees into functions with specific activities or tasks (Strydom, 2014:34).
It is important that retailers evaluate the variables in the market and macro-environment as these
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external variables shape the strategy and product offering of the retailer, essentially the retailer’s
internal environment. The core purpose of reviewing the layers in the retail environment is to
enable a retailer to align its strengths with the opportunities presented in the marketplace and
to remain sustainable and competitive (Erdis & Cant, 2015:24).
138 In the next section, we focus on the importance of the location of retailers.
1.5 LOCATION OF RETAILERS

139 When retailers select a location for their stores, they keep factors such as
the visibility, closeness to competitors, rent and exposure in mind. Selecting
the correct location is crucial for the following reasons (Fourie, 2014a:48;
Erdis & Cant, 2015:48):
• Long-term implications – The choice of location has long-term implications for retail
organisations. If one location does not work, it cannot be changed easily without incurring
costs.
• Competitive advantage – The competitive advantage to be gained from a specific location
is a significant factor. Certain locations are effective and have a competitive advantage for
certain customers. For example, if you live near Menlyn Shopping Mall, the shops there have
a competitive advantage in your mind compared to the shops in, say, Irene Mall.
• Fashionable locations – In South Africa, retailers also need to consider many different locations
for stores. As a semi-developing country, there are many areas of opportunity. However,
retailers should be aware that what may be a great place today may be a failure tomorrow.
• Social factors – Many social factors affect the popularity of a specific location – one of these
is crime. The crime rate in a particular area may make it more unpopular than other areas.
Not only could there be a risk of the retail store being robbed, but the constant danger
could also lead to a decrease in customers.
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• Market potential – Retailers should consider if there is sufficient market potential in the target
market area. This is determined by counting the number of people in the market area and
determining their purchasing power as well as willingness to purchase goods from the retailer.
• Business interception – A location may be chosen to intercept consumers when they are on
their way to traditional or anchor stores. Anchor tenants in a shopping mall, such as Pick n
Pay or Shoprite, are normally a big attraction to a shopping mall.
• Minimising competition – Current and future rivals should be considered when retailers select
their location. In some instances, a location away from competitors may be considered,
while in others proximity to competitors may be preferable.
1.6 EVOLUTION OF RETAILING

The process of offering customers products and services for personal, household and family use
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has changed dramatically over the past several years. Retailers are constantly on the lookout to
better and reinvent customer experience. Retailers generate innovative ideas to gain larger profit
shares, and to increase customer service and brand awareness. Traditional retailers are moving
away from brick-and-mortar locations and moving towards omni-channel retailing, social media
retailing, mobile apps and new payment systems, modern databases and enterprise resource
planning (ERP) systems (Crawford, 2014). As previously discussed, omni-channel retailing involves
the combination of retailing efforts in technology, mobile, physical experiences and digital
shopping in their marketing efforts to reach a multi-facet audience. Retailers are embracing the
digital experience, the store environment and integrated online and offline approaches that
add value to customers.
As increasingly more customers are “going online”, retailers are offering their products via
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online platforms to reach more customers in an innovative and convenient manner. Given the
advancement of smartphones and tablets, mobile shopping (or mobile apps) is slowly making its
way to the airwaves, as customers prefer to do their shopping in the comfort of their homes, 24
hours a day. As a result, most retailers are introducing mobile loyalty programs where shoppers no
longer have to queue and clutter their wallets. Instead, they can progressively track and redeem
their rewards using their smartphones (Origin Design, 2015). Many retailers in South Africa have
introduced mobile apps where customers can shop for items on their smartphones 24 hours a
day. For instance, Spree, Zando, and Takealot.com have both internet websites and mobile apps
where customers can buy items.
Retailing is also evolving into a new store format – pop-up or temporary stores. Pop-up stores,
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as the name suggests, only open for a specific period in a certain location, such as a shopping
mall, and then close (Zentes et al., 2011:56). Pop-up stores offer a limited range of products that
are usually seasonal. These interactive stores allow manufacturers and distributors to target
consumers directly at less cost than a year-round store would. They also allow retailers to extend
their brand to new locations or even experiment with design and other ideas that may not be
cost effective in a full-time retail space environment. More specifically, pop-up stores are really
about being in the right place at the right time, with the right products at the correct prices. In
addition, they are particularly popular around the festive holidays (Handshake, 2015).
It is therefore evident that retailing is evolving into providing customers with personalised and
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customised product and service options in the convenience of their own home, 24-hours a day.
Do some research of your own to see how the ever-changing technology enables the retailing
environment to change and evolve.
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1.7 SUMMARY
This learning unit provided the foundation to the module of Introduction to Merchandising,
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defined retailing and discussed the characteristics and types of retailers. It is clear that retailers
do not function in isolation, but in an ever-changing environment where certain controllable
and uncontrollable factors influence the functioning and daily operations of these retailers.
We explored the various macro-, market and micro-environmental factors that influence the
daily operations and decision-making of retailers. We then briefly discussed the important
considerations when choosing a location for the retail business. The learning unit concluded
with a brief discussion of the latest evolvements in the retailing industry.
After studying this learning unit, you should have a better understanding of the retailing industry
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and the most important aspects of the retailing environment. In the next learning unit, we discuss
the fundamental principles and nature of merchandising. When studying the next learning unit,
keep in mind the basics of retailing to understand where it all fits in.
1.8 CASE STUDY WITH QUESTIONS

146 Read the following case study and answer the question that follows.
147 Love and Lobster Restaurant
Mpho is the owner of a seafood restaurant called Love and Lobster that she started with money
148
she inherited from her grandmother. The restaurant, situated in an old house in a Cape Town
suburb, opened its doors three years ago and only has 35 tables. Although the restaurant had
start-up problems, Mpho has made this seafood restaurant a very popular outing for locals
and international tourists.
Mpho needs to be informed what types of fish she is allowed to sell to make sure that her
149
suppliers do not catch fish on the red list. In different countries, different types of fish should
be avoided. The red list indicates which fish species are vulnerable and avoids over-fishing.
Mpho wants to offer her customers quality fish and seafood options at an affordable price.
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The menu includes mainly fish, chips and seafood platters. During the last year, the interest
rates have gone up twice and further hikes are expected. Mpho has noticed that sales have
declined as customers cut back on entertainment and eating out. She has also noticed that
customers have become more health conscious – the records of Love and Lobster indicate a
decline in the sales of chips and fried fish and an increase in fish and salads. Mpho, therefore,
considers adding sushi and a vegetable side dish to her menu.
With the growing importance of customer service, Mpho has also invested in a technological
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service system. Each waiter is now fitted with a service watch. Each table has a pod with two
buttons, the first button is to get the attention of the waiter and the second button is to call
the manager. Once the button is pressed, the watch vibrates on the waiter or manager’s wrist
and shows the table number that needs assistance.
Source: Adapted from Fourie (2016:19).
19
QUESTION
Discuss how the physical, economic, social, technological and international factors in the macro-
152
environment influence Love and Lobster restaurant. You need to discuss the theory and apply
it to the provided case study.
1.9 REFLECTION
Before you continue to the next learning unit, reflect on the following questions:
1 Discuss the retailing environment in the African and South African context.
2 Differentiate between store and non-store retailing and provide examples of
both to illustrate the difference.
3 Discuss the importance, characteristics and all the factors of the macro-, market
and micro-environment and how they can influence retail activities. Provide
practical examples to demonstrate your understanding.
4 Can you think of scenarios of how retailers have evolved in the last couple of
years? Provide practical examples to illustrate your understanding.
1.10 SELF-ASSESSMENT QUESTIONS

Work through the following multiple-choice questions (MCQs) to test your
1
knowledge and understanding of the learning unit:
QUESTION 1
Which ONE of the following options about retailing is CORRECT?
2
1 Retailing refers to a set of business activities carried out to accomplish the

exchange of goods and services for the purpose of personal and business-
to-business use.
2 Retailers serve as the final link in the supply chain between the manufacturer
and the consumer.
3 Retailers usually purchase goods in small packages and repack them in bulk
packaging for the convenience of the consumer
4 Retailers can provide integrated marketing communication to consumers
by using different communication mediums to deliver different messages.
QUESTION 2
Which ONE of the following options refers to the macro-environment? It is
3
characterised by …
1 uncontrollable factors and include factors such as the political, social and
technological environment.
2 uncontrollable factors and includes factors such as customers, intermediaries
and competitors.
3 controllable factors and includes factors such as the mission, vision, skills
and resources.
4 controllable factors and includes factors such as the physical, technological
and international environment.
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QUESTION 3
A ... defines the fundamental, unique purpose of a business and identifies its
4
customers and products or services.

1 target market
2 mission statement
3 marketing objective
4 vision statement
QUESTION 4
Which ONE of the following options refers to the physical environment?
5
1 the forces controlled by national or provincial authorities or business regula-

tory bodies
2 the technological innovations that have a profound effect in areas of marketing
3 the economic forces that have an impact on organisations, such as the busi-
ness cycle
4 the availability or shortage of raw materials and the cost involved in the
production of products or services
QUESTION 5
Five groups of customer markets exist, namely …
6
1 consumer markets, industrial markets, government markets, resale markets

and international markets.
2 consumer markets, business-to-business markets, government markets,
industrial markets and sale markets.
3 government markets, international markets, corporate markets, industrial
markets and consumer markets.
4 manufacturing markets, engineering markets, industrial markets, non-profit
markets and retail markets.
5 Before checking the answers to the MCQs above, try to answer them yourself
to test your understanding and knowledge of the theory you have just learnt.
153 MEMORANDUM
155 QUESTION 1
156 Option 2 is the correct answer.
Option 1 is incorrect because retailing refers to a set of business activities carried out to accomplish
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the exchange of goods and services for the purpose of personal, and family or household use (and
not for business-to-business use). Option 3 is incorrect because retailers usually purchase goods
in bulk, repackage the products and resell the products in smaller quantities to the consumer.
Option 4 is incorrect because although retailers can provide integrated marketing communication
to consumers by using different communication mediums, the message should be a unified
message.
158 The correct answer can be found in section 1.2.
21
159 QUESTION 2
Option 1 is correct as the macro-environment is characterised by uncontrollable factors in the

161
retail environment and include the political and legal, economic, socio-cultural, physical and
international environments. Option 2 is incorrect because the market environment refers to
factors such as customers, intermediaries and competitors. Option 3 is incorrect because it refers
to the micro-environment. Option 4 is incorrect because the macro-environment is characterised
by uncontrollable factors, not controllable factors.
162 The correct answer can be found section 1.4.
163 QUESTION 3
The retailer’s mission statement should clearly indicate the current product market position
165
and customers of the business. Option 1 is incorrect because the organisation’s target market
refers to the potential customers that the organisation wants to attract to buy the organisation’s
products and services. Option 3 is incorrect because the marketing objectives of an organisation
refer to the goals set by the organisation when promoting its products and services to potential
consumers. Option 4 is incorrect as a vision statement provides strategic direction and describes
what the owner or founder wants the organisation to achieve in the future.
167 QUESTION 4
Natural resources such as water, coal, oil, gold and other minerals are not available in infinite
169
quantities. Businesses must be aware of these limitations as various factors can lead to a shortage
of raw materials and rising costs. All retailers need to be aware of the availability of raw materials
used in the manufacturing process at it can and will have an effect on the regular supply of the
product. Option 1 is correct as it refers to the political environment. Option 2 is incorrect as it refers
to the technological environment. Option 3 is incorrect as it refers to the economic environment.
171 QUESTION 5
Options 2, 3 and 4 are incorrect because business-to-business markets, sale markets, corporate
173
markets, manufacturing markets, non-profit markets and engineering markets do not form part
of the five main markets.
The correct answer can be found section 1.4.

174
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Learning unit 2
The nature of retail merchandising
Contents

Learning outcomes
Key concepts
2.1 Introduction
2.2 The concept of merchandising
2.3 The merchandiser and the function of merchandising
2.3.1 Role and responsibility of the merchandiser
2.3.2 The merchandising function
2.4 Principles of merchandising
2.5 Factors influencing retail merchandising
2.6 The merchandising philosophy
2.7 Summary
2.9 Reflection

Have you ever wondered how retailers ensure that stock is available to the consumer when they
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want it, where they want it? Have you ever considered how the retailer knows when to order
products, or why the retailer places products in a certain way? Have you ever considered that there
is a reason why a retailer places products there? These activities are all related to the function of
merchandising – ensuring that the right products are available to customers at the right place,
in the right quantities and quality and at the right time and price. In this learning unit, we lay
the foundation of the concept of retail merchandising. We also define merchandising, discuss
the role and responsibility of the merchandiser, and what the merchandising function entails.
We consider the principles of merchandising as well as the factors that can have an influence
on the merchandising function of an organisation. The unit concludes with a brief discussion of
the merchandising philosophy.
23
This learning unit unfolds as follows:
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177
LEARNING OBJECTIVES
• differentiate between retailing and merchandising

• explain and understand the concept of merchandising and retail merchandising
• explain the six rights of merchandising with practical examples
• discuss the role and responsibility of the merchandiser in the retailing environment
• discuss the four core areas of the responsibility of a merchandiser
• list and explain the key roles of the merchandiser
• discuss the processes involved in the role of the merchandiser
• critically discuss the merchandising function and discuss the central role of merchandising
• critically discuss the principles of merchandising and practically apply each principle
• explain the various factors that influence retail merchandising and provide an example
of each factor
• explain the merchandising philosophy and explain what is included in a company’s
merchandising philosophy
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KEY CONCEPTS
• Merchandising • Stock allocation

• Merchandiser • Merchandise plan
• Retail merchandising • Customer value
• Inventory • Merchandising philosophy
• Assortment • Depth of product range
• Range planning • Width of product range
2.1 INTRODUCTION
In the previous learning unit, we provided the foundation of retailing. Before we continue with
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the next learning unit on merchandising, have you ever considered the difference between
retailing and merchandising? Is there even a difference? As discussed in the previous learning
unit, retailing involves the process of selling products and/or services to consumers through
multiple channels to make a profit (Tyagi, 2016). Merchandising, however, entails the planning
and processes involved in ensuring that products are available in-store (in sufficient quantities),
and promoting and displaying the merchandise in such a way that it stimulates interest and
entices customers to make a purchase (Tyagi, 2016). It is therefore evident that merchandising
serves a very important role in a retail organisation. Merchandising not only involves acquiring
products to sell in stores, it also promotes and displays a product in such a way that it is visually
appealing and encourages prospective customers to purchase the product. Merchandising
encompasses the planning involved in marketing the right merchandise or service at the right
place, at the right time, in the right quantities and quality, at the right price to the consumer
(Business Directory, 2016).
In this learning unit, we discuss the concept of merchandising, explain what the merchandising
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function involves and look at the role and responsibility of the merchandiser. We also discuss the
principles of retail merchandising and briefly discuss the factors that influence the merchandising
function in different retail outlets. The learning unit concludes with a brief discussion of the
merchandising philosophy a retailer can adopt. But first, what exactly does merchandising entail?
2.2 THE CONCEPT OF MERCHANDISING

The word “merchandise” originates from the old French word merchant, which later led to the word
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“merchandise” – meaning “goods” (Pradhan, 2010:2). The word “merchandise” refers to products
and commodities bought and sold for a profit (Pradhan, 2010:2; Rosenau & Wilson, 2014:2). The
American Marketing Association (AMA, 2016) defines merchandising as “the planning involved
in marketing the right merchandise at the right place at the right time in the right quantities at
the right price”. We can say that merchandising involves the buying, presenting and selling of
merchandise to consumers in the right place, at the right time, in the right quantities and at the
right price. Retail merchandising includes all the activities directly or indirectly associated with
producing and reselling merchandise – it includes all activities associated with buying, pricing,
presenting and promoting merchandise (Donnellan, 2014:4–5).
25
Merchandising is “an integrated, end-to-end business process that runs from planning
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the assortment, to sourcing, to distribution, to the allocation of the goods to the stores, to
promoting and selling the assortment to the customers and finally to replenishing inventory
as necessary” (Aufreiter in Pradhan, 2010:4).
Retail merchandising is “the process of developing, obtaining, pricing, supporting

182
and communicating the retailer’s merchandise offering” (Lewison in Pradhan, 2010:3).
The challenge of merchandising is having the right product (or merchandise) in the right place,
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in the right quantities, at the right time and at the right price. Better known as the “six rights of
retailing”, it includes the following elements:
• Right product (merchandise) – If retailers do not offer the right products to the customers,
customers seek similar products and services at their competitors. Retailers should conduct
thorough research to ensure that there is a demand for products and that all departments
focus on successfully bringing the products or services to the market. For example, if
Woolworths does not sell black pants in the correct size and style, the customer may go to
Edgars to buy black pants that fit right.
• Right place – The right product should be available in the right place. Therefore, the right
place refers to the convenience of accessing the required product. This may include a store
window, a retail floor display or online retailing through an organisation’s website. For
example, if customers do not want to drive far to a specific shopping mall, they choose the
shopping mall closest to their house.
• Right time – Retailers must have the right product in the right place at the right time. The
right time refers to the actual time when consumers are willing to buy products and services.
Fashion merchandisers introduce their product lines many months in advance to gauge
buyer interest and to expedite orders. For example, online retailers provide the advantage
of being accessible 24 hours a day, seven days a week.
• Right quantity – If customers want a certain amount of a specific product at a specific retailer,
and the retailer does not have the right quantity, the customer seeks the right quantity
of the product at another retailer. Having sufficient stock on hand can ensure that supply
meets demand. Supply can be affected by the amount of storage space available, how fast
these products can be manufactured and supplier availability.
• Right price – The right price refers to price customers are willing to pay for a product or service.
The right price for the retailer is the price that generates sufficient money to ensure a profit.
The right price is therefore the amount consumers are willing to pay and retailers are willing
to accept in exchange for products and services. For example, a supermarket promotes
biscuits at a good price – the price should be competitive enough to draw customers, but
the store still needs to make an appropriate profit.
• Right service – Finally, to be successful a retail organisation needs to add value to its product
offering by means of excellent customer service and relationship building. Price is not always
the only factor customers consider when purchasing a product or service, therefore, retailers
should provide excellent customer service to ensure that customers return in the future.
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Figure 2.1: The “six rights” of retailing
Activity 2.1
Peter, a Mr SA Fitness 2016 contestant, is appointed as the merchandsier of a health shop

spesialising in gym supplements located close to his local gymnasium. List and explain some
elements that Peter should consider when deciding on the products to sell in the store.
Feedback
2
Peter and the buyer should consider the following:
 The right products – Peter should ensure that they sell the correct products to their cus-
tomers – quality supplements to assist the consumers in achieving their fitness goals.
 The right place – The store should be situated close to the gymnasium with ample and
accessible parking.
 The right time – Peter should ensure that they have sufficient stock and relevant diet
products available in summer when customers historically spend more time and money
on losing weight.
 The right quantity – Peter should ensure that they order the correct amount of stock. Some
supplements only have a six-month shelf life before they expire, therefore, it is vital not to
run out of stock, but also not to have stock that expires before it sells.
 The right price – It is important that they should price the store’s products competitively
as a well-known pharmacy sells a similar range in close proximity to the health shop.
 Right service – They should provide excellent customer service to consumers to ensure
that they are satisfied and will return to the store in the near future.
186 We discuss the role of merchandising in the retail environment in the next section.
27
2.3 THE MERCHANDISER AND THE FUNCTION OF
MERCHANDISING
Merchandising is a very important function in the retail organisation as it has the ability to
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differentiate a store from its competitors by means of the display, layout and image of the store,
as well as the availability of stock. The merchandiser needs to determine the ideal inventory
(stock) cover for a specific period to ensure that it does not have too much cash invested in stock.
The reason for this is that in most cases inventory is the biggest expense of a store. A store’s
inventory includes all products in the store that can be sold to consumers. Therefore, it is ideal not
to have too many or too few products available at a given time. It is crucial to do merchandising
effectively to ensure that the store’s products sell at the right price in the quickest time possible.
Inventory can be defined as the physical stock of goods that are kept in store to meet the
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anticipated demand of customers (Vrat, 2014).
Merchandising is a very important function in the retail environment as the store owner or buyer
190
relies heavily on the merchandising team. The merchandiser usually knows the products better
than the store manager or buyer. Merchandisers often have a better understanding of customer
needs as they deal and communicate with customers more frequently than the manager or buyer,
and communicate the needs and wants of these customers to the manager. To understand the
role of the merchandising function, we first look at the role and responsibility of the merchandiser
in the retail environment.
2.3.1 Role and responsibility of the merchandiser

As the amount of competition in the retail environment is exponential, the merchandising function
191
is very important – retailers not only want to retain customers, but also attract new ones. Ian
Jones, managing director of fashion jewellery chain Azendi, says, “Merchandisers are certainly
under pressure to optimise what they do. Buying insufficient stock always hurts more in terms of
lost sales.” (Ryan, 2009). The size of the retail organisation determines the degree of responsibility
of the merchandiser (Rosenau & Wilson, 2014). In small organisations, the merchandiser takes
full responsibility for sourcing products, while in bigger organisations more decision-makers are
involved – for instance the buyer.
The merchandiser is generally responsible for moving stock into and around the business (Jackson
192
& Shaw, 2009:30). In other words, the merchandiser is responsible for selecting and purchasing
products for the company and ensuring sufficient stock is available to meet the customer demand
(Goel, 2013:77). Furthermore, the merchandiser is responsible for ensuring that products are
displayed to achieve maximum sales (Wrice, 2006:18). The responsibility of a merchandiser can
therefore broadly be categorised into four core areas, namely (Fernie, Fernie & Moore, 2015:184):
• controlling the buying budget and merchandise plan
• controlling the flow of goods by managing the critical path
• ensuring the availability of products to meet demand
• effectively allocating products to match customer demand across the retailer’s distribution
channel
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The merchandiser plays a very important role in the organisation. Varley (2014) lists the following
193
key roles of the merchandiser:

• Analysing and evaluating the previous season’s sales and trends – The merchandiser needs
to understand the previous year’s trends and plan accordingly to ensure that the store has
sufficient stock available.
• Working with buyers to build and develop the range – The range that a store carries must
constantly be relooked and adapted to ensure that the store stocks the correct range for
its target market to maximise profits.
• Proposing departmental budgets – The supplier must set budgets for each store and the
merchandiser must actively drive to achieve the targeted budget.
• Developing and managing an excellent working relationship with suppliers – It is vital that the
merchandiser and buyer have a good relationship with suppliers and that both parties benefit.
• Maximising turnover and profitability – By selling the right products at the right prices, the
merchandiser is able to ensure that both the retailer and the supplier maximise the amount
of money they make.
194
195 The retail merchandiser:

196 https://www.youtube.com/watch?v=FO0GpSE_8IM
Visit the link above to a YouTube video briefly summarising the role and
197
responsibilities of a retail merchandiser. The video briefly explains the day

in the life of a retail merchandiser. The role and responsibilities are summarised as follows:
• ensuring that a proper level of stock is maintained at all

• ensuring that the merchandise is displayed properly and appropriately
• ensuring that there is proper and sufficient signage
• ensuring favourable shelf placement of products, which includes the set-up, planogram
execution as well as the stocking, replacing and rotating of the manufacturer’s products
• building relationships with the store’s management
• assisting the manufacturer and retail store in maximising their sales and volume
198 Merchandisers are involved in the following processes as part of their role (RHR, 2017):
• Analysing past sales figures/trends to anticipate future product needs – The merchandiser
needs to consider historic data to anticipate future needs. For example, green tea, which
detoxifies a person, sells very well in January after the Christmas period when people tend
to overeat. The merchandiser analyses the previous January’s sales figures to determine an
approximate forecast.
• Devising a merchandise plan using the above techniques – The merchandise plan is the tool
that ensures that the right product is sold at the right price in the right place at the right
time. According to Fernie et al. (2015), the merchandise plan includes core dimensions like
the total buying budget of the organisation, the gross profit margin (the difference between
the cost of goods and the selling price – we discuss this concept in learning unit 10) and a
year-on-year comparison with the previous year. For example, after analysing historic data
the merchandiser in a pharmacy chain store determines which brands of perfume were the
biggest sellers over the previous Christmas period. In this phase, the merchandiser determines
which display space in store would attract the most attention and sales from customers. By
considering the space available, promotional price and timing, the merchandiser determines
the amount of stock necessary.
29
• Relaying the merchandise plan to the buyer – The buyer can decide on what products, styles
and colours to purchase and from which suppliers at what price. For example, a store needs
to buy an assortment of kosher products for the Easter period. In this phase, the merchandiser
has a discussion with the buyer to motivate the suggested products and quantities.
• Devising a contract for the suppliers – This includes quality control, accuracy and flexibility.
This is done throughout the season. Suppliers and retail chains generally meet annually to
discuss their trading term contracts that include measures such as quality, delivery times
and shelf life.
• Allocating certain amounts of stock – to each outlet throughout the season. Retailers try to
minimise stock holdings and commitment to allow for maximum flexibility. For example,
during the busy Christmas period, retailers generally sell more sparkling wine. A retail store
is only allocated a specific number of cases as the demand is so high, so it is important to
monitor stock levels closely.
• Monitoring stock movement – Once the products are all distributed and put on sale, the
merchandiser monitors stock movement and considers aspects such as markdowns, inter-
branch transfers, promotions or clear-outs. For example, the merchandiser responsible for
the pool equipment in a hardware store monitors sales, and if he sees there is an over stock
when the winter season starts, he can consider a markdown with the assistance of the buyer.
If a merchandiser follows the process above, it ensures a mutually beneficial relationship between
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the supplier and the retail store.
Activity 2.2
Mary is a leading chocolate supplier’s merchandiser in a busy retail store. She realises in
November that the 2017 Valentine’s Day period is approaching. List and discuss the process
Mary should follow to ensure that the period runs smoothly and both the company and
retailer benefit with increased sales.
Feedback
3
Mary should analyse the 2016 data to determine which of her company’s chocolates lines sold
the best.
1. Mary should work on her merchandising plan. This includes allocating additional shelf space
in the fresh flower section where consumers can be persuaded to buy chocolates for their
valentines. Keeping this in mind, she should work on a stock forecast.
2. Mary should meet with the buyer to determine the stock necessary so the store does not run
out of stock. Mary should suggest a joint promotion, where a consumer can buy a bunch of
flowers and a chocolate slab at a great price.
3. Mary’s company and the retailer should have a contract in place that they revise on an an-
nual basis.
4. As Mary’s company always limits chocolates over busy holiday periods, Mary and the buyer
should ensure that there is sufficient stock for the promotion. They can do this by buying in
from November.
5. With the weaker rand, the promotion is not as successful as expected and there is still stock
available in March. Mary should negotiate to sell the stock at a reduced price to clear stock
before it expires.
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2.3.2 The merchandising function

Now that you understand the role the merchandiser play in the retailing environment and know
200
their core responsibilities, we look at the functions of merchandising.
According to Jackson and Shaw (2009), the merchandising role traditionally included the buying
201
of the product resulting in the merchandising team being responsible for range planning (the
function that determines the assortment of products to sell in store) and stock allocation (the
function that determines where to place the ideal amount of stock in store). However, many
retailers have revised the responsibilities of the merchandiser and removed the distribution role,
leaving merchandising to focus on analysing and planning. By moving away from the traditional
method where the merchandiser was not as strategic in the company and was mostly involved
in distributing stock, the merchandising role is now more focused on the forward planning of
the department and in deciding on the amount of stock needed in a specific period.
The central role of merchandising can be divided into four key roles, namely planning, directing
202
co-ordinating and controlling (Pradhan, 2010). We now briefly look at each key role:
203
Figure 2.2: Four key roles of merchandising
• Planning – Although the buyer does the product ordering, the merchandiser assists with
forecasting and planning. Forecasting is the prediction of stock needed – the buyer and
merchandiser can also look at the previous year’s sales and trends to determine the amount
of stock necessary. For example, increasing the amount of canned soup ordered over the
winter period.
• Directing – The merchandiser should assist and direct the buyer to order sufficiently. The
merchandiser knows the products better than the buyer does, and should direct the buyer
to order adequately. For example, a company launches a new flavoured green tea variant
to its existing range. The buyer wants to order only ten units of the new green tea product,
but as the merchandiser knows it will be on promotion at a very good price in the next few
weeks, he directs the buyer to order 50 units.
• Coordinating The merchandiser generally deals with a few buyers. The merchandiser should
therefore co-ordinate the amount of stock to order to ensure that all buyers are aligned
and that there is sufficient stock in store to meet the customer’s demand. For example, two
different buyers in store order cereals and milk products. When the store runs a promotion
where a consumer can buy both a litre of milk and a box of cereal, the merchandiser must
ensure that both buyers order sufficient stock of both cereal and milk.
• Controlling – The merchandiser relies on the buyer for markdowns, for example. The
merchandiser should therefore practise some control over the buyer and be as involved in
the buying process as the buyer. For example, the merchandiser should know exactly how
many packets of biscuits will expire in less than a month and influence the buyer to mark
it down and to order less stock of the specific biscuits in future to ensure that that much
stock does not expire in store again.
As can be seen from the above discussion, the role and responsibility of the merchandiser and
204
merchandising go hand in hand. Next, we look at the principles of merchandising.
31
2.4 PRINCIPLES OF MERCHANDISING
According to Pradhan (2010:21), merchandising is becoming increasingly important as it eventually
205
determines the loyalty a customer has for a specific store. When customers are able to find what
they are looking for and enjoy the shopping experience, they become loyal to the store and
return repeatedly. To be successful and influential, the merchandiser needs to adhere to the
following principles of merchandising (Pradhan, 2010:21–22):
• Understanding the target market – The retailer should stock products that fulfil the specific
customer’s need. For example, a tuck shop in a holiday resort that stocks necessities like
toiletries for holidaymakers who forgot their toothbrushes at home.
• Building the merchandise plan – The merchandise plan is unique to each store and involves
determining the unique product mix (the range of products) a store carries, the amount of
stock to cover to avoid out-of-stock situations and the placement of the stock in-store. Each
store is different – even if the store forms part of a buying group, such as Checkers or Spar, it
still has unique products and layouts as all towns and regions are unique. For instance, a Spar
in Sandton carries a very different range from a Spar store in Thohoyandou. For example, the
Spar in Thohoyandou stocks 12,5 kg bags of maize meal, while the Spar in Sandton stocks
gluten-free cereals at more than R50 for a 500 g pack. We discuss merchandise planning in
more detail in learning unit 3.
• Buying what your customer wants, not what you want – Merchandisers need to understand their
customers – different customers have different needs, wants, likes and dislikes. It is crucial
that merchandisers know their target market and ensure that they stock the merchandise
that caters for the needs of these customers. For instance, the merchandiser of a grocery
store is Jewish and does not consume pork. However, the merchandiser would still stock
pork products as this is what customers want.
• Building the right product assortment – The product assortment of a store entails the different
product items or categories available for purchase (Levy & Weitz, 2007:35). Customers want to
choose between an array of products and a variety of product assortments, such as different
sizes, colours and flavours. It is ideal to have more than one option per product available in
the store to meet the demand of customers and give them a choice. For example, a jewellery
stores stocks a variety of watch brands to ensure that the customers have a few brands to
choose from, or a spaza shop has different flavours and sizes of soft drinks, such as cans,
and 500 ml, 1 L and 2 L bottles. We discuss merchandise planning and the assortment plan
in more detail in learning unit 3.
• Being consistent – The store must ensure that its products are consistent with its image and of
reliable quality. For instance, a well-known and expensive jewellery store stocks genuine and
popular brand names, such as Guess, Rolex and Tag Heuer, instead of cheap and counterfeit
brands that are not consistent with the image of the store. Customers want to return to
a store if they have a good experience and are always able to find quality products and
excellent service. A store’s products should therefore be consistent and of good quality. For
example, a bakery should always have fresh bread in stock to ensure that customers return.
• Creating customer value – Price is not always the most important factor customers consider
when making decisions, and it is not the only way to create customer value. Customer
value is the “balance between the benefits and sacrifices stemming from an organisation’s
product offering and relationship, which will be viewed by customers as helping their goals”
(Machado, 2014:128). Customers seek value and quality and are therefore willing to pay a
premium price for it. Customers want to buy products that give them value for money and
that deliver on its promises, and they are willing to pay more for this. For example, All Gold
tomato sauce is more expensive than its competing no-name brands, but it is far superior
in quality; therefore customers would rather purchase All Gold tomato sauce.
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• Understanding the needs of the suppliers and negotiating a win-win situation – It is crucial
for the buyer to understand its suppliers and nurture mutually inclusive and long-lasting
relationships. Suppliers should be involved to ensure that both parties benefit from the sale
of products in store. Suppliers should be involved in all processes, from the ordering of stock,
to deliveries to ensuring that the product is in a good condition to sell. For instance, stock
should not be past its expiry date or damaged. We discuss selecting supplies and building
lasting relationships with suppliers in learning unit 5.
• Sharing information – For long-term success it is vital that the retailer and its suppliers share
information. For example, a supplier who knows in advance that its product will be out of
stock for a certain period should communicate this to the buyer in time. This ensures that
the store has sufficient stock because the buyer bought in more stock while the supplier
still had stock. Managing stock levels is therefore crucial for any retailer – we discuss this in
more detail in learning unit 3.
• Accepting that mistakes can happen – A merchandiser and store should accept the fact that
sometimes things do not go as planned. It may happen that a store decides to stock a new
product item or range, which turns out to be unsuccessful and not profitable. In this case,
the merchandiser needs to accept its mistake and move on. For instance, a retailer decides
to sell a new flavoured chocolate in its store; however, it does not sell as well as anticipated
and customers do not like to product. The retailer would then decide not to restock the
product due to the poor sales. The retailer may even have excess stock of this product and
has to sell it at a much lower price to make up some of its losses.
• Surprising the customer – The merchandiser should aim to surprise customers and keep them
excited to ensure that they return repeatedly and become loyal customers. For instance,
holding an in-store competition where a customer can win a car when buying two packets
of chips. The merchandiser can build an elaborate product display in the store entrance.
This entices customer to buy and keep them excited.
Activity 2.3
Sam decides to open a franchise paint store on the outskirts of Krugersdorp close to a new
residential development. Advise Sam of the principles of merchandising that he needs to
keep in mind.
Feedback
4
 Understanding the target market – Sam needs to understand the target market and its
needs. With the residential development, plenty of contractors and builders need paint
for the properties they are building.
 Building the merchandise plan – The store Sam bought is a franchise store with 66 other
branches in South Africa. Sam should understand that the range he stocks may be totally
different and unique to any other store.
 Buying what your customer want, not what you want – Sam should understand that
his customers may have very different needs from his own. He should stock accordingly.
 Building the right assortment – Sam needs to stock a variety of brands, paint and acces-
sories to ensure his customers have a wide range from which to choose.
 Being consistent – Sam needs to ensure that the products are of consistent quality.
 Offering value – The paint and accessories that Sam stock need to be of great quality.
 Understanding the needs of the vendor and negotiating a win-win situation – Sam
should involve his suppliers in the store to ensure that they both benefit from the sale of
products in store.
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 Ensuring a strong relationship with his vendors – If Sam needs a product urgently, he
should be able to ask his suppliers for assistance.
 Sharing information – Sam and his suppliers need to share information. For instance if
a supplier is considering a price increase, Sam should be informed in advance to plan
accordingly.
 Accepting that mistakes can happen – For example, Sam is persuaded to stock a new
outdoor paint. Unfortunately, the product does not deliver the results it promised. Sam
needs to cut his losses, sell it on markdown and stop stocking it.
 Surprising the customer – Sam and his merchandiser should keep the store exciting so
that customers return. They do this by running in-store competitions and by building
attractive displays is store.
2.5 FACTORS INFLUENCING RETAIL MERCHANDISING

As previously discussed, merchandising consists of the planning, purchasing and selling of products
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to customers and is a crucial part of successfully managing in-store operations. Merchandising

does not function in isolation, therefore, its elements should be carefully executed, or the retailer
could end up losing sales and profits.
Certain factors can have an influence of the merchandising function and retailers should consider
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these factors as they plan their merchandise initiatives. The factors influencing retail merchandising
include the following (Pradhan, 2010; SalesWarp, 2013):
• Size of the retail organisation – The size of the organisation has a major impact on the
merchandising function of the organisation. For example, a small convenience store operates
very differently to a large retail store that orders from a central distribution centre. A small
convenience store purchases smaller quantities and assortment of products compared to
a large supermarket such as Checker or Makro.
• Nature/type of the store – The nature or type of retail store affects the function of merchandising.
As with the size of the store discussed above, the type of store also plays an important role. A
merchandiser is much more involved in a large retail store compared to a small convenience
store. For example, a spaza shop owner most likely fulfils the role of the merchandiser, while
in a larger retail store a merchandiser specifically performs this function.
• The organisational structure – The organisational structure differs – in a small store the buyer
and merchandiser roles may be combined, while in a large store there are probably more
than one buyer and a few merchandisers.
• Merchandise to be carried – The products carried by the store determine the involvement of
the merchandiser. For instance, a merchandiser is much more involved in the forecasting
and ordering at a retail store where products are specialised or at a large grocery store, than
at a small convenience store or spaza shop.
In the next section, we discuss the merchandising philosophy. The merchandising philosophy
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a retailer adopts influences the merchandising function and the guiding principles for all the
merchandising decisions a retailer makes.
2.6 THE MERCHANDISING PHILOSOPHY

The merchandising philosophy plays an important role in the retail industry as it determines how
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the retailer or merchandiser operates in attracting customers to purchase its products (Capozzi,
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ND). The philosophy a retailer chooses to adopt drives its product decisions – from what product
line or assortment to carry, to the shelf space allocated to different products, to inventory turnover
and pricing and more (Zentes et al., 2011:322). The merchandising philosophy therefore provides
the store with a type of merchandising and marketing blueprint (Capozzi, ND). According to
Zentes et al. (2011:322), the merchandising philosophy determines the guiding principles for all
the merchandising decisions that a retailer makes. The philosophy also determines the roles of
the different people involved in the merchandising function. Schwarz et al. (2012) expound that
the merchandising philosophy acts as the framework for the organisational mission, goals and
objectives. The merchandising philosophy is therefore unique to each retailer and each store.
210 A retailer’s merchandising philosophy includes the following (Zentes et al., 2011):
• The total product range the store carries – The total product range of a store is all the products
stocked in a store across all categories. For instance, in a tuck shop the product range includes
all the different chips, soft drinks and chocolates.
• The breadth of product selection – Here the retailer must decide on the number of product
lines to stock in store. For example, a cellphone store stocks phones, chargers, phone covers
and accessories.
• The depth of the product selection – This is the number of stock-keeping units (SKUs) in a
product line. For instance a shoe store stocks fourteen types of running shoes for women,
• The quality of the product selection – The retailer must choose between low, medium or
high-quality products
• Brands – The retailer should decide whether to stock its own or a national (supplier) brand
• The pricing strategy – The retailer looks at trends, the amount of profit it wants to make, for
example, and determines pricing by considering these.
We use a pie shop at a petrol station as an example to illustrate a retailer’s merchandising

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philosophy. The owner of the pie shop should consider the following in its merchandising
philosophy:
• The total product range the store should carry – This includes all the products including the
amount of pies, soft drinks, chocolates and biscuits.
• The breadth of product selection – The owner has to decide on the ranges, for instance, pies,
soft drinks.
• The depth of the product selection – For example, 12 varieties of pies and 14 types of soft drinks.
• The quality of the product selection – The owner has to choose the quality. In the fast-food
business, it is advisable to carry high-quality products.
• Brands – The shop should decide whether to sell its own brand of pies or a well-known,
reputable brand of pies.
• The pricing strategy – The shop needs to decide what to charge for the pies.
The abovementioned determines the merchandising philosophy and the overall strategy the
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retailer implements. We discuss the various elements of merchandising management and planning,
and the functions involved in merchandising in the remainder of this document.
Activity 2.4
Thandi decides to extend her business and sell hair-care products in her hair salon, BeauHair,
which has been operating for six years in Mabopane. Discuss the factors that determine the
merchandising philosophy of her hair-care products.
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Feedback
5
Thandi should consider the following:
 The total product range the salon carries – Thandi decides to start on a small scale and
only stocks 30 products in total.
 The breadth of product selection – Thandi needs to decide on the categories of hair-care
products to carry. She decides on shampoos, hair relaxers and styling products.
 The depth of the product selection – Thandi decides to stock four types of shampoo, eight
types of hair relaxer and 18 styling products.
 The quality of the product selection – Thandi has a reputation to uphold and she does
not want to lose existing clients, so she only stocks high-quality products.
 Brands – Thandi trusts the supplier brand she currently uses and understands that her
target market is very brand loyal, so she decides to stock supplier brands at this stage.
 The pricing strategy – Thandi knows that her clients love the high-quality products she
uses when treating their hair, so she can charge a higher price than that of the products
found in grocery stores.
2.7 SUMMARY
In this learning unit, we discussed the concept of merchandising. We distinguished between
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retailing and merchandising and explained the concept of merchandising. We considered the
function of merchandising as well as the role and the responsibilities of the merchandiser in the
retailing environment. We also looked at the principles of merchandising and the factors that
influence the merchandising function of a company. The unit concluded with a brief discussion
of the merchandising philosophy and the elements that should be included in the philosophy.
The remainder of this document focuses on the various functions of merchandising – planning the
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assortment, category management, managing the stock levels, logistics and supply of merchandise,
displaying and presenting the merchandise to entice customers (visual merchandising and
atmospherics), setting the price of the products as well as promoting the products and services
to the customers. These are all functions of merchandising and we discussed it in detail.

Follow the URL link below to a case study on using supplier relationships to serve customers
215
better and answer the questions that follow:
217 Using supplier relationships to service customers better
Read the “Using Supplier relationships to serve customers better” article, a Marks and
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Spencer case study that is available online on http://businesscasestudies.co.uk/marks-

and-spencer/using-supplier-relationships-to-serve-customers-better/the-buying-process.
html#axzz4OptjcT2m and see how Marks and Spencer uses its supplier relationships to
evaluate performance.
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QUESTIONS
219
1 What role can the merchandiser play to ensure that Marks and Spencer gives better cus-
tomer service?
2 Discuss how Marks and Spencer can use its suppliers to drive its merchandising philosophy.
2.9 REFLECTION
1 Explain the concept of merchandising and differentiate between retailing and
merchandising.
2 Do you have a clearer understanding of the function of merchandising?
3 What is the role and responsibility of the merchandiser in the retail environment?
Give some examples of their duties.
4 Do you have a practical understanding of the principles of merchandising, and
do you know how to apply them to a case study?
5 Do you understand the merchandising philosophy and are you able to apply it?

7 Work through the following multiple-choice questions (MCQs) to test your
QUESTION 1
8 Which ONE of the following is NOT one of the “six rights of retailing”?
1 right place
2 right price
3 right tools
4 right time
QUESTION 2
9 The responsibility of a merchandiser can be broadly categorised in certain core
areas. Which ONE of the following is NOT one of these core areas of responsibility?
1 allocating products to match customer demand
2 controlling the manufacturing and packaging functions
3 controlling the buying budget and merchandise plan
4 ensuring the availability of products to meet the demand
QUESTION 3
10 The central role of merchandising can be divided into four key roles, namely …
1 controlling, record-keeping, delegating and scheduling.
2 managing, planning, sourcing and warehousing.
3 planning, directing, coordinating and controlling.
4 sourcing, logistics, warehousing and ordering.
QUESTION 4
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Which ONE of the following terms refers to the physical stock of goods that are
11
kept in store to meet the anticipated demand of customers?

1 assortment
2 demand
3 inventory
4 supply
QUESTION 5
12 The function of determining the assortment of products to be sold in-store, is
referred to as …
1 category management.
2 planning stock.
3 range planning.
4 stock allocation.
MEMORANDUM
220
222 QUESTION 1
Option 3 is correct as the right tools is not an element of merchandising. Option 1 is incorrect
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as the right place is an element of merchandising and looks at the store location and whether
it is correct for the specific product. Option 2 is incorrect as the right price determines whether
a consumer buys from the specific store. Option 4 is incorrect as the right time is an element of
merchandising that looks at whether the product is available at the correct time, for instance
Easter eggs in the Easter period.
226 QUESTION 2
Option 2 is correct as controlling the manufacturing and packaging function is not one of the core
228
areas of a merchandiser’s responsibilities. Options 1, 3 and 4 are all incorrect as these statements
are core areas of a merchandiser’s responsibilities.
229 The correct answer can be found in section 2.3.1.
230 QUESTION 3
Option 3 is the correct answer.
231
Options 3 is correct as the central role of merchandising can be divided into four key roles, namely
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planning, directing, coordinating and controlling. Options 1, 2 and 4 are all incorrect as record-
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keeping, delegating, scheduling, managing, sourcing, warehousing, logistics and ordering are
not the four central roles of merchandising.
234 QUESTION 4
Option 3 is correct as inventory can be defined as the physical stock of goods that are kept in-
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store to meet the anticipated demand of customers. Options 1, 2 and 4 are all incorrect as these
terms are not explained in the question.
238 QUESTION 5
Option 3 is correct as range planning is the function to determine the assortment of products to be
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sold in-store. Options, 1, 2 and 4 are incorrect as these concepts are not explained in the question.
Stock allocation is the function where the ideal amount of stock to be in-store is determined.
The correct answer can be found in section 2.3.2.

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TOPIC 2
Merchandise planning and sourcing
AIM
To demonstrate an understanding of merchandise planning and sourcing in accordance with
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the relevant literature and with the aid of practical and relevant examples as applied by modern-
day retailers.
LEARNING OUTCOMES
• understand and explain the full scope of merchandise management (e.g. merchandise
planning, sourcing, supply, logistics, category management) with the aid of relevant and
practical examples
• comprehensively discuss the importance and relevance of assortment planning
• discuss the merchandise planning process in detail with relevant and practical examples
• critically discuss category management in accordance with the relevant literature and with
the aid of practical and relevant examples as applied by modern-day retailers
• show a clear understanding of merchandise logistics and supply chain management
• critically discuss and illustrate supply chain management, the process and the various types
of supply chains with the aid of practical examples
• comprehensively discuss inventory management in accordance with the relevant literature
and with the aid of practical examples
• discuss retail logistics and practically apply logistics
• comprehensively discuss the retailer supply chain in relation to the various channels of
distribution and the types of supply chains
TOPIC CONTENT
244 Learning unit 3: Merchandise management
245 Learning unit 4: Category management
246 Learning unit 5: Merchandise logistics and supply chain management
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Learning unit 3
Merchandise management
Contents

Learning outcomes
Key concepts
3.1 Introduction
3.2 Merchandise management
3.3 The merchandise planning process
3.4 Sales forecasting (step 1)
3.4.1 Developing sales forecasts
3.4.2 Forecasting decisions
3.5 Merchandise requirements (step 2)
3.5.1 Merchandise planning in rand
3.5.2 Merchandise planning in units
3.6 Merchandise control (step 3)
3.6.1 Inventory control systems
3.6.2 Inventory valuations
3.6.3 Measuring merchandise performance
3.7 Assortment planning (step 4)
3.7.1 Factors affecting merchandise assortment
3.7.2 Preparing an assortment plan
3.8 Summary
3.10 Reflection

In this learning unit on merchandise management, we discuss the four stages in the merchandise
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planning process. Step 1 involves forecasting sales – we ask important questions, such as “How
much of each product should be purchased?” and “How are sales estimated?”. Step 2 involves
merchandise budgets – we specifically look at merchandise planning in rand value and in units.
We provide calculations and examples throughout the unit to help establish and determine
budgets and forecasts. Step 3 involves merchandise control – we discuss the various inventory
control systems retailers can implement to notify the retailer when stock levels are low. Step 4
in the merchandise planning process involves planning the assortment of the retail store.
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This learning unit unfolds as follows:

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249
LEARNING OBJECTIVES
• explain the importance of merchandise management in a retailing context and understand

where merchandise planning fits in
• understand the purpose, aim and function of merchandise planning and discuss the stages
of the merchandise planning process and practically apply each step
• explain sales forecasting, its importance and value as well as the types of sales forecasts
• comprehensively discuss the process of developing sales forecasts as well as the important
factors to consider when forecasting sales
• discuss and apply the merchandise requirements in terms of merchandise budget planning
in rand and in units
• explain and apply the steps involved in planning the merchandise budget
• comprehensively discuss and explain merchandise control or inventory management and
explain and practically apply the various inventory control systems that are available to
retailers
• discuss how inventory can be valuated using the cost and retail valuation methods
• discuss the steps in calculating the closing inventory value of merchandise using the retail
inventory valuation method
• explain the difference between beginning-of-month (BOM) and end-of-month (EOM)
inventory levels
• explain the importance and purpose of an assortment plan in the context of retailing
• differentiate between stock breadth and depth
• explain the factors affecting merchandise assortments
• explain, by discussing the steps, how retailers can prepare an assortment plan
• discuss how fist-in-first-out (FIFO) and last-in-first-out (LIFO) inventory valuations differ
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KEY CONCEPTS
• Merchandise management • Week’s supply method

• Merchandise planning • Stock-to-sale ratio methods
• Inventory investment • Model stock list
• Inventory assortment • Basic stock list
• Inventory support • Never-out list
• Forecasting • Merchandise control
• Markdowns • Merchandise budget planning
• Transfers • Merchandise assortment
• Macro and micro-forecasting • Assortment plan
• Variable and fixed costs • Variety
• Planning in rand/units • Category
• Basic stock method • Stock-keeping units (SKUs)
• Percentage variation method
3.1 INTRODUCTION
Rose is a spaza shop owner in Soweto. She opened her shop after losing her permanent job in
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Pretoria. As she has to buy clothes for her children and pay for their education, Rose decided that
starting her own business would be the best option for her and her family. She had some money
saved and knew someone with a car that could help her purchase and transport products from
the nearest town to her spaza shop in Soweto. She started small and slowly grew big enough to
register at the South Africa Spaza and Tuck Shop Association (SASTA) and apply for a loan from
the government. Rose realises that if she receives the loan from the government, she should make
sure that the merchandise she buys are products that her customers would purchase. Planning
the amount of stock and assortment of her merchandise would give her a competitive edge
over the other spaza shops in her township. If she can give her customers a good assortment of
products at a reasonable price, she should soon have a very profitable business. The best way
for Rose to achieve this, is by good planning and keeping track of her sales and inventory levels.
Rose’s spaza shop is an example of how merchandise planning has an effect on profitability. She
251
only has to plan for approximately 20 to 30 different kinds of products, including staple products
such as bread, milk, eggs, maize meal and some sanitary products. Larger retailers on the other
hand, such as Checkers or Pick n Pay, make assortment plans for thousands of different products,
brands and variations, which involve a more complex planning process.
Larger retailers make sure that each store, nationwide, has enough of the right stock available at
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the right time. They use forecasting to determine what merchandise each store needs. To make
accurate predictions or forecasts, Checkers uses data, which commonly includes past sales records,
inventory levels, information about trends in consumer demand and what the competition is
doing. The goal is to predict the right assortment of products (merchandise) to bring its customers
value. This ensures profitability and a high inventory turnover – in other words, when a retailer
can sell all the merchandise it bought quickly and at a profit.
In this learning unit, we discuss the merchandise planning process in depth. We discuss sales
253
forecasting and the various means to forecast future sales and predict trends in the market.
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We also discuss the merchandise budget by focusing mainly on merchandise planning in rand
and in units. We discuss merchandise control and end with the last step in the process, namely
assortment planning. We first look at what merchandise management entail.
3.2 MERCHANDISE MANAGEMENT

Merchandise management is one of the most important functions of any successful retailer and
254
refers to the analysis, planning, acquiring, handling and controlling of merchandise investments in
a retail operation (Dunne et al., 2014:349; Terblanche et al., 2013:193). Merchandise management
involves planning and controlling the budget to make sure that the correct merchandise and
correct amount of merchandise is selected and supplied to the customers (Terblanche et al.,
2013:193). The following components are all equally important in the merchandise management
function (Dunne et al., 2014:349; Terblanche et al., 2013:193–194):
• Analysis – Retailers should be able to accurately identify their customers to understand their
needs and wants. In other words, retailers should be able to identify their target market
to acquire and sell the correct merchandise to meet their customers’ needs. Analysis also
refers to analysing trends and studying information of what happened in the past to help
predict future trends – in other words, sales forecasting.
• Planning – Because retailers are sometimes required to source and buy merchandise months
in advance of the selling season, proper planning is imperative in merchandise management.
This requires retailers to predict future trends and buying patterns, as well as the state of
the economy, employment and weather.
• Acquisition – Because retailers generally buy their products from others, either manufacturers
or distributors, they need to source the best merchandise and the best possible prices. This
often involves a lot of research, travelling and negotiations with potential vendors.
• Handling – Handling refers to the logistical arrangements to get the merchandise to where
it is required in the right condition to sell to customers.
• Controlling – And lastly, controlling in merchandise management refers to the control of the
large rand investment in inventory to ensure an adequate financial return on the retailer’s
merchandise investment.
Merchandise management can be defined as the analysis, planning, acquiring, handling

255
and controlling of merchandise investments in a retail operation (Dunne et al., 2014:349).
In the next section we discuss the merchandise planning process, followed by an in-depth
257
discussion of each step in the process.
3.3 THE MERCHANDISE PLANNING PROCESS

The main purpose of merchandise planning is to satisfy the customers’ merchandise as well as
258
financial needs (Wiid, 2012:51). To achieve this purpose, a retailer should develop a merchandise
plan that creates a balance between the available stock and sales volumes (Wiid, 2012:51). To
maintain this balance, the retailer should forecast sales and plan its merchandise assortment
with regard to inventory support, investment and assortment. Inventory investment involves
the planning of total rand investment in merchandise inventory so that the retailer can reach its
financial objectives. Inventory assortment refers to the planning of various product items the
retailer should keep in stock in a particular product line. Lastly, inventory support involves the
45
planning of the number of units of each product item the retailer would need to meet its sales
forecast (Wiid, 2012:51).
Figure 3.1 below indicates the four steps in the merchandise planning process. In the remainder
259
of the learning unit, we discuss each step in the process in depth.
260
Figure 3.1: Merchandise planning process
The first step in the merchandise planning process is developing the sales forecast. We discuss
261
this step in the next section.
3.4 SALES FORECASTING (STEP 1)

As seen from the scenario in the introduction, forecasting is an integral part of the merchandise
262
management process. This is the part where the retailer predicts which merchandise would sell,
and how much to stock in its stores. The process of predicting sales is not based on guesses
or assumptions; but rather on solid information and data about past sales figures, current
inventory levels, trends in consumer demand and trends in local stores and competitors. The
right information enables the retailer to make better predictions.
The ability of the retailer to make sound predictions has a direct effect on customer satisfaction
263
and the profitability of the retailer. If the retailer can predict sales volumes correctly, the right
merchandise in the right quantities would always be available for customers to buy.
“In retail management, forecasting serves to predict and meet the demands of consumers
264
in retail establishments while controlling pricing and inventory” (Benge, 2016).
Forecasting sales ensures that there are no stock-outs, a low rate of markdowns and a low rate
266
of transfers. Stock-out situations mean that a retailer did not anticipate the amount of sales
of a specific product correctly and consequently ran out of stock. To ensure that this does not
happen, inventory levels should be sufficient to cover the demand of a specific item (Schönsleben,
2016:464). Markdowns refer to the selling of merchandise at lower rates to sell them quicker
or to make space on the shelves for new stock (Dunne & Lusch, 2008:344). Markdowns can be
planned or unplanned. Although retailers do plan to mark down merchandise at a certain stage,
they sometimes buy merchandise that does not sell as well as anticipated and consequently
have to sell it at marked-down prices, which means a loss in profits. An example of a planned
markdown is the Woolworths 75% sale at the end of each season. Transfers are when a retailer
has a stock-out situation and another branch that has sufficient stock, has to transfer the stock
to the retailer, which costs additional money (Dunne & Lusch, 2008:277).
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267 There are two major types of forecasting, according to Fiorito and Gable (2012:169):
• Macro-forecasting involves the market in general – for instance, would there be a demand
for accessories in the upcoming season, or would dresses be more in demand than skirts.
• Micro-forecasting, on the other hand, focuses more on detailed unit sales in a specific category
(e.g. women’s shoes) – would flat shoes be more in demand than heels in the coming season.
“Forecasting a merchandise budget is a prediction of future sales, inventories, markdowns

268
and purchases” (Fiorito & Gable, 2012:169).
Predictions are made about how much inventory would be sold and how well the consumers
270
would react to the choice and assortment of inventory. According to Clodfelter (2015:214), a
retailer should be able to answer the following questions after completing the forecasting process:
• How much of each product should be purchased/stocked? The retailer must know exactly how
much of each product it needs to purchase. Purchasing in this instance refers to the retailer
buying stock to resell. The assortment plan answers this question, as it shows the retailer
how many of each product to buy, including the colour, variation and style.
• Should new products be added to the merchandise assortment? This means that the retailers
should evaluate the existing assortment of products available and decide whether to change
it. For example, Woolworths notices an increase in consumer demand for healthy beverages
that can be used as alternatives for sodas or sugary drinks. It therefore adds the sparkling,
sugar-free, flavoured water series to its assortment.
• How much inventory is needed to support the planned sales? This means that the forecasting
figures calculated should show exactly how much inventory should be available to for
purchase. This includes calculations for how much inventory is needed at the beginning of
the month, and how much the retailer should order to supply the demand.
• What price should be charged for each product? The price charged for each product is calculated
by adding a mark-up on the cost price. The cost price is the price that the retailer paid for
the product. However, many other factors also influence the price charged for the product,
for example, demand for the product – is it high or low, what is the competition charging
for the same kind of product and would the price be affected by factors such as a higher
petrol price (Cant, 2010b:94).
The most important forecast a retailer can make is the sales forecast, that is, the total sales the
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retailer hopes to make. The sales can be estimated in the following ways (Clodfelter, 2015:215):
• By store – This means forecasting sales on all products in the store. Big retailers such as
Woolworths, with many outlets of various sizes, are able to plan merchandise per individual
store.
• By department – This means planning sales per department, for example, planning the ladies
clothing department, which includes tops, pants and dresses.
• By individual product line or item – This means planning products for individual SKUs or
products lines, for example, ladies summer tops.
• By consumer groups – There are many ways a retailer can segment consumers groups, for
example, according to age, gender or income such as females between 15 to 20 years of age.
3.4.1 Developing sales forecasts

Before a retailer can start to forecast sales, it should obtain in-depth information about all the
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factors that can have an impact on the amount of sales. Remember that the retailer is trying to
estimate the actual amount of sales that it would get in a certain period, because this has a direct
47
effect on how much merchandise to purchase. For example, if the retailer knows how many units
of milk it sold in the previous months, it can predict or estimate how many units it would sell in
the coming months. However, if the retailer wants to make an accurate estimate of the amount
of sales, it is not enough to only know the previous sales data. The retailer should also consider
other factors, for example, how much money it has to purchase new merchandise, how much
merchandise it should buy and what merchandise would sell.
We now look at some cost factors that are affected when the retailer purchases merchandise
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based on sales forecasts. For instance, a retailer sold 1 000 units of low-fat cream cheese in the
same month last year, but it has seen an increase in the sales of full-fat cream cheese in the past six
months. The retailer determines that this is due to a new diet that has gained popularity among
individuals. The retailer decides to increase the amount of full-fat cream cheese units it stocks
to cater for the increase in demand. However before the retailer can purchase the merchandise,
it should consider how the increase in merchandise would affect factors such as transport and
delivery costs, electricity costs and storage costs. The retailer should also consider factors that
could have a direct impact on the amount of sales. This example shows that trends in the health
industry have an effect on the buying habits of consumers, leading to an increase in sales of the
full-fat cream cheese. The retailer should therefore continuously gather in-depth information
about the internal and external environment that could have an impact on sales predictions.
We now discuss some of the most important factors retailers should consider when predicting
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sales of merchandise (Wiid, 2012:53):
• Past sales figures – Past sales figures are the most important data the retailer needs when
forecasting sales. Past sales figures are used to determine what customers would buy in the
future. These figures only give the retailer a guideline, but as discussed later in the learning
unit, retailers constantly have to update inventory information to determine sudden changes
in demand or a slower demand than anticipated. For example, information about inventory
levels helps retailers react quickly and sell slow-selling merchandise at lower prices before
the demand completely disappears.
• General business and economic environment – In times of recession and a high unemployment
rate, sales drop. Alternatively, in times where economic conditions are better and the
unemployment rate is lower, sales generally increase. Therefore, it is important to do research
and to keep up to date with the current business and economic conditions and consumer
markets to predict possible changes in consumer spending patterns.
• Competition – The competition can have a significant effect on forecasting sales. The retailer
needs to quickly read and respond to what the competition is doing. A competitor that
opens a store in the same mall, or a retailer that makes big changes to its merchandise or
starts a new marketing campaign, can have a very negative impact on a retailer’s sales. For
example, Beyers Chocolates rebranded its new range of chocolates, which resulted in a 48%
increase in sales (Bizcommunity, 2016). This increase in sales consequently had an impact
on the sales of other chocolate brands, such as Beacon and Cadbury.
• Trends in consumer demand – Staying up to date with what consumers want, and what the
local and international trends are, is vital for any retailer. It helps retailers understand which
products to stock, which products to stock in larger volumes or which products to remove
from the shelves. This is because an increase in the demand for a specific item increases
sales. For example, before the release of the new Apple iPhone, retailers stock less of the
previous models and sell them at reduced prices to create demand for the new phone.
• Changes in policy – Changes in policy, such as longer trading hours, better return policies and
better service can have an effect on sales. If the store’s general service and management
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are improved, there is a good chance that customers who visit the store would stay longer
and spend more money there instead of somewhere else.
Wiid (2012:53) lists the following factors that may be affected when a retailer predicts an increase
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or decrease in sales:
• Variable costs – When a retailer predicts an increase in sales, certain variable costs may be
affected. Variable costs change based on whether there is an increase or a decrease in
sales. If there are more sales, the costs increase, and if there is a decrease in sales, the costs
decrease. Examples of variable costs are delivery costs and profit earned from the sales. If
a retailer predicts an increase in sales, this probably means an increase in transportation to
transport and deliver the merchandise to the shop or warehouse. A predicted increase in
sales would also lead to an increase in profits, because the more the retailer sells, the more
profit it makes.
• Fixed costs – Fixed costs, are costs that a retailer incurs to keep in business. These costs include
rent, water and electricity. If a retailer predicts an increase in sales, it can result in an increase
in these costs. For example, Woolworths sells a large assortment of prepared vegetable
packs. It has seen an increase in these pre-cut vegetable packs in the winter. The increase
in demand causes an increase in electricity and water consumption costs, because it needs
additional cold storage and water to wash and prepare an increased amount of vegetables.
• Greater need for funds – If a retailer projects an increase in sales, it should adjust the budget
accordingly. Not only would it purchase an increased amount of merchandise to cater
for the increase in demand, but it should also take into consideration that an increase in
merchandise requires increased resources such as shelf space.
• Increase or decrease in other expenses – An increase or decrease in sales volume affects factors
such as storage costs, delivery costs and employee salaries.
The most important part in the forecasting process is to ensure that the retailer has access to
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accurate information. The more accurate the information, the more accurate the predictions/
forecasts would be. In the next section, we discuss the decisions the retailer should make before
forecasting can begin. These decisions include deciding how to calculate past sales annually or
monthly, and which method of inventory planning to use.
3.4.2 Forecasting decisions

When a retailer predicts the amount of sales for a certain period, those figures influence how much
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merchandise the retailer should purchase for that period. The amount of merchandise the retailer
should purchase then translates into the amount of inventory the retailer should plan for or keep
to ensure that there is enough stock for the predicted sales. To calculate the predicted sales, the
retailer needs the past sales figures. The retailer can estimate past sales figures annually or monthly.
The decision is determined by the kind of product – whether it is staple or fashion merchandise.
The retailer should make two major forecasting decisions, namely which method to use when
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calculating the past sales figures, and which method to use to plan inventory.
3.4.2.1 Calculating past sales figures

When forecasting sales, the retailer should use past sales figures. In this way, it can determine
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whether there are monthly or yearly trends or patterns in sales. The retailer should use its expertise
in the field to determine if other factors caused an increase or decrease in sales, such as a new store
49
opening in the same building, the holiday season, a yearly sale or changes in store hours. Experts
know that sales are not only affected by demand, but also by external factors.
In the next section, we discuss two methods the retailer can use to calculate past sales figures. Past
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sales can be calculated on an annual or a monthly basis. This depends on whether the retailer is
trying to determine the previous sales figures for staple or fashion products.
281 • Estimating annual sales

When estimating sales on an annual basis, retailers take past sales figures and plot them on a
282
graph, similar to the fictitious sales graph below. This enables them to see whether there are any
patterns and trends in past buying behaviour. These patterns help retailers estimate future sales.
The following graph plots past sales figures to identify any trends in sales. In the example below,
283
we used winter clothes as an example. It is evident that over a one-year period there is an increase
in sales before and during the winter season in South Africa.
284
Graph 3.1: Example of annual sales graph for a winter clothing retailer
Source: Author’s own
According to Wiid (2012:54), this method of sales forecasting is called time-series forecasting.
285
This means that retailers look at sales figures over time, and plot them in a series of dots to see
the trends. This method is used when working with staple products. There are two kinds of
merchandise to buy, namely staple products and fashion articles. Staple products are everyday
products that have a very consistent demand and are bought even in times of recession, including
bread, milk, maize meal and sanitary products. Fashion articles are merchandise that has a short
lifetime, and sales depend on trends and people’s tastes, for example clothes, shoes, cellphone
accessories and electronic products.
Annual sales are estimated by using one of two methods, either fixed or variable adjustment
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procedures. Both methods use past sales figures to determine future sales trends. The difference
is that with a fixed adjustment, a fixed percentage is added to the previous year’s sales growth
and with a variable adjustment, a variable/changeable percentage is added based on the type
of product and environmental influences. We now discuss each method in more detail:
• Fixed adjustment method – When using the fixed adjustment method, the retailer adds a
fixed percentage (higher or lower) to the previous year’s sales figures to predict the following
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year’s sales. This method relies on the judgement and knowledge of the retailer of the past
performance of the product. The retailer considers the previous sales records to determine
whether the sales patterns for the product are stable enough to add a fixed percentage.
When there is a predictable pattern of growth for a product or the product is in the late
stage of its life cycle, it makes sense to add a fixed percentage. However, if the product’s
sales differ a lot between each sales period, then a fixed percentage does not make sense.
• Variable adjustment method – When using the variable adjustment method, the retailer not
only considers past sales figures to determine whether there are trends, but also the growth
or decline in sales as percentages. The retailer then adjusts the percentage upwards or
downwards for the new financial year depending on the type of product and the influence
of certain environmental factors. For example, the growth in sales of Nespresso coffee
machines at Nelson’s Electrical Appliance Store was 3.5% from 2015 to 2016 and 6.5% from
2016 to 2017. The growth is attributed to the effective in-store promotions for the coffee
machines, and the opening of new Nespresso outlets around the country, which increased
awareness and accessibility to the coffee pods. Therefore, Nelson’s adjusts its predicted sales
to 8% for 2017 to 2018. It keeps the percentage relatively low, because other products such
as Espresto coffee machines and capsules have emerged in the market.
The following external and internal environmental factors can have an effect on the adjustment
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of predicted percentages (Wiid, 2012:56):
Table 3.1: External and internal environmental factors affecting forecasts
External factors Internal factors
• General prosperity of local and national • Changes in the size and location of
markets the sales space allocated to a specific
• Inflation rate merchandise category
• Possible development of recessionary • Changes in the type and degree of
conditions promotion done
• Discernible trends in the growth or decrease • Changes in the retailer’s policy, for
of the target market population example longer business hours, better
• Changes in the demographic characteristics service
of the target market
• Developing legal or social restrictions
• Changes in the competitive environment
• Changes in the needs and lifestyle of the
consumer
288 • Estimating monthly sales

Estimating monthly sales is a three-step process (Wiid, 2012:56), namely (1) estimating annual
289
sales, (2) estimating average monthly sales and (3) adjusting the estimated average monthly sales.
To calculate the estimated monthly sales, first look at the annual sales. Divide the annual sales
290
by 12 (for the 12 months of the year) to get the average sales per month. The following figure
shows the annual sales of canned soup for a year. Note that there is an increase in sales volumes
during the winter months in South Africa.
51
January February March April May June July August September October November December
Sales R1000 R1300 R1200 R1400 R1800 R1700 R1800 R1600 R1500 R1300 R1200 R1200
Total sales: R17 000
Average annual sales: R1416, 67
Calculate the total sales for the year by adding all the amounts of sales together. Calculate the
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average sales per month over a twelve-month period by dividing the total sales by 12.
If sales are constant throughout the year, meaning there are no seasonal fluctuations, this method
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of using the average is sufficient. However, sales can be influenced by seasonal fluctuations, such
as the weather or the school calendar. This means that for certain times of the year, there is an
increase or decrease in sales; therefore, a fluctuation in the sales volumes. For example, sales
of staple products, such as bread and milk, only vary slightly throughout the year. However,
there are significant fluctuations in sales for products such as school stationery, winter clothing,
heaters and fans. In the winter, there is an increased demand for winter clothing and heaters,
while during the summer months, there is an increased demand for summer clothing and fans.
Therefore, it is necessary to adjust the monthly sales accordingly.
Retailers adjust for seasonal fluctuations by using an index system. The index is a percentage or
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a number assigned to a specific value, which is calculated by looking at past sales figures. For
example, consider the sales data of boots for five years. It is clear that for eight months of the
year the sales of boots are relatively low, and every year from May until the end of August the
sales increase. Give the norm sales a value of 100, for example. For the months that the sales
are above average, its index number is above 100, and for the months where sales are below
average, the index number is below 100. By using the index system, it is easier for retailers to
adjust their monthly sales to calculate expected sales per month.
According to the following figure, the average sales for the year is R4 258. Assign the value of
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100 to the average, making the average value the index value. If roughly every R1 000 in sales is
equal to 10 points, the index figures are as follows:
Sales R2600 R2400 R2400 R2500 R7500 R9000 R8800 R6500 R2500 R2300 R2400 R2200
Index 80 80 80 80 130 150 140 120 80 80 80 80
It is clear how the index number varies depending on the amount of sales and the seasons. If
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these sales figures were for boots, it would be clear that in the winter months (May–August)
there is a significant increase in sales.
The second step in planning the merchandise process is determining the merchandise
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requirements. This step involves planning the merchandise budget.
3.5 MERCHANDISE REQUIREMENTS (STEP 2)

In the first step, we learnt how to forecast and calculate planned sales by looking at the past sales
297
figures. In this step, we explain how the planned sales are used to calculate how much inventory
the retailer needs to purchase and ultimately the budget requirements to meet these demands.
In this step, you learn how to plan the budget – planning in rand, and how to plan the number
of units required – planning in units. In simple terms, planning in rand means that you have a
certain amount of money to spend on buying merchandise. This amount is calculated by looking
at past sales figures and factors such as consumer trends and other internal and external factors
– which we discussed in step 1. Planning in units means that now that you have a specific amount
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that you are allowed to spend, you must allocate the amount of money to specific products (or
units). For example, if you have R30 000 to spend on a new range of men’s shorts, you have to
decide, based on inventory levels, past sales figures and planned sales figures, how much of each
size, colour and style to buy. This is called planning an assortment of merchandise based on the
planned merchandise budget (this is the third step in the process and is discussed in section 3.6).
298 The merchandise budget generally comprises five parts, namely (Pradhan, 2009:231–232):
• The sales plan – In other words, how much of each product needs to be sold in a specific
timeframe.
• The stock support plan – This tells us how much stock is required to achieve the set sales
objectives.
• The planned reductions – Reductions may need to be made if products do not sell.
• The planned purchase level – In other words, the amount or quantity of products that needs
to be produced to meet the demand in the market.
• The gross margins – The difference between the amount of stock sold and the cost of the
merchandise to the company.
In this step, the retailer sets up a budget that outlines how much capital to spend to purchase
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the right amount of merchandise (Clodfelter, 2015:246). Retailers can achieve this by using very
specific data such as planned sales in rand, planned inventory at the beginning of the month and
the mark-up percentage. Firstly, we discuss planning merchandise in rand followed by planning
merchandise in units.
3.5.1 Merchandise planning in rand

The purpose of the merchandise budget or planning in rand is to plan how much capital a retailer
300
has to invest in inventory for a certain period. This can be for the next six months or for the next
year. The process of planning the merchandise budget follows a three -process:
301
Figure 3.2: Planning the merchandise budget process
To make these calculations, the retailer needs specific data. We discuss the theory and definitions
302
of each component needed to make the calculations for the merchandise budget, and then
explain further with examples (Clodfelter, 2015:249):
• Initial mark-up for the period – This is the percentage retailers add to the cost of merchandise
to cover their costs and make a profit.
• Planned net sales – This is the planned sales based on sales figures from previous years.
53
• Planned beginning-of-month (BOM) inventory – The BOM inventory is the inventory needed
at the beginning of the month to ensure that there is enough stock for planned sales for
the month. BOM inventory is calculated by using the stock-to-sales ratio method of stock
planning.
• Planned end-of-month (EOM) inventory – The EOM inventory represents the retail value of
the stock left over at the end of a certain period, which is usually a month. The retail value
is the price that customers pay for merchandise, thus cost of merchandise plus mark-up.
The BOM inventory is the same value as the previous month’s EOM inventory.
• Planned reductions – Reductions can range from employee discounts, shortages (pilferage)
to planned markdowns. For example, the retailer decides each month which products must
be marked down or put on sale. This may be because of new stock coming in or the start
of a new season.
• Planned purchases at retail – Planned purchases at retail refer to the inventory the retailer buys
to have enough stock for the planned sales. The planned purchases in retail are calculated
using the net sales figures, BOM, EOM inventory levels and planned reduction figures. The
planned purchases in retail can be calculated by using the following formula:
Planned purchases at retail = Planned net sales – (BOM – EOM) + Planned reductions
• Planned purchases at cost. This is the cost price of inventory for a given period. The planned
purchases at cost can be calculated with the following formula:
Planned purchases at cost = Planned purchases at retail x (100% – Initial mark-up %)
303 We now discuss how a retailer calculates the mark-up or profit margin percentage.
3.5.1.1 Step 1: Calculating initial mark-up/profit margins

Profit is not necessarily all the money the retailer puts in its pocket after a sale. The gross profit
304
(meaning, the total amount of profit) is used to cover expenses such as buying new stock, shelving,
rent and transport while still having enough money to pay employees and be profitable (Cant,
2010b:94).
The retailer should therefore plan the initial mark-up percentage carefully to make sure that it
305
covers all its expenses and stays profitable. As we have seen in the previous section, the mark-up
is the percentage that retailers add to the cost price of merchandise before reselling.
306 To plan the initial mark-up percentage, you need the following data:
a. Estimated total annual sales
b. Reductions – which is usually 10% of the annual sales
c. Anticipated expenses – which is usually 20% of the annual sales
d. Desired profit objective which is 12% of sales
In the equation we associate letters with the descriptions, for example, “a” is estimated total
307
annual sales.
308 (c + b + d) ÷ (a + b) x 100 = %
(Anticipated expenses + Reductions + Desired profit objective) ÷ (Estimated total annual sales +
309
Reductions) x 100
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To illustrate, we help Rose from the spaza shop in the introduction to calculate her initial
311
mark-up percentage.
312 a. Estimated total annual sales = R240 000
313 b. Reductions are 10% of annual sales = R24 000
314 c. Anticipated expenses are 20% of annual sales = R48 000
315 d. Desired profit objective is 12% of annual sales = R28 800
316 Therefore:
317 (c + d + b) ÷ (a + b) = %
318 (R48 000 + R28 800 + R24 000) ÷ (R240 000 + R24 000) = 0.38 thus 38%
Rose has to add 38% mark-up to her merchandise before reselling. If she bought milk at the
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farmer for R17.50 per 2 litre, she would add 38% mark-up and resell it for R24,15 per 2 litre.
3.5.1.2 Step 2: Calculating planned merchandise purchases at retail and cost price
When working with monthly sales records, a retailer works in retail prices, that is, the price that
321
customers pay and not the price the retailer paid for the stock. The retailer first calculates the
planned merchandise in retail and then, by using the mark-up percentage already calculated,
works out the planned merchandise at cost.
322 • Calculating planned merchandise purchases in retail price

We use an example to explain the calculations. Rose is planning to buy new merchandise with
323
the loan she has received from the government. She has the following data at her disposal:
• Her planned sales per month are R20 000 (in retail prices).
• Her BOM / planned stock levels at the beginning of the month was R15 000 (in retail prices).
• Her EOM / planned stock levels at the end of the month was R13 000 (in retail prices).
• Shortages and planned markdowns for the month were R2 500 (in retail prices).
Therefore, using the calculation for planned purchases for the month (at retail prices) the formula
324
is as follows:
325 Planned purchases at retail = Planned net sales – (BOM – EOM) + Planned reductions
327 Therefore, Rose’s planned purchases in retail value are:

328 R20 000 – (R15 000 – R13000) + R2 500 = R20 500 (in retail price)
329 • Calculating planned merchandise purchases at cost price

In section 3.5.1.1, we calculated that Rose has to add a 40% mark-up on her merchandise to cover
330
her costs and make a profit. This means that she only pays 100 – 40 = 60% of the retail price to
pay for the stock.
331 We use the following formula to calculate purchases at cost:
Planned purchases at cost = Planned purchases at retail x (100 – Initial mark-up %)

332
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334 Using the figures from the previous section, the calculation is as follows:
335 R20 500 x 60% = R12 300
336 Therefore, Rose should plan to have R12 300 to buy enough stock for the month.
In section 3.5.2 we discuss how to plan inventory in units. This is a method where the retailer
337
uses the information about the current and planned inventory level to plan how much of each
item to buy. This means that the retailer looks at how many units there are instead of how much
money it needs to purchase the items. The stock lists can be per stock-keeping unit (SKU) or per
category (e.g. swimwear). We discuss the three different kinds of stock lists, namely model stock
lists, basic stock lists and never-out lists in the next section.
3.5.1.3 Step 3: Planning inventory levels

When planning stock levels, there is a delicate balance between having sufficient stock at the
338
beginning of the month to meet demand, while not investing too much capital in stock and
avoiding out-of-stock situations (Wiid, 2012:57). When planning inventory, also consider how
much stock must be left over for the beginning of the next month. Retailers can use the following
four methods to plan inventory levels (Wiid, 2012:56):
• basic stock method

• percentage variation method
• weeks’ supply
• stock-to-sales ratio method
339 We now explain each one of these methods in more detail.
340 • Basic stock method

The basic stock method is a very conservative way to plan stock levels. It uses a baseline level
341
of inventory, and the retailer makes sure that the stock never falls below that point. The retailer
uses this method to make sure that there are no out-of-stock situations. Retailers with a low stock
turnover rate usually use this method. When retailers have a low stock turnover rate, it means
that the stock they carry is sold out at a low rate. This means that it takes long for the retailer to
sell all the products in stock. A high turnover rate means that products are sold out quicker, and
the retailer needs to order more stock more frequently. A turnover rate of two is a low turnover
rate, and a turnover rate of 13 is high.
342 The basic stock method has a few basic calculations (Dunne & Lusch, 2008:288–289):
343 Average monthly sales = Sales per month ÷ Number of months

344 Average stock = Total sales for all the months ÷ Turnover rate
Safety stock = Average stock – Average planned sales
345
346 Basic stock = Safety stock + Planned monthly sales
This method of stock-taking uses average sales to predict monthly sales, and does not account
348
for seasonal variability. Therefore, this method would be perfect for staple merchandise with a
predictable selling pattern. One negative aspect of this method is the fact that retailers have to
keep more stock on hand than they would have if they only kept the planned stock for the month.
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To calculate how much stock a retailer needs at the beginning of the month, it looks at past
349
sales records. We use an example from Rose’s spaza shop.

Rose’s monthly sales for October, November and December were R12 000, R17 000 and
350
R25 000 respectively. She had a turnover rate of 2, which means she sold out her stock twice
in the period of three months. Do the following calculation to determine the stock required
for the beginning of October:
Average monthly sales for October, November and December
351
352 = R12 000 + R17 000 + R25 000

353 = R54 000 ÷ 3
354 = R18 000
355 Average stock for October, November and December
356 = R54 000 ÷ 2
357 = R27 000
358 Safety stock = R27 000 – R18 000
359 = R 9 000
360 Therefore, stock needed for the beginning of the month of October
361 = Planned monthly sales (R 12 000) + Safety stock (R9 000)
362 = R21 000
Therefore, Rose needs to buy R21 000 worth of stock for the month of October to make sure she
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does not have an out-of-stock situation.
365 • Percentage variation method

The retailer uses the percentage variation method when it has a high stock turnover rate – usually
366
above six times or more per year (Dunne & Lusch, 2008:289). Fashion merchandise usually has
such a high turnover. This is because fashion merchandise is not sold constantly or at the same
rate every month, and new styles and designs replace old stock. For example, Mr Price sells tops
with long sleeves, short sleeves and cropped sleeves. Each item can be sold out throughout the
year, and each item is sold in different quantities throughout the year. Therefore, Mr Price has
to adjust stock levels according to the variations in sales volume for each month depending on
the turnover rate.
“The percentage variation method is a technique for planning ‘rand’ inventory investments
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that assumes that the percentage fluctuations in monthly stock from average stock should
be half as great as the percentage fluctuations in monthly sales from average sales” (Dunne
& Lusch, 2008:289).
What this definition means, is that to calculate how much stock you need at the beginning of
369
the month, the amount of stock must be increased or decreased proportionally according to the
amount of sales you have predicted for the specific time. The proportion this method uses is 50%.
370 Percentage variation method calculation (Dunne & Lusch, 2008:289):
Stock needed for the beginning of the month (BOM)

371
= Average stock x ½ (1 + Planned sales for the month ÷ Average sales for the month)
372
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For example, we show the sales figures for women’s tops for January, February and March in the
374
table below. Calculate the beginning of the month (BOM) inventory by using the percentage
variation method.
Average monthly Planned monthly Average monthly BOM stock

stock sales sales
January R250 000 R 75 000 R86 666 R125 108
February R250 000 R100 000 R86 666 R125 144
March R250 000 R90 000 R86 666 R125 130
The table shows that for the month of January, the retailer should have R125 108 worth of stock
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at the beginning of the month to ensure that there is enough stock for the planned sales. Also,
note how the fluctuation in sales affects the BOM stock levels proportionally.
376 • Week’s supply method

Retailers that sell products with a constant rate of sales, for example greengrocers, usually use
377
the week’s supply method. The retailer plans inventory of green produce on a weekly basis. It
can plan stock levels in advance by looking at how many weeks there are in a year and dividing
it by the rate of inventory turnover. This gives the retailer the amount of times it would need to
re-order new stock.
“The week’s supply method is a technique for planning ‘rand’ inventory investments that
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states that the inventory level should be set equal to a predetermined number of weeks’ supply,
which is directly related to the desired rate of stock turnover” (Dunne & Lusch, 2008:290).
This method determines stock levels in direct relation to sales. This method uses the planned
380
annual stock turnover rate to determine the amount of stock needed to cover a pre-determined
number of weeks.
381 The following calculations are needed for the week’s supply method:
382 Number of weeks to be stocked = Number of weeks in the period ÷ Stock turnover rate for the
period
Average weekly sales = Estimated total sales for the period ÷ Number of weeks in the period
384
BOM stock = Average weekly sales x Number of weeks to be stocked

385
We explain the theory with an example: You are a grocer who plans apple sales a year in
387
advance. You know that your turnover rate is eight times per year. Your estimated total sales
for the year are R100 000.
388 Therefore:
389 Number of weeks to be stocked
= 52 ÷ 8
390
= 6.5 weeks
391
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393 Average weekly sales

394 = R100 000 ÷ 52
395 = R1 923
396 BOM stock

= R1 923 x 6.5
397
= R12 500
398
The calculations show, that you should have R12 500 worth of apples stocked at the beginning
399
of each month to ensure that there is enough stock for the month.
401 • Stock-to-sales ratio method

The stock-to-sales method uses a planned ratio to determine stock levels. A pre-determined
402
ratio for example 2:1 (stock to sales) or 3:1 can be used. This ratio is developed by looking at past
sales figures to determine what the ratio was, and would continue to be.
“The stock-to-sales method is a technique for planning ‘rand’ inventory investments where the
403
amount of inventory planned for the beginning of the month is a ratio (obtained from trade
associations or the retailer’s historical records) of stock-to-sales” (Dunne & Lusch, 2008:290)
405 For example, if you have planned sales of R12 000, you should have stock of R24 000 available.
Activity 3.1
You are a small business owner in your community selling basic merchandise such as fruit,
vegetables, bread, milk, cereals and some sanitary products.
Here are some figures you have available for the bread sales in the past year:
Sales 5 000 5 200 5400 5 300 5 500 5 700 5 600 5 500 5 400 5 600 5 300 5 200
Turnover rate for bread = 8
Questions:
1 What is the purpose of sales forecasting in the retail environment?
2 Would you forecast sales on a monthly or annual basis, based on the merchandise
you stock? Give an explanation.
3 How does the basic stock method differ from the percentage variation method?
4 Calculate the basic stock for the beginning of May to keep in mind when planning
merchandise.
Feedback
6
1. Retailers use sales forecasting to anticipate future sales. The better a retailer can anticipate
future sales, the better chance it has to stay profitable. Retailers use historic sales figures to
determine future sales. If a retailer is prepared and has enough inventory to cater for cus-
tomers’ needs, it stays competitive. Sales forecasting ensures that there are fewer instances
59
where the retailer runs out of stock, fewer instances where the retailer must transfer stock to
other shops and fewer instances where stock has to be marked down.
2. Retailers that stock basic/staple merchandise can estimate sales on an annual basis. This is
because the sales of staple merchandise stay relatively constant, and there are few fluctuations
in sales. Retailers that stock staple merchandise would estimate sales on an annual basis.
3. The basic stock method is used when calculating what the basic stock should be at the begin-
ning of a given month. The basic stock method does not take any fluctuations in sales into
account, and is usually used for staple merchandise. The percentage variation method is used
for fashion items. This method considers seasonal fluctuations by using an index system.
4. The basic stock is calculated as follows:
Average monthly sales = (Total sales ÷ Number of months)
= (R64 700 ÷ 12)
= R5 392
Average stock = Total sales ÷ Turnover rate
= R64 700 ÷ 8
= R8 088
Safety stock = Average stock – Average planned sales
= R8 088 – R5 392
= R2 696
Basic stock = Safety stock + Planned monthly sales for May
= R2 696 + R5 500
= R8 196
Therefore, there should be R8 196 worth of bread at the beginning of the month.
3.5.2 Merchandise planning in units

Planning merchandise in units is done with lists. Retailers should use three different kinds of
406
lists depending on the type of products they sell, namely model stock lists, basic stock lists and
never-out lists.
It is possible for a retailer to have more than one list. For example, Pick n Pay Hyper is a big store
407
that sells food, hardware and clothing items, therefore, staple products and fashion articles. It
would use the model stock list for the fashion articles, the basic stock list for the staple products,
and the never-out list for the most popular items or most-sold seasonal items in store such as
bread, milk and umbrellas.
408 We look at each of the lists in more detail.
3.5.2.1 Model stock list

Retailers use a model stock list when selling fashion articles/products. The company policy
409
determines the list of products, for instance, to only stock items that are popular and not
the complete range – to only stock 300 dresses in sizes 34 to 36 or to only stock umbrellas with
patterns.
The model stock list differs from the basic stock list in that it does not keep exact count of stock
410
on hand. The model stock list gives general guidelines on price, colour, style and material. For
example, a retailer knows it should buy 300 dresses in blue, white and red, but does not specify
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how much of each colour. The flexibility of this list compensates for the changes in selling
patterns in a season.
3.5.2.2 Basic stock list

You are probably rather familiar with basic stock planning. Retailers use this method when selling
411
staple products such as food, hardware, cosmetics and sanitary products. The list keeps precise
data of each stock item. The list also indicates what the minimum level of stock must be at all
times and how much stock has been ordered, the planned sales and the actual sales. The retailer
counts the stock at regular intervals to make sure that there is never a stock-out situation and
to know how much to order.
We use Rose’s spaza shop as an example: It is the middle of the month, and Rose is doing
412
stocktaking. She has 50 boxes of toothpaste in stock at the moment. She knows that her planned
sales are 40 boxes per month. At the beginning of the month she had 15 boxes and bought
another 35. She makes sure that there are never less than 10 boxes available on the shelf.
3.5.2.3 Never-out list

Retailers use the never-out list to make sure that the most popular products in the store never
413
run out. According to Wiid (2012:62), the list can include fast-selling staple products (such as
bread and milk), key seasonal products (such as jerseys, heaters or umbrellas) or fashion articles
(the latest trend). The retailer specifies what percentage should be in stock and displayed at all
times. For example, there should always be at least 90% of the items on the list in stock, displayed
and ready to sell.
Activity 3.2
You are an assistant buyer at Edgars and are tasked with preparing a merchandise-buying
plan in rand for the accessories department, more specifically for scarves. List the steps in
the merchandise buying process and calculate the initial mark-up percentage, the planned
scarf purchases at retail and also the planned scarf purchases at cost.
You have the following information at your disposal:

Estimated total annual sales = R50 000
Planned sales per month = R4 200
BOM = R3 500; EOM = R3 000
Shortages = R500
Reductions are 10% of annual sales = R5 000
Anticipated expenses are 20% of annual sales = R10 000
Desired profit objective is 12% of annual sales = R6 000
Feedback
7
1. Planned mark-up = (Expenses + Profit objective + Reductions) ÷ (Annual sales + Reductions)

= (10 000 + 6 000 + 5 000) ÷ (50 000 + 5 000)
= 21 000 ÷ 55 000
= 0.38
= 40% mark-up
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2. Planned merchandise purchases
2.1 Calculate planned scarf purchases at retail.
The calculations for planned purchases at retail are as follows:
Planned purchases at retail = Planned net sales – (BOM – EOM) + Planned reductions
= R4 200 – (R3 500 – R3 000) + R500
= R4 200 – (500) + R500
= 200
Therefore, planned purchases for scarves are R4 200 at retail value.
2.2 Calculate planned scarf purchases at cost.
The formula to calculate planned scarf purchases at cost is:

Planned purchases at cost = Planned purchases at retail x (100 – Initial mark-up %)
= R4 200 x (100 – 40)
= R2 520
This means, that I have R2 520 available to buy R4 200 worth of scarves for the month.
3.6 MERCHANDISE CONTROL (STEP 3)

Once the retailer has determined the amount of merchandise to stock at the beginning of each
414
month, week or season, he/she then needs to control the merchandise. One way retailers can
know whether they are on track with their forecast and merchandise budget, is to constantly
check the inventory levels. In other words, retailers have to ensure that stock is available when the
customer wants it. Retailers should therefore implement inventory control systems that gather,
capture, analyse and use merchandise data to determine whether sufficient stock is available
in-store (Wiid, 2012:85). Merchandise control essentially means controlling inventories.
Merchandise control can be explained as the determination and direction of merchandise

415
activities, in terms of both rand control and unit merchandise control (AMA, 2016).
Inventory management is the process of acquiring and maintaining proper assortment of

416
merchandise while keeping, ordering, shipping, handling and other related costs in check
(AMA, 2016).
If the retailer suddenly has excess inventory, this can mean that the sales team did not sell the
418
products effectively, or the price is too high in relation to the quality, or the product was not what
the consumers wanted to buy (Clodfelter, 2015:308). When you have control over the inventory,
you can know exactly when to replenish or change your merchandise strategy.
3.6.1 Inventory control systems

Inventory control systems are put in place to maintain adequate merchandise quantities to meet
419
the need of the customer without investing too much capital in stock (Wiid, 2012:87). “Inventory
control systems are organised to supply information about the status of merchandise for a specific
period” (Wiid, 2012:87). Inventory control systems that are managed correctly can assist retailers
in decision-making, because the system provides the retailer with important information about
stock levels and what has been purchased.
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According to Clodfelter (2015:308–309), there are four major benefits of an efficient inventory
420
system:
• Sales versus inventory – The information that the inventory system provides, helps the
retailer to know what the relationship is between the sales and inventory. This means that
the retailer can track the number of sales and check that there are enough inventories for
the projected sales for the month. The information can therefore ensure that the retailer is
neither overstocked, nor understocked.
• Identifying markdowns – The inventory system can provide the information about which
products do not sell fast enough. By discovering these products early, the retailer can
change its strategy and reduce the price of these products before customers completely
lose interest in them.
• Identifying best sellers – The retailer can see which products are selling faster than planned,
and re-order new stock in time.
• Identifying shortages – All retail shops have a margin of shortage or shrinkage, for example
due to employee theft or customer shoplifting. Retailers adjust their inventory systems
to provide for these shortages. If the inventory system is efficient, the retailer can quickly
respond if the data shows that there have been excessive shortages in inventory.
Retailers should therefore establish inventory control systems that give information on a near
421
to real-time basis. Timely information can help retailers make remedial decisions where they
have made mistakes in the choice of merchandise. The following inventory control systems,
which serve as inventory information systems, can be used to track and control merchandise
inventories (Clodfelter, 2015:309–310; Wiid, 2012:87–89). A combination of the various inventory
control systems can also be used for efficiency.
422 • Perpetual control system

Perpetual control means that the retailer continuously keeps track of inventory. This inventory
423
control system “supplies the most recent information and is intended to ensure a correspondence
between the inventory records and quantities actually in inventory at the given time” (Wiid,
2012:89). This can be done manually or with computers. Each sale is recorded and inventory
levels are adjusted as it happens. With a computerised inventory system, the information about
stock levels are gathered at the point-of-sale (POS), and directly put into a software system that
automatically adjusts the inventory levels, giving the retailer real-time information (Clodfelter,
2013:303).
The following manual inventory control systems can be used to facilitate the recording of inventory
424
information (Wiid, 2012:89):
• Sales slip – When an item is sold, the salesperson records the essential information of the
sale on the “sales slip” and sends it to the person responsible for controlling inventories
(usually the inventory control staff ). The responsible party then records this information
(e.g. selling price, units sold and date of inventory adjustment) on inventory control cards
and orders new stock if the inventory level is low. These sales slips are generally completed
by hand and sent to the inventory control staff.
• Stub control – This method involves the retailer attaching stubs of price tickets (or labels)
to the merchandise containing information of the item. When the item is sold, the stub (or
label) is removed and sent to the inventory control staff who then record this information
on inventory cards for each item.
63
• Point-of-purchase (POP) sheet – A POP sheet is normally used for items of high value, such
as electronics, where the information is recorded on inventory control cards when the item
is sold.
The following computerised inventory control systems can be implemented to control inventory
425
levels (Wiid, 2012:89–90):

• Point-of-sales (POS) systems – These are computerised systems, such as cash registers
or computer terminals, that are capable of transmitting merchandise information directly
to the central data processing facility. Inventory levels can therefore be adjusted immediately
once a product has been sold. Merchandise information is uploaded into the POS system
using optical scanners that read the information on the barcode of the item. This system
is commonly used in retail stores.
• Offline point-of-sales (POS) terminals – These computer terminals automatically relay
information directly to the supplier’s computer. The supplier then immediately knows
when and what merchandise to ship to the retailer or buyer.
426 The images below illustrate examples of POS systems that are used in supermarkets or stores.
427
428 • Periodic or physical control system

With this method of inventory control, the retailer physically counts the inventory on a periodic
429
basis. This can be annually, bi-annually or, for smaller shops, monthly or even weekly. Physically
counting inventory helps the retailer match the inventory against planned sales. In addition,
before the retailer can close its financial statements, such as profit and loss, it needs to determine
what the shrinkage was (due to theft, breakage or pilferage) (Clodfelter, 2013:305). The following
two periodic or physical inventory control systems can be implemented (Singh, 2009:231; Wiid,
2012:88):
• Tickler control – A tickler control system allows the retailer physically and periodically to
check sections of the inventory at regular intervals to determine the extent of its inventory
for a given period. The inventory is therefore counted and recorded on a rotating basis.
The retailers usually uses this control method for staple products, such as bread, milk and
maize meal.
• Visual control – This control system allows the retailer to examine the inventory visually to
determine if additional inventories are required. This method is generally used for items
that are displayed in drawers or bins.
430 • Inventory control systems in rand or unit value

An inventory control system in terms of rand value stores data on merchandise in terms of the
431
rand value – in other words, the value of merchandise can be expressed in terms of the cost price
or retail selling price (Wiid, 2012:87). For instance, R4 000 worth of blue shirts has been sold. Unit
control systems base the value of merchandise on the number of items rather than the rand value
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of the merchandise. This inventory control system indicates the number of merchandise items
in inventory, on order and items sold (Wiid, 2012:87). For instance, the inventory control system
indicates that there are 20 blue shirts in stock, five on order and 25 have already been sold.
The most important factor of the inventory system is the accuracy and usefulness of the information
432
it provides (Clodfelter, 2013:308). If the inventory system provides incorrect information, the retailer
would make incorrect assumptions and decisions, which would lead to stock-outs or excess stock.
433 Clodfelter (2015:314–315) lists a few mistakes that can cause incorrect inventory information:
• Inaccurate beginning inventory counts – When inventory is not counted correctly, all the
information is incorrect. Beginning inventory information is used in planning inventory
levels, and if the inventory counts are inaccurate, the retailer would purchase the wrong
amount of merchandise.
• Improperly coded merchandise – Merchandise that is not coded correctly, does not reflect
on the inventory system or reflects as a different product. This also leads to misleading
information about the inventory levels.
• Failure to record markdowns – If markdowns are not recorded correctly, the system records
the sales and prices of the inventory at the original selling price. As the retail sales data is
incorrect, the forecasting sales at retail value based on past sales figures is incorrect.
• Incorrect recording of sales, purchases, returns or transfers – This just means that whenever
an employee captures data about sales, purchases, returns or transfers incorrectly, it has a
negative impact on information about inventory levels.
• Dishonesty of customers or employees – The system only works when all employees are
meticulous and thorough when capturing data about inventory levels and sales.
3.6.2 Inventory valuations

Information about the actual monetary value of inventory is a crucial element in effectively
434
planning and controlling the financial state. The ways in which retailers determine the monetary
value of their inventory influence the results of their financial statements (i.e. balance sheet and
income statements) (Wiid, 2012:91).
Inventory valuation refers to the monetary value associated with the merchandise contained
435
in a retailer’s inventory (Averkamp, ND).
The retailer usually purchases inventory at different rates over a certain period, hence the need
437
to calculate the cost that should be assigned to inventory. For instance, if a retailer purchases
inventory four times a year, at R20, R25, R30 and R40 per unit, what should be attributed to the
inventory at the end of the year? Inventory can be valued at cost price (the cost method) or retail
price (the retail method). We explain each method:
3.6.2.1 Inventory valuation at cost price (the cost method)

The cost method of inventory valuation is a technique that provides a book valuation of inventory
438
based solely on the retailer’s cost of merchandise (Dunne et al., 2014:335). Smaller retailers
tend to use this inventory evaluation method as it is easy to understand and implement. This
method requires limited record-keeping, and merchandise is valuated at the cost price every
time the inventory is physically counted. This valuation method may cause some problems
when merchandise is purchased at different supplier costs during times of inflation. Therefore,
retailers use the first-in-first-out (FIFO) method or the last-in-first-out (LIFO) method to solve this
65
problem. For example, the retailer buys merchandise at the beginning of January at a specific
price and the price increases the next month; therefore, when the retailer does the inventory
check in March, some products are at the old price and some products are at the new price. The
retailer then has to decide how to value the products – either at the first price, or at the last price.
439 • First-in-first-out (FIFO)

FIFO uses the assumption that the products bought first are sold first in a chronological order. In
440
other words, the oldest merchandise is sold before the more recently purchased merchandise.
However, the items on the shelves display the most current replacement prices (Dunne et al.,
2014:339). The cost of the oldest items in inventory therefore determines the retailer’s cost of
merchandise sold (Wiid, 2012:91).
441 Applying FIFO in practice:
Follow this URL link for an example of how FIFO is applied in practice:
442
http://accounting-simplified.com/financial-accounting/accounting-for-
inventory/fifo-method.html
444 • Last-in-first-out (LIFO)

LIFO uses the assumption that products that are bought last, are sold first. This valuation method
445
is designed to cushion the impact of inflationary pressures by matching current costs against
current revenue (Dunne et al., 2014:339). With this valuation method, the cost of the merchandise
purchased last determines the retailer’s cost of items sold (Wiid, 2012:91). This method operates
under the assumption that the last item of inventory purchased is the first to be sold (Accounting
Tools, 2016).
To determine the value of inventory at cost, the retailer requires information about the value
446
of inventory at the beginning of the month (BOM), the purchasing of new stock as well as the
sales of inventory. This allows the retailer to calculate the value of stock at the end of the month
(EOM). The BOM and EOM are important to calculate the value of inventory using the FIFO and
LIFO methods.
447 We use the following example to explain how these methods affect the value of the inventory:
Assume that you are a retailer, and bought 100 pairs of socks at R20 each at the beginning
448
of January. On 5 February you bought another 50 pairs, but at R25 each. On 24 January you
sold 50 pairs of socks and had 50 pairs left in stock. You need the BOM and EOM value to
determine FIFO and LIFO. Therefore, the calculations are as follows:
Using FIFO, the EOM inventory is valued at the cost of the first socks purchased at R25 each.
449
Therefore, the inventory is valued at R1 250 = R25 x 50.

Using LIFO, the EOM inventory is valued at the cost of the last socks purchased at R20 each.
450
Therefore, the inventory is valued at R1 000 = R20 x 50.
3.6.2.2 Inventory valuation at retail price (the retail method)

The second inventory valuation method that retailers can use is the retail inventory method (RIM).
452
The retail inventory method values merchandise at the current retail price and enables the retailer
to calculate the cost of its inventory at the end of a period, without taking constant physical
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counts (Dunne et al., 2014:336; Flood, 2013:350; Tepper, 2014:164). This method overcomes the
disadvantage of the cost method, discussed above, by keeping detailed records of inventory
based on the retail value of the merchandise at hand (Dunne et al., 2014:336). In a nutshell, the
RIM allows the retailer to take the retail prices of inventory and adjust the cost vale to reflect
the current retail value – essentially converting retail inventory to a cost figure (Fiorito & Gable,
2012:97).
Use the following four steps to calculate the closing inventory value of merchandise using the
453
retail inventory valuation method (Dunne et al., 2014:336–339; Fiorito & Gable, 2012:97–98; Wiid,
2012:92–94):
454
Figure 3.4: Calculating the closing inventory value of merchandise
455 • Step 1: Determining the quantity of merchandise available for sales at cost and retail
price
The merchandise that is available for sale at cost price is equivalent to the cost of merchandise
456
on hand at the beginning of a period and adding both net purchases and freight charges
during the period. Freight charges refer to all costs associated with shipment, transporting and
distributing merchandise (Free Dictionary, 2016). Additional price increases or mark-ups should
also be added to the merchandise available. The formula for calculating the total quantity of
inventory available is as follows:
457 Total merchandise available for sale = Open inventory + Net purchases + Additional price
increases + Freight cost
Consider the following example when calculating the total quantity of merchandise on inventory
459
at cost and retail price:
460 466 At cost price (R) At retail price (R)

472
Open inventory
461 467 R240 000 473 R400 000
+ Net purchases
462 R160 000
468 R280 000
474
+ Additional price increases

463 – 469 R4 000
475
+ Freight costs
464 R8 000
470 – 476
465 = Total merchandise available 471 R408 000 477 R684 000
67
478 • Step 2: Calculating the cost to retail complement
The second step is to calculate the retail complement or percentage relationship of the cost of
479
merchandise to selling price. Calculate the cost complement as follows:
Cost value of inventory

Cost complement =
Retail value of inventory
480
481
We show how the cost complement can be calculated by using the total merchandise figures
483
calculated in step 1:
484 Cost complement = Cost value of inventory ÷ Retail value of inventory

485 = R480 000 ÷ R684 000
486 = 0.70175
This means that the cost of the merchandise equals 70.18% of the retail value of merchandise.
487
Since the cost complement is 0.70 (or 70.18%), 70.18 cents of every retail sales rand is composed
of merchandise cost.
489 • Step 3: Calculating the deductions from retail value

At this stage, we calculate the total deductions from the total merchandise available for sale. In
490
addition to the sales on a daily basis that lower the inventory levels, reductions can also lower
the retail inventory levels. These retail deductions can include markdowns, discounts and stock
shortages. Markdowns refer to the lowering of the price of merchandise due to a sale (e.g. 50%
sale), reduced prices on end-of-season sales, discontinued products or damaged products.
Discounts are an amount taken off a regular price, for instance, employee discounts, and discounts
for students or senior citizens. Lastly, stock shortages refer to a scarcity in the inventory levels due
to pilferage, breakage and theft of merchandise.
491 Calculate the total deductions in the inventory levels as follows:
Total deductions = Sales of period + Markdowns + Discounts + Shortages

492
494 Look at the following example:
If the sales for February to June were R320 000, the merchandise was marked down by R60 000,
495
discounts amounted to R20 000 and stock shortages of R4 000 occurred, what are the total
deductions from retail value?
496 Total deductions = Sales + Markdowns + Discounts + Shortages

497 = R320 000 + R60 000 + R20 000 + R4 000
498 = R404 000
500 • Step 4: Determining the value of closing inventory at retail and cost price
After calculating the total deductions, the retailer can determine the value of closing inventory
501
at retail price. The retail value of inventory and the end of a period are calculated by subtracting
the total deductions from the total merchandise available for sale at retail price.
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502 Hence, the value of closing inventory at cost and retail price can be determined as follows:
503 507 At retail price (R)

504 Total merchandise available for sale 508 R684 000
505 – Total deductions 509 R404 000
506 = Closing inventory at retail price 510 R280 000
Calculate the cost price value of closing merchandise by multiplying the closing inventory at retail
512
price by the cost complement. Take note that this equation does not yield the actual closing
inventory at cost price; however, it does provide an estimation of the cost figure.
513 Closing inventory at cost price = Closing inventory at retail price x Cost complement
Calculate the closing inventory value at cost price, based on the example used in the four steps,
515
as follows:
516 Closing inventory at cost price = R280 000 (calculated above) x 0.7018 (calculated in step 2)
517 = R280 000 x 0.7018
518 = R196 504
Now that you know how to calculate the value of inventory using the cost method and the retail
520
method, we show you how to measure the performance of the merchandise successfully.
3.6.3 Measuring merchandise performance

Establishing the performance of merchandise is essential to understanding which products have
521
performed well and which have not performed at all. We discuss evaluating and measuring the
performance of merchandise in detail in learning unit 10.
The last stage in the merchandise planning process, as shown in figure 3.1, is planning the
522
merchandise assortment. We now discuss the last stage in detail.
3.7 ASSORTMENT PLANNING (STEP 4)

The retailer’s main goal is to provide customers with an assortment of products that suit their
523
needs. A retailer can have the best location, but if it does not have the right selection of products,
customers do not buy there.
When planning the assortment of merchandise the retailer does not only need to know how
524
much money it has to purchase the right amount of merchandise, it also needs to know what
its customers want. Customers expect to find what they are looking for at a shop. For instance,
customers who regularly go on camping trips expect to find the gear they are looking for when
they go to an Outdoor Warehouse outlet. The customers expect to find certain product lines,
such as tents, and want to be able to choose between different types, models, materials, brands
and price classes. If customers cannot find what they are looking for in a shop, it probably means
that the retailer would lose the sale of that item as well as the other items the customers were
planning to buy. Choosing the right merchandise assortment is critical to the success of any retailer.
69
525 Important key concepts to understand:
Variety represents the number of merchandise categories a retailer offers. Variety is referred
526
to as the breadth (range or extent of categories) of merchandise and the assortment is referred
to as the depth (how many products in each category) of the merchandise (Levy & Weitz,
2007:35).
Category is used to describe a group of merchandise items that are either substitutes
527
or complement each other, for instance pasta and pasta sauce, or dairy products is a category
(Terblanche et al., 2013:197).
Assortment is the number of different items in a merchandise/product category (Levy &
528
Weitz, 2007:35).
A stock-keeping unit (SKU) is a single item of merchandise, which is described in detail to
529
differentiate it from other SKUs, and for inventory control purposes (Terblanche et al., 2013:197).
For example, Sissy Boy ladies skinny jeans, dark blue in a size 32.
Note: The assortment plan is essentially a list of products that the retailer plans to stock at
531
a particular time. It is also known as a model stock list, which we discussed in section
3.5.2.1.
At this point you already know how to forecast sales based on past sales figures, determine the
533
budget for planned sales and how to plan inventory in rand and units. The next step is to look
at planning the merchandise assortment to keep in stock. The merchandise is categorised, for
example into groups such as swimwear, sportswear and dresses. We then determine how much
of each (variety) and how many variations of each (assortment) to keep in stock.
3.7.1 Factors affecting merchandise assortments

When planning assortment, it is important to understand customers’ preferences and size
534
requirements, currents trends and have good insight into past sales figures. This ensures that
retailers offer the appropriate number of options (breadth) in the right quantities (depth), and
appropriate choices that match up with the customers’ expectations.
We look at a few factors that have an influence on a retailer’s decision-making when planning
535
its merchandise assortment (Clodfelter, 2015:293):

• Store size, characteristics and fixtures availability – These characteristics make it easy for
a retailer to decide which merchandise to buy. If there is physically no space to put the
merchandise, in other words no space or shelf space, it is an easy decision not to stock the
product. A retailer should also keep the image of the company in mind when stocking
products. A retailer such as Pep Stores is known to stock lower-priced clothing items and
Truworths is known to stock more expensive, high-end clothing items. Pep stores cannot
afford to stock products that it has to sell at Truworths prices, because customer do not
expect to pay these high-end prices at Pep Stores.
• Customers – Customers not only influence the product range because of their preferences, but
also because of certain other characteristics, such as demographics, their current economic
situation, social trends, new technology and legal requirements. Think about the items you
can find on the shelf at your local retailer. If there are many children in the neighbourhood
(demographics), more toys and sweets would be available. However, if the store is located
near old-age homes, it may stock medicines or even wheelchairs. If the retailer is located
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in a lower-income area (economics) it obviously would not sell expensive jewellery. Social
trends also influence the product assortment that retailers offer.
• Complementary merchandise – When a retailer decides to add to its merchandise assortment,
it must first decide whether the merchandise would complement the current merchandise.
For example, Pick n Pick Hyper sells DVD players, and decides to add DVDs to the merchandise
mix. It realises that its profit margin on the DVD players is high, and decides to add a large
assortment of DVDs to stimulate the sales of DVD players.
• The profitability of merchandise – When making a merchandise investment, buyers must
make a trade-off between how much of which product to buy and the amount of space
available to display. When retailers decide to stock a larger amount of categories and SKUs,
they may not make a large enough profit on the products. For example, a retailer buys a
large variety of sizes of a very trendy style, and one or two of the sizes sell out very quickly.
As the retailers is not able to buy new stock in the season, many customers cannot find
their size and go home unsatisfied. The retailer must then put the rest of the stock on sale
and cut that style from the assortment. Therefore, it does not make the planned profit on
all the stock.
• Corporate objectives – Choosing the assortment of merchandise is a strategic decision. Retailers
look at many variables when deciding on their merchandise selection. They decide what
kind of customers they want to cater for and whether the selection of products is in line
with their brand image. For example, Pick n Pay offers customers a very large assortment of
products and brands from which to choose. When looking for a tomato and onion mix or
chakalaka, Pick n Pay offers at least four different brands. However, Woolworths usually only
offers a Woolworths brand and one other brand. Woolworths keeps its brand exclusive and
offers a smaller range of high-quality products. In contrast, Pick n Pay offers a wide range
of products with a wider price range to cater for a larger group of people.
3.7.2 Preparing an assortment plan

Customers go to a store to buy very specific items, therefore retail stores all have different sales
536
patterns. These sales patterns are also affected by the season, geographic location and age of
the target market. The assortment plan is basically a model stock plan, which is the merchandise
budget translated into merchandise units. For example, by looking at the past sales figures of
women’s swimwear, the retailer knows, according to the budget, that it needs to buy R200 000
worth of inventory. The model stock list then translates the rand amount into categories. These
categories are determined by the buying habits of the target market. Factors include brand,
price, material, colour and size (Clodfelter, 2015:293). For example, the list states that the buyer
should buy 100 x R200 swimsuits or 500 x R300 swimsuits. If the list is categorised by colour, it
would state 100 x blue swimsuits or 500 x black swimsuits.
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537 We briefly discuss the five step in the assortment planning process (Clodfelter, 2015:294–295):
538
Figure 3.4: Steps in preparing an assortment plan
539 • Step 1: Determining the breadth

The breath of an assortment is the range or extent of categories. This means, that the retailer
540
must decide how many product categories there should be. For a fashion retailer the product
categories are, for instance, men’s clothing, women’s clothing, shoes and children’s wear. For a
general retailer the categories would include fresh produce, canned food, beverages, cereals,
pet food and cleaning material. The classifications must then be divided into sub-classifications.
For ladies clothing it could be skirts, tops and pants. For pet food it could be pellets, canned
food and sauces.
541 • Step 2: Determining the brands and price lines

The retailer must make decisions about the brands and price categories for each sub-classification.
542
These decisions are tied in with the overall strategy of the retailer and depend on its target
market. For example, Edgars keeps stock of more than 100 different brands at various prices to
serve a large customer base. There are women’s dresses from Mango, which is a high-end fashion
brand, and there are dresses from Kelso, which is a lower-priced brand. The retailer must know
what its customers’ preferences are when it comes to brands, and it must also choose price lines
that appeal to its target market.
543 • Step 3: Identifying general characteristics of sub-classifications

In this step, the retailer must identify the general characteristics of the items that customers would
544
buy. Women’s pants, for example, come in different sizes, colours, styles, lengths and materials.
By identifying what customers would buy, retailers know which characteristics to consider
when drawing up the assortment plan. The assortment plan does not accommodate every
customer, but gives a general guideline. The budget mainly determines the breadth and depth
of the assortment. It is vital to ensure that the selection of characteristics make up a balanced
assortment. For example, Edgars stocks black dresses in sizes 6 to 20, but as most women buy
sizes 10 to 16, most of the dresses stocked would be in those sizes.
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545 • Step 4: Determining proportion of sub-classifications

Now, the retailer must determine the proportion of sub-classifications. This means that the retailer
546
must look at each sub-classification and decide which characteristics are the most popular. Some
colours are more popular than others are, and some styles sell quicker than others. Therefore,
by looking at past sales figures, and knowing the customers’ preferences, the retailer can decide
which proportion of characteristics to represent in its stock. For example, Woolworths has 12
different types of shoes for women, including sandals, flip-flops, wedges and pumps. Most of
the shoes are available in black, tan or silver. Some selected styles are available in brown or red.
This shows that Woolworths knows what its customers’ preferences are. It only keeps the styles
and colours in stock that it knows its customers would buy most often.
547 • Step 5: Calculating specific amounts to purchase

In this step, the retailer combines all the decisions made in steps 1 to 4, and converts them into
548
quantities.
For example, assume you work in the department responsible for the inventory of kitchen
549
appliances, including kettles. From market research, you know that your customers are not brand
loyal and would substitute brands depending on style, colour, price and specifications. The Salton
brand kettle is the most popular because of the price and style. You decide to only stock Salton
kettles. According to the merchandise budget you have drawn up, you have R10 000 to spend on
new stock. At R100 a kettle, you can buy 100 kettles. The Salton brand has two distinct kettles,
plastic and stainless steel. The plastic kettle is available in black, white, red and blue. However,
you decide to purchase the black and white kettles only.
From examining past sales figures, you have seen that from all the Salton kettle sales, 65% of the
550
sales where the plastic kettles, and 35% the stainless steel kettles, as can be seen in the table below.
Sales
Stainless steel 35%
Plastic – white 20%
Plastic – black 45%
You have seen an increase in the demand for red kitchen appliances, and decide to add a red
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plastic kettle to the assortment. To incorporate the new colour, you decide to decrease the
percentage of stainless steel and white plastic kettles as their sales are lower compared to black
plastic kettles. We convert the decisions and percentages into specific amounts as shown in the
table below.
Sales Units
Stainless steel 30% 30
Plastic – white 10% 10
Plastic – black 45% 45
Plastic – red 15% 15
100
Looking at the data, you can see that by multiplying each percentage with 100 (the number of
552
units you can buy with R10 000), you get specific unit amounts.
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553 Assortment planning – Webinar on Demand
This example is a simplified version of the actual process. As you can imagine,
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a retail store with hundreds of categories and thousands of products cannot

be managed manually. Therefore, retailers use software to track and plan merchandise sales.
The software uses complex tables and data-capturing methods to help buyers keep track of
sales, and plan merchandise and assortment. This video from Software Paradigm International
(SPI) explains how software can help a retailer’s buying team: https://www.youtube.com/
watch?v=mKUZ7YLUASo
Meticulous budget and assortment planning is not possible if the retailer does not control
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inventory. Controlling inventory means that the retailer knows exactly how much inventory
there is at specific intervals or continuously. Correct data from inventory control helps reduce
shortages and markdowns, and forecasts sales more accurately.
3.8 SUMMARY
In this learning unit, we learnt that the goal of merchandising is to offer the right amount of
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merchandise at the right time in the right place at the right price. A retailer can achieve this by
acquiring good information about all the factors that can have an effect on the amount of sales.
Drawing up a merchandise budget can help the retailer to predict sales for a certain period. This
information enables the retailer to calculate how much merchandise it would be able to purchase.
We have learnt that a retailer needs to make complex decisions when deciding on its assortment
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plan. Retailers should consistently monitor their customers to see how their needs and wants
could influence the product range kept in the store. Lastly, we discussed the importance of an
inventory system. This system helps a retailer keep track of sales, how much inventory is left
and when to re-order. The data gathered by the inventory system informs a retailer whether its
planned sales and planned inventory were sufficient to cater for actual sales. This is measured
by looking at the actual inventory levels and the total value of inventory.

Consider the following scenario and answer the questions that follow:
559
You are the buyer for men’s shirts at a local fashion outlet. You want to purchase short-sleeve,
560
solid-colour, 100%-cotton shirts from two suppliers, Stone Harbour and Aero Clothing. You
have a R200 000 budget to distribute as follows: Stone Harbour, 75% and Aero, 25%. A Stone
Harbour shirt costs R15, while an Aero Clothing shirt costs R21.
561 Colours would be distributed in the following manner:
Stone Harbour White 50%

Blue 35%
Yellow 10%
Pink 5%
Aero Clothing White 70%
Blue 30%
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563 QUESTIONS
1 What is the goal of assortment planning?

2 Calculate how many shirts of each brand would be purchased.
3 Determine how many of each colour would be purchased for each brand.
3.10 REFLECTION
1 Briefly discuss how knowing what customers want affects merchandise assort-
ment choices.
2 Briefly discuss how a retailer’s profitability depends on choosing the merchandise
assortment.
3 How would inaccurate sales and inventory data affect merchandise planning?
4 How does assortment planning for fashion and staple merchandise vary?
5 How would you test whether the merchandise budget was successful in predict-
ing sales?

QUESTION 1
15 Which ONE of the following terms can be defined as the analysis, planning, acquir-
ing, handling and controlling of merchandise investments in a retail operation?
1 inventory assortment
2 inventory support
3 merchandise management
4 merchandise planning
QUESTION 2
16 Which ONE of the following involves the planning of total rand investment in
merchandise inventory so that the retailer can reach its financial objectives?
1 inventory analysis
2 inventory assortment
3 inventory investment
4 inventory support
QUESTION 3
17 What is the SECOND step in the merchandise planning process?
1 assortment planning
2 determining the merchandise requirements
3 developing the sales forecast
4 merchandise control
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QUESTION 4
18 A … system allows the retailer physically and periodically to count a small por-
tion of the inventory so that each segment of the inventory is counted for a
given period.
1 point-of-sales
2 sales slip
3 tickler control
4 visual control
QUESTION 5
19 Consider the following information and calculate the initial mark-up percent-
age of the merchandise.
• Estimated total annual sales = R320 000
• Reductions are 10% of annual sales = R32 000
• Anticipated expenses are 20% of annual sales = R64 000
• Desired profit objective is 12% of annual sales = R38 400
1 23%
2 25%
3 38%
4 40%
MEMORANDUM
564
566 QUESTION 1
Option 3 is correct as merchandise management can be defined as the analysis, planning,

568
acquiring, handling and controlling of merchandise investments in a retail operation. Option 1

is incorrect as inventory assortment refers to the planning of various product items the retailer
should keep in stock in a particular product line. Option 2 is incorrect as inventory support
involves the planning of the number of units of each product item the retailer would need to
meet its sales forecast. Option 4 is incorrect as the main purpose of merchandise planning is to
satisfy the customer’s merchandise as well as financial needs.
570 QUESTION 2
Option 3 is correct as inventory investment involves the planning of total rand investment in
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merchandise inventory so that the retailer can reach its financial objective. Option 1 is incorrect
as this is a fictitious term. Option 2 is incorrect as inventory assortment refers to the planning
of various product items the retailer should keep in stock in a particular product line. Option 4
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is incorrect as inventory support involves the planning of the number of units of each product
item the retailer would need to meet its sales forecast.
574 QUESTION 3
575 Option 2 is the correct answers.
Option 2 is correct as the second step in the merchandise control process is determining the
576
merchandise requirements. Options 1 is incorrect as assortment planning is the fourth step;

option 3 is the first step; and option 4 is the third step in the merchandise planning process.
578 QUESTION 4
Option 3 is correct as a tickler control system allows the retailer physically and periodically to
580
count a small portion of the inventory so that each segment of the inventory is counted for a
given period. Option 1 is incorrect as a point-of-purchase (POS) system is a computerised system
that is capable of transmitting merchandise information directly to the central data-processing
facility. Option 2 is incorrect as when an item is sold, the salesperson records the essential
information of the sale on the “sales slip” and sends it to the person responsible for controlling
inventories. Option 4 is incorrect as a visual control system allows the retailer to examine the
inventory visually to determine if additional inventories are required.
582 QUESTION 5
584 The initial mark-up percentage can be calculated as follows:

(Anticipated expenses + Reductions + Desired profit objectives) ÷ (Estimated total annual sales
585
+ Reductions) x 100
586 = (R64 000 + R38 400 + R32 000) ÷ (R320 000 + R32 000) x 100
587 = (R134 400 ÷ R352 000) x 100
588 = 0.3818 x 100
589 = 38%
590 The correct answer can be found in section 3.5.1.1.
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Learning unit 4
Category management
Contents

Learning outcomes
Key concepts
4.1 Introduction
4.2 Definition and purpose of category management
4.3 Benefits of category management
4.4 The role of category management
4.5 Category management as a philosophy
4.6 The category management process
4.6.1 Step 1: Defining the category
4.6.2 Step 2 Establishing the role of the category
4.6.3 Step 3: Establishing category performance measures
4.6.4 Step 4: Devising strategies and tactics for the category
4.6.5 Step 5: Establishing the category mix
4.6.6 Step 6: Implementing category management roles
4.6.7 Step 7: Reviewing the category
4.7 Product category life cycle
4.8 Efficient consumer response (ECR)
4.9 Limitations of category management
4.10 Summary
4.12 Reflection

Tinned fish, household detergents and men’s casual wear are but a few examples of the thousands
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of different product categories that exist in our world today. Category management is a discipline
with the main aim of obtaining the most efficient groups of products that operate with specific
strategies and relative profitability. It is a style generally categorised from the close collaboration
between supplier and retailer.
We developed this learning unit to help you understand category management as a beneficial
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discipline available to various organisations and supply networks. We begin the flow of knowledge
with the definition and purpose of category management and a discussion of the benefits in
applying it to a management process. The discussion explores the category management process
in depth and the product category life cycle in the retailing industry. Lastly, we explain the
efficient consumer response (ECR) process with relevance to the system as well as the limitations
of category management.
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LEARNING OBJECTIVES
• define and explain the purpose of category management

• identify the benefits of category management
• discuss the role of category management in the context of retailing
• explain the four main category roles in retailing
• explain category management as a philosophy
• describe the retailer’s product portfolio or category in terms of its product breadth, depth
and length and be able to apply each practically
• explain and practically apply the steps in the category management process
• discuss and practically apply the six category management strategies and tactics
• discuss the category product life cycle in relation to category management
• describe the term “category mix” and apply the concept practically
• discuss efficient consumer response (ECR) and its importance in the retailing industry
• explain the limitations of category management
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KEY CONCEPTS
• Category management • Transaction building
• Strategic business units (SBUs) • Profit and excitement generating
• Product breadth, depth and length • Image enhancing
• Product assortment • Product category life cycle
• Gondola ends • Category mix
• Traffic building • Segmentation and targeting
• Turf protection • Efficient consumer response (ECR)
4.1 INTRODUCTION
In the midst of the growing retail space, retailers face the challenge of creating a seamless
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customer experience. This requires investment in category management as a way to attract more
customers and boost sales by effectively managing product categories. In this learning unit, we
introduce the concept of category management, its development, process, product category
life cycle, category mix, influence of categories within the retailer’s assortment and limitations
of category management. We firstly define category management and explore its purpose in
merchandising.
4.2 DEFINITION AND PURPOSE OF CATEGORY MANAGEMENT

According to Dunne et al. (2014:3016), category management comprises the simultaneous
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management of price, shelf space, merchandise strategy, promotional efforts and other elements
in the retail marketing mix in the merchandise category based on the company’s goals, the
changing environment and consumer behaviour. According to Webb (2015), category management
refers to the process of clustering and centralising similar goods into bigger contracts/orders
to improve administration and reduce costs. Agarwal (2016) concurs and states that category
management is “the process of managing retail business that measures category outputs rather
than the contribution of individual brands or models”. Instead of categorising products according
to their departments, category management strategically categorises products according to
consumers’ shopping behaviours (Varley, 2014:57).
Category management can be defined as “the strategic management of product groups

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through trade partnerships, which aims to maximise sales and profits by satisfying consumer
needs” (Varley, 2014:57).
According to the aforementioned definitions, it is clear that the purpose of category management
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is to supply customers with the right products, using correct distribution outlets to ensure that
they are available when needed. As a result, products and services are placed into categories
according to how customers shop, purchase and consume or utilise them to make it more
convenient for customers to do their shopping.
The purpose of category management is therefore to assist retailers in explicitly defining the role
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that each category plays in the overall store portfolio to promote the product category more
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aggressively and as a result offer consumers assortments that are more varied (Dhar, Hoch, &
Kumar, 2001). Accordingly, a successful category role can largely assist retailers in achieving the
best performance by (Dhar et al., 2001):
• offering broader assortments
• having strong private label offerings
• charging significantly lower everyday prices
• using creative advertising to increase store traffic and in-store sales
If we consider category management in its most basic form, we should remember that customers
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tend to shop according to different categories or groups (e.g. cosmetics, toiletries, fresh produce,
and hardware). For example, Pick n Pay places products into certain groups (or categories) to
offer customers substitutes or alternatives. All the different types of sweets are placed in one
area, such as a variety of chocolates, different types of confectionery and potato chips. The name
boards hanging from the ceilings in grocery stores generally indicate the category of products
that can be found in that specific aisle. The image below is an example of a “cleaning supplies”
category aisle/section in a retail store where products such as dishwashing soap, detergents,
bathroom cleaner and floor cleaner are grouped together.
602
The way category management is defined depends on its level of involvement with an organisation
603
and the purpose it serves. Therefore, category management can be used for the following:
• Categorising items into different subgroups, for instance categorising baking items into one
aisle in the retail outlet, or grouping fresh produce together.
• Defining the basic SBUs as the product category, rather than specific brands or product
lines. For example, Palmolive does this by referring to one of its SBUs as “homecare” items
and groups all the different homecare products such as detergent, softener and cleaning
products into one category.
• Increasing total profit as retailers could enter into negotiations with suppliers (e.g. when
negotiating with a supplier the retailer may decide to purchase a larger quantity as a way
of receiving a quantity discount). This would then allow the retailer to earn more profit per
item as it sells it to the consumer for the same price, but it bought it slightly cheaper.
• Improving the collaboration with suppliers in development of categories that can improve
workload, enhance lead times and share expertise – sometimes suppliers and retailers can
form beneficial relationships by sharing logistical functions of certain products. For example,
when purchasing certain perishables from a supplier the retailer could request the supplier
to deliver other products at the same time to save on both time and delivery costs.
604 We next discuss the numerous benefits of category management for the retailer.
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4.3 BENEFITS OF CATEGORY MANAGEMENT
Category management is often used in the retailing environment due to its distinctive benefits.
605
More specifically, category management groups retailers’ efforts into categories with the objective
of assessing their financial and marketing performance separately. For example, Clicks does
this by promoting its make-up category when it offers “buy three and get one free”. This allows
Clicks to save on the promotional efforts of marketing or promoting each brand specifically.
Some retailers also arrange products into SBUs as a way to better serve the needs and demands
of customers. For example, when you walk into a Checkers Hyper for your monthly shopping
everything in the store is laid out for your convenience. However, certain Checkers Hypermarkets
have a pharmacy in the store (this is a separate SBU for Checkers Hyper). This offers customers
the convenience of having their prescriptions filled while doing their shopping (Agarwal, 2016).
606 Therefore, the key benefits of category management in the retailing sector are as follows:
• Increasing sales, goodwill and market share – Customers are made aware of certain product
categories that may encourage them to increase their basket spend (e.g. when seeing
products on special or promotion consumers may be encouraged to buy more than they
initially planned to).
• Maximising shelf efficiencies – By managing certain categories, the retailer is aware of what
the customer wants to purchase and can therefore aim to offer these products to the
customer (e.g. by placing products in certain aisles the retailer allows the consumer to shop
for that specific category all at once). For example, Dis-Chem places make-up, medicine and
supplements in certain sections to make it easier for customers to find the products they
are looking for. Planning out the floor plan according to category, allows the retailer to use
shelving (space) correctly and efficiently.
• Less inventory shrinkage – The largest problem that retailers face is inventory shrinkage, which
can be caused through customer or employee theft, pilferage and damage or breakage to
goods in-store. Therefore, many retailers have begun grouping expensive products together
and placing them in areas where there are cameras and security guards or alternatively
behind counters (e.g. razor blades and certain electronic products). Although these products
would not typically be categorised together they are in this instance due to their high-value
and issues of inventory shrinkage.
• Enhancing the customer knowledge level – Imagine that you are looking for a product to help
you lose weight. YouDis-Chem look in the health/fitness and supplement aisle at Dis-Chem
for a product. If all these items were not placed together, you would possibly buy some
gluten-free bread but miss the different supplements or meal-replacement shakes that
could also assist you in losing weight. By categorising these products together, Dis-Chem
has allowed you to increase your knowledge level as you are learning about the different
types of products available.
• Improving return on investment (ROI) – Retailers want to determine their ROI for a specific
category or product type, because this shows how much they gained from their investment.
When retailers categorise products, for instance, sweets, snacks and soft drinks together at
the tills it allows for impulse shopping that is very beneficial to the retailer. Instead of just
buying a chocolate, the consumer could also buy a soft drink or a pack of gum.
• Customer satisfaction: Retailers that have a deep understanding of their customers’ needs and
provide product assortments that fully satisfy customers, can maximise their performance
in the long run.
We briefly explain the role that category management plays in the retailing industry in the next
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section.
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4.4 THE ROLE OF CATEGORY MANAGEMENT

An effective category role can be beneficial in reducing total assortment. Decreasing the breadth
608
and depth of assortment may meet with resistance in many product categories due to their
positive impact on category performance (Dhar et al., 2001). Thus, retailers should be more
accepting of reductions in assortment in staple categories (e.g. tea, milk, bread, sugar) where
assortment have reached saturation levels and reductions are unlikely to be noticed.
The breadth of assortment refers to the number of product lines or categories a business produces
609
or a retailer carries (Betancourt, 2004:148; Study.com, 2016). For example, a car manufacturer may
have a product line of sedans, sports cars and SUVs. The length of a product assortment refers
to the number of products in a particular product line or category (Study.com, 2016). The car
manufacturer may have three different sedans, two different sports cars and four different SUVs.
The depth of an assortment refers to the different versions or variations of the same product that
may exist in each product line or category (Betancourt, 2004:148; Study.com, 2016). The depth
of a product line refers to the different sizes, flavours and variations. A car manufacturer may
have a basic, standard and luxury version of the sedans it offers, and a basic and standard SUV.
The following example of Colgate illustrates the breadth and depth of its product assortment.
In this example, the breadth includes the different categories of products, namely toothpaste,
mouthwash and toothbrushes. While the product depth refers to the different variants and types
of toothpastes, for instance Total Advance, Optic White and Total.
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It is also important for retailers to reduce brands and products that are solely catering to the
611
heterogeneous tastes of customers and therefore not performing well. More specifically, adding
new items to the assortment or eliminating items from the assortment is a fundamental and
ongoing process for retailers. In addition, the objectives of the retailer are to maintain control
over its assortment, to obtain above market average growth and to improve the profitability of
the entire category. Therefore, this approach can effectively lead to decreased assortment and
corresponding inventory, increased sales and increased customer satisfaction.
“Product assortment refers to the extent of different product types offered by a retailer, which
612
is usually either ‘narrow and deep’ or ‘broad and shallow’” (Goworek & McGoldrick, 2015:334).
Product assortment is the different types of products that a business makes or a retailer
613
offers for sale (Study.com, 2016).
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It is said that category management is both a philosophy and a process. We discuss category
615
management as a philosophy in section 4.5, followed by the category management process in

section 4.6.
4.5 CATEGORY MANAGEMENT AS A PHILOSOPHY

Historically, the origins of category management in the retailing sector are surrounded by two
616
conflicting theories. These two theories are held by PMMS Consulting Group (2011) and United
Parcel Solutions (2005) who propose different perspectives on the emergence of this concept
in a retail context.
Firstly, PMMS Consulting Group (2011) argues that the aspect of category management gained
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popularity in marketing around the 1980s by grouping products into categories based on how
the consumer used the product, for example household products. An example of this approach
can be seen in the context of Rekitt Benkiser (the manufacturers of Dettol, Durex, Strepsils, Vanish
and Veet) that distributes its product brands across three different categories (i.e. health, hygiene
and home products) to cater to the specific needs of customers, thereby enhancing satisfaction
and re-purchase intention. Consequently, this approach has aided retailers to increase their sales
and profit by maximising synergies and minimising unproductive competition between their
own products and brands. Michelin demonstrates this approach by manufacturing Kleber tyres
and marketing it as a high-quality budget brand tyre, with the result that Michelin has secured
market share in two segments. If Michelin only operated in the high-end market, it would not
have an opportunity to serve the budget brand market and would potentially lose profits.
Therefore, by managing its category and understanding that not every consumer in the market
could purchase tyres in that category, it developed a lower-priced tyre.
Secondly, United Parcel Solutions (2005) speculates that the Grocery Manufacturers of America
618
(GMA) developed category management in the 1990s as an initiative of the efficient consumer
response (ECR) industry initiatives. This notion is supported by Nielsen, Karolefski and Heller
(2006:8) who argue that the concept was established in the early 1990s by grocery retailers who
were interested in connecting more with consumers by ensuring that they stocked the products
the customers wanted to buy the most. The practice of category management seems to have
evolved from the food industry where the main emphasis was on enhancing shelf assortment
and including low-value products.
Although they are not clear on how category management emerged in the retailing sector, the
619
two perspectives reveal that the concept has evolved from managing single categories to multiple-
related categories that focus on offering a desired customer solution. Category management
is thus a core philosophy of retailers who are not only thinking about their suppliers’ product
lines, but also about their own shelf assortment (Dussart, 1998). More specifically, the existence of
category management is attributable to the inequality in monetary value, shelf space occupied
and importance of products in the perspective of the retailer and the customer. This discrepancy
of inequality among products triggered the need to categorise products in such a manner that
has proven to be most convenient for both customers and retailers. In so doing, the majority
of retailers started to group products according to their specific use and enhanced the shelf
placement by placing together the most sought and bought products (Lohman, 2016).
Category management has expanded into other retail sectors, such as pharmaceutical (e.g. flu
620
medicine and contraceptives) and financial services (e.g. investments, savings or pensions) due
to its increased importance in the organisational landscape (Mihalcova & Pruzinsky, 2015:269).
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Plazibat and Brajević (2012) suggest that category management’s focus has changed over the
621
past decade with tremendous focus on these three areas:
• Efficient product introduction – Continuously offering new products to customers so that

they have a wider variety of products to choose from (especially cheaper alternatives). As
in the case with Michelin Kleber-tyres as mentioned above.
• Efficient product promotion – Promoting products and new categories to incentivise consumers
to switch from other products or to try new products. For example, with the Clicks “three
for two” promotions consumers who may have gone into the store to buy two products
now have to buy one more (perhaps a product they have never used before) to get one free.
• Efficient store assortment – Offering consumers a “one-stop-shop” in the sense that consumers
do not want to go to different stores to buy their products. For example, when doing your
weekly grocery shopping you need to go to the dairy farm to get cheese and milk, a butcher
for meat and a greengrocer for vegetables. This is not really a practical way of shopping.
Gruen (2002:17) states that the following developmental trends should be considered to achieve
622
success in category management:
• Managing multiple suppliers to create a more exciting shopping experience shifting the category
management focus from category efficiency to include a customer response that is positive
and enduring. This could entail listening to what the customer wants from a specific retailer
and not being too stringent on the product offerings, in other words, not favouring one
supplier over another.
• Expanding beyond a single category product focus to multiple categories designed to address
a consumer solution. For example, customers may be looking for convenience and do not
want to travel to different stores to buy their products, therefore they want a one-stop-shop.
• Simplification and efficiency in category management planning, such as organising products
in one area. This manages the space in the retail environment and makes it easier for
consumers to find the product they are looking for.
• Shifting the category management focus from a project to a core process orientation. Category
managers often see category management as a once-off activity, which should not be the
case. As customers’ needs and demands constantly change it is important for retailers to
manage the category management process continuously by monitoring the environment
and making changes as the need arises.
• Web-services and e-category management to facilitate in delivering category management
in an open and competitive environment. As online shopping become more prevalent,
more retailers are offering their products and services online, which can offer the retailer
the opportunity to serve a market that may not be in its immediate geographical area. This
also allows the retailer the opportunity to compete with other retailers who may not have
a brick-and-mortar store.
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624 Category management – making the right choices

625 https://www.youtube.com/watch?v=XggKKhU3tXE
Follow the URL link and watch the YouTube video titled Commerce Anywhere:
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Making the Right Assortment Decisions (Category Management) to assist you

in understanding category management. In the video, the importance of category management
and choosing the correct assortment for your retail store are discussed in detail.
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Activity 3.1
Think back to your last shopping trip to a food retailer (e.g. Pick n Pay or Spar) and explain
how the retailer categorises the different product offerings.
Feedback
8
When entering a Pick n Pay or Spar, products are organised according to categories so that customers
can find the products they are searching for easily. For example, fresh produce (e.g. vegetables,
fruit, herbs) are all located in one area, rice and grains are placed in one area, and so on. In some
instances, products are grouped together based on their usage, for instance powdered milk (or
coffee creamer) can be found close to the coffees instead of in the long-life milk aisle.
Category management is commonly seen as a planning and implementation process that aids
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retailers and suppliers in attaining their performance-based objectives and strategic aims. We
discuss the seven stages of the category management process in the next section.
4.6 THE CATEGORY MANAGEMENT PROCESS

The category management process was developed in the early 1990s to assist retailers in creating
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a management plan for communicating with suppliers and understanding behavioural patterns
of consumers towards their product categories (Nielsen et al., 2006). In addition, the process is a
repetitive, strategic and long-term business philosophy that promotes cross-functional working
between retailers. It involves professionals from diverse areas such as procurement, finance,
supply chain, marketing, store operations, sales and space planning, which essentially has an
impact on how efficient the organisation operates. In other words, the process is repetitive in
the sense that evaluations and changes need to be done to ensure that the categories are being
managed correctly with a long-term (strategic) focus.
More specifically, category management consists of seven key stages (Nielsen et al., 2006). These
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stages set out the logical process for retailers to follow to ensure that they achieve success in the
implementation of category management. Therefore, the precision with which each of these
steps is carried out directly influences the goal of the retailer in creating more awareness and
preference among the other products on the shelf. Figure 4.1 below provides an illustration of
the category management process.
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630
Figure 4.1: The category management process
4.6.1 Step 1: Defining the category

Step 1 in the category management process is defining the category. During the first step, the
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retailer categorises its products into various groups, or categories, depending on the use of the
product as well as its packaging. Retailers and category managers have always debated the best
technique for classifying a product. Some suggest that categories should be defined based on
the buying behaviours of consumers and not on the buying behaviour of the retailer. Before a
retailer can begin with the category management process, the retailer and its suppliers should
first understand what constitutes a category. Supplier knowledge of a category becomes a
vital component in developing the correct definition and segmentation of a category. Thus, a
retailer essentially assigns products to the various categories dependent upon customers’ taste
as well as the amount, size and packaging of the product.
Products in a specific category should generally be substitutes of one another, be it different

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brands, flavours, colour variations, product quality or price levels (Varley, 2014:59). Products in
a certain category may also be complementary products, such as coffee creamer and coffee,
or potato chips and dip. A retailer’s classification of products may differ based on the size and
degree of specialisation in the format used (Varely, 2014:60). Some product categories even
have sub-categories, for instance, the haircare category can be sub-categorised as shampoos,
conditioners and styling products.
The definition of a category tends to vary from one situation to another and from one retailer to
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another. A category may be defined narrowly or very broadly, depending upon several factors.
For example, the category of a sandwich may be defined to comprise vegetarian sandwiches
only (narrowly defined); while a broadly defined category of sandwiches may include all types
of varieties such as vegetarian, fried, grilled or non-vegetarian options. The main emphasis and
priority of this category is placed on customers as they are the major sources of revenue for
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purchasing the categorised products. The task should further result in categorising particular
products by titles according to their sizes, packaging, colour, sub-categories, variety of products
and variety in the product.
4.6.2 Step 2: Establishing the role of the category

Step 2 involves establishing the role of the category. At this stage, the category manager reviews
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the role played by the various products or brands in the category (Varley, 2014:60). Category roles
are assigned based on the customers’ like or dislike of the product or brand as well as market
trends. This implies that retailers should develop the base for allocating resources for the entire
business. While assessing the role played by a category, retailers should thoroughly consider the
nature and size of product category. Some categories may represent low-priced brands, while
other categories are dominated by luxury brands.
In contrast, a category that largely comprises low-priced brands may not provide any opportunity
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to earn profitable margins for both the retailer and the supplier. Own-label products, such as
the Checkers “No Name” brand or Pick n Pay’s “PnP” brand, have roles that are concerned with
achieving sales or profit objectives. Hence, it becomes imperative for a retailer to consider the
role played by a category in the store while determining a particular category. For instance,
upgrading the ice-cream product category by introducing premium luxury ice cream and ice-
cream confectionery to increase profit levels.
According to category management best practices, there are mainly four category roles, namely
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(Lohman, 2016; Ray, 2010:31):
• Destination – When the customer considers the retailer the most preferred choice who
offers consistently superior value in these categories. Destination categories lead in areas
of turnover and market share. Customers do not mind to travel far or spend more time on
these categories. For example, customers value the high quality of fresh produce (category)
at Woolworths, and are willing to travel far to acquire the products.
• Occasional/seasonal – Obtaining these product categories is seasonal or occasional. Seasonal/
occasional product categories are, for instance, Christmas decorations and cards, Diwali
crackers, seasonal fruits, summer and winter clothing, heaters, Valentine’s gifts and Easter
eggs. These product categories provide competitive value to the customer and deliver
profit to the retailer.
• Convenience – This category typically enhances the image of the retailer as the place for one-
stop shopping. The customer does not feel the need to travel to another place to purchase
products from this category, because this category delivers good target customer value in
a convenient way. For example, consumers know that Engen Quick Shops stock items they
may need urgently like plasters, tea, coffee and milk.
• Routine – This role refers to establishing categories that a customer comes too regularly.
If a brand, product or variation does not have a clear role, category managers must decide whether
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to remove the product from the assortment or to transfer it to another category that may be
more profitable. Different product categories have different characteristics, which means that
they require different management to achieve optimum profitability (Varley, 2014:61).
When deciding which products to include in their assortment, retail buyers need to be aware of
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the cyclical sales patterns that individual products and categories tend to follow. The product
life cycle can be used to understand the sales and profit implications of products over time. We
discuss the product life cycle (PLC) in terms of category management in section 4.7.
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4.6.3 Step 3: Establishing category performance measures

Establishing category performance measures is the third step in the category management
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process in which the retailer develops a standard or benchmark to assess the performance of
the various categories. It further involves setting measurable targets in terms of sales, volume,
margins, profits, market share, inventory turnover and gross margin return on investment (GMROI)
(Citeman, 2010).
Establishing category performance measures is essential for measuring the performance of a

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particular category, which later provides a foundation for further improvement in the category. The
main objective of this step is to ensure that both the retailer and supplier work together towards
assessing the performance rates they hope to achieve in the categorisation. Some category
managers and retailers even go as far as to develop a scorecard that includes the current state
of the business and targeted goals, and the proposed strategies for bridging the gap between
current status and target goals. Therefore, category performance measures essentially signify
the category scorecard that results in the target objectives the retailer and supplier set when
implementing the category business plan.
4.6.4 Step 4: Devising strategies and tactics for the category

The next stage of the category management process involves the retailer developing marketing
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and product supply strategies and tactics to implement. The main aim of developing strategies
and tactics is to enhance the retailer’s intention to capitalise on category opportunities through
creative and optimum utilisation of available resources assigned to a specific category (Agarwal,
2016). Category tactics are implemented to establish the optimal category assortment, pricing
promotions and shelf penetration, which are vital to ensure that retailers are on the right path
with the various product category strategies.
The following six category management strategies and tactics are crucial for improving the
642
performance of product categories:
643 • Traffic building

A traffic-building strategy is used to draw the attention of the customer towards the store, a
644
certain aisle or product category. The traffic-building strategy focuses mainly on mass products,
and most of the prospective customers are aware of the pricing and features of these products
(Madaan, 2009:148). More specifically, this strategy usually applies to products that are price
sensitive, have a high degree of household penetration, are frequently purchased and promoted,
have high sales in the category and generate the major portion of sales for the retailer. For
instance, cereals like Corn Flakes, which are often on promotion, are placed on gondola ends to
increase traffic to the cereal aisle. Similarly, products like maize meal are promoted intensively
to get feet into the store.
Gondola ends (or end-of-aisle-displays) are located at the end of each aisle in a retail store and
645
spans the two rows of back-to-back shelves (Koekemoer, 2005:308).
646 • Turf protecting

A turf-protecting strategy (or super traffic building strategy) is used to safeguard the sales and
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market share of a product category against competitors through competitive-based pricing

(Singh 2009:246). Because this strategy is expensive to implement, it is only used when truly
necessary and essential. Therefore, the turf-protection strategy should be implemented with
89
care as and when required due to the high investment required to implement. However, properly
implementing this strategy can assist the retailer in creating a positive overall price image for
the store or product category. When implementing a turf-protecting strategy, the retailer is
required to follow with price reductions to maintain the strategy (Singh, 2009:246). For instance,
many chocolate brands, like Cadbury and Nestlé, lower their prices to compete with one another,
particularly because chocolate bars are regarded as convenience or impulse products. Alternatively,
when Tastic runs promotions on its rice, Pick n Pay may also run a promotion on its No Name
Brand rice to compete with the price.
648 • Transaction building

The transaction-building strategy focuses on increasing the consumer’s average spend in a
649
category (Singh, 2009:246). This strategy is implemented to increase the sales of a specific product
category by highlighting sales, multi-packs, products with trade-up options, aggressive pricing,
bulk sizes and products that are subject to impulse purchase. For instance, Clicks does this on a
regular basis when it offers customers the opportunity to buy three items for the price of two,
where the cheapest of the three items are free.
650 • Profit generating

The profit-generating strategy is implemented to generate profits by focusing on a sub-category
651
or parts of the category while keeping prices in competitive ranges. In addition, products
generating higher margins generally have a considerable amount of loyalty compared to less
price-sensitive items, where higher than category average gross margins are commonly used
in this category (Singh, 2009:246). As a result, a retail store’s own brands are also implemented
under the profit-generating strategy. For example, many retailers like Checkers have generated
more profit by offering their private label brand (House Brand) to customers.
652 • Excitement generating

The excitement-generating strategy is implemented to create enthusiasm and pleasure for
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a specific product category by means of communicating a sense of dire need, urgency or

opportunity (Singh, 2009:246). Product categories that are implemented under this strategy are
generally seasonal items, the latest arrivals, special products, limited edition products, a rapidly
growing segment, fashion trends and products that are generally impulse-buying items. For
example, many retailers offer specials or limited edition offers to entice customers and encourage
them to make the purchase.
654 • Image enhancing

This strategy is mainly implemented to improve or enhance a retailer’s image with regard to
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quality, variety, price, service, presentation, delivery and brands available. The following are
examples of image-enhancing strategies that retailers can use: offering live fish stocked in tanks
to customers; exclusive product offerings; combo specials; happy meal menus; wide product
assortment; multiple payment options; competitive pricing; and a feel for the product (Singh,
2009:247).
Any of the above strategies should be selected to provide a platform for manufacturers and
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retailers to focus on creatively using the available resources to pursue category management
opportunities.
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Activity 4.1
Woolworths provides consumers with meal solutions by offering different types of food
that can be combined as a complete meal (e.g. fishcakes, salad, wine and malva pudding).
These are known as the “Eat in for less than R250” meals. Identify the category strategy that
Woolworths is using. Motivate your answer.
Feedback
9
Woolworths is typically using an image-enhancing category strategy. The retailer is offering

consumers a solution which essentially encourages them to go to Woolworths and purchase
ready-made/convenient meals, because this is what consumers are demanding.
4.6.5 Step 5: Establishing a category mix

In the current era of retailing, many category strategies and roles lack the necessary consumer
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insights and are ultimately not linked to the category management process in an efficient way
(Salmon, 2013:3). Thus, a successful category mix starts with defining each category’s role in the
portfolio of the business.
At times, retailers temporarily or permanently differentiate by adding new products to their

658
assortment, which do not belong to their traditional merchandise. For instance, supermarkets sell
non-food products, such as kitchen appliances and hardware; hardware stores offer furniture; and
travel packages and food items can be found in sports shops. However, many product categories
have stagnated, making a move into new fields an attractive option. As a result, retailers wish to
exploit their high customer frequency by selling new product ranges into these untapped fields.
This further implies that new categories that are related to existing ones offer more potential
with less risk (Tanase, 2005).
It is important to coordinate strategies and tactics related to integrating various category roles and
659
functions by providing a means for measuring success. One particularly important characteristic
of this context is that most retailers simultaneously use more than one category role and usually
facilitate this by working with more than one supplier in any particular category of products. The
reason for this is that variety and choice is an important determinant of consumers’ decisions to
patronise a store, and it is therefore in a retailer’s interests to maintain a network of suppliers to
provide the necessary assortment of products.
660 Retailers can adopt an effective category mix in the following instances:
• Offering new categories and services that are closely related to the retailer’s core assortment.
For instance, furniture stores offering decor accessories; hardware stores offering garden
furniture and travel accessories; sports outlets offering sports supplements.
• Diversifying the assortment into new categories that appeal to the core target group of the
retailer. For example, a clothing retailer for teenagers or a younger target market adding
cosmetics or music CDs to its product assortment to appeal to its target market.
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661 Impact of category management practices
http://link.springer.com/article/10.1057/jt.2012.2
662
Follow the URL link to read an insightful article on the impact of category
663
management practices on customer satisfaction in the grocery retail sector.

The authors introduce a key variables model for category management incorporating
six variables, namely product assortment, product pricing, product penetration, product
promotion, product availability and customer service.
4.6.6 Step 6: Implementing category management roles

Once the category mix has been established, the category manager has to implement these
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tactics. Category managers are assigned their respective roles and duties in implementing and
executing the various category strategies. According to O’Brien (2015:383), the category manager
is an individual with certain responsibilities to establish and implement category strategies and
tactics. The category manager also has the responsibility to ensure that the strategies and tactics
implemented are continuously monitored and maintained.
The job description and responsibilities of the category manager may include the following
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(O’Brien, 2015:383):
• leading and managing the category projects with team members

• conducting research and maintaining a thorough understanding of the category, the current
and potential supply base and market, and the needs and wants of the internal organisation
and stakeholders
• conducting research and maintaining an understanding of what the end customer needs
and may want from the organisation with regard to product categories
• conducting research and maintaining an understanding of all supplier and supply base risk,
ensuring contingency and mitigating actions
• identifying and implementing the most effective, impactful and apparent strategic sourcing
strategies for the various categories
• keeping up-to-date with the market, environment and changing needs of the customers
and being able to adapt and respond to the changes
• continuously reporting on the milestones and benefits of the category strategies and tactics
These are only a few of the key responsibilities of a category manager.

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4.6.7 Step 7: Reviewing the category

The final step in the category management process is reviewing the category. This enables the
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retailer and suppliers to measure the performance of a product category and recognise key
areas of opportunity and threats to overcome by implementing alternate plans. It is critical for
a supplier to revisit the dynamics of the category and its appropriate strategies and tactics. This
is an important strategic plan and enables a supplier to measure the performance against the
appropriate strategies and set tactics. Note that category business plans are subject to change
when assumptions change. For instance, in case of any specific change in business environment,
assumptions made earlier may not apply. Therefore, the plan must be modified regularly and
without delay for changes in underlying assumptions. Similarly, it is also paramount to schedule
reviews at regular intervals and note them in the implementation plan.
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Activity 4.3
Follow the link and read the contents explaining that consumers are looking for convenience on
their own terms: http://multichannelmerchant.com/marketing/customers-want-convenience-
on-their-terms-not-yours-15052013/. After reading the article, explain how retailers need to
consider this aspect when managing their product categories.
10 Feedback
As more consumers want products that offer convenience, many retailers, especially food retailers,
have begun offering this to consumers in the form of, for instance, pre-cut vegetables and fruit,
pre-made meals and meal ideas. Many retailers include the product category of “ready-made
meals” in their outlets. This affects the product categories that retailers offer as it allows them to
tap into other profit-generating channels.
4.7 PRODUCT CATEGORY LIFE CYCLE

When retailers select products, they need to be aware of the recurring sales pattern that both
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individual products and product categories tend to follow (Varley, 2014:62). Although the product
category life cycle, which relates to a certain product item or brand, may be of some value to
a retailer purchasing fast-moving consumer goods (staple products), the product category life
cycle is perhaps a more useful concept for many buying decisions, and has implications for
the way a category is managed (Varley, 2014:62). A product’s category life cycle can be divided
into several stages characterised by the revenue generated by the product category (NetMBA,
2010). In addition, the position of a product or category in its life cycle can dictate the product
strategy and can guide a retailer when making decisions about the product assortment depth.
The category life cycle generally follows the same four stages as the traditional product life cycle,
as shown in figure 4.2 below.
670
Figure 4.2: The product life cycle (PLC) stages
When the product or category is first introduced in the market (i.e. introduction stage), sales are
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relatively slow until customers become aware of the product and its benefits. At this stage, the
retailer also offers a limited assortment of products in the category, for instance one flavour or
variation. For example, when flavoured teas were first introduced in the market, only a limited
number of flavours and assortments were available. Some retail organisations may even broadcast
93
their new product before it is introduced to the market. Such a premature announcement can
alert competitors and remove the element of surprise when the product is eventually launched.
During the introduction stage, the advertising costs are generally high to increase customer
awareness of the product or category rapidly and to target the early adopters of the product.
The growth stage is typically a period of rapid revenue growth (Ntemba, 2010). Sales increase as
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more customers become aware of the product and its benefits, and as a result, additional market
segments are targeted. Once the product has proven to be a success and customers begin asking
for it, sales increase and a wider assortment of products may be added to the category (Varley,
2014:63). During the growth stage, the marketing team may even expand the distribution of the
product. When competitors enter the market, often during the latter part of this growth stage,
there may be price competition and increased promotional costs to convince consumers that
the business’s product is better than that of the competition.
The next stage in the product category life cycle is the maturity stage, which is where the product
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category becomes established and more competitive in the market. In the maturity stage, the
product category is the most profitable. At this stage, a large assortment of product variations
and brands are available (Varley, 2014:63). While sales continue to increase into this stage, they
often do so at a slower pace. Since brand awareness is strong, advertising expenditures are
consequently reduced. Competition may further result in decreased market share and prices.
As competing products may be very similar during this stage, it becomes increasingly difficult
to differentiate the product from its competitors.
The last stage of the product category life cycle is the declining stage. In this stage, the product
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category loses appeal and sales eventually begin to decline as the market becomes saturated,
the product becomes technologically obsolete or customer tastes change. At this stage, retailers
should reduce the assortment to leading brands and the best-selling variations (Varley, 2014:63). If
the product has developed brand loyalty, the profitability may be maintained for longer periods.
Therefore, unit costs may increase with the declining production volumes and eventually no
more profit can be made. A retailer would then decrease the number of product assortments
in the category.
Category management focuses on the efficient satisfaction of consumer needs. This process
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encompasses the dynamic response to consumer demand. In the next section, we discuss the
concept of efficient consumer response.
4.8 EFFICIENT CONSUMER RESPONSE (ECR)

A crucial part of the philosophy behind category management is that the product range should
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be responsive to the needs and demands of customers (Varley, 2014:47). Category management
hence focuses on efficiently satisfying consumer needs and encompasses the dynamic response
to consumer demands. To effectively respond to consumer demands and needs, retail buying
organisations as well as the entire retailer supply chain, should become responsive to consumer
demands (Varley, 2014:67). This brings a completely new meaning to the phrase, “you are only as
strong as your weakest link”, as rapid and efficient response to consumer demands relies on all
activities that are involved in getting the products from the point of manufacture to the point
of sale (Botha et al., 2011:13–14). In a nutshell, retailers and category managers should be able to
rely on their suppliers in those categories to respond quickly in supplying stock to the retailer.
Efficient consumer response (ECR) describes an all-encompassing supply chain management
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system, which encompasses buying activities, promotional activities and product development,
replenishment systems, logistics operations, and suppliers and their manufacturing facilities
(Varley, 2014:67). ERC is a “managerial process that starts with consumer demands, and then
gears the whole of the supply chain to responding to that demand” (Varley, 2014:67).
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ECR relies heavily on technology, which specific reference to information systems (databases).
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The aim of the process is to provide information seemingly across supplier and retail channels
to share knowledge and provide statistics on consumer purchasing behaviour. This attention to
detail provides the knowledge necessary to increase market share, decrease costs and increase
profits (Botha et al., 2011:13–14).
4.9 LIMITATIONS OF CATEGORY MANAGEMENT

Although category management provides a solution to enhancing customer experience and
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allows retailers to respond effectively to consumer demands, it is also important to consider

the limitations that may hinder the success of category management in retail. Such limitations
include the following (Varley, 2014:71–74):
• It allows a leading supplier to eradicate all its competitors across an entire category of
products and execute its will on weak retailers.
• It places all rival suppliers at a great competitive disadvantage by allowing the knighted
supplier to wander freely over all of their subtle business data and make decisions about
which products to shelve, in what amounts and at what prices.
• It allows retailers to organise pricing structures with one another through a shared supplier
serving the part of a category manager for numerous retailers concurrently.
• Narrow focus on categories may obscure interdependencies and associated cross-category
opportunities.
• Too much emphasis is placed on the process and too little on the outcomes.
• It can limit competition.
• It can be seen as a strategy to reduce costs and waste, while pleasing the final customer is
not the number one priority.
• Changes in category management is not necessarily good for customers since they limit
customers’ product choices to the most profitable items, and may hinder their ability
to compare prices.
• The fact that many customers complain that they can no longer find what they are looking
for may be partially due to a misunderstanding of differences between category roles.
4.10 SUMMARY
In conclusion, it remains vital for retailers to use category management as a daily process that feeds
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into business operations to ensure that every area is integrated towards enhancing relationships
with suppliers and improving the customer shopping experience. Failure to do so often results
in incremental costs associated with trying to improve product category instead of managing
the process effectively and efficiently to achieve the desired goals of improved revenues and
customer satisfaction.

681 Read the case study below and answer the questions that follow.
682 4aKid
For a Kid CC, trading as 4aKid, is a company based in Sandton. It is predominantly a child safety company
683
and is passionate about providing quality child safety products, as it believes that all children have the
right to live, learn and play in a safe environment. All its child safety products provide simple solutions
to the everyday concerns parents may have about their children’s safety. The company aims to provide
a quality selection of child safety products, baby accessories and pregnancy items so that parents
or caregivers have one less thing to worry about. Its mission is to ensure that its safety products are
affordable and available to parents across the country, and to create child safety awareness, whether
at home, in the school environment or out in public.
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4aKid originally began selling only child safety products. These include safety products for being “on
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the go” such as safety harnesses, child locators and safety wrist straps. Water safety products include
shampoo rinse jugs, pool alarms and snug tubs. It carries car safety products, including Secure-A-
Kid car safety belts for children’s seat belts, car seat strap clips and easy sleepers. The company also
sells pacifiers, leg warmers, mosquito bands for children, hats, feeding accessories, blankets and
much more. The company realised that to bring in more revenue and build the company, it needed
to start listening, and follow and create trends. This led to its “4aKid Couture” brand, which includes
children’s clothing, unique gear and accessories, and imported products such as Huggalugs, Noo
Wear, Elodie Details and Smitten.
All its products are of a premium quality, comply with local and international safety standards and
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plastic items are BPA free. Its electronic products come with CE certificates and relevant products are
ICASA approved. The innovative designs combined with credible and helpful purposes and value-
added features make parents’ lives easier and simpler.
The company’s brand has grown extremely large with over 1 200 products. As soon it notices a trend,
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the company sources the products itself, whether locally or internationally, and establishes sole
agencies and distribution agreements with international companies for various branded products
from around the world. The company continuously searches the internet for new and necessary
products for children, and is always aware of what is going on in the market. It constantly searches
for innovative products all over the world, and product improvement and development has become
a daily task. It is an online company, but also has agents and resellers who purchase its products and
sell them part-time or in a shop, to make extra income.
Source: Adapted from Niewenhuizen & van Heerden (2016)
689 QUESTIONS
1 Develop a product category mix for 4aKid by discussing and implementing the category
management processes. In your discussion, indicate the product depth and width of 4aKid
as well as the category strategy/tactic that best suits the company’s product portfolio.
2 Explain to the owners of 4aKid the limitations of category management they need to keep
in mind.
3 Discuss a typical product life cycle pattern and apply the stages to any one of 4aKid’s
products.
4.12 REFLECTION
1 Define category management and explain the purpose of category management
in the context of retailing.
2 Explain the role of categories in a retailer’s assortment.
3 Explain the two theories/philosophies of category management.
4 Describe the category management process in detail with practical examples to
illustrate your understanding of the process.
5 Explain how product categories differ through the different stages of the product
category life cycle.
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QUESTION 1
22 The strategic management of product groups through trade partnerships, which
aims to maximise sales and profits by satisfying consumer needs, is BEST referred
to as …
1 assortment control.
2 category management.
3 inventory assortment.
4 merchandise planning.
QUESTION 2
23 The … of an assortment refers to the different versions or variations of the same
product that may exist in each product line or category.
1 breadth
2 depth
3 length
4 width
QUESTION 3
24 What is the THIRD step in the category management process?
1 defining the category
2 devising strategies and tactics for the category
3 establishing category performance measures
4 establishing the role of the category
QUESTION 4
25 According to category management best practices, there are mainly four cat-
egory roles, namely …
1 benefit, seasonal, purpose and timing.
2 convenience, seasonal, purpose and management.
3 destination, occasional, convenience and routine.
4 support, routine, sourcing and destination.
QUESTION 5
26 Which ONE of the following options BEST represents the stages in the product
category life cycle?
1 categorisation, testing, implementation and evaluation
2 classification, growth, stagnation and obsolescence
3 development, piloting, growth and decay
4 introduction, growth, maturity and decline
97
690 MEMORANDUM
692 QUESTION 1
Option 2 is correct as category management can be defined as “the strategic management

694
of product groups through trade partnerships, which aims to maximise sales and profits by
satisfying consumer needs. Options 1, 3 and 4 are all incorrect as these terms/concepts are not
explained in the question.
696 QUESTION 2
Option 2 is correct as the depth of an assortment refers to the different versions or variations of
698
the same product that may exist in each product line or category. Option 1 is incorrect as the
breadth of assortment refers to the number of product lines or categories a business produces or
a retailer carries. Option 3 is incorrect as the length of a product assortment refers to the number
of products in a particular product line or category. Option 4 is incorrect.
700 QUESTION 3
Option 3 is correct as the third step in the category management process is establishing the
702
category performance measures. Option 1 is incorrect as this is the first step, option 2 is the
fourth step and option 4 is the second step in the category management process.
704 QUESTION 4
Option 3 is correct as the four main category roles are destination, occasional/seasonal, convenience
706
and routine. Options 1, 2 and 4 are all incorrect as benefit, purpose, timing, support and sourcing
do not represent the four category roles.
708 QUESTION 5
Option 4 is incorrect as the stages in the product category life cycle are introduction, growth, maturity
710
and decline. Options 1, 2 and 3 are all incorrect as these do not represent the stages in the process.
The correct answer can be found in section 4.7.

711
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Learning unit 5
Merchandise logistics and supply chain management
Contents

Learning outcomes
Key concepts
5.1 Introduction
5.2 Supply chain management
5.2.1 Creating value through supply chain management
5.3 Retail logistics
5.3.1 Activities of retail logistics
5.3.2 Integrated logistics
5.4 The retail supply chain
5.4.1 Channels of distribution
5.4.2 Types of retail supply chains
5.5 Managing the supply base
5.5.1 Searching for supplier
5.5.2 Identifying suitable sources of supply
5.5.3 Evaluating suppliers
5.5.4 Building and maintaining relationships with suppliers
5.5.5 Ordering and following up on the purchase
5.6 Summary
5.8 Reflection

With the ever-increasing size and dispersal of traditional retail operations, controlling merchandising
712
as part of store operations is of paramount importance. Modern supply chain management can
achieve a competitive advantage through shorter lead times for restocking, reduced inventory
size and cost, improved management information and greater overall control.
In this learning unit, we discuss supply chain management and retail logistics – in other words,
713
how products are dispersed to the various stores from the point of production or manufacture
to the point of consumption by the end consumer. We first look at supply chain management
and how retail logistics fit into the broader picture of supply chain management. We discuss
retail logistics by focusing on the activities involved in logistics as well as the significance of
integrated logistics. We consider the retail supply chain by looking at the various channels of
distribution and the type of retail supply chain that can be used to distribute products from the
point of origin to the point of consumption. Lastly, we discuss the management of the supply
99
base by briefly explaining the search for and selection of suitable sources of supply, evaluating
suppliers, building and maintaining relationships with suppliers and ordering and following up
on the purchases made.
715
LEARNING OBJECTIVES
• explain the concepts of supply chain management and logistics, and explain where
logistics fits into the bigger scheme of supply chain management
• discuss and understand retail logistics, what it entails as well as its significance in retailing
• discuss the various activities of retail logistics with practical application
• explain and practically apply the various channels of distribution that can be utilised in
supply chain management
• identify and explain, with examples, the various intermediaries/middlemen/ channels/
chains/links of supplying products
• explain and provide practical examples of the supply chain length and widths
• explain how retailers/businesses search for suppliers and explain how suitable sources
of supply can be identified
• explain how the success or effectiveness of suppliers can be evaluated
• explain how relationships can be built and maintained with suppliers
• explain the importance of ordering and following up on the purchase with suppliers
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KEY CONCEPTS
• Supply chain management • Dual distribution

• Logistics • Intermediaries
• Logistics infrastructure • Manufacturers/producers
• Order processing • Wholesalers/distributors
• Information systems • Agents/brokers
• Transportation • Grey market sourcing
• Warehousing • Alliances and concessions
• Inventory management • Supply chain length
• Material handing • Supply chain width
• Integrated logistics • Intensive distribution
• Channels of distribution • Selective distribution
• Direct and indirect distribution • Exclusive distribution
5.1 INTRODUCTION
716 Retailers source merchandise from all over the world. Merchandise sold
in South Africa often have labels marked “Made in China” or “Made in
India”. With the ever-increasing demand of customers wanting good quality
products at low prices, retailers search globally to find the right suppliers
that can offer merchandise at unbeatable prices. Everything displayed in
a retailer’s store is supplied because of carefully planned supply chain
management and logistics activities. Supply chain management encompasses the planning and
management of all the activities involved in sourcing and obtaining products (Terblanche et al.,
2016:257–258). Logistics typically include activities such as procurement, distribution, maintenance
and inventory management (Hugos, 2006). Supply chain management, on the other hand,
includes all activities that fall under the definition of logistics (Terblanche et al., 2016:258). The
range of activities involved in the physical distribution of merchandise through the supply chain
is often referred to as retail logistics, and the management of these activities is referred to as
supply chain management (Varley & Rafiq, 2014:113). In essence, logistics is part of supply chain
management, which is a much wider, intercompany, boundary-spanning concept (Mangan &
Lalwani, 2016:13).
Customers expect to purchase the product they want or need without any effort from their
717
closest retailer. They are not concerned about how the product reaches them or what happens
behind the scenes for the product to be available in stores. There is an entire logistics and supply
system in operation to ensure that products and services reach the intended customers in the
right place, and at the right time and price.
In this learning unit, we discuss supply chain management and retail logistics in more detail. We
718
also focus on how to manage the supply base in merchandising. But first, what is supply chain
management and where does logistics fit into the big picture?
101
5.2 SUPPLY CHAIN MANAGEMENT
Supply chain management includes the planning and management of all the activities involved
719
in sourcing and obtaining products (Terblanche et al., 2016:257–258). Supply chain management
therefore involves the management of a network of relationships in a company and between
interdependent organisations and business units consisting of material suppliers, purchasing,
production facilities, logistics, marketing and related systems that facilitate the flow of materials,
services, finance and information from the point of origin to the final end consumer (Mangan
& Lalwani, 2016:12). It is clear from this definition that supply chain management encompasses
all logistical activities, therefore, logistics is a subset of the broader and overarching concept of
supply chain management.
Ray (2010:4) further explains supply chain management as the process of designing a product,
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sourcing components for manufacturing the product, manufacturing the finished product and
distributing it from its origin to the final consumer. Supply chain management therefore involves
the management of various processes, such as product development, sourcing, manufacturing,
distribution, transportation and warehousing (Ray, 2010:4).
Supply chain management includes all the activities and exchanges involved in the extraction,
721
processing, manufacturing and distribution of products and services from raw materials
through to the end-consumer for consumption (Wiid, 2012:67).
Supply chain management ensures the effective flow of raw materials to finished products
723
that are distributed to the end consumer (Pradhan, 2009:465). The main focus of supply chain
management is to be cost effective. If the supply chain can operate in a cost-effective way, the
retailer is able to gain a competitive advantage by providing the customer with better prices.
This can be achieved if all the “chains” in the supply chain is integrated. This means that all the
parties involved in the supply chain should share information and work together to achieve
a common goal.
Managing the supply chain is core to a retailer’s business since one of the important value
724
additions of a retailer is moving the product from the point of manufacturing or other sources
(supplier) to the end consumer (Ray, 2010:4).
725 Coca-Cola’s supply chain management

726 https://www.youtube.com/watch?v=UBSOiHUctrY
Visit the URL link to view a video about the supply chain of Coca-Cola.
727
It is clear from the video that Coca-Cola’s supply chain is very extensive,
especially if you keep in mind that every day the Coca-Cola Company serves 1.9 billion servings
of its beverages in 200 countries worldwide (Coca-Cola, 2016).
Source: Coca-Cola (2016)
5.2.1 Creating value through supply chain management

Managing the supply chain effectively brings value to customers. Marion (2015) explains that
729
supply chain management is all about getting the customers what they want, when they want
it, by spending as little money as possible in getting that done. In other words, the supply
chain’s function is operating as efficiently as possible, and getting the highest level of customer
satisfaction at the lowest cost (Murray, 2016).
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The following are ways in which the supply chain creates value for customers (Levy & Weitz,
730
2007:269; Genco Insights, 2015):
• A retailer creates value for customers when effective management of the supply chain can
ensure reduced stock-outs and tailored assortments for customers. This means that, when
retailers can ensure fewer stock-out situations by effectively planning merchandise, ordering
on time and replenishing stock in time, and carrying the right merchandise, it creates value
for customers. For example, a consumer’s washing machine breaks down and the consumer
knows that Makro stocks the specific brand they want. However, Makro does not have the
brand the customer is looking for in stock. At this point the customer has one of three
options: return to the store as soon as Makro replenishes its stock; buy another brand; or
go to another store to buy a washing machine.
• In addition to having sufficient products available, retailers can streamline their supply channel
operations by using data strategies (Genco Insights, 2015). This means that they can track
the movement of goods through the supply chain. In this way, they know when to order
new merchandise and can ensure faster delivery times and fewer damaged items.
• Another benefit of information systems in the supply chain is that retailers can provide their
stores with customised merchandise assortments. As the information system provides the
retailer with detailed information about the sales transactions, it can now supply each store
with the right merchandise. For example, in Cape Town it rains in the winter. Therefore, a
Pick n Pay in Cape Town would stock more raincoats and umbrellas in the winter. A Pick n
Pay in Johannesburg would stock more umbrellas in the summer because of the summer
rainfall in Gauteng.
731 Retail logistics in Raben Group:

732 https://www.youtube.com/watch?v=98h2PrEdCf0
In this video, the Raben Group takes you on a journey of its business. It
733
shows you how it uses the latest technology to serve its customers with fast and efficient
merchandise storing and transportation. It uses a system of bulking together orders per store
to ensure that it does not have to drive to each store too often.
734 Source: Raben (2016)
Now that you understand supply chain management, and know where logistics fits into the
736
broader picture of supply chain management, we discuss retail logistics in more detail. Bear in
mind that logistics form part of the broader supply chain management process.
5.3 RETAIL LOGISTICS

Logistics is the aspect of supply chain management that refers to the planning, implementation
737
and controlling of the efficient flow (transportation) and storage of products, services, and related
information from the point of origin to the point of consumption to meet customers’ needs (Levy
et al. 2012:255). Logistics can be defined as all aspects involved in the planning and implementation
of any physical movement of products from the manufacturer to the customer (Terblanche et
al., 2016:215). In a nutshell, logistics involves getting, in the right way, the right product, in the
right quantity and quality, in the right place, at the right time, for the right customer at the right
price (Mangan & Lalwani, 2016:9). From these definitions it is clear that logistics generally involves
transportation and storage or warehousing activities.
103
“Logistics is the process of planning, implementing and controlling procedures for the
738
efficient and effective transportation (delivery) and storage (warehousing) of products,

including services, and related information from the point of origin (or manufacturing) to the
point of consumption for the purpose of conforming to customer requirements” (Mangan
& Lalwani, 2016:9).
Logistics is the physical flow of merchandise from where the retailer gets the merchandise from
740
the supplier into the hands of the consumer. The logistics of the supply chain has everything
to do with transporting (or delivery) and storing (or warehousing) merchandise. Other factors
to consider in logistics are order processing, receiving of merchandise, unpacking, checking,
repackaging if necessary, storing in a warehouse, and then putting it together with other products
for transport to the retailer.
Managing the logistics of the supply chain is probably the most important part of merchandising,
741
because a retailer must be able to keep just enough stock to ensure availability for its customers
without over budgeting on inventory. For example, Ayanda wakes up and wants to make himself
a toasted sandwich. However, when he switches on the toaster, it does not work. He reads the
newspaper and notices that Dion Wired has a sale on kitchen appliances and sells the exact
same toaster he uses. After work he goes to Dion Wired, expecting to find his toaster and other
brands in the store. Ayanda does not realise that for Dion Wired to supply his toaster and other
brands, it must have a supply chain and information system in place to supply the toasters when
customers want them. As soon as Ayanda makes the payment, the information about the sale
goes directly to the computers at Dion Wired headquarters as well as the manufacturers in China.
The person responsible for replenishing the stock knows exactly how many toasters have been
sold and when to order new stock, and the manufacturer can anticipate new orders.
If the merchandise cannot be transported to the store cost effectively, correctly or on time, it
742
can result in the overall increased cost of logistics, late deliveries and damaged merchandise. A
retailer starts planning the logistics of the supply chain by looking at the logistics infrastructure
available. The logistics infrastructure is the method of transport or delivery a retailer can use
to move products from the point of origin to the point of consumption – whether it is by rail,
air, road or sea. Logistics infrastructure also includes the condition, efficiency or standard of the
infrastructure, such as the condition of the roads, or accessibility. South Africa, for example, has
ten harbours where freight ships can dock, railway tracks and an extensive road network. If a
country has a good logistics infrastructure, it is easy and cost effective to transport products
from the supplier or manufacturer to the retailer’s warehouse or store. It does not make sense to
use a supplier that is situated in a remote part of the country or world, because transportation
would be too costly due to the lack of logistics infrastructure.
Whether the retailer sources merchandise from local or international manufacturers/producers,

743
the products must be stored and re-distributed in smaller quantities to cater for the retailer’s
shops. This is called warehousing. Activities that form part of warehousing are order processing,
repackaging and redistribution, which we discuss later in the study guide. In the next section,
we look at the activities of logistics in the retail merchandise environment and the importance
of integrated logistics.
5.3.1 Activities of retail logistics

Apart from transporting products from the point of origin to the point of consumption, logistics
744
also includes order processing and information systems, inventory management, warehousing
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and materials handling. All the activities of logistics involve using machinery, equipment and
transportation to move goods to and in a warehouse where they are received, stored and
repackaged for redistribution.
745 We now discuss the various activities of retail logistics in more detail (Sople, 2007):
• Order processing and information systems – The retailer places an order for products from the
supplier. The order is received and the order is delivered–this is known as order handling.
This stage would not be possible without an integrated information system. This system
keeps tracks of incoming orders, inventory levels, packaged/handled orders and invoices.
• Transportation – The transportation of goods can be in the form of rail, road, air, sea or
pipeline. The retailer must decide which mode of transport would be the quickest and most
cost-effective way to move goods from the manufacturer to the customer. The choice of
transportation has a direct effect on the overall cost of logistics as well as the order lead time.
The order lead time is the time it takes to transport the order to the retailer. Some modes
of transport take longer than others do. It is important to note that the transportation of
goods usually involves more than one mode. For example, when the finished product is
bought from a manufacturer in China, the goods are shipped in containers to the nearest
port in South Africa. From there, depending on the product size, weight and amount, goods
are transported from the harbour to the warehouse via air and/or road transportation.
Factors to consider when deciding on the mode of transport include the following (Trade
Logistics, 2016):
- The cost of the mode of transportation – Some modes are more expensive than others
are. For example, road transportation is cost efficient and goods can be moved quickly.
- Safety – The safety and security of goods in transit are also important factors to
consider when choosing the mode of transport. Some products may be damaged
when transported via sea. Some products need special packaging or refrigeration,
which may make air travel difficult. Choosing the right mode of transport ensures that
packages are not damaged while in transit.
- Reliability and regularity of service – Air travel has a quick travel time, but goods have to
be checked in and checked out which takes time. In addition, land, air and sea travel
can be affected by bad weather conditions.
- Characteristics of goods – The type of goods transported has an effect on the mode of
transport. If products are fragile or need special packaging, they take up more space.
Land and air transport cater for smaller and lighter shipments while rail and sea transport
cater for heavier and larger shipments.
• Inventory management – Inventory management is the process in the supply chain where
the retailer keeps track of inventory and the inventory levels. There must be a balance in
the inventory levels to keep just enough stock to supply the customers’ demands without
over-investing in stock that cannot be sold. This process includes knowing when to order
new stock, the rate at which the stock is used and what the minimum levels of stock should
be. We discussed inventory management in detail in learning unit 3.
• Warehousing – Warehouses are buildings that are equipped to receive, store, process and
repackage goods for distribution. For example, the Woolworths distribution centre in Midrand
is a large warehouse that receives, stores and distributes rebranded goods to Woolworths
stores in that area. The warehouse has a freezer and chilled area for fresh produce, a tray
wash area and also high racking and multi-level storage for clothing (Aurecon, 2016).
• Materials handling – Materials handling includes all the activities involved in moving
and transporting the merchandise to and from warehouses. Depending on the kind of
merchandise, the size and quantities, different equipment is used to handle the merchandise.
105
Effective planning can ensure that the merchandise is handled as few times as possible
and is stored and handled in such a way that it takes up the least space in the warehouse
and is not damaged. It is also important to keep costs of handling as low as possible. If
merchandise has to be handled too many times it can increase the overall cost of logistics.
For example, Makro sells a whole range of fridges. When the fridges are delivered to the
Makro warehouse, they are unloaded and stored in the warehouse. Fridges are big items
that require ample room, and must be handled carefully to ensure that their components
are not damaged.
746 Amazon: What happens after you placed an order:

747 https://www.youtube.com/watch?v=wC4vITSVXoA
Amazon is an American online shop that is well known for its sophisticated
748
logistics supply chain. Amazon uses robots that quickly locate products in
the warehouse and bring them to the package area where they are packaged for customers.
Using robots and less human capital is not only a way to reduce logistics costs and work
more efficiently, but also a way in which Amazon can provide better service to its customers.
Follow the URL link above to see how Amazon warehouses and distributes products globally.
5.3.2 Integrated logistics

Integrated logistics means that the entire supply chain must work together – the functions in the
750
supply chain must work together in harmony to be successful. Han (2009:66) explains integrated
logistics management as increased logistics-related communication and greater coordination
of focal business activities in the organisation and in those of its suppliers and customers. In this
way, the retailer is able to provide the customer with even better service.
Martin Christopher, a leading expert in the supply chain management field, says that a
751
retailer’s competitive advantage lies in how well its supply chain operates (Christopher, 2016).
Competition is not retailer against retailer, but supply chain against supply chain. The relationships
and collaboration between supply chain members are key to its success. Therefore, building
good relationships and sharing information between supply chain members can give a retailer
the competitive advantage.
Collaboration and information sharing can save costs in the following areas in the supply chain
752
(Christopher, 2016):
• Order processing – Costs increase when the members in the supply chains use different
product codes or have different unitisation requirements (e.g. different pallet sizes). If
everyone in the supply chain works on the same metric scale, there is no duplication of
information. This also applies to information systems – if the suppliers use different software
systems, there is duplication of information instead of integration.
• Planning – If the members in the supply chain collaborate on the planning, forecasting and
replenishment of inventory, the moving of goods are more efficient. For example, if the
manufacturer in China collaborated on the planning of inventory, it would know exactly how
much it needs to produce for the next year. Therefore, the manufacturer does not have to
wait until an order is placed, which streamlines the process. Another way of achieving this is
by linking the inventory level information system at the warehouse with the manufacturer’s
information system. The manufacturer knows in real-time what the inventory levels are,
and is able to replenish inventory immediately. This, in turn, results in a quicker turnaround
time (inventory stored to be sold), and the retailer does not have to store excess inventory.
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• Certain functions in the organisation have a direct effect on the supply chain. The marketing
department, buying department and inventory department must work together when
forecasting inventory. For example, the inventory manager wants to decrease inventory
because it costs too much to store it in a warehouse, but the purchasing manager wants to
buy more inventory because he forecasted an increase in demand. The different functions
in the organisation must work together to find the best working solution.
Activity 5.1
Give a definition of retail logistics and explain how the effective management of the supply
chain creates value in the retail merchandise environment.
11 Feedback
Retail logistics has to do with the flow of merchandise and information between the suppliers and
the retailer. Activities that form part of the logistics in the retail merchandise environment include
order processing, transportation, warehousing, inventory management and materials handling.
Supply chain logistics ensures that merchandise is supplied to the retailer in the right quantities
at the right time. This can happen when there is a flow of information between the retailer and
the supplier such as inventory levels and sales transactions.
The retailer creates value by supplying customers with the products they want, when they want
them. This means that the retailer ensures that here are no stock-out situations and that the store
stocks the right assortment of products. The retailer can achieve a significant competitive advantage
if it can provide customers with the right products at the right time while ensuring that it does not
over-capitalise on inventory – meaning that it only buys the right amount of stock.
The retail supply chain is an integral part of the success of any retailer and the effective management
753
of the retail supply chain ensures greater profits while satisfying consumer demand. We next
discuss the retail supply chain.
5.4 THE RETAIL SUPPLY CHAIN

The supply chain (or channel) is the combined effort of many organisations or intermediaries that
754
supply products to the final consumer via various distribution channels. The supply chain is a
“set of institutions that move goods from the point of production to the point of consumption”
(Wiid, 2012:66). The retail supply chain is primarily concerned with the management of raw
materials to the transportation and delivery of the final product to the end consumer (Kent &
Omaar, 2003:306).
The supply chain is a “set of institutions that move goods from the point of production to
755
the point of consumption” (Wiid, 2012:66).
5.4.1 Channels of distribution

Different supply chains or channels are found in the retail industry that supply products through
757
various stages between the producer/manufacturer and the final consumers. These chains or
channels are also commonly referred to as channels of distribution or distribution channels.
107
Retailers use a direct or indirect distribution channel, and in some cases a dual distribution channel.
758
In a direct channel, the products and services are distributed directly from the manufacturer/
producer to the end consumer. For example, buying potatoes and tomatoes at a farmer’s market
(Hatten, 2016:318). In an indirect channel, on the other hand, the products pass through various
intermediaries or middlemen before reaching the final consumer (Hatten, 2016:318). For example,
a farmer distributes his fresh produce to various retailers in the area and the retailer in turn sells
the produce to the final consumer. In some cases retailers use two or more channels to distribute
the same product to the same target market – this is known as dual distribution (Hatten, 2016:318).
For example, a clothing manufacturer selling its products to intermediaries (e.g. retailers) and
directly to consumers via catalogue sales, uses dual distribution.
In an indirect channel, the supply chain may include intermediaries such as manufacturers,
759
wholesalers, agents/brokers and retailers to distribute the products to the final consumer. An
intermediary is an individual or a business that acts as a link between the producer and the final
consumer to supply the products and services effectively to the end user. For instance, if the
customer buys directly from the manufacturer, the chain length is short. However, if the customer
buys from a retailer, two or three parties or intermediaries may be involved – the manufacturer,
a wholesaler and the retailer.
The supply chain is a chain of “links and networks of different parties like vendors, manufacturers,
760
dealers, wholesalers and retailers” (Ghosh, 2015:726). Figure 5.1 illustrates the various links that be
used to distribute a product from the place of production to the final consumer for consumption.
761
Figure 5.1: The retail supply chain to demonstrate the links between the manufacturer/
producer and the consumer
There are different types of intermediaries, middlemen or suppliers in the supply chain. Not all
762
suppliers are the manufacturers or producers of the products. A supplier can be the merchant
or vendor that manufactures or sells a product or service to a third party for resale. Alternatively,
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the supplier can be the provider of raw materials, minerals or agricultural products (The Reseller
Network, 2016). Varley (2014:116–118) describes the following five different types of suppliers/
intermediaries:
• Manufacturers or producers – Large retailers usually deal directly with the manufacturer or
producer of the products, while small retailers buy their goods and services from wholesalers,
such as Makro. Retailers who buy goods from manufacturers are likely to place large orders
that reserve production space. This means that if the retailer ordered 10 000 units of a specific
product, the manufacturer reserves the first 10 000 units for the retailer. For instance, in
South Africa, Tiger Brands manufactures Jelly Tots, Ace and Black Cat and sells it directly to
the Pick n Pay group.
• Wholesalers and distributors – The best-known resellers in South Africa are wholesalers
and retailers. Wholesalers are defined as businesses that buy products for resell purposes.
They sell more than 50% to other businesses and less than 50% to the final consumer. For
example, a cash-and-carry wholesaler, such as Metro and Makro. Retailers buy with cash
and then transport the products to their stores where they are sold to the end consumer.
• Agents/brokers – An agent/broker acts as a sales intermediary between a product manufacturer
and a retailer. In this way, the manufacturer can supply a large base of small clients efficiently.
Agents do not take ownership of the products they sell and can be agents for various
manufacturers simultaneously. Sales agents could be importers of global products. Tacoma
Foods is an example of an importer that supplies international brands to retailers such as
Shoprite Checkers, Woolworths and Pick n Pay. Have a look at the Tacoma Foods website
and note its wide variety of products: http://www.tacoma.co.za/home.html.
• Grey market sourcing – This refers to the practice of obtaining branded merchandise from
traders who do not have a licence from a manufacturer to sell its goods. The main problem
with dealing in grey goods is guaranteeing the authenticity and quality of the product.
• Alliances and concessions – A concession is a business within a business, or a shop within a
shop. A set area or a predetermined amount of space is demarcated for a specific range of
products, the supply of which is controlled by an entity/retailer other than the host retailer.
Alliances enable a host retailer to enter a new product market by allocating store space to
a product specialist retailer that is in the process of building up its own product expertise.
The difference here is that the host retailer does not buy stock from the product specialist
retailer to resell it – the stock is placed in the store at the risk of the specialist retailer.
763 Tiger Brands

South Africa is famous for having high-quality manufacturers. Tiger Brands
764
is a well-known manufacturer and marketer of over 30 brands including All

Gold, Purity, Ace, Doom, Powerade and Oros. All Gold is known for making
tomato sauce and jams. It prides itself on using high-quality produce to make its products.
All Gold also only sources its produce from South African farmers. Big and small retailers buy
their products directly from Tiger Brands.
Have a look at the Tiger Brands website and read about its interesting beginnings here in
765
South Africa. http://www.tigerbrands.com/about-us-4/tiger-brands-history/

Source: Tiger Brands (2016)
766
5.4.2 Types of retail supply chains

Supply chains are categorised by their length or width. In short, the length of the supply chain
768
is measured by how many links there are between the manufacturer and the consumer. The
109
width of the supply chain is measured by how intensely the products are distributed in an area.
We next discuss the length and the width in more detail.
5.4.2.1 Supply chain length

Supply chain length refers to how many parties/links are involved in the selling process. The
769
supply chain can be either direct or indirect as discussed above. For example, a farmer who sells
his produce directly to the public is an example of a direct supply chain. If a customer buys the
produce from Pick n Pay, and Pick n Pay sources the produce from a farmer, it is an indirect supply
chain. This is because the customer does not buy directly from the farmer, but buys it from Pick n
Pay. Typically, Pick n Pay would buy produce from a farmer, but it can also buy produce through
a produce agent that sells on behalf of the farmer. Therefore, there are three links between the
farmer and the customer – farmer to agent – agent to Pick n Pay – Pick n Pay to customer.
770 The Joburg Market

The Joburg Market is a well-known flea market where retailers, shopkeepers,
771
restaurateurs and exporters buy fresh produce. The Joburg Market is the
largest market in South Africa with a wide variety of fruit and vegetables.
Approximately 5 000 farmers from across South Africa come to sell their fresh produce to
772
a larger buyer base. Farmers use market agents to sell their produce, and can pay up to
7.5% commission on produce sold. Market agents work by themselves or in partnerships to
sell or buy agricultural products on the instruction of or on behalf of a retailer or manufacturer
(BothaRoodt, 1993).
Go to the URL link below to see how fruit and vegetable prices are set daily, and take note which
773
produce is in season and how it affects demand for the produce: http://www.joburgmarket.
co.za/dailyprices.php
774 Source: Joburg Market (2016)
776 The following factors have an influence on the length of the supply chain (Wiid, 2012:69):
• The size of the customer base – If the customer base is small, it does not make sense to have a
long supply chain – the manufacturer can easily handle sales directly to the end consumer.
However, if there is a large customer base, it means that large quantities of products are
sold. Therefore, it makes sense for the manufacturer to sell produce to intermediaries such
as wholesalers and retailers to resell merchandise in smaller quantities. For example, a farmer
who produces tons of vegetables is not able to handle the administration and logistics
to supply every household with their individual vegetable quantities. Products that can
be sold directly are household cleaners or cosmetics. The manufacturer sells its products
through agents to consumers. This is called a direct selling approach. The supply chain is
short, because each agent is able to handle the administration of its client’s orders. South
African examples of direct selling companies are Avon, Justine and Tupperware.
• Geographical dispersion – If customers are dispersed widely, it makes sense to move
merchandise to places where customers are able to obtain the merchandise easily. For
example, a farmer, who lives 200 km from the nearest city, is not able to sell all his produce
if he only caters for the community in his direct environment. Therefore, he sells his produce
in large quantities to retailers who, in turn, make the produce available to the end consumer.
For example, if you want to buy milk, it is much cheaper to purchase it directly from the
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farmer. However, if you live in the city, it would cost you more to drive out to the farm to
buy the milk than to go to the nearest retailer.
• Behavioural patterns – These include purchase frequency, average purchase size and the
needs of the consumer.
5.4.2.2 Supply chain width

The supply chain width is usually described in terms of intensive, selective or exclusive distribution
777
width (Dunne et al., 2011:164). Therefore, the width of the supply chain refers to the distribution
of retailers/links in the chain/channel.
778 We now discuss each in more detail:

• Intensive distribution – Intensive distribution is for convenience goods/fast-moving goods such
as food and fashion items, which are distributed intensely, to as many retailers as possible.
Sasko is a well-known manufacturer of bread, flour and quick mix packages. Because it sells
a staple product, it makes sure that its products are distributed throughout the country, to
as many retailers as it can cater for.
• Selective distribution – Selective distribution means that only a select number of retailers
stock these specific products. Electronic products usually fall into this category. For example,
you can only buy Nespresso pods at Nespresso outlets, but you can purchase the machine
from selected retailers such as Boardmans and Dion Wired.
• Exclusive distribution – With exclusive distribution, a product is only distributed to one or
two selected retailers in an area. For example, Porsche only has five distribution centres in
the whole of South Africa. This not only makes the distribution exclusive but also makes
the product very exclusive.
Now that you know what a supply chains look like, we discuss how choosing suppliers and
779
building sustainable relationships with them can give a retailer a competitive advantage above
other retailers. We discuss searching for the right supplier, factors to take into consideration
when choosing the right supplier, finding suitable sources of supply, the importance of supplier
relationships and negotiating the purchase.
Activity 5.2
Imagine that you are a strategic marketing consultant. Vusi is the new owner of a fashion
outlet in Soweto, and he has asked you to help him understand how a retail supply chain
works. The shop sells high-end fashion items for newborns and children up to the age of
14. The previous owner sourced clothes from various manufacturers in China, who branded
the clothes for the shop.
1 Give the client a definition of what a supply chain is.
2 Discuss the different types of supply chains and the factors that would have an impact
on the choice of supply chain for the fashion outlet.
Feedback
12
1. The supply chain is the network of organisations that are responsible for manufacturing,
transporting and selling products to the end consumer. The supply chain comprises manu-
facturers, transport agencies, warehouses, selling agents and retailers – the process of getting
the product from the manufacturer to the consumer. For example, a fashion outlet sources
clothes from manufacturers in China. The supply chain for the retail outlet would comprise
111
the suppliers in China, the transport agency responsible for moving the merchandise from
the manufacturer to the freight harbour, and then from the South African border to the shop,
or to the warehouse where the retail outlet receives, repackages and distributes clothing.
2. Supply chains vary in length and width depending on where the product is sourced, what
kind of product it is and how many customers are in the customer base.
The length of the supply chain is measured by how many “links” there are between the cus-
tomer and the manufacturer. Three factors can have an effect on the length of the supply
chain, namely the number of customers, the geographical dispersion of customers and the
behavioural patterns of customers.
The more customers there are, the more chains/links there are in the supply chain. For prod-
ucts that are used every day, such as staple products, the supply chain is very long to cater
for as many customers as possible. If customers are dispersed geographically, the supply
chain has to involve more parties to be cost effective in providing products to customers. For
example, a vegetable farmer who is situated hundreds of kilometres outside the city is not
able to provide customers in Cape Town with fresh vegetables. He uses selling agents to sell
his produce to retailers, and the retailers are able to provide customers with the vegetables
at convenient locations. Lastly, the behavioural patterns of customers have an impact on
supply chain length. If there is a sustainable and consistent demand for products, the sup-
ply chain is longer. If there is only a demand for a product at certain intervals, the supply
chain is shorter. For example, only the wealthiest people buy yachts. These yachts can be
customised according to the customer’s specifications. Therefore, the customer buys the
yacht directly from the manufacturer, which means the supply chain is direct and short.
The width of a supply chain is measured by intensity of the distribution network. This means
that if the distribution network is intense, the product is widely available. Customers are able
to buy the products they need from any shop around the corner. Famous brands of staple
foods are distributed as intensely as possible, for example Weet-Bix cereal or Clover milk.
A distribution network can also be selective. This means that the product is only available
through certain retailers.
A fashion outlet in Soweto has a relatively small customer base that is not widely dispersed
with predictable and measurable shopping habits. Because the fashion outlet is not part of
a franchise, the distribution network for the shop is very small and exclusive. The fashion
outlet sells unique clothing for children that is not available anywhere else; this means that
it has an exclusive distribution network.
5.5 MANAGING THE SUPPLY BASE

Most retailers use multiple suppliers or intermediaries to distribute their products to their target
780
markets. A retailer such as Checkers stock products from big brand names, for example, Unilever
(Handy Andy, Vaseline, Surf, Ola), Tiger Brands (Jelly Tots, Ace, Black Cat) and Pioneer Foods
(Bokomo, Bovril, Maizena). Finding the right supplier that can meet the demands of the store
on a continuous base is a crucial part of managing suppliers. The retailer must find dependable
suppliers that can handle returns and adjust product orders.
In the next section, we discuss searching for suppliers, identifying and evaluating sources of
781
supply, ordering and following up on purchases, and finally building and maintaining relationships
with suppliers.
5.5.1 Searching for suppliers

Finding the right supplier is crucial to the survival or any retailer. By answering enough questions
782
and gaining enough knowledge and information about the supplier, the retailer can make
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informed decisions when choosing suppliers. It is not always possible to obtain all the information,
but any data can help the retailer to find the best supplier match (Wawasan Open University,
2009). Retailers can use the following criteria to assess whether a supplier would be able to supply
products reliably (Wiid, 2012:71):
• Does the supplier ship an order in time? Suppliers not delivering in time can have a devastating
effect on a retailer. For example, if the retailer ordered merchandise for a specific occasion,
such as Valentine’s Day or Christmas, and the supplier were not able to deliver the products
in time, the retailer would lose sales and therefore suffer decreased profits.
• Does the supplier fulfil orders adequately? The supplier must be able to fulfil orders correctly
and supply the amount agreed upon between the retailer and the supplier. If a retailer
orders 60 boxes of eggs, because it forecast sales of over 50 boxes and the supplier could
only supply 40 boxes, the retailer would lose sales.
• Does the supplier maintain adequate stocks? The supplier must not only be able to meet the
demand of the retailer, but must also have safety stock in place. Carrying safety stock is an
inventory management method used to ensure that there is always a minimum amount
of stock that can cater for shortages, increase in demand and unforeseen circumstances.
• Does the supplier adjust orders to meet the retailer’s needs? The flexibility of the supplier to
meet the demands of the retailer is a very important aspect. A supplier must be able to
increase or decrease orders in a timely manner to meet the demands of the retailer. A retailer
may see an increase in the demand of a certain product and order more for the next month
than it did for the previous.
• Would the product be available on a continuous basis? The supplier must be able to supply
products sustainably and continuously. For example, a butcher who buys chicken from
a farmer must make sure that the farmer is able to deliver the agreed-upon amounts of
chicken every week. The butcher cannot wait for the farmer, because a decrease in product
availability causes a decrease in sales and thus profits.
• What are the terms and conditions of sale under which the product is available? The supplier may
have limited ability to provide the products throughout the year because of the seasonality
of the product. For example, certain flowers only bloom at a certain time of the year – tulips
only bloom in spring. If the supplier can only provide a certain amount of products with a
three-week lead time, the retailer must decide whether it would be able to place orders in
time to receive the stock when needed.
Now you know the right questions to ask when searching for a suitable supplier. In the next
783
section we discuss how to identify suitable sources of supply.
5.5.2 Identifying suitable sources of supply

When identifying sources of supply, the retailer asks the question: “Where should I source my
784
merchandise from?” The choice depends on the product the retailer is buying and the size of the
order. Retailers can procure merchandise from the raw resource producer, final manufacturer or
wholesaler. For example, Edgars buys its school shirts from a factory in China. It does not buy the
cotton to make the shirts from the raw resource producer and then has the shirts made. It buys
the shirts ready made from a manufacturer according to its specifications. In the case of fresh
produce, Woolworths contracts farmers to produce certain fruits and vegetables. Therefore, it
purchases the fresh produce from raw resource producers.
As a small retail shop cannot buy tons of merchandise, and manufacturers cannot handle small
785
transactions, this retailer would buy smaller amounts of merchandise from wholesalers. For
113
example, a tuck shop at a school buys it sweets and soft drinks at Makro. Manufacturers expect
buyers to place a minimum order, for example, 1 000 units.
786 Lindt-Sprüngli farming program

http://www.lindt-spruengli.com/sustainability/lindt-spruengli-
787
farming-program/
When identifying suitable sources of supply, the most important question should be, “Does
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the supplier use sustainable sources”? The Lindt-Sprüngli company is well known for the
Lindt chocolate brand. It has to source tons of cocoa beans to produce its chocolate. This
must be done in a sustainable way that does not have a negative impact on the environment
or the local communities. Follow the URL link to read more on how it has set up sustainable
farming of cocoa beans in Ghana.
Source: Lindt & Sprüngli (2016)
789
5.5.3 Evaluating suppliers

An important step in the supplier management process is to put an audit and assessment
791
programme in place. Eldridge (2012) explains that “you should always conduct an audit before
the contract is signed to confirm that the supplier does not have any significant compliance or
quality system failures that could affect your ability to provide top-quality products.” Evaluating
suppliers do not end when the supplier has been chosen. Audits of suppliers must continue after
the contract is signed to monitor, assess and evaluate suppliers’ performance (Eldridge, 2012).
792 The most important factors a retailer can use to evaluate its suppliers are as follows (Wiid, 2012:73):
• Suitability of merchandise – This is one of the most important factors to consider. If you are at
a trade show and there are hundreds of suppliers, you must choose products that are in line
with the image of your company as well with what customers would buy. Checking whether
the merchandise is suitable is therefore crucial for the future profitability of the retailer.
• Completeness of a line – As a retailer, you offer your customers products that complement
each other. These product lines are carefully chosen and combined to give the customer the
best value. Therefore, it would be ideal to source an entire product line from one supplier.
This would decrease transport costs, and the more you buy from a supplier, the better price
you can negotiate.
• Profitability of merchandise – Retailers are constantly on the lookout for suppliers to supply
them with quality products at good prices. Merchandise is only profitable if it is in demand
and can be sold at profitable prices.
• Delivery – The retailer must make sure that the supplier would be able to deliver merchandise
on time and in the quantities specified. For example, if you order merchandise that is time
sensitive, such as Christmas or Valentine’s Day products, the supplier must be able to deliver
in a timely manner in the quantities determined by customer demand.
• Stability – The retailer must make sure that the supplier would be able to meet the delivery
deadlines continuously. A retailer must know that its order can be met on time and that it
would be able to make repurchases in the future. The retailer can check suppliers’ financial
status, business processes and credibility to make sure that they are stable. Previous
experience and recommendations are also good ways to make sure that suppliers are reliable.
• Promotional assistance – Retailers are more likely to buy merchandise from suppliers that
give support in the form of promotions. For example, specially made branded stands for
merchandise and in-store sales promotions for new products.
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• Dependability of quality – The supplier must be able to supply quality goods consistently.
If a retailer stocks products from a manufacturer that does not supply consistent quality, it
can harm the retailer’s reputation. For example, if Pick n Pay buys electric toy cars from a
manufacturer and most of the cares are returned due to a defect, it reflects badly on Pick
n Pay’s selection of toys.
• Returns – It is very important for the retailer to make sure what the supplier’s policies are
for merchandise returns. Would the supplier be able to make adjustments if incorrect
merchandise was sent, delivered late or damaged in transit? Retailers can lose plenty of
money if merchandise is delivered late. The stock may not be in demand anymore, and
must therefore be marked down. Alternatively, if stock is delivered early, it must be stored
in warehouses or it can be damaged by excessive handling. The retailer must be able to
negotiate a reduction in price or replacement of goods in such events.
• Distribution policy – The distribution policy has to do with the supplier’s exclusivity. If the
supplier only makes the merchandise available for certain stores, this would give the retailer
an advantage when selling merchandise that is in demand. The retailer must also make
sure whether the supplier is willing to make stock available on consignment. The profit
margin is much less, but there is less risk for the retailer, because it only pays for stock that
is already sold.
• Support services – Support services include after-sales service, warehousing, transport and
support in the form of sales representatives. When a supplier has functioning and competent
after-sales service, it helps with problem resolution and building a better relationship between
the retailer and the supplier. Suppliers who have knowledgeable sales representatives who
can give tips on market trends and promotion are also helpful.
• Prices and terms – Each supplier has a different policy for payment, transport costs and
discounts. It is important for a retailer to know if it can build up credit, negotiate fixed rates
and what discounts it can get for early or cash payments. All these factors have an impact
on the final price of goods.
5.5.4 Building and maintaining relationships with suppliers

It is important for retailers to build successful, long- term relationships with suppliers. Suppliers
793
need retailers, and that is why retailers have the negotiating power to make sure that both parties
can meet their profit objectives. If a retailer builds long-term relationships with a supplier, both
parties will benefit from it.
“The four foundations of successful strategic partnerships are mutual trust,

794
open communication, common goals and credible commitments” (Wiid, 2012:77).
To make the above statement clear, Rizza (2015) explains that a retailer can earn a supplier’s trust
796
with honest communication by listening to its concerns and involving it, to ensure that the supplier
becomes a vested partner in the retailer’s business. When a supplier is a vested partner, it is just
as committed to supplying quality products as the retailer is. Rizza (2015) further explains that
building meaningful relationships with suppliers can hold benefits for both parties. If a retailer
treats its suppliers as partners, both parties experience higher success rates, decreased risk and
enhanced collaboration and innovation. This results in better quality products, sustainable
product delivery, reliability and costs reductions. By working together, retailers and suppliers
can provide customers with better service.
115
5.5.5 Ordering and following up on the purchase
This is the stage where the retailer places a purchase order from a supplier. Retailers are advised
797
to place orders with their own order form, because when both parties have signed the form it is
a legally binding contract between the two parties. The order form must state all the items that
were negotiated in the negotiation process. For example, the full names and addresses of the
supplier and retailer, delivery dates, quantity, payment methods, transportation and insurance.
The retailer must follow-up on an order once it is placed and approved. This ensures that the
order is received and processed in a timely manner.
In conclusion, managing the supply base has a direct effect on a retailer’s profitability. If the
798
retailer cannot find reliable suppliers, it is not able to provide customers with value-adding
products on a continuous basis or to supply the products customers want. When a retailer has
out-of-stock situations or if customers cannot find the products they are looking for, the retailer
loses sales and has lower profitability.
The merchandise logistics process, including the acquisition, ordering, handling and storing of
799
merchandise, is not possible if a retailer does not have good relationships with its suppliers. Retailers
must constantly evaluate their suppliers to make sure that they provide quality, sustainable service.
5.6 SUMMARY
The supply chain is the key to the retailer’s competitive advantage. It is important to choose
800
reliable suppliers that are able to provide goods in a timely and consistent manner. Supply chain
management helps retailers improve choice and availability of products on a continuous basis.
Creating strategies that keep costs low but still provide customers with good service is the key
to good supply chain management. Relationships and collaboration between the members of
the supply chain, shared experience and faster and new innovations, ensure that the overall
costs of logistic are kept to a minimum. This in turn gives the retailer the advantage of giving its
customers better prices and better service.
You should now have a clear understanding of supply chain management, retail logistics and
801
managing the supply base. In the next topic, we discuss the retail store environment in more detail.

The Foschini Group is a South African investment holdings company that operates through
802
divisions branded as Foschini, Donna-Claire, Fashion Express, Luella, Markham, exact!, American
Swiss and @home to name a few. Foschini is a brand that sells clothing, footwear and cosmetics
to women and children (The Foschini Group, 2016).
804 QUESTIONS
1 How would you characterise the width of the Foschini brand’s supply chain?
2 The Foschini Group wants to extend its footwear range by adding leather pumps. It is look-
ing for new suppliers in China. What advice would you give it about evaluating suppliers?
Discuss three factors that The Foschini Group must take into consideration.
3 Logistics entails many activities. Name three activities and explain the impact they would
have on the logistics decisions if the supplier of the shoes were located in China.
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5.8 REFLECTION
1 How does choosing the right supplier affect the overall performance of a retailer?
2 How does managing the supply chain create value for the customer?
3 How does having an integrated supply chain give a retailer a competitive
advantage?

QUESTION 1
Which ONE of the following types of suppliers does not have a licence to sell a
29
manufacturer’s goods?
1 alliances
2 wholesalers
3 grey markets
4 concessions
QUESTION 2
30 When assessing suppliers the retailer must ensure that the products bought from
the supplier complement each other. This is called …
1 profitability of the merchandise.
2 suitability of merchandise.
3 completeness of a line.
4 dependability of quality.
QUESTION 3
31 The process of planning, implementing and controlling procedures for the ef-
ficient and effective transportation and storage of products from the point of
origin to the point of consumption to conform to customer requirements, is
BEST referred to as …
1 logistics.
2 distribution channels.
3 sales channels.
4 marketing.
QUESTION 4
32 Nespresso pods are only available at Nespresso outlets, but the machine is avail-
able at selected retailers such as Boardmans and Dion Wired. This is an example
of … distribution.
1 exclusive
2 extensive
3 intensive
4 selective
117
QUESTION 5
33 The four foundations of successful strategic partnerships are mutual trust,
open communication, common goals and …
1 continuous contact.
2 credible commitments.
3 friendliness.
4 transparency.
805 MEMORANDUM
807 QUESTION 1
Option 3 is correct as grey market sourcing obtains products from traders who do not have a
809
licence from a manufacturer to sell its goods. Options 1 and 4 are both incorrect, because selling
on concession means that products are sold on the premises of another business, but as a separate
business; in other words, a business within a business. Option 2 is incorrect, because wholesalers
are selling agents that buy products in bulk from manufacturers and resell them to retailers.
811 QUESTION 2
Option 3 is correct, because completeness of a line means that the products bought from a
813
supplier must complement each other. The ideal would be to source an entire product line from
one supplier. Option 1 is incorrect, because the profitability of the merchandise does not affect
how well the products complement each other. Option 2 is incorrect, because the suitability of
the merchandise points to whether the merchandise is suited to the needs of the retailer and its
consumers. Option 4 is incorrect, because the dependability of quality is the supplier’s ability to
supply quality goods consistently.
815 QUESTION 3
Option 1 is correct as logistics is the process of planning, implementing and controlling procedures
817
for the efficient and effective transportation and storage of products from the point of origin to
the point of consumption to conform to customer requirements. Option 2 is incorrect, because
the distribution network is only a part of the logistics. It explains the width of the supply chain
and not how the products are moved. Option 3 is incorrect, because the sales channel has to
do with sales and marketing. Option 4 is incorrect, because the basic definition of marketing is
to advertise products to customers.
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819 QUESTION 4
Option 4 is correct as selective distribution means that only a select number of retailers stock
821
these specific products. Electronic products usually fall into this category. Option 1 is incorrect
as with exclusive distribution a product is only distributed to one or two selected retailers in
an area. Option 2 is incorrect as extensive distribution is not a type of supply chain. Option 3 is
incorrect as intensive distribution is for convenience goods/fast-moving goods such as food and
fashion items. These items are distributed intensely, to as many retailers as possible.
823 QUESTION 5
The four foundations of successful strategic partnerships are mutual trust, open communica-
825
tion, common goals and credible commitments. Options 1, 3 and 4 are all incorrect as these
do not represent the four foundations. Transparency refers to open communication, which is
already listed in the question.
The correct answer can be found in section 5.5.4.

826
119
120
TOPIC 3
The retail store environment
AIM
To, understand, design and evaluate the retail store environment in a practical and relevant
827
manner as applied by modern-day retailers.
LEARNING OUTCOMES
• explain the scope of visual merchandising and store atmospherics and practically apply all
aspects related to these concepts
• understand and explain the role and responsibility of the retail merchandiser
• discuss the role of store design and the various design aspects
• explain all elements of visual merchandising and be able to apply it practically to a given
retailer and target market
• discuss and practically apply the various types of fixtures and fittings used in modern-day
retailing environments
• understand the importance of displays and critically discuss and apply the objectives and
roles, functions, elements and types of displays in relation to merchandising and the retailing
environment
• understand and explain the importance and use of elements of store atmospherics, such
as sight, touch, sound, scent and taste, and practically apply these
TOPIC CONTENT
829 Learning unit 6: Visual merchandising
830 Learning unit 7: Retail store atmospherics
121
Learning unit 6
Visual merchandising
Contents

Learning outcomes
Key concepts
6.1 Introduction
6.2 Scope of visual merchandising
6.3 The roles and responsibilities of the visual merchandiser
6.4 Store design
6.4.1 Elements of design
6.4.2 Principles of design
6.4.3 Arrangement of displays
6.4.4 Store layout
6.4.5 Signage and graphics
6.4.6 Feature areas
6.5 Fixtures and fittings
6.5.1 Types of fixtures and fittings
6.6 Displays
6.6.1 Objectives and role of displays
6.6.2 Functions of displays
6.6.3 Elements of good displays
6.6.4 Types of display equipment
6.7 Visual merchandising in non-store retailing
6.8 Summary
6.10 Reflection

In the learning unit, we discuss visual merchandising, what it is, what visual merchandising
831
entails and how it can be defined. The introduction gives you a clear understanding of what
visual merchandising is and how retailers use visual merchandising in their stores. After the
introduction, we discuss the scope of visual merchandising (definition) as well as the roles and
responsibilities of a visual merchandiser. A section on store design follows, which focuses on
the elements and roles of design in a store; the principles of design; how a store can arrange
its displays; the different types of layouts that can be used; the types of signage and graphics
available for use in and outside the store; and the different feature areas a store can create to
increase awareness and exposure of merchandise. Thereafter, we discuss fixtures and fittings,
their role and importance, their function and purpose as well as the different types. A detailed
discussion follows on displays, their role, objectives and function. We look at the elements of a
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good display, the types of display equipment and how to manage space effectively. We place
emphasis on window displays, shelve space and mannequins. We define, discuss, explain and
provide examples of all these terms and concepts to give you a clear understanding.
833
LEARNING OBJECTIVES
• define visual merchandising and discuss its importance in the retailing environment
• identify the various categories of visual merchandising and explain each category in detail
• discuss the role and responsibilities of the visual merchandiser
• explain store design and identify the various interior and exterior store design factors
• list the most important factors retailers should consider when placing and arranging
displays in-store
• discuss store layout and critically discuss the various types of store layouts retailers can
implement and practically apply each
• discuss the types of signage and graphics and explain the purpose of feature areas and
their importance
• explain the various feature areas retailers can use to display their merchandise and
practically apply each
• critically discuss fixtures and fitting by explain and applying the various types of fixtures
and fittings in a retail environment
123
• critically discuss displays by explaining the objectives and role of displays in retailing as
well as the functions of displays
• explain visual merchandising in the context of non-store retailing
KEY CONCEPTS
• Visual merchandising • Promotional aisles/areas

• Visual merchandiser • Point-of-purchase counters
• Store design • Decompression zone
• Interior and exterior • Fixtures and fittings
• Elements of design • Shelving and rails
• Principles of design • Round fixtures
• Unity and order • Four-way fixtures
• Formal/symmetrical balance • Bins, baskets and tables
• Informal/asymmetrical balance • Gondolas
• Display arrangements • End-caps
• Grid layout • Promotional displays
• Free-form layout • Institutional displays
• Racetrack/loop layout • On-shelf and off-shelf displays
• Spine layout • Point-of-purchase displays
• Signage and graphics • Window displays
• Feature areas • Mannequins
• Entrances • Non-store retailing
• Freestanding displays • E-tailing
6.1 INTRODUCTION
Have you ever walked past a retail store and stopped to look at the striking, unique and beautiful
834
window displays, the bright flickering name of the store, or has a large “SALE” sign grabbed your
attention? Has the trendiest fashion style displayed on the mannequins in a store evoked a desire
to have it? Have you ever had the need to just walk around in a store and browse through the
merchandise, and the unique and stylish displays, shelving, styles and colours used to emphasise
products? If any of these have ever caused you to stop and look, you have been sidetracked by
visual merchandising.
Visual merchandising focuses on the display of products that a retailer sells. These decisions involve
835
careful consideration and planning (Botha et al., 2011:55). In simple terms, visual merchandising
refers to the way in which products are presented for sale in a retail store. What fixtures and
fittings to use? How to present the products? What store layout to use? What types of displays to
use? These are typical questions that a retailer needs to answer when deciding how the products
should be presented to the customer.
In this learning unit, we discuss in detail visual merchandising and the various techniques,
836
methods, plans and processes used to make a store and its merchandise attractive to customers.
We discuss what visual merchandise is all about as well as the roles and responsibilities of the
visual merchandiser. Thereafter, we discuss store design, fixtures and fittings as well as various
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displays in detail. The learning unit concludes with a brief background on visual merchandising
in non-store retailing.
Before we discuss what visual merchandising is all about, study the two photographs below to
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see the way in which two different retailers use simple visual merchandising techniques. Once
you have worked through this learning unit, refer back to these photographs to see whether
you view them differently. See if you can identify the various visual merchandising techniques
used in each of these images.
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6.2 SCOPE OF VISUAL MERCHANDISING

The purpose of visual merchandising is not just to present the products in an attractive way,
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but also to sell the products through a visual medium. In other words, a retailer should display
products in a store in such a way that they are able to sell themselves without the help of a sales
assistant. A store’s visual merchandising strategy is therefore a way to say, “this is who we are
and what we stand for” using visual elements. It is critical for a retail store to understand the
basic visual merchandising concepts and theories to give an effective product presentation to
the customer (Pegler, 2012:1).
Visual merchandising involves the use and manipulation of attractive interior and exterior techniques
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to engage customers and boost the sales activities of the retailer. In visual merchandising, the
merchandise being sold is typically displayed in such a way that it attracts customers by drawing
attention to the product’s best features and benefits with visual merchandising techniques and
elements (Business Dictionary, 2017). In a nutshell, visual merchandising is the art and science of
presenting products in the most visually appealing way (Ebster & Garaus, 2011:77). The ultimate
goal of successful visual merchandising is to attract customers into the store, engage them with
the merchandise and displays, and encourage them to make a purchase (VM Central, 2016).
Visual merchandising is the art and science of presenting products in the most visually
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appealing way that creates a positive image of the store and results in getting the attention
of the customer (Bhalla & Anuraag, 2010:20; Ebster & Garaus, 2011:77).
Visual merchandising is all about showing products and ideas at their very best, with the ultimate
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goal of making a sale. It is important to understand that a store is not necessarily selling the object
on display or the idea that is being promoted, but rather trying to convince the viewer of the
value of the object, the store promoting the object or the organisation behind the idea (Pegler,
2012:2). In simple terms, visual merchandising is the art and science of presenting a store and its
merchandise in such a way that it attracts the attention of potential customers (VM Central, 2016).
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Visual merchandising consists of four broad categories, namely store design, fixtures and fittings,
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displays and store atmospherics as summarised in figure 6.1. We discuss the first three categories,
namely store design, fixtures and fittings, and displays in this learning unit. We discuss the fourth
category, store atmospherics, separately in learning unit 7 as various elements and tactics can
be used in store atmospherics.
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Figure 6.1: Categories of visual merchandising
Based on the above figure, we can agree with Varley (2014:221) that the scope of visual
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merchandising includes the following:

• the types of fixtures and fittings to be used
• the method of product presentation
• the construction of off-shelf displays
• the choice of store layout (to encourage complementary purchases)
• the use of point-of-sale material (to encourage impulse purchases)
• the construction of window displays
• the presentation of products in an online store
847 Note: You should be able to define and discuss the concept of visual merchandising and
explain the key aspects of the definition, as well as understand the scope of visual
merchandising and how visual merchandising can be used to improve the store's image.
It is critical that a visual merchandiser should know and understand the various types, techniques
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and equipment available for visual merchandising. First, what exactly are the roles and
responsibilities of the visual merchandiser?
6.3 THE ROLES AND RESPONSIBILITIES OF THE VISUAL

MERCHANDISER
The ultimate goal of a visual merchandiser is to increase sales. This is done by first attracting
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potential customers into the store through effective window displays. Once they are inside the
store, it is critical to keep them inside through effective in-store displays and a well-planned
layout, which encourage them to make a purchase and ultimately return to the store for future
purchases (Morgan, 2008:18).
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Visual merchandisers must be creative, have a great imagination and be able to make sales. The
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image inside the store has a direct influence on the customers’ perception and attitude towards
the store, as well as the impression they form. It is therefore the visual merchandiser’s duty to
create and sustain a consistent and positive image of the store. Visual merchandisers should use
the space, colours, lines, designs, lighting and movement effectively to make both the store and
the displays visually appealing to customers. It is critical that the visual merchandising techniques
used by the visual merchandiser in the store should appeal to all five the consumers’ senses, not
just their vision. Therefore, visual merchandisers are also responsible for planning background
music, aromas and any other aspects that appeal to all the human senses (Wiid, 2012:170). We
discuss appealing to all the senses of the customer in detail in learning unit 7.
To create an effective and pleasant in-store environment, it is critical for visual merchandisers to
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ensure the following (Russel, 2015:9):

• understanding the store, the brand, and the product’s DNA (knowing what it stands for)
• uncovering the visual merchandising culture in the organisation
• staying up-to-date on industry knowledge (knowing what is going on in the industry, e.g.
trends)
• understanding standard and custom fixtures
• developing training programmes and curricula to ensure that all team members are on the
same page
• developing effective window displays and interior presentations
• sourcing the best supplier
Now that you know what visual merchandising is, the elements that comprise visual merchandising
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and the roles and responsibilities of the visual merchandiser, we look at the various techniques,
starting with the store design.
6.4 STORE DESIGN

Store design refers to the interior and exterior appearance of a retail store that sells products
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to individual customers. The purpose of store design is to create an attractive and appealing
environment to entice customers to enter the store, to browse and ultimately to make a purchase.
It is critical that the store design should be consistent throughout, highlight the retailer’s product
strategy and ensure that the needs of the target market are met. If this is done properly, it leads
to a sustainable competitive advantage (Nell, 2013:17). It is important to understand that the
store design of different retail stores is different, and that it depends on the type of product that
is sold as well as on the image of the store (Morgan, 2008:34).
The design of a store consists of two aspects, namely the exterior and the interior of a store.
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Figure 6.2 summarises the exterior and interior design factors. We discuss these factors in this
learning unit, while we discuss atmospherics separately in learning unit 7.
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856
Figure 6.2: Store design factors
The exterior of a store has a powerful impact on the image of the store and should be planned
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accordingly. The storefront side of a store is referred to as the exterior part of the store. It includes the
marquee (sign displaying the store’s name), entrance, windows, exterior lighting and construction
material (referring to the actual building materials). A retailer can present different images with
its storefront that are in line with the type of merchandise it offers, or the image it wishes to
portray, such as a traditional, fashionable or discount store (Berman & Evans, 2010:510). Customers
who walk through an unfamiliar shopping centre or street would most likely judge a store by its
exterior. It is therefore important for a retail store to ensure that the exterior of its stores attracts
the attention of people passing by.
The interior design of a store plays a key role in the shopping experience of customers as customers
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experience certain emotions or feelings when entering the store (Wiid, 2012:109). Various interior
store design factors can influence the opinions, perception and attitude of customers about a
particular store. Interior design factors include the type of flooring, the different colours that are
used, the type of lighting, the sounds in the store and scents (we discuss these factors in learning
unit 7). Other interior factors include the types of fixtures that the products are displayed on,
layout of the store, wideness of the aisles, cleanliness of the store, types of displays, and whether
there are proper directions, signage and graphics inside the store. These factors all play a critical
role when designing the interior of a store (Berman & Evans, 2010:512).
The design of the retail store usually focuses on three main aspects, namely layout, signage
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and graphics, and a feature area to create an effective consuming condition. We discuss these
aspects in detail in sections 6.4.4 to 6.4.6. We first discuss the elements and principles of design
to understand the use of the various design factors.
6.4.1 Elements of design

Retailers need the necessary knowledge and understanding of the elements of design as each
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of the elements can have an influence on the way in which customers react to a display (Wiid,
2012:188). Positive customer response towards a display would most likely stimulate interest
and lead to increased buying. Elements of design should be considered when creating displays
(Poloian, 2013:322). The elements of design that a retailer needs to understand and implement
successfully are line, shape, size, texture, weight and colour. These elements are summarised in
figure 6.3 and discussed below (Wiid, 2012:188-189).
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861
Figure 6.3: Elements of design
862 • Line
Line refers to the physical outline of products – it is formed by the way in which the products are
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arranged or packed on the shelves in stores. Line creates a specific feeling or idea in the mind
of the consumer. It is good to know that vertical lines create a formal and more dramatic mood
related to a sense of precision, power, self-confidence and pride, while curved lines create a more
informal mood related to femininity, flexibility and continuity. Diagonal lines refer to a sense of
action and direction, while horizontal lines represent a sense of calmness and quietness (Poloian,
2013:322; Wiid, 2012:188). The way in which these lines are utilised and combined determines the
effectiveness of the merchandise presentation (Pegler, 2012:22). Thus, the type of mood that a
visual merchandiser would like to create in a store would depend on the type of lines they use.
864 In the image on your left, can you see how vertical lines have been
used in the window display to create a formal and dramatic look and
feel to the merchandise? The standing mannequins also add a vertical
dimension to the display, while the seated mannequins create a sense
of action and direction into the store. Also look at the shapes used in
this window display – we discuss shapes next.
865 • Shape
Cubes, triangles and circles are the shapes often used in displays. The same shapes that are used
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together in a display create a sense of harmony, whereas different shapes used together in a
display create contrast and are used to draw attention (Wiid, 2012:189).
867 • Size
A pleasant mood is created when products of the same size are displayed together and more
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contrast is created when products of different sizes are displayed together. It is good to know
that small products disappear if they are placed in a large window display, therefore different
sizes of products need to be used (Wiid, 2012:189).
869 • Texture
Texture refers to how the product or display unit looks and feels, and can be real or artificial
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(Poloian, 2013:322). It can range from shiny to gloomy, or smooth to rough. Texture is a vital
element of display as it creates either harmony or contrast (Poloian, 2013:322). Various textures can
be used in a display to create contrast and highlight the texture of the product (Wiid, 2012:189).
For example, when an apparel retailer displays soft silky pashminas against a rough background,
it emphasises the soft texture of the product.
871 • Weight
Merchandise has an actual weight and an optical weight. The optical weight of an item is the
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amount an object appears to weigh rather than its actual weight (Poloian, 2013:322). For instance,
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a duck feather pillow may appear to be light and fluff y, but it is actually heavier than anticipated.
In visual merchandising the optical weight of an item is more important than the actual weight for
balance in the display. The weight of a product can be real or a suggested weight. For instance,
darker items appear to be heavier than lighter items of the same size. When colour and size are
used together in a display, it can influence the customers’ perception of the weight of a certain
item in the display (Wiid, 2012:189).
873 • Colour
Colour is regarded as the most important element of display, as it can have a powerful and
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dramatic emotional and biological effect on a person. For example, the colour orange has the
ability to make a person feel hungry (a biological effect) whereas white, blue and green make a
person feel calm (an emotional effect). Colour plays a critical role in the design of a store as the
effect colour has can motivate customers to make a purchase (Wiid, 2012:189). We discuss the
use of colour in visual merchandising in depth in the next learning unit.
In the next section we discuss the important principles of design as methods used to manage
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space to create unity in a work of art.
6.4.2 Principles of design

When arranging the elements of design, as discussed above, according to the basic principles
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of design, a reputable display is created. The principles of design outline how the elements of
design must be put together to create unity and order (Wiid, 2012:189). Unity is created with the
dominance or emphasis of one main theme or idea, while the other elements in the display only
contribute to the main idea. When the objective is to increase sales, unity in visual merchandising
is very important – the display should have a central theme that emphasises the sales message
(Wiid, 2012:190).
Achieving order in a display refers to all the elements that are arranged in an uncomplicated order
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to ensure that the sales message is quickly transferred to people walking by. A good combination
of all the principles of design creates displays that make customers stop, look and ultimately
purchase products.
Therefore, to create unity and order, the following principles of design should be considered:
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emphasis, contrast, balance, harmony, proportion and rhythm. We summarise these principles
in figure 6.4 and discuss them below.
879
Figure 6.4: Principles of design
880 • Emphasis
Emphasis (or dominance) refers to that point in a display that is dominant and that people look at
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first. Individuals first see the emphasised area, item or object and then look at the entire display. It
is therefore always better to put emphasis on only one point or item in the display (Wiid, 2012:191).
Too many emphasised areas result in a display that lacks unity and in return confuses the viewer.
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882 In the image on the left, the jewellery display has the most important
item – the big diamond necklace – in the middle of the display area and
other smaller items, such as rings and earrings around the necklace to
place emphasise on the necklace.
883 • Contrast
Contrast occurs when tension is created between merchandise and props or colour used in the
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display (Poloian, 2013:324). Contrast refers to the combination of different sizes, shapes, lines,
textures and colours that are used together to draw attention and place emphasis on a specific
item. The dominant or emphasised unit in a display can be larger, brighter, darker or lighter than
the background and the supporting units, objects and items (usually the background and props).
This emphasises the dominant unit, object or item and attracts the viewer’s attention to it (Wiid,
2012:191). Contrast is normally used to create an exciting, stimulating and comfortable buying
atmosphere. For instance, in the image below, the merchandiser places lighter merchandise
items against a contrasting black background to make the merchandise stand out.
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886 • Balance
There are two types of balance in store design, namely formal (or symmetrical) and informal (or
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asymmetrical) balance. Formal or symmetrical balance involves positioning items on either side of
a central line so that they are equally weighted optically (Poloian, 2013:322). In other words, items
are displayed in such a way that the left and right sides of the display are similar on both sides.
Placing more than one similar item on both sides of the middle of the display, as this is easier to
design. Informal or asymmetrical balance is the positioning of items on either side of the centre
line so that they are not equally weighted optically (Poloian, 2013:322). In other words, different
items, objects or units of different sizes, shapes, textures and colour are arranged together in
such a way that the entire display looks balanced (Wiid, 2012:191). For instance, more weight can
be placed on one side of the display to make it look more interesting. Below are examples of
how balance is created by means of formal (symmetrical) and informal (asymmetrical) balance.
Formal (or symmetrical) balance Informal (or asymmetrical ) balance
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888 • Harmony
Harmony is illustrated with the same elements of design, such as lines, shapes, sizes, weights,
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colours and textures, in an attractive arrangement (Wiid, 2012:192). Harmony is usually associated
with a quiet, peaceful, luxurious and formal buying atmosphere, for example an exclusive boutique
selling high-end products.
890 • Proportion
A harmonic relationship between items or objects can be created through the proportion of
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objects, items or products (Poloian, 2013:232). Proportion therefore refers to the relationship
among items, products or objects with regard to their size. For example, a display of baby shoes
appears more delicate and precious when placed next to an oversized teddy bear. It is important
to not only keep the size of the merchandise or props in mind, but also the size of the display
area, which should be in proportion to the size of the products being displayed. Small products,
such as jewellery and sunglasses, cannot be displayed in a large area and large products, such as
sofas, tables and washing machines, cannot be displayed in small display areas (Wiid, 2012:192).
It is also important for the size of the show cards to be in proportion to the size of the display
area and the products displayed.
892 • Rhythm
Rhythm in design refers to the sense of visual movement that is created by the way in which
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the different elements of design are arranged together. Rhythm can be created by repetition,
progression and interruptions (Wiid, 2012:192). Repetition refers to the repeated use of a certain
element of design in the display. For example, in a shoe display, different shoes of the same
size and colour can be used to create repetition and rhythm. Rhythm can also be created by
placing the products or items in sequence in the display, based on their size – small products
in front and the larger items to the back of the display area. This type of placement is known as
progression – the gradual change in size and/or colour of the merchandise in the design area. An
interrupted rhythm can be created by adding a product, item or object in the design area that
differs in size, shape and colour from the rest of the items. The interruptions of rhythm in the
display can stimulate the interest of the customers.
894 In the image on the left, there is unity in the jewellery display area.
The emphasised or dominant area is the large display unit at the
back; all the other smaller display units in different shapes and sizes
create a contrast that immediately draws the attention to the
emphasised area. As you walk through a shopping centre, try to
identify the various display elements and principles retailers use.
By now, you should have an idea of how the elements and principles of design are used to display
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merchandise. We next discuss the various arrangements that can be used to display merchandise.
Keep in mind the elements and principles of design we have just discussed when creating unity
and order through the arrangement of displays.
6.4.3 Arrangement of displays

The arrangement of displays involve the arrangement of products in remarkable and stimulating
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patterns to create rhythm, harmony and contrast in the display. Products in a display area can be
arranged in pyramid, zig-zag, step, repetition or radiation patterns. Keep in mind the elements
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and principles of design when reading about the various arrangements in which merchandise
can be displayed.
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Figure 6.5: Arrangement of displays
6.4.3.1 Pyramid pattern

A pyramid arrangement is a triangular display of merchandise in a vertical or horizontal shape. The
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pyramid starts with a broad base and moves to a point on the highest level (Poloian, 2013:326).
Vertical pyramids can be two or three-dimensional and are normally used for products in boxes
or baskets. For example, when boxes are stacked on top of one another in a pyramid form. In
a horizontal pyramid, the base of the pyramid is placed towards the back of the display and the
point of the pyramid is at the front. The pyramid arrangement is usually used in supermarkets,
pharmacies and hardware stores, as a large quantity of the same merchandise can be grouped
together (Wiid, 2012:192).
Figure 6.6 below illustrates the two types of pyramid arrangements. Try to identify these patterns
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of arrangement when you go to the shops.
Vertical pyramid (moving up from the floor) Horizontal pyramid (level with the floor)
Back
Front
Floor
Figure 6.6: Pyramid pattern
6.4.3.2 Zig-zag pattern

In a zig-zag arrangement no display levels are at the same height. This pattern is considered more
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flowing, elegant and feminine and is mostly suitable for the display of jewellery, cosmetics and
shoes. Department stores use the zig-zag pattern when they display shoes and clothes, such as
sweatshirts, shirts and skirts in an open display (Wiid, 2012:193). Figure 6.7 below illustrates the
use of a zig-zag pattern.
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901 Figure 6.7: Zig-zag pattern
6.4.3.3 Step pattern

The step arrangement refers to a series of steps, which lead the eyes in a direct line from bottom
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to top. Various different types of products can be arranged in this pattern (Wiid, 2012:193). This
pattern is regarded as a pleasant type of display that creates a sense of movement. Figure 6.8
below illustrate the use of the step pattern in a bakery. The different breads begin at a low point
and climb incrementally to a higher point in a diagonal arrangement (Poloian, 2013:326).
Figure 6.8: Step pattern
6.4.3.4 Radiation pattern

A radiation pattern refers to products that are arranged in rays spreading outwards from a central
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point (Wiid, 2012:193); the central point is broken up into individual items that spread out or can
be highlighted by light. This arrangement creates interest, as there is one dominant point from
which the other elements of the display radiate (spread/flow) outwards. For example, Christmas
lights (fairy lights) around a display automatically draw attention to the central point, or clothing
items that are displayed around a mannequin showing the type of brands and price that the
mannequin is wearing. The use of this pattern is show in figure 6.9 below.
Figure 6.9: Radiation pattern
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6.4.3.5 Repetition pattern

This pattern of display refers to products or items similar in nature that are arranged together or
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in the same way based on the size and space or angle (Wiid, 2012:193). This pattern is mostly used
for classical styles of clothing and professional wear. An example of this pattern of arrangement
is show in figure 6.10 below.
Figure 6.10: Repetition pattern
It is vital that retailers should be aware of the different types of patterns for arranging displays,
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and the type of arrangement best suited for the type of merchandise being displayed. It is also
critical that retailers should know where to place these display patterns (as discussed above) in
a store to draw the shoppers’ attention. The following are some aspects that retailers need to
take into account when placing and arranging displays in-store (McIntosh, 2008):
• Creating a focal point – Overwhelming or boring displays can have a negative effect on the
image of a store. It is therefore critical that a retailer should know on what point or aspect of
the display to focus and whether one or a few aspects need to be the focus point. Retailers
should plan properly what they want the customers to see in the display. It could be a new
product, which needs to be the focal point, with complementary products placed around
the focal point to encourage numerous sales (McIntosh, 2008).
• Using lines and shapes to plan the design – It is critical that a retailer should have a visual
merchandiser, or at least a person who knows how to create and arrange displays. It is
not as simple as merely putting a few items together to create a display area. An effective
display should be designed, drawn and visualised, before physically building or putting the
elements together (McIntosh, 2008). Retailers need to think of the following:
- Should the display be horizontal or vertical?

- Should the products be displayed in a straight or curved line, or in a pyramid or zigzag
pattern?
- Should the design combine a variety of elements (line, shape, size, texture, weight and
colour), or just one?
- Have the principles of design been considered and implemented?
• Creating balance – Effective displays have visual balance. Dark colours, for instance, appear
heavier than light colours and large objects appear heavier than small objects. For example,
larger and darker items are normally placed near the bottom of a display, while the lighter
items are placed on top. When too many bulky and/or darker objects or items are placed
on one side, the display may look unbalanced (McIntosh, 2008). When many items/objects
are placed together on one side of the display, they can be balanced by placing one larger
item/object on the other side of the display. See examples of creating balance below.
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All people react emotionally to visual stimuli. Displays create certain moods and desires
in consumers – a lack of balance creates an impression of uncertainty and uneasiness.
Consumers are not even aware of this, as they simply search for product displays or in-store
environments that give them a positive feeling and create a pleasant mood.
• Keeping it simple – Retailers should try to keep their displays simple and to the point. The
main goal is to draw a customer’s attention to the products being promoted. It is often
more effective to display products in basic rows on a wooden wall than displays where
every row or shelf has a different arrangement. The retailer’s purpose is to make it easy for
customers to find what they are looking for and to make sense of the product arrangement
(McIntosh, 2008). Therefore, retailers should group the same types of products together,
with complementary products close by.
• Using proper lighting – Lighting is very important in visual displays and can make people stop
and stare at the display. Do not light displays directly from the top as unpleasant shadows
can form. Rather place lighting a little off to the side and to the front of the display. It is
preferable to light the display from more than one angle and to change or adjust the lighting
when changing the displays (McIntosh, 2008). We discuss the use of different lighting in
learning unit 7 on store atmospherics.
• Looking at the display from all angles – It is critical that the visual merchandiser or store
manager should look at the display from all angles after it has been completed as people
do not necessarily view the display directly from the front. Most people approach a display
from the side and see it from a different angle and perspective – placing the emphasis on
an item not intended by the retailer. It is critical to ensure that the best view of the display
is the one that most people would see (McIntosh, 2008).
In the next section we discuss the various store layouts that retailers can use. These are the floor
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plans of a retail store, and each plan has a different objective.
6.4.4 Store layout

The store layout needs to guide customers silently to where they want to go and expose them
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to the entire store’s offerings (Gadekar, 2012). The layout of a store firstly depends on the type
of products that the store sells and secondly on the size and structure of the store. The types of
fixtures used in-store determine the type of layout. Although there are different types of store
layouts, they all have the same purpose – to move customers through all the areas in the store
to ensure that entire product ranges are viewed (Varley, 2014). There are four main types of store
layouts as shown in figure 6.11, namely grid layout, free-flow or free-form layout, a racetrack or
loop layout, and spine layout.
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Figure 6.11: Types of store layouts
6.4.4.1 Grid layout

A grid layout is illustrated by aisles that are set in a repetitive rectangular pattern. This layout
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is popular among supermarkets, hardware stores, pharmacies, discount stores and self-service
stores. The advantages of a grid layout are that it allows customers to shop quickly, makes product
control easier, uses floor space in a very effective way and basic fixtures can be used to display
products. Disadvantages of a grid layout are that customers cannot always position themselves in
the store, therefore proper signage is needed (Ebster & Garaus, 2011:14), and high shelving limits
customers’ vision to view more merchandise, which does not encourage unplanned purchases
(Martin, 2013). Figure 6.12 below illustrates the grid layout. A consumer can start at any aisle and
move upwards or downwards.
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Figure 6.12: Grid layout
6.4.4.2 Free-form (free-flow or boutique) layout

In a free-form (free-flow or boutique) layout the aisles, displays and shelves are arranged in
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an asymmetrical manner, meaning that they are placed in a free-flowing pattern (Ebster &
Garaus, 2011:14). A free-form layout enables consumers to move freely throughout the store
and encourages them to browse (Wiid, 2012:110). The advantages of a free-form layout is that it
improves the atmosphere of the store and the customers’ shopping experience, the store appears
to be more interesting, shoppers are encouraged to browse more easily and they feel less hurried,
which can lead to them making unplanned purchases. Stores that typically implement free-flow
layouts are boutiques, speciality stores, jewellery stores and perfume stores. Figure 6.13 below
illustrates the free-form layout.
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Figure 6.13: Free-form or free-flow layout
6.4.4.3 Racetrack or loop layout

The racetrack layout, also known as the loop layout, refers to displays that are arranged in the
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shape or form of a racetrack or a loop with a main aisle running through the store (Wiid, 2012:110).
The advantages of using a racetrack or loop layout is that customers are able to see merchandise
from different departments, which can lead to unplanned purchases (Martin, 2013). Furthermore,
a racetrack layout provides different viewing angles by using low fixtures to help customers
view different departments (Martin, 2013). The disadvantage of this type of layout is that it can
be uninteresting and limited in creativity of the use of decor (Bhalla & Anuraag, 2010:119). This
type of layout is usually used in department stores. Figure 6.14 below illustrates the racetrack/
loop layout.
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Figure 6.14 Racetrack or loop layout
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6.4.4.4 Spine layout

In a spine store layout design, the customer aisles runs from the front to the back of the store,
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with merchandise departments branching off to the back side walls of the store (Gadekar, 2012).
The spine layout effectively utilises space, especially in small stores and is more cost effective
(Bhalla & Anuraag, 2010:120). The disadvantage of using this layout is that it can be very plain
and uninteresting as the space for creativity is low. It may also be confusing for customers as
they may not understand where to move next and may miss a few sections in the store (Bhalla
& Anuraag, 2010:120). Figure 6.15 illustrates the use of a spine layout in a retail store.
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Figure 6.15 Spine layout
Store layout decisions play a significant role in the development of the store’s image. Make sure
918
that you are able to describe each of the store layouts and can provide suggestions on the various
fixtures and fittings that could be used for each store layout design for a particular retailer.
Activity 6.1
Can you identify the type of layout that the following retail stores in South Africa have imple-
mented in their store designs?
• Edgars
• Pep Stores
• Dis-Chem
• Checkers
• Guess
13 Feedback
The stores implemented the following types of store layout:
 Edgars – A racetrack/loop layout, as Edgars is a department store.

 Pep Stores – A combination of a grid layout and a free-flow layout as Pep is a discount store.
 Dis-Chem – A grid layout as it is a pharmacy and customers walk up and down between
the parallel aisles.
 Checkers – A grid layout as it is a supermarket.
 Guess – A free-flow layout as it is a boutique.
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Once a retailer has selected the best layout for the purpose of the store and its merchandise,
919
it can plan exactly where on the shelve products should be placed. Retailers use a planogram
to place products on the shelves. A planogram is a visual diagram or schematic illustrating the
exact placement of products on shelves to maximise the sales of these items (Wiid, 2012:83). Two
of the basic reasons why retailers should implement planograms in their stores are for product
placement and improving sales (Bhalla & Anuraag, 2010:131–132). However, the main purpose of
planograms are to support the ease of selection and enhance the merchandise presentation in
a neat and organised manner. Planograms are typically used in chain stores, such as Checkers,
Makro, Woolworths and OK, to ensure the consistent arrangement and placement of merchandise
in all stores. Planograms are also changed periodically to reflect seasonal changes in product
assortment, especially in fashion retailers (Donnellan, 2014:197).
Planograms are visual diagrams or plans indicating the physical allocation of product display
920
space in a product grouping used for standardising merchandise presentation (AMA, 2017).
Planograms are therefore visual representations of where and how retail products should be
placed on the shelves or display areas to increase awareness and maximise sales (Wiid, 2012:83).
Below is an illustration of how a planogram is used in the retail industry. Think of other products,
922
such as hardware, paint, or canned food and how retailers can use planograms to plan the
placement on shelves.
923
Figure 6.16 Planogram
6.4.5 Signage and graphics

The purpose of using signage and graphics in a store is to help customers locate particular
924
products and departments in a store. Effective signage/graphics attracts the attention of shoppers
and transfers the brand identity, thus influencing the consumers’ first impression of what they
would find inside the store (Hefer, 2012:98). Signage and graphics can therefore be defined as
any drawings, paintings or words that create a graphic display that retailers can use to help
consumers locate certain products and departments (Nell, 2013:17).
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The signage of a store is an extra way of drawing customers into the store. Signage can be a very
925
effective method of communication between the store and its customers, as it is easy to modify,
frequently read, always available and inexpensive compared to other advertising methods (Wiid,
2012:115). Signage, or the sign of the store, can be defined as an outdoor advertisement, which
is placed in front of the store, shows the name of the retailer and describes the type of product
or service that is being offered. If possible, the exterior sign should indicate the name, location
and type of product. The main advantages of signage are as follows (Wiid, 2012:115):
• helping the customer to recognise the seller, for example Pep Stores
• indicating what types of products are sold, for example London Pie
• indicating where the retailer is located, for example Checkers Soweto
• indicating the type of product or service that can be expected, for example, a McDonald’s
sign anywhere in the world means the same products, service, quality and advantage to
customers
• indicating the trading hours of the store, for example Monday–Friday, 09:00–17:00
Typical uses of signage include the following (Goworek & McGoldrick, 2015:229–230):
926
• Signage can be used on store-front windows to inform customers and passers-by of specific
events, such as new product launches and sales; therefore the signage on the windows can
be used as free advertising.
• Signage used in-store, for example on the walls and fixtures and fittings, can also be very
effective in helping customers find the products they are looking for and influence them
to make unplanned purchases.
• Signage can play a role in customer service as it provides customers with valuable information,
such as trading hours and product information.
• The customer experience can be improved by placing informative signs in-store, which is
more economical than employing extra staff to provide information.
• Technology can play a role in improving the impact of signage in-store. For example, digital
signs showing that cashiers are available have become established fixtures in some stores
such as Dis-Chem and Builders, and also improve both efficiency and cost-effectiveness.
• Lately, retailers have started placing interactive tablets in fixed positions in-store to provide
more information than traditional signs could accommodate, via consumers’ own electronic
devices.
Note: It is important to be able to discuss the typical uses of signage and graphics in stores.
927
Try to identify all the different types of signage and graphics that retailers use in the
stores that you entered over the past few weeks, and think of ideas on how they could
improve on it.
6.4.6 Feature areas

In addition to using layout and signage, retailers can also use feature areas to guide customers
929
through their stores and influence their buying behaviour. Feature areas are those areas in a
store that are specially designed to draw customers’ attention (Levy et al., 2012:479) and include
windows, entrances, freestanding displays, promotional aisles or areas, walls, dressing rooms,
and point-of-purchase counters. We summarise these feature areas in figure 6.17 and discuss
them below.
141
930
Figure 6.17: Feature areas
6.4.6.1 Windows
Window displays have the ability to draw customers into a store, as they can tell customers
931
in a visual manner what the store is selling, and indicate the type of image the store wants
to communicate. Research has indicated that storefront window displays are a very effective
tool for retailers, as they can show off the store’s image to new customers who are unaware of
the store, brand and products (Levy et al., 2012:479). We discuss the use of windows as a display
area further on in this unit.
6.4.6.2 Entrances
Customers’ image and perception of a store are directly influenced by their first impressions
932
of the store’s entrance. Most department stores have the cosmetics and fragrance section at
the main entrance, as these sections are visually attractive and create a sense of excitement.
Although a store’s entrance plays a critical role in the development of its image, it is also critical
for retailers to take note of the “decompression zone”, which is the first three meters of the store’s
entrance. Customers are usually not prepared to shop for products or make purchase decisions
in this zone, as they are still adjusting to the new store environment that they have just entered
(Levy et al., 2012:479). Retailers should therefore keep this decompression zone free from any
products, display and signage.
Retailers can use a variety of different store entrances. However, the following four major types
933
of entrances are normally used (Wiid, 2012:118):

• Open entrance – Open entrances are generally used by supermarkets, such as Checkers,
Pick n Pay, OK and Makro, and are inviting to customers. Large open entrances do not feel
constricted and allow easy access for customers with trolleys.
• Semi-open entrance – With a semi-open entrance the retailer provides easy accessibility to
the store.
• Funnel or lobby entrance – This entrance allows customers to feel as if they are inside the
store, without actually stepping over the entrance of the store.
• Standard door – A standard door entrance gives the retailer a more exclusive feel in the
mind of the customer and allows a retailer to use numerous window displays that stand
out and communicate the retailer’s offering to a passing audience.
6.4.6.3 Freestanding displays

Freestanding displays can be fixtures or mannequins that are placed on aisles to draw customers’
934
attention and guide them into a specific department in a store by using a racetrack or free-form
layout (Levy et al., 2012:479). The fixtures and mannequins usually display the latest trends and the
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most exciting products in that specific department. We discuss the various fixtures and fittings
that retailers can use in section 6.5.
6.4.6.4 Promotional aisle or area

A promotional aisle or area is a specific space that is used to display all products that are on
935
promotion/sale. For example, pharmacies use promotional aisles or areas to sell seasonal products,
such as flu medicine and Vitamin C in the winter and sunscreen and Vitamin D in summertime
(Levy et al., 2012:479). Certain stores, such as Mr Price Home, have promotional tables on which
all sale products are displayed, or promotional shelves indicating “buy-two-get-one-free”.
Clothing retailers, such as Gap, Woolworths and Edgars, normally place their sale products at
the back of the store so that customers have to pass all the full-price products before they get
to the sale section.
6.4.6.5 Point-of-purchase counters

Point-of-purchase counters, or also known as cash wraps or checkout areas, are the places in the
936
store where customers can purchase the products (Levy et al., 2012:479). Retailers, for example,
Clicks, Pep Stores, Woolworths, Spar and Pick n Pay, place impulse products, such as sweets,
soft drinks, chips, batteries and magazines in the lines of these point-of-purchase counters to
increase sales while the customers are waiting.
6.4.6.6 Walls
As the floor space is very limited in some stores, retailers use their wall space to store and/or
937
display additional products to increase their stock levels. Products can be stored on shelves and
racks and be coordinated with displays, photographs, or graphics containing the products (Levy
et al., 2012:479). For example, Makro sells items from the display areas or catalogues and the store
staff need to fetch the products from very high shelves or storerooms.
6.4.6.7 Dressing rooms

Dressing rooms are a very important feature in apparel retail stores. Customers often only
938
decide after trying on clothes, whether to buy it. Large, clean and comfortable dressing rooms
put customers in the mood to buy merchandise. Some retailers have started using technology,
such as interactive mirrors and 3D scanners, in their dressing rooms to enhance the buying
experience (Levy et al., 2012:479).
We have discussed the various feature areas that a retailer can use to display merchandise and
939
entice customers to purchase their products. We next discuss the different fixtures and fittings
the retailer can use to display the merchandise in these feature areas.
6.5 FIXTURES AND FITTINGS

The ultimate purpose of fixtures is to hold and display products in an effective way. Fixtures are
940
also used to define areas in a store and to direct traffic flow. It is important to realise that fixtures
work in conjunction with other design elements, such as the types of floors (carpets, tiles, vinyl),
lighting and the overall image of the store. For instance, a store with a vintage theme should
use more wooden fixtures instead of modern aluminium or metal to communicate a feeling
143
of tradition or history to customers. Clothing retailers use straight-racks, round and four-way
fixtures, whereas gondolas and end-caps are used more by other retailers (Levy et al., 2012:487).
As depicted in figure 6.18 below, fixtures and fittings include shelving, rails, round fixtures, four-
ways, bins, baskets and tables, gondolas and end-caps. We discuss each type of fixture or fitting
below.
Note: The primary purpose of fixtures and fittings are as follows:

941
• holding and displaying products safely and effectively

• defining areas of the store and encouraging traffic flow
• enhancing the overall store image, as they need to work together with other design elements
6.5.1 Types of fixtures and fittings

It is important to know and understand each type of fixture and fitting that can be used in retail
943
outlets. You should also be able to identify each type of fixture or fitting by looking at a picture.
Visit retail stores in your neighbourhood and try to identify the type of fixtures and fittings
retailers use to display their merchandise.
944
Figure 6.18: Fixtures and fittings
6.5.1.1 Shelving
Shelving in retail stores come in various forms and sizes. Most of the shelving types comprise
945
a number of fixture parts that give flexibility so the size, shape, outline and structure can be
changed or formed according to the needs of the store. Shelving can also come in smaller parts,
as stand-alone units that can be placed anywhere on the floor or against the walls. It is good
to use wall space to combine or link general product displays with the overall interior design of
the store (Varley, 2014:224). Most apparel stores use wall shelving to display large quantities of
products that can be stacked from the floor to the ceiling and draw interest by showing all the
alternative colours and shades. The images below illustrate different shelving types in retail stores.
946
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6.5.1.2 Rails
Rails can be mounted on walls or combined in a freestanding fixture. As the rails are adjustable,
947
the retailer can choose different heights. Cascading rails improve the appearance of forward-
facing hanging garments (Varley, 2014:225). Customers access clothing easier that hang from
these rails, which are in a diagonal shape.
6.5.1.3 Round fixtures

948 Round fixtures are round and stand on a pedestal, and display products in a circle.
Round fixtures tend to carry more products than rails and take up less floor space.
Round fixtures are very suitable when showing different colours and styles in the
same category, but they are not very space efficient, as customers need to access
them from all sides (Levy et al., 2012:487). For example, Gap stores use round
fixtures to show all the colours available in basic tops or sweaters, or clothing
factory stores place all the shirts on one round fixture and the pants on another.
6.5.1.4 Four-way fixtures

949 Four-way fixtures have two crossbars that sit vertically on a pedestal. The fixture
can carry a large amount of products and allows the customer to view the entire
garment (Levy et al., 2012:487). However, four-way fixtures are harder to maintain
than round or straight rails/fixtures, and the types of products on an arm should
be of the same style and colour not to confuse customers. Four-way fixtures
are commonly used in apparel retailer stores.
6.5.1.5 Bins, baskets and tables

Bins and baskets are usually used to carry larger product quantities, for example tuna cans, socks,
950
chocolate bars and soap. They are very effective for small or promotional items. They can be
filled with one type of product, for example cans of tuna; different types of the same product
type, for example different types, brands and colours of socks; or a variety of products that are
priced the same and through which customers must search (Varley, 2014:226). Some retailers
put all their promotional items on a table, for example Mr Price Home, which gives flexibility in
terms of space and display area. However, some retailers use tables to display the majority of
their items – this is sometime observed in higher-end (boutique) stores.
951
6.5.1.6 Gondolas
Gondolas are extremely versatile, as they can be used for most items. “Gondolas are moveable
952
shelving units on which merchandise can be displayed” (Wiid, 2012:177). They are very popular
in grocery and discount stores (grid layout) to display almost everything from chips, canned food
145
to toys on both sides. Gondolas are also used to display linen, towels and houseware items in
department stores. Apparel can also be displayed on gondolas; however, it may be difficult for
customers to view apparel items as they need to be folded (Levy et al., 2012:487).
953
6.5.1.7 End-caps
End-caps are a form of a display that are normally located at the end of an aisle using a grid layout.
954
Because they are very visible, the sales of products that are displayed on these end-caps increase.
Retailers therefore use end-caps in store for higher-margin, impulse products. In supermarkets,
manufactures often negotiate for end-cap displays when they have promotional offers on their
products (Levy et al., 2012:479). The images below illustrate the use of end-caps in a retail outlet.
955
After you have studied this section, try to do activity 6.2 to get a good idea of the types of fixtures
956
and fittings that stores are using.
Activity 6.2
Do the following activity and compare your answer with the information in this learning unit.
• Visit your closest Pick n Pay store and observe how the store uses the various fixtures
and fittings, product presentations, store layout and displays.
• Visit your closest Edgars store and observe how the store uses the various fixtures and
fittings, product presentations, store layout and displays.
• Compare your observations of the two stores. Are there any differences? What are the
differences? Can you give reasons for these differences?
14 Feedback
Some of the points you may have noticed include the following:
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In a Pick n Pay store, you would have noticed the use of the grid layout with slight variations where
items such as fruit and vegetables are displayed. Extensive use is made of gondolas and shelving.
In the fruit and vegetable section, bins and baskets are used to display the merchandise. Four-way
fixtures are used in the clothing section and the clothes are displayed according to size and style.
Classification dominance and tonnage merchandising displays tend to feature quite strongly.
In an Edgars store, you would have noticed the use of the racetrack layout that leads you through
the store. Each department has its own theme and uses different fixtures and fittings according to
the merchandise. You would have noticed that in contrast with Pick n Pay, Edgars uses more four-
way fixtures and round fixtures. You would also have noticed more themed and lifestyle displays.
Edgars stores tend to use window displays whereas Pick n Pay stores do not.
You probably identified many additional things in the two stores. Each store may have variations
(decentralised approach to visual merchandising) according to the local market. Take a good look
around to make sure that you are familiar with the way in which retailers use all the elements of
visual merchandising.
6.6 DISPLAYS
Stores use fixtures and fittings to hang, place or show the items they offer, whereas displays are
957
the way in which the merchandise is presented or arranged on the fixtures and fittings, all in an
effort to attract customers by creating the desired image. Therefore, the ultimate purpose of a
display is to present and promote the products that are sold in the store. Displays can generally be
broken down into four different categories or types, namely on-shelf displays, off-shelf displays,
point-of-purchase displays, window displays and mannequins, which we discuss in section 6.6.4.
Firstly, what exactly are the role and objectives of displays in merchandising?
6.6.1 Objectives and role of displays

The main objective of all visual merchandising activities is to increase the sales of products and
958
services. Depending on the objectives, we can distinguish between promotional and institutional
displays.
6.6.1.1 Promotional displays

Promotional displays are used when the retailer’s objective is to increase the sales of specific products
959
or services. The attractiveness of the display on which the products are presented, motivates
customers to buy the products (Wiid, 2012:171). An effective promotional display stimulates the
desire to buy and reminds buyers of items they need. It also exposes customers to new products,
the latest fashion trends and suggests new ways to use products.
6.6.1.2 Institutional displays

When the retailer’s objective is to promote the store’s image instead of specific products, it uses
960
institutional displays (Wiid, 2012:171). Displays about issues of public interest (e.g. HIV/Aids, global
warming, breast cancer, rhino poaching) indicate that the retailer cares about the community’s
welfare and promote the image of the retailer.
147
6.6.2 Functions of display
A indicated above, the main objective of displays is to increase sales. Therefore, retailers should
961
ensure that their displays are effective by implementing the following functions (Wiid, 2012:171):
• Drawing consumers’ attention – It is possible to achieve this through the effective use of
colours, lighting and the integration of moving parts in the display.
• Stimulating and holding customers’ interest – It is not enough to attract customers’ attention
only, their interest also needs to be stimulated and retained.
• Stimulating the desire of consumers to look at the products displayed more closely – For example
to look at the products or try them on. Therefore, displays should stimulate the consumers’
desire in such a way that they want to buy the products.
962 The general functions of retail displays include the following (Wiid, 2012:171):
• maximising product exposure

• improving product appearance
• stimulating product interest
• displaying product information
• allowing sales transactions
• ensuring the security of products
• allowing for the storage of products
• reminding customers of the products they plan to buy
• creating extra sales for impulse products
It is important that the retail displays should strengthen the image of the store and contribute to
963
the overall atmosphere of the store by creating exciting displays based on certain promotional
events.
6.6.3 Elements of good displays

It is not an easy task to create a good display. To communicate the planned message successfully,
964
retailers need to think, plan and consider each element of the display very cautiously. Elements
of a display include the products, the in-store location and position of the display, colours,
background material, lighting and signage. Retailers can use the following guidelines to help
them create a good display (Wiid, 2012:174–176).
• A theme is needed – A theme refers to specific ideas that are used in all the displays throughout
the store to create consistency. It helps retailers express a strong message about the products
that are for sale.
• It should be unique – Displays must be unique and different from others to draw attention. The
position of the market determines what is different. In other words, the types of products/
brand and trends in the market determine what type of display is relevant, but unique and
different.
• It must be appropriate and tasteful – People are becoming more open to new ideas, which has
a direct influence on what they consider appropriate and tasteful. Individuals who observe a
display should decide for themselves what is appropriate and tasteful in their eyes. Therefore,
it is critical that the retailer should have proper knowledge and understanding of its target
market to ensure that the displays tie in with the target market’s taste.
• It should be clean, neat and attractive – It is critical to check displays regularly to ensure that
they are clean, neat and attractive at all times.
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• It should provide information – The visual appearance of the displays should communicate
most of the information to customers. It is debatable whether prices should be included in
a display or not, but this decision is determined by the type of store and the type of target
market.
• It needs to be simple – Displays should be as simple as possible as the majority of customers
only have a few seconds to look while passing by. This means that less is more and that
there should not be too many different items in a display. It is advisable that displays only
have one focal point, as too many can lead to confusion and decrease the effectiveness of
the display.
• It should show/use products – It is critical for displays to use the store’s products – it can lead to
increased purchases, as some people need ideas on how to use, wear or consume products.
• It should convey the right store image – Displays should be based on the store’s own personality
or image. For example, if retailers want to convey an image of quality or prestige, the display
should be in line with that image. A jewellery store that sells expensive diamond products
should make sure that the displays include high-end props/objects/items that enhance the
image of the store and the products on display.
• It must be safe – It is very important that displays are safe at all times and that no products/
items/props/objects can harm or injure customers. For example, items hanging from the
roof should be secured and should not fall on consumers.
• It should not be a security threat – Displays should be of such a nature that no products/
items/objects can be stolen. The following are some ways to eliminate theft from displays:
- displaying only one of a pair, for example, one pair of shoes
- displaying products in a specific pattern so that it is noticeable if something is missing
- never using expensive items/products in a display if cheaper ones work just as well
- using enclosed cabinets in less secure areas, for example, Sunglass Hut displaying all
expensive sunglasses in an enclosed cabinet
• It should contain features such as, contrast, repetition, movement, harmony, balance, rhythm
and proportion to draw attention. We discussed these features in detail in section 6.4.2.
6.6.4 Types of display equipment

A previously mentioned, the primary function of a display is to present and promote the products
965
that are offered in the store (Hefer, 2012:96). Displays can generally be broken down into five
different categories, namely on-shelf displays, off-shelf displays, point-of-purchase displays,
window displays and mannequins, as depicted in figure 6.19 below. We discuss each of these
types of display equipment separately below.
966
Figure 6.19: Visual merchandising display equipment
6.6.4.1 On-shelf displays

On-shelf displays are referred to the “normal” types of in-store displays that show different types
967
of products in a logical order (Varley, 2014:231). They combine functionality with aesthetics. To
have on-shelf displays in a store is regarded as a visual merchandising requirement as all products
should be displayed in some form. The way in which products are presented depends largely on
the type of fixtures that are available in the store. The following can be used (Varley, 2014:231):
149
• Vertical stacking – displays magazines or CDs
• Horizontal stacking – displays folded garments or packed meat on top of each other
• Hanging – displays merchandise on hangers, hooks or mounted to the wall
• On-shelf displays – uses floor fixtures (as discussed in section 6.5.1), for example, hang-rails,
four-way stands and round fixtures
6.6.4.2 Off-shelf displays

Off-shelf displays are used to add extra impact by showing products as they could be used, or
968
next to other products to influence complementary purchases, for example, placing coffee mugs
next to a coffee display. Off-shelf displays are not used in the normal selling process, but rather to
create a major visual impact. They are arranged in a creative way and only the visual merchandising
team change them. These types of displays often include props. Props are secondary to the
products that are sold in store (they are an add-on) and their main aim is to decorate a store and
to increase the amount of products that are sold (Hefer, 2012:95). It is very important that the
amount of props should be in balance with the products used in the overall display.
Off-shelf displays can also be used for promotional purposes. Depending on the type of season,
969
event or special day, the retailer’s store displays can change on a weekly or monthly basis, for
example, back-to-school, Valentine’s Day, Easter, Christmas and winter displays. The mood,
character and the number of display props that are needed to draw customers’ attention are
dependent on the store’s target market, the types of products it sells and the size of the store
(Hefer, 2012:99).
6.6.4.3 Point-of-purchase (POP) displays

Point-of-purchase (POP) displays are regarded as the most effective display that a self-service
970
retailer can use, for example a grocery or department store. POP displays used to be associated
with products sold at the checkout counter. However, today POP displays can be displays or fixtures
used to assist retailers in selling their products (Hefer, 2012:100). POP displays are usually used to
encourage impulse buying and can be in the form of posters, price tags, samples of products,
video advertising spots, bins and baskets that draw customers’ attention to the product (Wiid,
2012:177).
POP displays are linked to manufacturers’ product advertising campaigns and repeat the messages
971
that customers hear on the radio, see on television or read in magazines. The manufacturers of
the specific products and brands are responsible for providing the materials for a POP display in
a retail store (Wiid, 2012:177). The ultimate goal of POP displays for a manufacturer is to promote
its products at the point of sale. Supermarkets usually use POP displays at the end of an aisle,
specifically where products such as canned food, serviettes and biscuits are combined into the
display. The displays of sweets, soft drinks, chips, magazines and chewing gum at the point of
payment (checkout counters) are also POP displays and are aimed at increasing impulse buying
(Wiid, 2012:177).
Retailers that offer a wide variety of brands are faced with very competitive manufacturers
972
that each want more shelf space or POP displays for their products (Ebster & Garaus, 2011:68).
However, too many different POP displays can confuse and overload the shoppers. Retailers need
proper guidelines on what displays should look like to create a pleasant overall store image and
clearly communicate that specific image to their suppliers (Ebster & Garaus, 2011:68).
973 It is critical that retailers know the following functions of POP displays (Ebster & Garaus, 2011:68):
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• Creating demand for specific products – The main goal of all types of displays is to create
demand for specific products. POP displays contain new ideas and elements that are very
effective at capturing the attention of shoppers and may lead to unplanned purchases.
• Enhancing the store image – According to the image of the store, baskets and bins can
be used to promote bargains, or displays that are more elegant can be used to promote
exclusive products.
• Enhancing shopping convenience – Shoppers find it easier if products are placed on POP
displays which are located at the front of the store, close to the entrance. These displays
help shoppers find products, specifically during busy seasons, such as Christmas, Easter or
even during promotions.
• Controlling in-store traffic movement – POP displays direct customers to move (walk) in a
specific direction. For example, shoppers’ attention can be drawn to areas in the store they
do not visit often by placing interesting POP displays in those areas.
It is important that retailers ensure that each POP display contains the following four aspects
974
(Ebster & Garaus, 2011:68):
• Products – Retailers should determine which types of products to add to the POP display.
This depends on the type of store and the overall store image. The types of products to
be placed on the POP display include products with the highest profit margins, the latest
trends, promotional products or high-demand and impulse products.
• Props and colours – Props such as mannequins and other accessories that can show products
in their practical perspective (a dress on a mannequin shows the fit) together with different
colours increase the effectiveness of POP displays. Strong colours such as yellow, red or
orange draw more attention than pastel colours such as light purple, baby blue or soft pink.
• Lighting – It is important for retailers to ensure that there are special lighting sources, for
example, a spotlight that can be moved to put emphasis on the products on display.
• Show cards/tags – Retailers should use price tags if the POP display is used to promote
special offers. Benefit tags should be used when the price of the product is not reduced
but offers special benefits to shoppers, for example shirts that are UV-protected or sugar-
free chocolate bars.
POP displays can further be divided into two types. The first type is content displays which provide
975
shoppers with information (e.g. about the latest promotions) or enhance the store image (Ebster
& Garaus, 2011:69). The second type is product displays, which are mainly used for a twofold
placement, which means a product’s second location in the store away from its regular place. For
example, a large bin containing various chocolate bars placed between aisles that offers a special
promotion such as “buy 4 for R30”. These exact same chocolate bars can also be found in their
regular spot in the “sweets” aisle. Product displays are also used to promote specific products,
often in combination with price discounts. It is important that consumers should be able to touch
product displays and remove products from it, should they want to (Ebster & Garaus, 2011:69).
6.6.4.4 Window displays

Window displays are the windows outside a retail store that the retailer uses to display the
976
products it offers and to draw customers into the store. Window displays can be a very effective
tool to communicate to consumers what the retailer stands for, the store’s image and the types
of products that the store offers – with the aim of creating interest in the customers. Creative and
interesting window displays would probably stop anyone walking past the store and ultimately
have such an influence on them that they want to enter the store (Hefer, 2012:104).
151
There are two types of window display styles, namely an enclosed window or an open-back
977
window display. An enclosed window has a solid back wall, two side walls and a glass front that
faces the aisle or the street. This type of window has hidden doors where the visual merchandisers
can enter into the display area to change it. Pep Stores often uses closed windows. An open-
back window display, on the other hand, does not have a back wall, therefore people walking
in the aisle or in the street are able to see most of the products in the store, depending on the
size of the store. Stores using open-back window displays should use props in a conservative
way, otherwise viewers miss the message that the window is attempting to communicate due
to visual confusion (Hefer, 2012:105). This type of window display is popular among retailers as
it allows the viewer to see what is inside the store and not merely the selection of merchandise
in the window.
Alternatively, retail stores can also use one of the following types of window displays (Kliment
978
& Barr, 2004:86; Pegler, 2012:72–73; Wiid, 2012:118–119):
• A shadow box – A shadow box refers to a small, raised window used for detail presentations
of unique products. It has a smaller window surface (the shadow box is often lower), but it
is higher than the standard display window. This is typically used to display jewellery items.
• Elevated windows – Elevated windows refer to the floor area that is lifted above street level.
A normal, human-sized mannequin is not able to stand up straight in this window. However,
it would fit if it sits, kneels, lies down or only the top or bottom half of the mannequin is
used instead of a full body.
• Deep windows – Deep windows, as the name suggests, are large display areas. Deep windows
require a lot of products and props to fill the spaces, as well as sufficient lighting to light the
back area of the window. This may cause clutter or the image not communicating correctly
with the viewer.
• Tall windows – In tall windows the lighting is quite far from the products or mannequins.
The visual merchandiser should use lighting on the sides of the window to place emphasis
on the display area and use overhead (“roof”) lights for atmospheric purposes.
• Island or lobby windows – These windows have glass on all four sides, allowing the merchandise
presentation to be viewed from different angles and any direction.
• Angled windows – Angled windows feature glass panes that expand from the front of the
store and end at the entrance to the store, which is set back about two meters. The display
therefore forms an L-shaped window display. Follow the URL link for some examples
of angled windows: https://www.google.co.za/search?q=angled+window+display&
rlz=1C1JPGB_enZA727ZA727&espv=2&biw=960&bih=540&source=lnms&tbm=isch&sa=
X&ved=0ahUKEwiKoIyMq6jSAhVMOMAKHZATDk4Q_AUIBigB#imgrc=pBsWGc8OK6BXrM
• Corner windows – As the name suggests, corner windows are located on a corner and
virtually wrap around a corner. This type of window display is beneficial as viewers can
see the merchandise from two different directions, which increases the chance of people
seeing the merchandise.
• Arcade windows – Arcade windows are used when the entrance to the store is set back
from the front window. A small part of the window therefore faces the storefront and
the rest of the window leads customer into the store entrance. Visit the following
URL to see how arcade windows are used: http://searcharchives.vancouver.ca/
spencers-department-store-arcade-window-display
6.6.4.5 Mannequins
Mannequins are regarded as a prop instead of a display type. However, in apparel stores
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mannequins are the main feature displaying clothes as they would look in “real life”, therefore
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they are discussed as a display tool in this section. Mannequins are, however, one of the main
elements of visual merchandising.
A mannequin is a life-sized representation of the human body that is mainly used in the promotion
980
of apparel (clothing-related) items (Hefer, 2012:93). They stand determinedly for hours, days and
months, in the same position with the same attitude and act as a silent salesperson. Retailers that
manage to dress their mannequins in a fashionable way create a remarkable display presentation.
Visual merchandisers that dress the stores’ mannequins very fashionably showing the latest
fashion trends, create awareness and a desire among shoppers, which can lead to unplanned
sales (Hefer, 2012:93).
Mannequins come in all shapes, sizes and genders, for example men, women and children
981
and can be used to display an entire outfit. Because retailers can choose from various types of
mannequins, it is important to choose the type of mannequin that fits with the store’s image
and the target market. For example, if the store’s target market is fashionable teenagers, then
a more modern type of mannequin should be used. Stores do not only need to use full-figure
mannequins; they may also use one of the following body parts, for example (Wiid, 2012:178):
• torsos to display swimsuits, jackets, lingerie, blouses and skirts

• heads and shoulders to display jewellery, scarves, hats and hair pieces
• hands to display gloves, jewellery and watches
• legs to display stockings and socks
• shoe forms to display shoes and sandals
• men’s suit forms to display suits and sport jackets
When next you visit a clothing retailer, pay attention to the different types of mannequins that
982
are used. Although full mannequins are generally used to display clothes, shoulder and head
mannequins are used to display scarves or shirts, legs are used to display stockings and shoes,
and necks or hands are used to display jewellery.
6.7 VISUAL MERCHANDISING IN NON-STORE RETAILING

Non-store retailing simply refers to those retailers or retailer outlets that do not have a physical
983
brick-and-mortar (traditional) retail store. Non-store retailing, also referred to as e-tailing (electronic
retailing) takes place via catalogues that are sent to consumers and the internet. In non-store
retailing, the use of visual merchandising elements are much more limited than in stores, thus
focusing mainly on the visual elements. These retailing methods (online) are more limited in
their ability to stimulate all five of the human senses. However, e-tailers do have the advantage
of being able to provide a large amount of visual and aural (hearing) information at a relative
low cost in comparison with stores (Goworek & McGoldrick, 2015:240).
Catalogues, also known as non-store distribution channels, are losing ground compared to
984
the increase of online sales. However, catalogues have much in common with online sales and
are still a feasible distribution channel. Websites as well as catalogues can show products in
a realistic setting by using photographs. The type and quality of the paper together with the
type of binding that is selected for a catalogue can also contribute to the brand image and how
consumers experience it (Goworek & McGoldrick, 2015:240). Despite having no property or
any specialist design facilities, non-store retailers sometimes have an advantage over physical
stores. For example, market stalls (non-store retailers that have a stall at a certain market) can
sometimes create an effective atmospheric retail experience for customers – by making them
feel part of a community.
153
There are also some similarities between brick-and mortar stores and non-store retailers. Multi-
985
channel retailers – retailers that offer their products via various channels, for example through
a store, an online store and catalogues – need to develop their retail environment in such a way
that the same brand image is provided and communicated throughout the various distribution
channels. For example, if a brick-and-more store plays music through a radio station in the store,
it should do the same on its website to recreate the store environment online through both visual
and aural techniques. It is also important that the presentation of the website should be consistent
with the retailer’s marketing mix and brand image. The home page of the website performs the
same function as the store’s exterior and the standard format of the webpage is comparable
to the interior store design. Online visual merchandising therefore relates to how the products
are photographed and positioned on the webpage. The order in which products are placed on
the webpage, should be the same order in which products are positioned or displayed in the
store. For example, products that are positioned in the front often achieve higher sales volumes
than those in the back. Presenting two-dimensional (2D) images on a website has the same
effect as placing products on shelves, and 3D rotations on the website enable shoppers to see
a full view of the product, the same as in a store (e.g. a mannequin wearing clothes) (Goworek
& McGoldrick, 2015:240).
Retailers need professional web designers to create their websites or art directors to do their
986
catalogue layouts, who communicate with retail marketers, to achieve the desired style of
presentation. Good, clear, detailed photographs help sell products. A zoom function to enlarge
photographs helps viewers see textures and more details of the materials and products. These
are all needed to reduce product returns and to increase sales (Goworek & McGoldrick, 2015:240).
Optometrists have managed to create a website on which shoppers can upload a photograph
of themselves to which they can add images of glasses to see how it would look in “real life”.
It is important that the checkout and payment system should be made as easy and secure as
possible for customers to reduce any risks associated with online buying.
6.8 SUMMARY
This learning unit introduced visual merchandising and its elements. It is critical to realise that
987
visual merchandising comprises four main elements, namely the store design, fixtures and
fittings, displays and store atmospherics. We discussed the role and responsibilities of visual
merchandisers and their teams. It is critical to understand that visual merchandising has a
direct effect on the image, appearance and overall atmosphere of the store. The more visually
appealing and interesting the display, the higher the chance that people would browse and
make an unplanned purchase – the ultimate goal of visual merchandising. It is therefore critical
that retailers, be they grocery, apparel, DIY, pharmaceutical or furniture retailers, should realise
the importance and value of creating pleasant in-store environments by implementing all the
elements of visual merchandising.
In the next learning unit we discuss the fourth element of visual merchandising, namely store
988
atmospherics.

Read the “Pick n Pay launches a new image” article by Storewatch that is available online on
989
http://www.supermarket.co.za/SR_Downloads/S&R%202016-1%20Storewatch.pdf and see

how it has managed to give its store and brand an entirely new look and feel. Pick n Pay has
also managed to simplify its in-store process and improve its displays, which contribute to
the success of its store.
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991 After you have worked through the article, answer the following questions:
1 What type of store layout does Pick n Pay use, based on your knowledge of Pick n Pay and
the article?
2 Can you identify all the elements of store design it has implemented and improved on?
3 What types of fixtures and fittings has Pick n Pay installed?
4 Do you think that gondolas are an effective type of fixture to use in Pick n Pay? Motivate
your answer.
6.10 REFLECTION
1 Briefly discuss the differences between a balanced and an unbalanced window
display.
2 Discuss the various types of fixtures and fittings available to the retailer when
making visual merchandising decisions.
3 Describe the various store layouts a retailer can consider when designing the
store layout.
4 Distinguish between the different types of displays a retailer could use to pres-
ent the products.
5 Assume that you are responsible for the visual merchandising at an up-market
fashion boutique selling clothes, shoes and a variety of accessories such as de-
signer handbags. Describe the store layout you would select for the store, and
then explain which fixtures, fittings and displays you would use to present the
products you are selling.

QUESTION 1
36 Which ONE of the following options relates to fixtures and fittings?
1 shelving, rails, bins, gondolas and baskets
2 shelving, mannequins, signage, rails and bins
3 shelving, rails, end-caps, free flow and graphics
4 shelving, end-caps, signage, bins and gondolas
QUESTION 2
37 Which ONE of the following can be created by repetition, progression and
interruptions?
1 proportion
2 harmony
3 rhythm
4 emphasis
155
QUESTION 3
38 Which ONE of the following options defines store design?
1 moving customers through all the areas in the store to ensure that the entire
product range is viewed
2 creating an attractive and appealing environment to entice customers to
enter the store, browse and ultimately make a purchase
3 helping consumers locate particular products and departments in a store
4 holding and displaying products in an effective way to entice customers to
make a purchase
QUESTION 4
39 Which ONE of the following options BEST represents the elements of design?
1 line, shape, size, texture, weight and colour
2 emphasis, balance, contrast, harmony, proportion and rhythm
3 texture, weight, contrast, balance, rhythm and shape
4 contrast, shape, colour, balance, emphasis and texture
QUESTION 5
40 A department store such as Edgars display its merchandise at different levels,
meaning that some shirts are folded and placed on a shelve above a wall fixture
that contains blouses, pants hang just below the blouses on another wall fixture,
evening dresses are next to the blouses and pants are on a long wall fixture. This
refers to a … arrangement of display.
1 pyramid
2 zigzag
3 step
4 repetition
992 MEMORANDUM
994 QUESTION 1
Option 1 is correct as fixtures and fittings include shelving, rails, round fixtures, four-ways, bins,
996
baskets and tables, and gondolas. Option 2 is incorrect as mannequins and signage are not part
of fixtures and fittings. Option 3 is incorrect as end-caps, free flow and graphics are not part of
fixtures and fittings. Option 4 is incorrect as end-caps and signage are not part of fixtures and
fittings.
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998 QUESTION 2
Option 3 is correct; rhythm can be created by repetition, progression and interruptions. Option
1000
1 is incorrect as proportion refers to the relationship among items/products/objects with regard

to size. Option 2 is incorrect as harmony is illustrated using the same elements of design such
as lines, shapes, sizes, weights, colours and textures in an attractive arrangement. Option 4 is
incorrect as emphasis refers to that point in a display that is dominant and at which people
would look first.
1002 QUESTION 3
Option 2 is correct as store design creates an attractive and appealing environment that entices
1004
customers to enter the store, to browse and ultimately to make a purchase. Option 1 is incorrect
as to move customers through all the areas in the store to ensure that the entire product range
is viewed, refers to store layouts. Option 3 is incorrect as to help consumers locate particular
products and departments in a store relates to signage and graphics. Option 4 is incorrect as to
hold and display products in an effective way refer to fixtures and fittings.
1006 QUESTION 4
Option 1 is correct as the elements of design that a retailer needs to implement are line, shape,
1008
size, texture, weight and colour. Option 2 is incorrect as emphasis, contrast, balance, harmony,
proportion and rhythm refer to the principals of design. Option 3 and 4 are incorrect as some
of the principals of design are mixed with the elements of design.
1010 QUESTION 5
Option 2 is correct as a zigzag arrangement means that no display levels are at the same height.
1012
This pattern is viewed as being more flowing, elegant and feminine and is mostly suitable
for displaying jewellery, cosmetics and shoes. Department stores in particular use the zigzag
pattern when they display shoes and clothes, such as sweatshirts, shirts and skirts in an open
display. Option 1 is incorrect as a pyramid arrangement is a triangular display of merchandise
in a vertical or horizontal shape. Option 3 is incorrect as a step arrangement refers to a series of
steps that lead the eyes in a direct line from bottom to top. Option 4 is incorrect as repetition
refers to products/items that are similar in nature arranged together or in the same way based
on the size and space or angle.
157
Learning unit 7
Retail store atmospherics
Contents

Learning outcomes
Key concepts
7.1 Introduction
7.2 Store atmospherics defined
7.3 Sight (vision)
7.3.1 Colour
7.3.2 Lighting
7.4 Touch (tactility or haptics)
7.4.1 Materials and textures
7.4.2 Temperature
7.5 Sound (auditory factor)
7.5.1 Music
7.6 Scent (olfaction)
7.7 Taste
7.8 Summary
7.10 Reflection

Two major types of variables affect the shopping behaviour of consumers, namely external and
1014
interior variables. External variables influence the store traffic and sales, for instance the window
displays and entrances, while interior variables such as music, odour and lighting influence the
time spent inside the store (Sivakumar, 2007:91). We discussed the external variables in detail in
the previous learning unit. In this learning unit, we focus on the interior variables that can affect
the behaviour of consumers. These variables include sight, sound, scent, touch and taste factors.
As mentioned in the previous learning unit, store atmospherics is one of the components of
1015
visual merchandising. In this learning unit, we discuss store atmospherics in more detail.
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1017
LEARNING OBJECTIVES
• define and explain the concept of store atmospherics in a retail context

• understand the importance of the influence of the sensory channels on the store
atmospherics
• explain how sight/vision can influence the perception and behaviour of consumers and
practically implement the factors
• understand and discuss what different colours mean and explain how colours and colour
schemes or combinations can be used in retail environments to create a specific atmosphere
• show an understanding of the use of lighting in retail settings and explain how to implement
various lighting systems
• discuss the tactile/haptic factors that can influence the atmosphere in a retail environment
and explain how touch can be used to influence customers perceptions and behaviours
• explain how the temperature inside a retail store can affect the behaviour of customers
• show an understanding of the use of sound and music in a retail store and explain how
the tempo, pitch and volume can influence the behaviour and perception of customers
• explain the use and effect of different aromas and fragrances in the retail environment
• explain how taste can be used in a store atmospheric context
KEY CONCEPTS
• Atmosphere • Triadic colour scheme

• Atmospherics/store atmospherics • General lighting
• Visual merchandising • Linear lighting systems
• Sight (vision/visual) • Directional/point light systems
• Colour • Baffled lighting
• Colour schemes/combinations • Speciality lighting
159
• Hue/shade • Suspended and pin-spot lighting
• Value of colour • Touch/tactile/haptics
• Intensity or chroma • Acrylic and vinyl
• Monochromatic colour scheme • Translights
• Analogous colour scheme • Sun-boards
• Complementary colour scheme • Sound/auditory factor
• Split-complementary colour scheme • Scent/olfaction
• Tetradic colour scheme • Taste
7.1 INTRODUCTION
Imagine that you are standing outside a clothing boutique on a hot summer day, waiting for
1018
the store to open so you can scout for the perfect outfit for a special evening out. You become
agitated as the store is five minutes late to open and you have already been waiting ten minutes
at the entrance. You are furious and annoyed because of the inattentive service you received
at a take-away coffee stall near the boutique. You yell at the shop assistant behind the store
entrance door to open the store, but the shop assistant remains calm and merely smiles at you.
A few minutes later, the shop assistant finally opens the store and sincerely apologises for the
delay, welcomes you to the boutique and offers you a cool beverage.
The atmosphere in the boutique is noticeably different from the outside – instead of the scorching
1019
heat outside; it is pleasantly air-conditioned inside the store. Soothing and soft music is playing,
which is almost unnoticeable, but yet clearly different from the loud and noisy street. The
boutique faintly smells of roses and vanilla from the diffusers spread throughout. The store is only
illuminated by dimmed lights, while shaded windows keep the harsh sunlight out. The boutique’s
walls are covered with white and light-yellow tones of wallpaper and soft wall-to-wall carpets
cover the floor. The boutique offers a lounge area with a variety of beverages and comfortable
sofas with scatter cushions in muted colours that complement the relaxing, tranquil atmosphere
of the boutique.
The shop assistant keeps you waiting for a few minutes, allowing you to sip your cool beverage
1020
while seated on the comfortable sofa. When the shop assistant arrives after the short cooling-off
period, you are more relaxed and in a better mood, ready to continue your shopping and allow
the shop assistant to help you look for the perfect outfit.
From this scenario, it is evident that as a customer of the clothing boutique, you were agitated
1021
and upset about the store opening late and frustrated by a bad experience at the coffee stall
nearby. However, after you entered the store and spent a few minutes inside the relaxing store
environment, your mood changed, and instead of shouting at the shop assistant for opening late,
you were able to enjoy your shopping trip and found the perfect outfit for your special evening.
As can be seen from this example, the store atmosphere strongly influences how we feel and
behave, and ultimately whether we enter the store and purchase a product/service or not.
Store atmospherics is an important element of the retail store environment. Store

1022
atmospherics comprises a number of elements, some of which are easier to control than others
are. In this learning unit we discuss the elements of the store environment that the retailer can
control, namely colour, lighting, music, scent, touch and taste. Each of these elements has an
impact on whether customers demonstrate approach (buy) or avoidance behaviours. We first
explain store atmospherics in more detail.
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7.2 STORE ATMOSPHERICS DEFINED

What is an atmosphere? Apart from the gas layers surrounding the earth, an atmosphere is the
1023
dominant mood, aura or ambience of a place, situation or creative work (Dictionary.com, 2016).
In marketing terms, an atmosphere describes the conscious design of an area/space to create a
desired and emotional effect on customers that enhance their purchase probability (De Farias et al.,
2014:88; Madaan, 2009:202; Nell, 2013:21). It is this emotional state of mind that influences shopping
enjoyment and subsequent shopping behaviour (Okonkwo, 2010:120; Zentes et al., 2011:277).
These emotional states are brought about through the five major sensory channels, commonly
known as the five senses (Floor, 2006:272). The five major sensory channels to the atmosphere
are sight (visual), sound (aural), scent (olfactory), touch (tactile) and taste.
The concept of “store atmospherics” was first introduced by marketing guru Phillip Kotler, who
1024
describe the elements such as lighting, colour, music, aromas, odours, textures and temperature
that appeal to the five human senses, as mentioned above (Nell, 2013:21). These atmospheric
elements or cues, have the ability to influence the feelings customers have of the physical
surroundings of a retail store. It is said that the longer a customer stays inside the store, the higher
the chance is of that customer making a purchase (Nell, 2013:21). Marketers are well aware of
the phenomena of influencing and manipulating individuals through their five senses – this is
referred to as store atmospherics.
All marketing tools, such as advertising, are not present once the customers walk into the store,
1025
therefore, the store atmosphere/environment has a more immediate effect on the customers’
in-store behaviour. For instance, when entering a fancy clothing boutique in Sandton, a smiling
and friendly shop assistant welcomes customers, they smell fresh flowers and soft music makes
them feel at ease. These sensory factors may positively influence a consumer to purchase a
garment from the boutique. Knowledgeable retailers therefore follow this approach to influence
the buying behaviour of their customers positively and favourably (Ebster & Garaus, 2011:106).
Store atmospherics can be defined as the physical characteristics of a store that are used to
1026
develop an image to attract consumers (Nell, 2013:21).

Kotler (2001) defines store atmospherics as the design of a buying environment in which
1027
specific buying emotions are created using the senses (sight, sound, scent and touch) to
enhance the consumer’s likelihood of purchasing (in Nell, 2013:21).
We discuss each of the atmospheric elements, namely sight, sound, scent, touch and taste, in the
1029
subsequent sections. Each of these elements contributes towards the overall in-store atmosphere
and visual appeal of a retail store.
1030
161
1031 Why store atmosphere matters to your customer?
http://ac.els-cdn.com/S0167811696000158/1-s2.0-S0167811696000158-main.
1032
pdf?_tid=e43ab262-9b6b-11e6-bddb-00000aab0f02&acdnat=147748001
7_36998299aa85c16920f8a807fbd4b132
Follow the link above to read the interesting study by Spies, Hesse and Loesch (1997) who
1033
investigated the effects of store atmospherics on customers’ mood, satisfaction and purchasing
behaviour. The study considered two furniture stores who differ considerably in atmosphere.
Read the full article to see how different atmospheric elements influence the mood, satisfaction
and ultimately the buying behaviour of customers.
7.3 SIGHT (VISION)

Sight or vision is considered to be the most powerful sensory channel and refers to the act of
1035
seeing and forming a perception of certain objects by using the eyes (Nell, 2013:22). It is said,
that sight perceives 80% of the information received by the brain and therefore plays a key role
in how we see the world around us (Giacoma-Caire, 2013). Therefore, colour and lighting are
considered the key visual components in store design. We discuss this in more detail.
7.3.1 Colour
Colour is used to stimulate the sight senses, and change the emotional state, or mood, and the
1036
behaviour of customers (Goworek & McGoldrick, 2015:235). Therefore, retailers can use colour
to communicate a specific message and a desired brand personality as well as to set the mood
in a retail setting (Floor, 2006:277). Many retailers believe that neutral colours, such as white, grey
and beige, are the most suitable to use in-store – these neutral colours do not clash with the
different colours of the merchandise, but rather exhibit the full advantage of the merchandise.
Using neutral colours result in a retail store not having its own identity and not communicating
the intended message or brand image to the public. Posh boutiques generally use white, while
cheaper retail stores choose neutral and unobstructed variants of white (Floor, 2006:277). However,
lately retailers have slowly been moving away from using neutral colours in their store design, as
they realise that the colours they use in-store is one method of communicating a specific brand
personality or image to the customers (Floor, 2006:278). By choosing the correct colour(s), and
using these colours in all promotional activities and in-store communications, a retail brand can
create a strong visual identity.
Colour refers to the “element of art that is produced when light, striking an object, is reflected
1037
back to the eye” (Esaak, 2012 in Nell, 2013:23).
Colour has three known and important qualities that should be considered when planning
1039
colour combinations (Sule, 2002:83; Wiid, 2012:196):

• Hue (or shade) – The hue or shade of the colour refers to the name that is given to the specific
colour or the actual appearance of the colour. The main hues are red, yellow, green, blue
and purple.
• Value – The value of the colour refers to the lightness or darkness of a colour that can change.
For instance ranging from white, to grey to black.
• Intensity or chroma – This refers to the purity, strength or brightness of a colour (the
chromaticity), for example, “royal blue”, “dull grey”, “bright red” or “bottle green”.
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Apart from a colour’s ability to be warm or cool, colour also has various societal and cultural
1040
meanings and associations (Varley, 2014:203). Different cultures associate different social meanings
with specific colours. For instance, in China white symbolises a period of death and mourning,
whereas in Western cultures, white symbolises purity. Below is a list of the associations and
meanings of different colours in Western cultures (Floor, 2006:277–278; Nell, 2013:23–25):
Table 7.1: Colour and its meaning in Western cultures
Colour Meaning Association

Red Exciting, affection, powerful, desirable, Warm and passionate, love, Valentine’s
dynamic, aggressive Day, Christmas, sale, warning, fire
Pink Sexy, feminine, caring, romantic, soft, Raw meat, flowers, Mother’s Day,
sweet, loving lingerie, ribbons, lace
Orange Warm, cheerful, playful, wholesome, Fire and flames, tropical sea and a
energetic, optimistic, sociable, excitement sunset
Yellow Joyful, warm, inspiring, happy, lively, Lemons, daisies, spring, summer and
affectionate, friendliness, happiness the sun
Purple Luxurious, honourable, royal, wise, youthful High fashion colour – worn by kings,
queens and members of court
Blue Peaceful, calm, cool, masculine, clean, Sky, the ocean, loyalty
trustful, pureness
Green Fresh, natural, young, healthy, alive, growing Summer, spring, trees and forests,
nature, St Patrick’s Day
Brown Solid, steady, dependable, conservative Earth, farm, house, clay, wood, autumn
Grey Business-like, tight, exclusive, serious Elegance and sophistication
Black Detached, sophisticated, elegant, Night, darkness, death, funerals,
mysterious depression and mystery
White Pure, clean, perfect, simple, innocent, hope Angels and purity
From the table above, it is clear that different colours may influence how customers react. For
1041
example, warm colours (such as red, orange, yellow, pink and brown) can create a feeling of
warmth, friendliness and big-heartedness that may influence an individual to purchase a product
or service (i.e. stimulating active response). Cool and receding colours (such as white, blue, green
and purple) may make the customer feel cold, unfriendly, moody and hence impossible to reach.
Neutral colours, on the other hand, can be either warm or cold. Black, white and shades of grey
are considered cool, while off-white and shades of beige and deep brown are considered warm,
neutral colours (Nell, 2013:25).
The meaning of colours in Africa

1042
Colour Meaning in Africa

Red In many African countries, red is the colour of mourning or death. In Nigeria,
red is the colour of wealth, vitality or aggression. In other areas of Africa, red
means good luck.
Yellow In South Africa, yellow means wealth, while in other countries yellow is generally
worn by chiefs.
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Colour Meaning in Africa
Green In South Africa green is the colour of hope and spring or the colour of nature.
In North Africa green is the colour or corruption.
Blue In South Africa blue means happiness, while in other African countries blue is
the colour of virtue and protection – to ward off evil.
Black Colour of funerals in most parts of Africa.
White Symbolises purity and joy. In the Zulu culture white means goodness.
Retailers should be aware of the meaning of colours in different counties when marketing
1043
their product, as the meaning of a colour can influence whether consumers purchase the
product or not. Read more on the meaning of colours in different countries across the world:
http://markedbydesign.net/blog/meaning-in-color/
Sources: Empower-yourself-with-colour-psychology.com (2016b); Marked by Design (2011).
As previously mentioned, colour can contribute to the desired message or personality the retailer
1044
would like to communicate to its customers. Colour can become a recognisable and unique
element of any store – think about the colour used by MTN or Vodacom – you can associate a
colour with each of these retailers and brands. In the past, The Body Shop designed its stores in
green, but more recently, it uses sand and earthy colours. These colours symbolise its involvement
with humanity and being environmentally conscious (Floor, 2006:278).
Ebster and Garaus (2011:129) explain that colour can have two different emotional effects on
1045
consumers. These effects can be classified based on two dimensions as follows:
• Pleasure – Pleasure refers to whether a person likes the colour they see or not. Colour can
therefore have an effect on how a customer generally feels towards a colour.
• Arousal – Certain colours can enhance a customer’s arousal level, while others have the
opposite effect.
1046 The psychology of colour in marketing and branding:

https://www.helpscout.net/blog/psychology-of-color/
1047
In the link above, the author explains the psychology of colour as it relates to
1048
persuasion. See how different brands use colours and what it says about their brand personality.
The author refers to the study on the “Impact of color on marketing” by S Singh – you can read
the full article here: http://www.emeraldinsight.com/doi/pdfplus/10.1108/00251740610673332.
The article refers to many other studies and journals in its discussion. Read these studies to
understand fully the use of colour in marketing and branding.
A combination of colours, or a colour scheme, can also communicate a certain message. We look
1050
at the various colour schemes, what they mean and how they can be implemented in retailing.
7.3.1.1 Colour schemes/combinations

An endless number of colour combinations can be used to communicate a certain message
1051
to customers, or create a specific state of mind or mood in a store. Different colour schemes
or combinations of colours can also be used to display merchandise to make it more appealing
to the customer, and ultimately to increase sales.
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1052
Figure 7.1: The colour wheel
There are six common colour combinations or schemes that retailers can use in-store or when
1053
displaying their merchandise. These colour schemes can assist retailers in choosing which
colours to combine to draw attention to the merchandise and store. The colour schemes are as
follows (Hopkins, 2012:80; Patterson & Saville, 2012:45–46; Bruecher et al., 2014:8–10; Sumathi,
2004:43–44; Wiid, 2012:197–198):
• Monochromatic colour scheme – A monochromatic colour scheme only uses one colour
and adds white or black to create different values and intensity. In other words, only one
colour is used, but the tone and intensity (or brightness) of the colour may vary, for example
varying from light blue to dark blue. Colours with similar value or chroma generally work
well together. In retailing, the display of men’s shirts or women’s blouses can be arranged
in a monochromatic colour scheme if all the shirts or blouses with a blue tone are displayed
together.
• Analogous or adjacent colour scheme – This colour scheme uses more than one colour next
to each other on the colour wheel (or analogous) and creates a harmonious balance in
visual communication. Some examples are green, green-yellow and yellow; or red, red-violet,
violet. In an analogous colour scheme, the effect is greater when one dominant colour and
two other supporting colours are used. It is recommended not to use more than five adjacent
colours on the colour wheel in this colour scheme (refer to figure 7.2).
• Complementary colour scheme – Complementary colours, also known as contrasting colours,
are opposite each other on the colour wheel, for instance green and red, blue and orange,
or purple and yellow. Complementary colours show a strong contrast and appear vibrant,
elegant and sharp. A complementary colour scheme is often used to attract or direct a
viewer or shopper’s eyes as the contrast between these two colours are striking. Various
tones or intensity of the colours can be used together to create harmony (refer to figure 7.2).
• Split-complementary colour scheme – This is a combination of three colours on the colour
wheel. This colour scheme includes a main colour and the two colours on each side of
its complementary colour on the colour wheel. For instance, the complementary colour of
green is red, and the two colours next to red are red-purple and orange – therefore, these
165
are the split-complementary colours of green. The combination of this colour scheme is
also vibrant; however, the interaction between the three colours reduces the visual tension
that is characteristics of a complementary colour scheme (refer to figure 7.2).
• Tetradic colour scheme – The tetradic (or double split-complementary) colour scheme uses
four colours arranged into two complementary colour pairs on the colour wheel (refer to
the “rectangle” image in figure 7.2).
• Triadic colour scheme – This colour scheme (also known as the triadic colour harmony) uses
three colours that are spaced equally, and form an equilateral triangle on the colour wheel.
For example yellow, red and blue. Using these colour combinations can provide a level of
vibrancy and harmony so that one colour does not dominate the other two (refer to figure 7.2).
• Square colour scheme – The square colour scheme makes use of four colours spaced evenly
around the colour wheel. For instance, red, blue, green and yellow.
1054
Figure 7.2: Colour schemes
1055 Look at the image on the left. Can you see how the colour wheel,
and colour schemes are used to display merchandise in a retail
setting to appeal to the consumer? In this image, an analogous
colour scheme is implemented where the merchandise is
arranged from right to left, from green, to blues and purples,
red, orange and then yellow. Also, look at the shoes in the image
– which colour scheme is used here?
Consider any clothing retail store you frequently visit and look at
1056
how it displays merchandise and uses various combinations of

colours and colour schemes. Can you identify any of the colour
schemes we discussed above?
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Consider the following when using colour schemes or combinations in retail stores (Mandaan,
1057
2009:203):
• Your colour scheme should match the overall theme of the store’s display. Hence, the colours
in the store design and visual merchandising should be associated with festivals, special
occasions and gender. For instance, during Christmas the colour scheme of a retail store
could be red, or pink on Valentine’s Day.
• Different colours are associated with different states of mind, as mentioned above. Therefore,
retailers can use colour combinations according to their targeted shoppers.
The type of retail business can influence the combination of colours used in store. Consider the
1058
following (Empower-yourself-with-color-psychology.com, 2016):
• An artistic and creative retail outlet, such as a flower boutique or gift shop should use colours
that reflect its creative flair. For example, purple or variations or shades of purple (i.e. plum,
magenta), pink, pale blue and yellow.
• Retailers aimed at female consumers, such as fashion boutiques and beauty salons, should
choose from softer feminine colours. For instance pastel colours, pinks, coral, soft blue or
green, turquoise or light purple. Always consider the type of customers, as well as the image
of the store before choosing a colour or colour scheme.
• Colours that are attractive to men should be used in men’s stores. Although, keep in mind
that women tend to shop on behalf of men. Blue is a colour that is attractive to the majority
of people of all genders and age groups.
• Toy stores should be attractive to both children and their parents or grandparents. Bright
primary and secondary colours attract children, while softer colours attract the parents and
the grandparents. A good mixture of both is therefore important in toy stores.
• Restaurants, bistros, cafes and coffee shops should use warm colours (i.e. reds and oranges).
Red tends to stimulate an appetite while orange is considered a social colour.
• Red, yellow and white work well in fast-food outlets as yellow keeps people moving, red
stimulates their appetite and white suggests hygiene.
• Softer versions of orange, such as peach, apricot, terracotta or coral should be used in upper-
class restaurants to encourage an appetite and conversation, or deeper reds for elegance
and appetite stimulation. To create a more stylish effect, these colours can be combined
with green, aubergine or cream.
• Entertainment businesses should use colours that show fun and happiness, such as yellow.
The colour of merchandise can also be affected by the lighting used in a store. Lighting can be
1059
used positively to highlight and draw the customers’ attention to the merchandise. However,
lighting can also cause problems when not properly matched with the colours of the merchandise/
store (Varley, 2014:204). Without the proper lighting, colours are not as effective as envisioned
by the retailer (Nell, 2013:26). In the next section we look at how lighting influences the visual
appeal of a store and the buying behaviour of consumers.
1060 Colour psychology and purchasing influence:

1061 https://www.youtube.com/watch?v=qO9UPy04WMs
Visit the video above to see how colour can influence our moods, emotions
1062
and behaviour. In the video, Lissette and Mark discuss how to use the right colour in the right
way to influence human behaviour.
167
1064 Basics of using colour in retailing:
http://www.retaildesignworld.com/single-page/5347c684736ea-visual-
1065
merchandising-basics-colour
Visit the URL link above to see how the various colour schemes are used in retail stores. See
1066
if you can identify the colour scheme used in each of the images.
Activity7.1
Consider the following brands or products and identify the colour scheme or combination
of colours they use. You can search these brands or products on Google to see which colours
they use.
1 Kinder Joy
2 Coca-Cola
3 IKEA
4 Fanta Orange
5 BP
Feedback
15
1. Kinder Joy uses blue, red, orange and yellow in its packaging. It therefore uses the square
colour scheme, which includes four colours that are evenly spaced on the colour wheel.
2. Coca-Cola uses one colour in its brand and logo, namely red. It therefore uses a monochro-
matic colour scheme – one only colour is used in various tones or shades.
3. IKEA uses blue and yellow in its logo and branding. It therefore uses a complementary colour
scheme with colours opposite each other on the colour wheel.
4. Fanta Orange uses three colours, namely orange, green and dark blue in its logo. It there-
fore uses the triadic colour scheme with three colours that are spaced equally and form an
equilateral triangle on the colour wheel.
5. BP uses three colours, namely green, light green (or green-yellow) and yellow in its logo.
It therefore uses an analogous or adjacent colour scheme with three colours next to each
other on the colour wheel.
7.3.2 Lighting
The lighting in a retail store is a great contributor to the general atmosphere in the store. When
1068
entering a store, our first impression is often influenced by the availability of light in the store
(Ebster & Garaus, 2011:125). Lighting can be referred to as “the medium of illumination that makes
sight possible” (Collins, 2012 in Nell, 2013:26). In other words, lighting is merely the use of natural
and artificial (or ambient) light sources to make objects, pictures, figures and merchandise visible
and draw attention to a specific area or space (Nell, 2013:26). It is by using lighting that things
become visible.
The selection of lighting in a store can alter the appearance of the merchandise in the store
1069
(Goworek & McGoldrick, 2015:235). It is therefore important to use the correct and most appropriate
lighting as it has the ability to set a specific mood in a retail store. The following have been
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MNM1506/1
identified as reasons why lighting plays a critical role in the creation of an effective in-store
atmosphere (Nell, 2013:26–27):
• Lighting attracts customers and makes the interior of the store visible to individuals passing
by.
• Lighting offers retailers the opportunity of variation. In other words, lighting allows a retailer
to create different scenes or atmospheres in-store, for instance a sports shop can use different
lights to reflect the seasons, such as green in spring or orange in autumn.
• Lighting is an important element in a store’s inner and outer design and image as it creates a
favourable impression of all the merchandise on offer and display. This ultimately contributes
to the atmosphere of the store.
• Lighting has the ability to highlight specific merchandise, such as items on special or new
arrivals.
• Lighting has the ability to separate one area in the store from another and to create a specific
mood or feeling that can enhance the overall image of a store.
• Lighting is capable of directing customers into a store and through the store, by moving
their attention from one feature or element to another.
• Lighting can contribute to the overall mood and atmosphere of the store, such as warm
and cosy or romantic and elegant.
• Lastly, it promotes the neatness and cleanliness of the store.
Ebster and Garaus (2011:125–126) further explain that lighting can influence individuals and
1070
their behaviour, and acts as a cue. The right light can cause numerous desirable reactions in the
consumer (Ebster & Garaus, 2011:125–126):
• Bright lights increase impulse buying – A brightly lit store would most likely increase a
customer’s level of arousal, which in turn increases the propensity of the customer to make
an impulsive purchase. Lights that are too bright should not be used, as they can lead to
avoidance behaviour instead of approach behaviour.
• Bright lights have a positive effect on merchandise – Overall, lighting has a positive influence,
not only on the number of products examined, but also on how attractive these products
appear. Consumers spend more time in front of a lighted display than they do in front of
an unlighted display.
From the above discussion, it is evident that lighting is an important element that contributes to
1071
the overall atmosphere of a retail store. It is therefore important that retailers fully understand
how to use lighting effectively. Retailers should keep in mind that the type of light they use
should always complement the merchandise, colours, and themes in the store (Nell, 2013:27).
Ebster and Garaus (2011:126) explain that the different areas and merchandise in a store require
different kinds of light. They should also consider the quality of the light for each application,
for instance, using a brighter light in the reading area of a bookstore. Retailers can choose from
the following different types of lighting in a retail outlet (Ebster & Garaus, 2011:126–127):
• General lighting – General lighting refers to how the entire store is illuminated. General
lighting does not focus on any specific merchandise or on a specific wall or unit – it is merely
background illumination in the store and should be bright enough to enable customers to
browse through the entire store. For example, the lighting that is used in a Makro wholesale
store. Refer to image (a) in figure 7.3.
• Linear lighting – A linear lighting system is used to lead customers through the entire store
– this lighting helps customers find their way through the store. Lights are placed over the
main aisles or main loop of the store, while other lighting systems are used for the rest of
the store. For example, a grocery store, such as Checkers or Pick n Pay, uses linear lighting
in the centre of its aisles to guide customers throughout the store and aisles. Refer to image
(b) in figure 7.3.
169
• Directional lighting – Directional lighting can be used to direct a light beam to highlight
merchandise or fixtures. A point light system can also be used to highlight certain products.
For instance, Edgars and Woolworths uses directional lighting on their mannequins to
draw customers’ attention to the merchandise they are wearing. Refer to image (c) and (d)
in figure 7.3.
• Baffled lighting – In some instances a baffled light is used to flatter the merchandise.
Merchandise may be lit indirectly with the use of additional material such as wood or
metal. For example, a clothing retailer uses metal plates as wall fixtures as part of its theme
and lighting is directed to the metal plates instead of the merchandise. Refer to image (e)
in figure 7.3.
• Speciality lighting – Speciality lighting systems are generally found in jewellery stores to
make the jewellery shine and sparkle. Jewellery stores, such as American Swiss or Browns,
use speciality lighting in their display cabinets in-store. Refer to image (f) in figure 7.3.
1072 Figure 7.3 illustrates the various lighting systems to be used in stores:
1073
Figure 7.3: Types of lighting systems
The overall level of artificial light should be such that customers can visibly and clearly see the
1074
merchandise and so that the store appears brighter and more inviting to individuals passing
by. From the above discussion, it is evident that lighting is a vital component of any feature,
display, fixture or merchandise. It hugely enhances the dramatic effect, with suspended lighting
(or pendant lights) and pin spots accentuating product areas (Varley, 2014:204). Today, more
powerful and controllable lighting systems, such as halogen and metal-halide spots, are used to
add precision to lighting designs. In addition, more fixtures are designed with integral lighting
systems, such as supermarket gondolas with incorporated strip lights or backlit display shelving
for shoes (Varley, 2014:204).
Suspended lighting, sometimes referred to as pendant lighting, is a single light fixture

1075
hanging from the ceiling and is usually suspended by a cord, chain or rod.
Pin spot lighting is “a spotlight that produces a narrow beam of light illuminating a very
1076
small part of a stage, used especially to focus attention on a detail” (Dictionary.com, 2016).
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The texture of material can also potentially be a visual element, which crosses over with tactility
1078
(or touch). In the next section we discuss the tactile component.
Activity 7.2
Discuss the different types of lighting retailers can use in-store and give an example of how each
one can be used. Consider the retail stores you have visited recently when giving examples.
Feedback
16
There are six different types of lighting that retailers can use in-store to accentuate their merchandise.
Refer to section 7.3.2 for a detailed discussion about the various types of lighting and examples
of each.
7.4 TOUCH (TACTILITY OR HAPTICS)

How many times have you wandered around a store picking up products, feeling the texture
1079
of a clothing item, the softness of a cashmere sweater, the firmness of a pillow or sofa, or the
curves of a shampoo bottle? Individuals tend to touch most products before deciding whether
to purchase them or not. Touching items helps individuals make an emotional connection with
the product. Touch can be explained as “a tactile or tangible sense through which consumers
have the ability to make physical contact with the surrounding world” (Nell, 2013:33). Being able
to see and feel a product helps to sell the product – giving an individual the opportunity to feel
a product is a major advantage that online retailers do not have. Hence the quote:
1080 “Seeing is believing, but touching is feeling” (Ebster & Garaus, 2011:79).
The tactile aspects of store atmospherics refer to the fixtures, products, textures, materials and
1082
temperature inside the store. The main tactile experience of customers inside a retail store is
through handling the merchandise. In this section, we briefly look at material and textures as
well as temperature and how these elements influence the buying behaviour of individuals.
7.4.1 Materials and textures

Trying on clothes gives a customer both a visual and tactile sensation – a customer can see the
1083
clothing item and feel the texture of the material (Goworek & McGoldrick, 2015:237). People want
to feel the different textiles of clothing, blankets, towels, and linen, they want to try on shoes and
clothing, and apply make-up and perfume before making a decision whether to purchase the
products or not (Nell, 2013:33). Imagine you are in a clothing store looking for a blouse to wear
to work; as you browse you feel the soft silky material, woollen jerseys you could wear over the
blouse in winter or the rough texture of cotton.
Krishna (2010:19) developed the following four categories of touch as people touch products for
1084
reasons other than merely determining the material or features of a product:

• Touch to purchase – The actual goal here is to make a decision and buy a product.
• Touch to obtain non-touch product information – The goal here is to remove non-touch
product information such as the smell, visual appeal and sound.
171
• Touch to obtain touch product information – The goal can also be to remove specific material
properties of the products, such as the texture, weight and temperature.
• Hedonic touch – The goal with hedonic touch is generally to explore in terms of the senses
or just purely to have fun.
Materials and textures have the ability to clarify the identity and value of a brand. Natural
1085
textures and material, such as wood and leather, are normally perceived as soft and warm and
tend to make people feel more relaxed and in harmony with nature (Nell, 2013:35). Unnatural
and processed textures and materials, such as glass and metal, are generally perceived as cool
and hard and are normally associated with the outdoor environment (Nell, 2013:35). Customers
perceive products, brands and retail outlets; hence if unattractive material is used, customers
may judge it as bad and uninviting (Nell, 2013:35).
It is important to understand the materials that are used in-store and in displays. The following
1086
five different materials can be used in a store setting (Bhalla & Anuraag, 2010:88):
• Acrylic – Various types and colours of acrylic can be found in a retail store. Display units, such
as shelves, donation boxes, and mobile charging units can be made from acrylic. You may
have seen a clear acrylic box when a retail store had a lucky draw. Acrylic comes is various
colours (ranging from clear, frosted to semi-transparent) and various thicknesses (from 1
mm to 12 mm).
• Vinyl – Vinyl stickers are available in large sizes or huge rolls in a number of colours and
patterns. Numerous retail outlets use vinyl stickers in store windows or on walls in-store, for
example, Christmas decor or “Sale” signage. These stickers are versatile and easy to remove
from any surface.
• Digital prints – Digital prints are the reproduction of digital images on physical surfaces,
such as photographic paper, cloth or plastic. They include posters, banners and outdoor
signage. They are self-adhesive on one side, thus easy to apply on any flat and clean surface.
• Translights – Translights are also digital prints, but are lit from the back. For instance, a poster
or board lit from behind to give a more dramatic effect and make it stand out.
• Sunboard – A sun board (or foam board) is a very strong, light and easily cut sheet of material
that is generally used for the mounting of vinyl prints and digital prints, as backing in framing
and for painting. A sun board is made up of three layers – an inner polystyrene foam layer,
and white clay-coated paper on the outside (India, 2014). It is available in various thicknesses.
7.4.2 Temperature
A consumer’s receptors register temperature as a sensory expression, as either warm or cold.
1087
Whether a product, brand or in-store atmosphere is considered warm or cold is essential for a
customer’s touch experience. For example, when going to a frozen yogurt or ice-cream shop,
you expect the ice cream to be cold; otherwise, you would have a negative experience. The same
applies to the majority of retailers, especially grocery stores, restaurants and clothing retailers.
If a customer perceives the store as either too warm or too cold, it has a negative impact on the
customer’s behaviour due to the unacceptable atmosphere in the store (Nell, 2013:35–36).
Heating and air-conditioning can be used in a store to regulate the temperature with the aim of
1088
extending the time customers spend in the store (Goworek & McGoldrick, 2015:237). Temperatures
ranging from 24°C to 27°C are the most comfortable for individuals. Temperatures that are too
high cause individuals to experience discomfort and irritability. If exposed to high temperatures
for too long, an individual could experience exhaustion (Morkel, 2011:25). Retailers have to
ensure that the temperature inside the store is comfortable to their customers. The incorrect
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temperature in-store may influence a customer not to try on the clothes and ultimately not to
purchase any products (Morkel, 2011:25).
From the above discussion it is clear that the haptic or tactile component of a store’s atmosphere
1089
is important and retailers must give attention to the touch sense to create a pleasant in-store
atmosphere. In the next section we discuss the sound, or aural, influence on the behaviour of
customers.
Activity7.3
Read the scenario in the introduction of the learning unit again. Explain how the temperature
outside the store influences the mood of the customer and how the adjustment in tempera-
ture influences the behaviour of the customer.
Feedback
17
In the scenario in the introduction of this learning unit, the customer waits outside the store in the
scorching heat for it to open. The customer is agitated and irritated from standing outside in the
heat. Once the customer gets inside the store, the temperature is a lot cooler. The retailer probably
has air conditioning inside the store to regulate the temperature. The cooler inside of the retail
store is another atmospheric factor that influences the shopping experience of the customer. Once
inside the much cooler store the customer becomes less agitated and irritated and starts enjoying
her shopping experience. Think of any store that you have entered in the last month Can you
remember the temperature inside the store? How did it affect your mood and buying behaviour?
7.5 SOUND (AUDITORY FACTOR)

Have you ever paid attention to the music playing in a store, or in a restaurant? Have you ever
1090
wondered why certain retailers play loud and fast music instead of soft and soothing music? Sound
or the aural atmospheric factor influences the mood of an individual as well as their purchasing
behaviours. Sound refers to the sense of hearing that is produced by the stimulation of the hearing
organs through vibrations sent through the air, such as music (Nell, 2013; Dictionary.com, 2016).
Sound affects our mood and psychological state; it has been important in societies for many
years because people attach certain meanings to different types of sounds and music genres
(Nell, 2013:27). Sound alerts us to danger in our surroundings and promotes peace of mind for
the soul (Hultén et al., 2009:67).
As sound is used to communicate with customers, retailers can use sound in the following
1091
different ways (Nell, 2013:27–28):
• Communicating messages in mass marketing about the organisation, its products, services
and brand, and creating awareness
• Evoking or generating specific feelings and emotions in consumers
• Strengthening the image and identity of a certain retailer, brand, product or service offering
• Creating effective and memorable sound experiences. Many companies can be associated
with a song, voice, jingle, music genre or a distinct sound, which can be regarded as the
signature sound of a particular brand, product or retailer – such as the BMW advertisements.
173
Sound also refers to the pitch or volume of music that retailers use to create a pleasing atmosphere
1092
in their stores. In this section we focus mainly on music, the pitch, tempo and volume of music
that retailers use and how it influences the customers.
7.5.1 Music
Music can influence the atmosphere in a store as well as customers’ behaviour towards and
1093
perception of the retailer. Music is often used to create a specific image and atmosphere in a
retail store and it has the ability to unconsciously influence behavioural responses in consumers
(Jansson-Boyd, 2010:77). Dunne et al., (2014:569) further explain that music has the ability to
create a soothing and calming environment and is reflective of the merchandise sold in stores.
The tempo of music influences how long customers tend to stay inside the store (Dunne et al.,
1094
2014:569). Fast-paced music tends to speed up shoppers’ movements while slower music has the
opposite effect. Retailers frequently use this tactic during peak times to encourage customers to
move through the store more quickly (Goworek & McGoldrick, 2015:235). Restaurants commonly
use this tactic – a busy franchise restaurant, such as the Dros or Spur, plays fast and loud music,
while fancier restaurants, such as Kream and Heat, play softer and slower music. These fancier
restaurants want customers to spend more time inside and spend more money, while busier
restaurants want guests to eat quickly so that they can serve more covers. Certain retailers, such
as Mr Price, even have their own in-house radio stations to broadcast promotional information
between music tracks (Goworek & McGoldrick, 2015:235).
The type or genre of music retailers play in-store can be just as influential on how much customers
1095
spend (Dunne et al., 2014:569). It has been found that the pace of classical music can change the
speed of in-store traffic in a supermarket (Jansson-Boyd, 2010:77). Slower music, such as classical
or jazz music, decreases the speed of traffic and increases the sales volume (Jansson-Boyd,
2010:77). It is important to choose a music genre that fits with the type of store or the image a
retailer wishes to portray.
Ebster and Garaus (2011:117) explain that music can positively influence the perception customers
1096
have of the quality of merchandise in the store – a positive perception can be influenced by both
the style and genre of music played in-store. The quality of service the store provides is evaluated
more highly when classical music is played fast instead of slow. In contrast, when popular music
is played, slower music increases quality perceptions. When customers actually like the music
played inside the store, they evaluate the products and services in-store more highly (Ebster &
Garaus, 2011:117).
1097 Music can positively affect the behaviour of customers in the following ways (Nell, 2013:29–30):
• Time perception – Music with a slow tempo increases the emotional response and makes
customers perceive the waiting time as shorter, thus resulting in customers spending more
time in-store.
• When customers stay in-store for longer periods, they tend to spend more money than
originally planned.
• Positive word-of-mouth – Customers who had a positive experience in-store recommend
the store to others.
It is clear that music has an impressive effect on the mood and behaviour of customers. Music
1098
can be used in many different ways, such as soft or loud, fast or slow, and verbal or instrumental.
It can also be played in the foreground, or the background. Music played in a store, and how it
is played, can lead to several desirable emotions and reactions (Ebster & Garaus, 2011:116).
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Activity 7.4
Based on your own experience, discuss how different genres and tempos of music are used in
diffent retail outlets. Also mention how the use of music inside the store affects your mood,
attitude towards the retailer and your buying behaviour inside the store.
Feedback
18
You may have realised that certain retailers play loud music in-store, while others use music for
background sound only. Some retailers also play fast-paced music, while others play slow or
classical music. For instance, Markhams or Mr Price usually plays loud and upbeat music in its
stores, while Poetry plays soft classical or instrumental music. You may have felt irritated by the
loud, upbeat music played in Markhams or Mr Price and left the store quickly – it would depend
on your own preferences and mood at the time.
Next, we discuss the last two senses, namely scent (olfaction) and taste. We briefly look at how
1099
retailers can use these senses to alter and influence the behaviour of customers.
7.6 SCENT (OLFACTION)

The sense of smell, or olfaction, refers to any agreeable smell, such as pleasant fragrances or
1100
aromas or bad odours (MacMillan Dictionary, 2016). Our sense of smell is the strongest of all
our senses as it has the ability to evoke emotions and stimulate feelings. Smell is linked to our
preferences, personality, attitude, feelings and emotions and already pre-exists before retailers
influence our mood and emotions (Okonkwo, 2010:135). Scent and smells allow individuals to
create a perception, help them remember, to describe things or to explain what a fragrance or
odour smells like (Nell, 2013:30). Consider the following propositions (Weening, 2014):
• Individuals prefer pleasant smelling places rather that places with a foul odour.
• Individuals associate smells and fragrances with people, places, products and experience,
whether bad or good experiences.
• Scent is the most powerful trigger of memory or recall.
Furthermore, scent comprises either natural smells and fragrances (such as flower fragrances or
1101
vanilla) or artificial scents (such as spearmint and musk). Coffee shops, cigar shops, bookstores
and bakeries use the natural fragrances of their products to lure customers into the stores (Ebster
& Garaus, 2011:123). The smell of freshly baked bread is still the most effective way of creating a
pleasant store atmosphere, encouraging customers to enter the store and shop (Morgan, 2008:170).
Scent is an important atmospheric element. The importance of the scent agreement or congruency
1102
is as follows (Nell, 2013:32):
• Product congruency – This refers to the natural and obvious scent that is associated with a
product. For example, a ladies clothing store smells like fresh flowers.
• Intensity – Intensity refers to whether a scent is distinct, subtle or blatant to achieve a positive
smell experience. If the smell is too intense, customers become irritated and may leave the
store. The intensity can be controlled by various devices, such as automatic spray canisters
that bring the fragrances into the store (Ebster & Garaus, 2011:124).
175
• Gender congruency – Masculine and feminine scent can be used to distinguish between
genders in various retail stores. For example, feminine smells are roses, vanilla or flowers
while masculine scents are spicy-honey, musk or old-spice.
Different aromas can be used in a retail store environment to attract customers to the store.
1103
Retailers can use the following six main scent families to create a pleasant in-store environment
(Nell, 2013:32; Weening, 2014):
• Citrus – Citrus fragrances include lemon, lime, orange, mandarin, grapefruit, bergamot and
clementine. These fragrances are believed to be rejuvenating, stimulating and harmonising
and work best for retailers aiming to create a high-energy store environment.
• Floral – The major floral fragrances are rose, jasmine, orange blossom, violet and gardenia
that range from innocent and sweet scents to sophisticated and exotic options. Upscale
retail stores, such as fashion boutiques or jewellery stores generally use floral fragrances or
fresh flowers to fragrance the store.
• Outdoorsy – These scents include woodsy notes (e.g. pine and cedar), green notes (e.g. fresh
green grass and mint) and herbal notes (e.g. basil, rosemary, thyme or sage). Outdoorsy
fragrances and aromas are inspired by nature, represent freshness and cleanliness, and work
best in outdoor activity retail stores or stores emphasising eco-friendliness. It is said that
basil fragrances stimulate and improve a customer’s memory, while mint fragrances calm
customers and relieve their stress.
• Fruity – Fruity fragrances and aromas, for example apple, peach, pear, plum, orange and
apricot are bright, uplifting, often youthful, and believed to relieve tension. Speciality fashion
retailers generally use fruity notes.
• Ozonic – These fragrances are usually described as airy and fresh, subtle and light. Ozonic
fragrances are normally used in small retail stores to reinforce the impression of a fresh, breezy
and open atmosphere. These fragrances can be used in small gift shops or clothing stores.
• Gourmand – Gourmand fragrances and aromas include smells of coffee and chocolate,
which are designed to create a homey and cosy environment. Theses fragrances are ideal
for speciality food shops, kitchenware and tabletop stores.
The smells or scents that a retailer uses (or does not use) in-store should be suitable for the type
1104
of merchandise being sold, the image or theme of the store as well as the type of customers
it targets – for instance male or female. Using the right smell can create a pleasant in-store
atmosphere that would likely stimulate positive emotions and result in increased time spent in
the store (Morgan, 2008:170).
Taste is another atmospheric element that is closely related to scents that apply to a retailer
1105
selling or serving food and drinks (Goworek & McGoldrick, 2015:236). We discuss taste next.
7.7 TASTE
The last sense we look at is taste. Taste is “a sensory experience that results from stimulation
1106
of chemoreceptors located on the tongue, palate, pharynx, larynx and other areas of the oral
cavity” (Schifferstein & Hekkert, 2008:93). The five flavours we can taste, namely sweet, sour, salty,
bitter and spicy, play a vital role in product experience and in helping us choose which food and
beverages we like (Schifferstein & Hekkert, 2008:94). These tastes are linked to smell as without
them, we are not able to perceive the fragrances or smells of what we taste (Ciacoma-Caire, 2013).
Using taste as a store atmospheric factor can be challenging for many retailers. The taste sense
1107
is mainly used in food retail outlets where retailers offer samples for customers to taste before
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purchasing the product. For example, Checkers would have someone braai boerewors. Customers
smell the boerewors that attracts them to the area of the store where they can taste and then
purchase it. Here you can see how smell and taste are linked. As it is not always possible to taste
products before buying them, customers use other criteria, such as colour, texture and smell, to
judge what it would taste like (Blythe, 2013:64).
7.8 SUMMARY
In this learning unit, we discussed store atmospherics in terms of the five human senses, namely
1108
sight (vision), touch (tactility or haptics), sound (auditory factor), scent (olfaction) and taste. We
discussed the importance of the use of colour in stores as well as the various colour schemes
and combinations that retailers can use. We also discussed various lighting systems. With regard
to touch, we looked at the influence of materials and textures as well as the temperature inside a
store on the behaviour of customers. We then discussed the use of music and the various aromas
and fragrances retailers can use. Lastly, we briefly explained the importance of the taste sense
in store atmospherics.
1109 Here are some of the most important takeaway points from this unit on store atmospherics:
• Store atmospherics can be used to arouse pleasant dispositions – happy customers spend
more time inside the store if they are satisfied with the store environment, and ultimately
spend more at the specific retailer.
• Colour can be used to communicate a specific message and brand personality, and set the
mood inside the retail store.
• Colours have different meanings in different countries, cultures or religious groups. Retailers
should know and understand the cultural meaning of colour in different counties to avoid
sending the wrong message or image to the specific target market.
• Colour schemes or specific combinations of colours should be used together to great a
sense of balance and harmony.
• Lighting can be used to draw attention to certain merchandise, items, fixtures or fittings in
a retail environment to influence customers’ level of arousal.
• The temperature inside a retail store should be at an adequate temperature to encourage
customers to spend more time in the store. If a store is too warm, customers may become
irritated and leave the store without looking at the merchandise.
• Slow and soft music can reduce the arousal level and keep customers inside the store
for longer. Fast and loud music, on the other hand, can evoke feelings of excitement and
stimulation.
• A unique, pleasant scent can effectively differentiate a store from its competition. Optimal
ambient scents should not only be pleasant but also fit the store type.
• In food and beverage retail stores, retailers should allow customers the opportunity to
taste products.
1110 In the next learning unit, we discuss merchandise promotion and communication strategies.
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1111Read the following scenario and answer the questions that follow:
1112 Store atmospherics and shopping experience

It is 7:50 on a hot Saturday morning. You are waiting outside an evening-wear store for it to open so
1113
you can look for the perfect suit or dress to wear to the gala dinner that very evening. Five minutes
past the store’s opening time, you are still waiting for the store to open. You are getting impatient in
the heat as you still have places to go and things to do before the festivities of your special evening.
You are already furious and annoyed because of the inattentive service you received at a take-away
coffee stall earlier that morning. You yell at the shop assistant behind the entrance door to open the
store, but the shop assistant remains calm and merely smiles at you. A few minutes later, the shop
assistant finally opens the store and sincerely apologises for the delay, welcomes you to the store
and offers you a cool beverage.
The atmosphere inside the store is noticeably different – instead of the scorching heat outside, it is
1114
pleasantly air-conditioned. The soft, soothing music playing in the background is almost unnoticeable,
but yet clearly different from the loud and noisy street outside. The store faintly smells of vanilla and
flowers from the diffusers spread throughout the store. The store is illuminated by dim lights, while
shaded windows keep the harsh sunlight out. The store’s walls are covered with white and light-yellow
tones of wallpaper and soft wall-to-wall carpets cover the floor. The store offers a lounge area with
a variety of beverages, and comfortable sofas with scatter cushions in muted colours complement
the relaxing, tranquil atmosphere inside the store.
The shop assistant gives you a few minutes to enjoy the cool beverage before she approaches you
1115
to ask how she can be of assistance. After you have spent a few minutes inside the relaxing store
environment, your mood changes, and instead of shouting at the shop assistant for opening late,
you are able to enjoy your shopping trip and find the perfect outfit for your special evening.
1117 QUESTIONS
1 Define store atmospherics and discuss its importance in the retailing environment.
2 Identify and discuss the various store atmospheric elements identified in the scenario and
explain how each influence the behaviour of a customer in the retail store.
3 The retail store in the scenario uses yellow wallpaper. Do you think this is the best colour
option for the store? Motivate your answer.
4 Why do you think this particular store uses dim lights? Motivate your answer by discussing
the role of lighting in a retail store.
7.10 REFLECTION
1 Explain what store atmospherics entails and discuss how the five senses can
influence the behaviour of customers.
2 Name and discuss the various colour scheme and combinations that can be used
in-store and give an example of how each colour scheme is used in practice.
3 Explain the various types of lighting systems and how lighting is used to highlight
merchandise, objects, items, fixtures or fittings in a retail environment.
4 How can the temperature inside the retail store influence the attitude and be-
haviour of customers?
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5 Explain how the type of music and the tempo of music influence the behaviour
of customers. Give examples of how music is used in different retail settings.
6 How can the taste sense be used in a retail store atmospheric context?

QUESTION 1
43 Designing a buying environment in which specific buying emotions are created
using the senses to enhance the consumer’s likelihood of purchasing, is referred to
as …
1 ergonomic development.
2 merchandise planning.
3 store atmospherics.
4 visual merchandising.
QUESTION 2
44 The … of the colour, such as “red” or “blue”, refers to the name that is given to
the specific colour or the actual appearance of the colour.
1 chroma
2 hue
3 intensity
4 value
QUESTION 3
45 In this colour scheme more than one colour next to each other on the colour
wheel is used to create a harmonious balance in visual communication:
1 analogous
2 monochromatic
3 tetradic
4 triadic
QUESTION 4
46 A … lighting system is used to lead customers through the entire store – this
lighting system helps customers find their way through the store.
1 baffled
2 directional
3 linear
4 specialty
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5 QUESTION 5
47 The natural and obvious scent that is associated with a product, such as a ladies
clothing store smelling like fresh flowers, is referred to as …
1 intensity of products.
2 product congruency.
3 product hue.
4 tetradic of products.
MEMORANDUM
1118
1120 QUESTION 1
Option 3 is correct as store atmospherics can be defined as designing a buying environment in

1122
which specific buying emotions are created using the senses (sight, sound, scent and touch) to
enhance the consumer’s likelihood of purchasing. Option 1 is incorrect as this is a fictitious term
not used in this module. Option 2 is incorrect as the main purpose of merchandise planning is
to satisfy the customers’ merchandise as well as financial needs. Option 4 is incorrect as visual
merchandising is the art and science of presenting products in the most visually appealing way
that creates a positive image of the store and gets the attention of the customer.
1124 QUESTION 2
Option 2 is correct as the hue or shade of the colour refers to the name that is given to the specific
1126
colour or the actual appearance of the colour. The main hues are red, yellow, green, blue and
purple. Options 1 and 3 are both incorrect as the intensity or chroma refers to the purity, strength
or brightness of a colour, for instance “royal blue”. Option 4 is incorrect as the value of a colour
refers to the lightness or darkness of a colour that can change, for instance white, to grey to black.
1128 QUESTION 3
Option 1 is correct as in an analogous or adjacent colour scheme more than one colour next to
1130
each other on the colour wheel (or analogous) is used and it creates a harmonious balance in
visual communication. Option 2 is incorrect as in a monochromatic colour scheme only one colour
is used and white or black is added to create different values and intensity. Option 3 is incorrect
as a tetradic colour scheme uses four colours arranged into two complementary colour pairs
on the colour wheel. Option 4 is incorrect as a triadic colour scheme uses three colours that are
spaced equally and form an equilateral triangle on the colour wheel.
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1132 QUESTION 4
Option 2 is correct as a linear lighting system is used to lead customers through the entire store
1134
– this lighting system helps customers find their way through the store. Option 1 is incorrect as
a baffled lighting system flatters the merchandise. Option 2 is incorrect as directional lighting
can be used to direct a light beam to highlight merchandise or fixtures. Option 4 is incorrect as
speciality lighting systems are generally found in jewellery stores, where it makes the jewellery
shine and sparkle.
1136 QUESTION 5
Option 2 is correct as the natural and obvious scent that is associated with a product, such as a
1138
ladies clothing store smelling like fresh flowers, is referred to as product congruency. Options 1,
3 and 4 are all incorrect as these are fictitious terms.
181
182
TOPIC 4
Communicating the retailer’s
merchandise
AIM
To understand merchandise promotions/communication and merchandise pricing in accordance
1140
with the relevant literature and with the aid of practical and relevant example as applied by
modern-day retailers.
LEARNING OUTCOMES
• highlight the contribution of communicating the retailer’s product or service offering using
appropriate practical examples
• understand, explain and practically apply the retailing communication process
• discuss and practically apply the retail promotional mix elements in a retailing environment
in relation to the latest theory and in a practical manner
• explain the essential aspects of pricing merchandise and the objectives of pricing
• critically discuss and apply the various pricing strategies, tactics and pricing adjustment
tactics to a practical scenario
• understand and practically apply the factors influencing the pricing strategy used by retailers
• understand the various formulas and be able to calculate various aspects as per the
information provided
TOPIC CONTENT
1142 Learning unit 8: Merchandise promotions and communication strategies
1143 Learning unit 9: Pricing merchandise
183
Learning unit 8
Merchandise promotions and communication
strategies
Contents

Learning outcomes
Key concepts
8.1 Introduction to retail communication
8.2 Communication process
8.3 Promotional objectives
8.4 Promotional mix elements
8.4.1 Retail advertising
8.4.2 Sales promotion
8.4.3 Public relations (PR)
8.4.4 Personal selling
8.4.5 New/alternative media
8.5 Summary
8.7 Reflection

Assume that six months ago you opened a small hardware shop in Diepsloot with a friend who
1144
was a shop assistant with you at Building Essentials. Business is slow and you realise that you
need to promote your shop to draw customers. However, there is a huge problem – you have
spent all your money on rent and stock. In fact, you are in a “catch 22” situation – to grow you
need to promote your business, but because you are a small business, you do not have the funds
to promote it.
In this learning unit, we look at the various ways that a retailer can communicate with its target
1145
market to generate business, be it a small business or a large retailer such as Pick n Pay, Edgars
or HiFi Corporation.
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1147
LEARNING OBJECTIVES

• explain what is meant by the term “retail communication” and discuss the
various communication channels
• explain what the promotional mix is and discuss the promotional mix elements
• highlight the components of the retail communication process and practically apply
the communication process
• explain what retail promotion is as well as its long-term and short-term objectives
• discuss retail advertising and explain the various marketing communication channels in
advertising as well as the strengths and weaknesses of each
• critically discuss and apply the five most important promotional mix elements in retailing
• highlight the importance of sales promotion and discuss the various sales promotion
types that can be used in a practical way
• highlight the importance of personal selling and explain how new/alternative media
can be used in retailing
KEY CONCEPTS
• Promotional mix • Sales promotion

• Promotional mix elements • Coupons
• Communication • Premiums
• Objectives (long and short-term) • Price reductions
• Retail advertising • Contests, competitions and sweepstakes
• AIDA • Loyalty programmes
• Print media • Aisle displays
• Broadcast/electronic media • Demonstrations
• Out-of-home media • Point-of-purchase promotions
185
• Digital interactive media • Personal selling
• Public relations (PR) • New/alternative media
8.1 INTRODUCTION TO RETAIL COMMUNICATION

How did you know your local fruit and vegetable store was having a sale on oranges and
1148
watermelon? Where did you hear that a famous South African kwaito artist was performing at
your town hall? You may have heard an advertisement on the radio or seen an advertisement in a
local newspaper where these events were promoted. You may even have seen a billboard on the
street when you were walking to work. Retailers are constantly communicating with customers
to inform them of products, special events and services that are on offer.
Retailers can use a number of promotional tools to communicate with their customers – can you
1149
mention a few? Did you think of advertising, sales personnel (personal selling), print advertising
and publicity? What about billboards and the SMS advertisements you receive on your cellphone?
There are many more promotional elements, but the ones we discuss in this unit are the most
appropriate for a retail marketer. These promotional elements are known as the promotional
mix. The promotional mix is a subset of the marketing mix, where the marketer attempts to create
the most favourable combination of different personal and non-personal selling elements to
achieve certain marketing objectives (Kurtz & Boone, 2016:522). The promotional mix is therefore
a combination of advertising, sales promotions, public relations, direct marketing, sponsorships
and new media – these are known as the promotional mix elements (Van Niekerk, 2014). Each
of these promotional mix elements should ideally be integrated to convey the same message
through various channels. Hence, the message conveyed to the customers should be similar
regardless of the medium used to communicate the message (McDaniel et al., 2011:538).
Before we discuss these promotional mix elements, we first look at the retail communication
1150
process and the most common promotional objectives that retailers set for themselves.
8.2 COMMUNICATION PROCESS

Communication can be seen as the sharing or spreading of information, and it aims to create
1151
mutual understanding between the retailer and its customers (Cant, 2010a:69). The elements in
the communication process are depicted in figure 8.1.
1152
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1153
Figure 8.1: The retail communication process
Source: Van Niekerk (2014:16)
The main elements of the communication process include the following (DuBrin, 2009:409; Van
1154
Niekerk, 2014:16–17):
• Sender (or source) – The sender is the company or individual sending the message. The
sender is also referred to as the source or the communicator, as this is the point where
the communication process starts. The sender of a message is, for example, an advertising
agency or the in-house marketing team of a company.
• Encoded message – This is the message that is being sent by the sender or source. This is the
way in which the message is presented to the receiver of the message. In other words, the
symbols, pictures, words, gestures or visual aids used to communicate a meaningful message.
• Message channel – The message channel is the medium or channel used to transmit the
message from the sender to the receiver. The message can be sent through a channel such
as the radio, television or even the internet. Retailers should choose a channel that is suitable
for the intended message.
• Decoded message – This is the message that is received by the receiver or target audience of
the message. Once the message has reached the intended market or customer, the receiver
interprets it and assigns meaning to it. The term “decoded” means how it is interpreted or
understood by the receiver.
• Receiver/audience – This is the individual, target audience, or organisation at which the
message is aimed or intended for. The receiver decodes the message sent by the source/
sender.
• Feedback – This is the response from the receiver of the message to the sender’s message.
Feedback is an important element of the communication process as, without feedback, the
sender cannot determine the effectiveness of the message. Feedback therefore completes
the communication process so that the sender and receiver can arrive at a similar understanding
of the message (Verderber et al., 2017:9).
• Noise (interference) – This is anything that hinders the message from being received correctly
by the receiver. For example, the static on the car radio that distorts the message when
driving through a tunnel. Noise or interference can occur at any point of the communication
187
process and can influence the clarity or accuracy of the message being delivered or received
correctly by the receiver.
The retailer, as the communicator or sender in the communication process, uses symbols such
1155
as words, figures, signs and pictures to encode a marketing message. The retailer also selects
certain channels through which to convey this message to the potential customer (e.g. by means
of an advertisement). The potential customer decodes the message by interpreting the symbols
used by the retailer and reacts in a certain way, thereby providing feedback to the communicator.
This may involve going to the hardware store and purchasing the product that was advertised.
This reaction indicates whether the customer correctly interpreted the message.
The symbols used in encoding messages must have the same meaning for the communicator
1156
(the retailer) and the receiver (the customer) of the message, otherwise the intention of the
message is misunderstood and the customer does not understand what the retailer is trying to
say in the message. There is always some degree of noise or interference in message encoding
and decoding (e.g. competing hardware stores’ advertisements). This can result in ineffective
decoding by the customer. On the other hand, noise can also be children crying while the retailer’s
advertisement is playing during an advertisement break on the news. The mother (who is the
target audience) is distracted and the message is lost. It is therefore very important for retailers
to understand their customers well – would they understand the message being sent to them
and interpret it in the way intended by the retailer? Retailers must also understand the “noise”
that customers face when interpreting communication messages and find ways of standing out
from their competitors’ advertisements and communication messages. Watch the following
YouTube clip on noise in advertising that illustrates this concept:
1157 Noise in advertising:

1158 https://www.youtube.com/watch?v=mnJ6VChu934
Visit the following URL link above to view a video about retail communication.
1159
It highlights that the message should stand out from the crowd and should therefore be
innovative and creative.
Now that we have looked at the elements of the communication process, we examine the various
1161
promotional objectives that retailers can set.
8.3 PROMOTIONAL OBJECTIVES

To effectively manage the promotion mix, retailers must first establish their promotional objectives.
1162
Setting marketing communication objectives and compiling the marketing communication

budget are crucial activities of the retailer. It is important because the objectives of the
marketing communication campaign should reinforce the overall objectives of the retailer.
Objectives are broad statements of what should be achieved by the implementation of a
marketing communication campaign. These objectives can be classified into long-term and
short-term objectives as illustrated in figure 8.2 (Lusch et al., 2011:292–293).
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1163
Figure 8.2: Long-term and short-term promotional objectives
Long-term objectives entail the retailer establishing objectives to sell the store itself rather than
1164
the merchandise in it. By doing this, the retailer is trying to create a positive image for itself in
the minds of the consumer. There are two kinds of long-term promotional objectives:
• The retailer can create a positive store image to establish or even reinforce a positive image in
the minds of consumers, relative to its competitors. Diepsloot Hardware, could for example,
use the slogan “Best service no matter how much you spend” to show potential customers
that all are welcome no matter how much money they spend. This would create a positive
image by focusing on customer service.
• A public service promotion would help consumers view the retailer as a “good citizen”
in the community. For example, Diepsloot Hardware could offer to repair the roof of
the community centre or local old-age home.
Short-term objectives entail the retailer attempting to improve short-term performance by focusing
1165
on customers, either on existing ones or on attracting new ones:
• Retailers can increase patronage from existing customers by encouraging them to buy more
products. For example, Diepsloot Hardware could offer customers a loyalty card to obtain
15% off their fifth purchase from the store.
• Retailers can attract new customers from their trading area or even from outside their trading
area. By promoting its gardening section, Diepsloot Hardware Store could try to attract stay-
at-home moms to the store instead of its regular customers, such as builders and plumbers.
It could also advertise in local newspapers in other communities outside its community,
therefore encouraging customers to come to the store from further away.
1166 Successful marketing communication objectives (Cant, 2010a:72) should:
• be derived from the primary objectives of the retailer

• describe the target market of the retailer and how to communicate with it
• be quantifiable and measurable, for example, the retailer should be able to calculate the
impact the communication had on the sales of the retailer
• indicate the time period that the objective should be achieved over, for example, in 2018
Now that we have discussed the objectives of retail communication, we focus our attention on
1167
the most important promotional mix elements. We first look at retail advertising as an element
of the promotional mix.
189
8.4 PROMOTIONAL MIX ELEMENTS
As previously mentioned, the promotional mix comprises several elements, namely advertising,
1168
direct marketing, public relations, personal selling, sales promotions, sponsorships and new or
alternative media. We discuss the promotional mix elements that are most important to the
retail industry in more detail.
1169
Figure 8.3: Promotional mix elements
8.4.1 Retail advertising

The most-used promotional mix element is advertising. Retail advertising includes all paid
1170
forms of non-personal communication about stores, merchandise and services by an identified

retailer. Its purpose is to inform the consumer and to favourably influence consumers’ attitudes
and perceptions about the store, its merchandise and its activities, and to induce sales directly
or indirectly (Cant, 2010a:80). Advertising is conveyed to a target market through mass media,
such as television, radio, the internet, newspapers, magazines, direct mail, outdoor displays or
transit messages (Van Niekerk, 2014:21).
Advertising is non-personal because the message is delivered through a public medium (e.g.
1171
television or radio) to many consumers simultaneously. For most retailers advertising is the
principal tool to establish a store image and generate customer traffic (i.e. the amount of people
who visit the store). Since advertising is also very expensive, retailers must commit their time,
effort and thought in carefully managing their advertising campaigns and expenditures.
Retail advertising can be defined as “an indirect, non-personal communication conveyed

1172
by the mass media and paid for by an identified retailer” (Wiid, 2012:145).
One of the best-known advertising theories is the AIDA model. The AIDA model proposes that
1174
for advertising to be effective, it must first attract the attention of the customers, then generate
an interest before creating a desire for the product that leads to action by buying the product
(Goworek & McGoldrick, 2015:163). For instance, a technology company is planning the launch
of a new state-of-the-art laptop with the functionalities of a cellphone and a tablet. The launch
may involve a television advertisement to create awareness and gain initial attention among
individuals. Direct mail may then be used to stimulate interest among prospective customers.
Having demos available for customers to test would create further interest and hopefully a desire
for the new product. This, in turn, would lead to an action –the customer may purchase the new
invention or not. The AIDA process is show in figure 8.4 below.
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1175
Figure 8.4: The AIDA model
The main purpose of retail advertising is to get customers into the store and to create a specific
1176
image of the store in the mind of consumers to get them to purchase the retailer’s product
offerings (Wiid, 2012:147). To achieve these objectives, retailers can use the following three types
of advertising (Terblanche et al., 2016:153; Wiid, 2012:148):
• Product advertising – Product advertising promotes the attributes and benefits of a specific
product or service offering. For example, when Checkers runs its Heydays special promotion,
it uses product advertising to communicate the specials on different products.
• Institutional or corporate advertising – This type of advertising presents the retail store
in general to maintain favourable relationships with customers. Therefore, retailers use
institutional or corporate advertising to create a certain image of a store in the mind of
the consumer. For example, Woolworths places a lot of emphasis on transformation, social
development and environmental friendliness. Nedbank emphasises green marketing in its
advertisements.
• Cooperative advertising – In this type of advertisement the manufacturer prepares the
advertising material and allows the retailer to insert its store name on the advertisement.
Cooperative advertising allows the manufacturer and retailer (or wholesaler) to share
advertising costs. For example, when McDonald’s advertises a Coke with a meal.
Once a retailer has identified the type of advertisement based on the objectives of the campaign,
1177
it can use different communication channels to communicate its message.
Advertising consists of four major marketing communication channels, namely print media such
1178
as magazines, newspapers and flyers; broadcast or electronic media such as radio and television;
out-of-home media such as outdoor media, billboards, posters and transit advertising; and digital
interactive media, such as the internet and digital television and radio (Koekemoer, 2014:99–106).
1179 • Print media

Print media involves any form of advertising where information is communicated to the consumer
1180
by printing on paper, and it is publically and privately managed and controlled (Du Plessis et
al., 2010:98). Newspapers and magazines are the two main types of print media, and are very
effective at delivering a message to the target audience. This is because most people read
the same newspapers every day and people tend to buy the same magazines regularly. Print
media allows advertisers to explain their message in a way that incorporates both visual and
verbal communication – explanations in the text of the advertisement can be illustrated by
means of a picture or photograph. Various retailers distribute weekly or monthly specials in
191
local newspapers such as the Record. You may also have noticed retailers handing out brochures,
pamphlets or flyers of their latest specials at traffic lights.
We illustrate some strengths and weaknesses of newspapers and magazines, according to

1181
Koekemoer (2014:100–101), in table 8.1 below.
Table 8.1: Strengths and weaknesses of newspapers and magazines
Strengths of newspapers Weaknesses of newspapers

Suitable for high frequency Short lifespan

Relatively cheap per reader Many advertisers in the same newspaper

High coverage Declining circulation

Adaptable to change
Strengths of magazines Weaknesses of magazines

Longer lifespan Limited flexibility to change messages

National coverage Many advertisers to compete with

Usually loyal readers Short time to convey the message
1182 • Broadcast/electronic media

Broadcast or electronic media generally includes radio or audio media as well as television
1183
advertisements (Higuera, 2011:1). Retailers often use radio and television advertisements as many
people listen to the radio while driving to work or watch television in the evenings. Furthermore,
advertisers use broadcast or electronic media as they are relatively inexpensive in terms of cost
per person and also reach mass audiences with their messages (Koekemoer 2014:101).
Both radio and television media has the potential to tell stories and appeal to people’s emotions
1184
when transmitting a message. Retailers often use them because of their ability to reach mass
audiences. Advertising messages sent through broadcast/electronic media use a small time frame,
normally between 15 and 60 seconds. The costs of the time slots on radio and television vary
throughout the day – the more listeners a programme attracts, the more expensive the timeslot
is. Table 8.2 below lists some of the strengths and weaknesses of electronic or broadcast media.
Table 8.2: Strengths and weaknesses of broadcast or electronic media
Strengths of radio Weaknesses of radio


Geographically selective Limited availability
Can reach specific audiences at specific No reference back to message


times Only short message

No literacy necessary

Low cost
Strengths of television Weaknesses of television

Involves most of the senses Relatively expensive medium

Viewer is unlikely to ignore the message Reaches a general audience

Wide coverage and high impact High production costs
Repetition can irritate the viewer
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1185 • Out-of-home media

Out-of-home media is one of the oldest advertising media retailers can use. It is flexible and
1186
inexpensive and may take a variety of different and innovative forms. Out-of-home media is
generally categorised as outdoor media and cinema media (Koekemoer 2014:104). Outdoor
media consists mostly of billboards, signs and posters that can be found in and on bus stops,
taxis, sports stadium signs and even street poles.
The cinema, on the other hand, is another medium used for advertisements. Although, a large
1187
number of people watch movies at the cinema, these advertisements are extremely expensive to
transmit. One of the biggest advantages of cinema advertising is that the audience is extremely
attentive as there are fewer distractions in the cinema (as compared to television advertisements)
and also less noise in the communication process.
We illustrate some strengths and weaknesses of using out-of-home media and cinema advertising
1188
in table 8.3 below.
Table 8.3: Strengths and weaknesses of outdoor media and cinema
Strengths of outdoor media Weaknesses of outdoor media

Cost per passer-by is low Reaches the general passer-by

Offers support and serves as a reminder of Limited message
other advertisements Usually a short message
High impact Local restrictions
Geographically selective
Strengths of cinema media Weaknesses of cinema media

Involves most of the senses Relatively expensive medium

High-quality reproduction Limited message

Very high impact Lengthy preparation

Viewer cannot ignore the message Expensive to go to the cinema
1189 • Digital interactive media

Digital interactive media uses channels of communication with which the audience can participate
1190
actively and immediately (Koekemoer, 2014:106). This medium is changing the way marketers
advertise to their customers. Consumers can now find information on the internet about products
and services, discuss products on Facebook and Twitter and even receive special offers on their
mobile telephones. Although this medium poses many challenges to advertisers, it is an exciting
medium and is developing constantly.
Activity 8.1
Do practical research on the cost of television, magazine and newspaper advertising by asking
someone you know who works in the advertising industry or does marketing for a company
what the costs are of placing an advertisement in a newspaper or magazine.
Feedback
19
You would discover that a 30-second television advertisement could cost as much as R150 000 if it
is shown during peak viewing periods. A full-colour, full-page advertisement in a popular magazine
193
would cost as much as R80 000, and a small advertisement in the Sowetan newspaper would cost
approximately R20 000. Because these media are so expensive, only financially strong retailers such as
Woolworths, Checkers and Rebel Liquors can afford to use them. As a small hardware store owner,
you would hardly be able to afford these media to advertise your business, and so would need to find other
more affordable and suitable methods.
Next, we discuss sales promotions, the second type of promotion mix element retailers can use
1191
to communicate their message to their audience.
8.4.2 Sales promotion

We all love “free gifts”, especially the ones that last a long time, such as caps, pens and water bottles.
1192
Gifts like these are a great way for retailers to promote their products to their customers. These gifts
form part of a communication tool known as sales promotion, which retailers can use to reinforce their
methods for communicating with customers.
• Sales promotion can be defined as “a blend of marketing activities and materials designed
to intensify the effort of the sales force and also to persuade customers to buy the product
offering within a limited time” (Erdis & Cant, 2015:123). Sales promotions are short-term
incentives used by marketers or retailers to entice customers and encourage them to make
a purchase (Armstrong & Kotler, 2013:420). A retailer, such as Diepsloot Hardware, has a wide
variety of sales promotion types from which to choose, depending on the promotional
objectives it wishes to attain (Erdis & Cant, 2015:123–124). We summarise the different types
of sales promotions techniques and briefly explain each below:
• Coupons – Coupons are one of the best-known sales promotion techniques retailers use. A
coupon is a form of printed or electronic (mobile or online) voucher, which allows users to
obtain a discount if they meet the redemption conditions of the coupon (Krahl, 2008:2). In
simple terms, a coupon is a reduction in the price of the product to encourage customers to
try a new product (Van Niekerk, 2014:26). For instance, Diepsloot Hardware could consider
placing these coupons in the local magazine to allow customers R50 off their next purchase
of a hosepipe.
• Free samples – Customers receive free sample to encourage them to try a new product during
the early stages of the product’s life cycle. Free samples are usually given to customers when
the product or perhaps the flavour is new to the market and customers may be reluctant to
purchase these new products. For instance, grocery stores may hand out a new flavoured
soft drink to customers to try out. These free samples could assist customers in deciding
whether to purchase the product again.
• Premiums – Premiums are items that are offered free or at a lower price, when the customer
purchases another product. A premium entails offering customers an additional product
as an incentive to buy the original product. For example, during Checkers’ Heyday specials,
customers may purchase a packet of bacon and receive six eggs free.
• Price reductions – This sales promotion refers to the temporary reduction in the price of a
product or service. For example, selling Omo washing powder for R59.95 instead of R75.95
per 3 kg.
• Contests, competitions or sweepstakes – Contests, competitions and sweepstakes are a popular
way to promote a retail store. This type of sales promotion technique is used to encourage
customers to compete for prizes or try their luck in a lucky draw. In consumer contests
and competitions customers compete for a prize based on their skills and knowledge, while
in sweepstakes winners are chosen purely by chance (such as a lucky draw).
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• Gifts – These free items are freely handed out to customers to create awareness of the brand,
organisation or the product or service offering. Gifts, such as a Diepsloot Hardware 2018
calendar, is a popular promotional element as customers would keep such a gift in a visible
location for the entire year. Other examples of gifts include pens, caps or even T-shirts with
the Diepsloot Hardware logo.
• Loyalty programmes (or frequent buyer programmes) – These are a popular technique retailers
use to encourage customers to buy more frequently. For example, Diepsloot Hardware could
introduce a loyalty programme where customers could earn 3% back on all purchases over
R500 at the end of a particular year. Popular loyalty programmes in South Africa include
Click’s Club Card, Pick n Pay’s Smart Shopper or FNB eBucks Rewards.
• Point-of-purchase (POP) promotions – These are used to attract customer attention to a
particular product at the point-of-purchase or till point. They also encourage customers to
buy additional products that they did not plan to purchase in the first place. These could
include promotional signage and baskets of the product being promoted.
• Aisle displays – Hardware items such as paint brushes and turpentine could be displayed
on special aisle displays at the end of each aisle to attract the customers’ attention to these
products.
• Demonstrations – These can be used to show hardware customers how a particular tool,
such as a wood sander works, thus generating interest about the product. Verimark and
Glomail often use demonstrations of their products to show customers how they work, to
try it themselves and to illustrate the benefits of the products.
Activity 8.2
Which of the above sales promotion tools would you recommend for Diepsloot Hardware
and why?
Feedback
20
You could have recommended demonstrations and samples to the owners of Diepsloot Hardware.
Demonstrations would be a very effective way of promoting items sold at a hardware store, as
many customers would be more comfortable buying a product if they could see the correct way
to use it. A salesperson could demonstrate how to put up a bookshelf for example, using tools
and supplies from the store.
Samples could also be a very effective promotional tool for the hardware store. Samples of
sandpaper or even lawn fertiliser could be given away at till points to encourage customers to try
the products and come back to the store to purchase more. Did you mention any others in your
answer?
The next promotional mix element we look at is publicity, or public relations.

1193
8.4.3 Public relations (PR)

Public relations (PR), or publicity, is an important element of marketing communication and can
1194
be either controlled or uncontrolled (Fourie, 2014b:84). Public relations is defined as the “unpaid,
non-personal influencing of the consumer by making available (to publicity media) the current
195
news value of the store (including its products or services) and obtaining a favourable review
in these media” (Fourie, 2014b:84). In essence, PR involves the communication efforts of an
organisation to create and maintain favourable relationships with its stakeholders (Van Niekerk,
2014:24). The communication value of publicity lies in the fact that virtually all the media can be
used to carry the publicity message – the press, radio and television.
Public relations (PR) is the “unpaid, non-personal influencing of the consumer by making
1195
available (to publicity media) the current news value of the store (including its products or
services) and obtaining a favourable review in these media” (Fourie, 2014b:84).
The distinctive feature of publicity is that the message must have a certain amount of news
1197
value for the audience. Another of its features is that the retailer has no direct influence over the
formulation of the message, because the journalist concerned decides what they wish (or do not
wish) to say. We therefore see that there is also a negative side to public relations. The Rooibos tea
industry had to contend with unfavourable publicity when harmful bacteria were discovered in
the product. The industry had to spend vast sums of money on positive marketing communication
to neutralise the negative effects of the unfavourable publicity (Cant, 2010a:78). Public relations is
not always “free”, as stated in the definition. Retailers often have to spend large sums of money
to obtain favourable mention in the press and on radio and television.
Retailers can sponsor sports meetings, for example, or donate large sums of money to charity.
1198
This is an effective way of demonstrating their responsibility to society and, in turn, the name of
the store receives “free”, favourable mention in the media. Consumers are often more inclined
to accept the marketing message of such a “good” retailer.
Public relations can be either planned or unplanned. When the retailer has some level of control
1199
over the news being published, it is planned PR. Unplanned PR can damage the reputation and
financial structure of the business if negative (Wiid, 2012:163). Examples of public relations include
a story in a magazine, a column item in a newspaper, a slot on the SABC news, a mention by a radio
talk show host, an annual report or even a film about the organisation (Cant, 2010a:78–79). The
best-known forms of public relations are news or press releases, special functions, sponsorships
and negative publicity. A retailer can combine the various forms to obtain publicity.
1200 Next, we discuss personal selling as a promotional mix element that retailers can use.
8.4.4 Personal selling

Personal selling can be defined as the process of assisting and persuading a prospect to
1201
buy a product or a service or to act on an idea through the use of interpersonal (person-to-
person) communication (Cant, 2010a). Personal selling attempts to inform customers and to
persuade them to purchase products or services in an exchange situation (Lamb et al., 2013:353).
Although self-service retailing is becoming increasingly commonplace in the consumer goods
field, there is still a demand for effective personal selling, especially in high-service product fields,
such as cellular telephones, personal computers and even hardware products. Personal selling
has the following communication advantages for a retailer:
• face-to-face communication
• instant feedback
• exposure is usually voluntary by consumers actively seeking information
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Personal selling involves direct, face-to-face communication between a retail salesperson

1202
and the customer (Wiid, 2012:145).
In retail stores, it is the task of the sales personnel to sell products directly to consumers. Sales
1204
representatives must constantly remember that they project the retailer’s image. Studies in the
field of communication reveal that words play a surprisingly small part in the communication
process (Cant, 2010a:80). Only 10% of our understanding comes from spoken words, about 40%
from what we hear (how it is said: tone of voice, volume and speed of delivery) and about 50%
from what we see or feel (facial expression, clothing, posture, eye contact, touch and gestures). A
positive message can be communicated to the potential buyer with a smile, a firm handshake and
good eye contact. A pat on the shoulder can communicate the message that the representative
agrees with what the buyer said. Representatives can also indicate that they are listening to
buyers and understand their problems by just nodding their heads occasionally. We provide a
few general guidelines, which are applicable in most selling situations (Cant, 2010a:93):
• The dress and grooming of the sales representative usually convey the first impression that
the buyer uses to make certain assumptions about the representative. Clothing should not
be extravagant, but rather convey simplicity. Avoid flashy colours and clothing as these are
not associated with the seriousness of the business world. Clothing must be appropriate
for the type of business, environment and climate, and the representative must wear good-
quality clothing that fits well and gives a tidy appearance.
• The facial expression of the sales representative reflects their inner feeling and conveys a
message to the potential buyer even before words are spoken. The consumer can easily
detect whether the enthusiasm about the product or interest is genuine by looking to see
whether the words and facial expression of the representative support each other.
• The voice of the sales representative is one of the most important aspects in communication
with the consumer, as it is the medium the representative uses to convey their words. Voice
is especially important over the telephone, where other aspects are hidden to the consumer.
• The handshake (if applicable) of the sales representative is probably the first as well as the
only physical and the most intimate contact between the sales representative and the
potential buyer. Without the use of words, a handshake can convey a strong message. For
example, a firm handshake (usually in the Western culture) conveys a caring but steadfast
attitude, while a weak grip communicates indifference and a dubious attitude.
• Good manners are indispensable in any sales situation. There is no substitute for good
manners. Although every person has a reasonably good idea of the meaning of good
manners, we sometimes unintentionally do things that irritate others and that they regard
as bad manners. The sales representative must consequently be sensitive to aspects that
others may regard as bad manners, for example, smoking in front of customers and visiting
customers without an appointment.
In the case of a small hardware store, personal selling is a vital promotional medium. Such a
1205
business often has to assist the do-it-yourself customer with advice on product alternatives and
product application, for example, for paint or floor varnish. In many instances, the customer merely
has difficulty finding the products in the store. In such situations, although the personal selling
is usually informal, it may entice the customer to return to the store because of the personal
attention received.
As the promotional mix elements have changed over the last few years to adapt to the changing
1206
needs and wants of customers, and the fast-changing nature of technology, new communication
tools have emerged. We discuss these new tools, known as new or alternative media, next.
197
8.4.5 New/alternative media
The last promotional mix element we discuss for the purpose of this module is new or alternative
1207
media. Technology is constantly changing the way retailers communicate with their customers and
entice them to purchase their merchandise. Just a few years ago, cellphones were limited to black
and white SMSs and MMSs (multimedia messaging services). Today, smartphones allow retailers
to send videos, use colour and sound, develop mobile applications (“apps”) to offer value, build
relationships and create loyal customers. Furthermore, social media platforms, such as Facebook,
Twitter, Pinterest, LinkedIn, and many others, allow retailers to be in constant communication
with their customers, advertise free and easily create awareness. Can you think of any other
technological changes that influence how retailers communicate with customers – such as smart
watches like the iWatch or Fitbit? New media therefore refers to the use of technology, such as
smart cards, the internet, smartphones and SMS or mobile application technology (i.e. mobile
marketing). Many organisations and retailers use these new forms of media to communicate with
their customers in an interactive and modern manner (Klopper et al., 2006:256).
As the reach of the internet is spreading continuously and customers are spending more time
1208
online, the internet and mobile marketing has become the number one source of information
at work and at home (Huhtala, 2010:17). As new or alternative media is an inexpensive medium,
retailers should use this medium to reach and build long-lasting relationships with their customers.
Can you think of ways in which new media can be used in your place of work or how it is already
1209
being used? Do some research on this topic to see how technology is being used today to market
products and services in an innovative manner.
8.5 SUMMARY
In this learning unit we focused on the importance of communicating with retail customers
1210
through the various promotional mix elements. We explained the retail communication process
and its elements. Retailers need to be aware of the way their customers interpret messages before
they send them to ensure that they are interpreted correctly. Next, we looked at promotional
objectives and the various objectives that retailers have when embarking on promotional
activities. We also discussed the various promotional elements that retailers can use, specifically
advertising, sales promotion, public relations, personal selling and new or alternative media.
Now that you know how to communicate the message to your customers, we discuss how to
go about pricing your merchandise successfully in the next learning unit.

1211 Read the following case study and answer the questions that follow:
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Jam and Daisies: Garden Dining

1212
Since opening its doors in November 2011, Jam and Daisies, a tea garden in a stylish home in Pretoria,
1213
has employed a variety of advertising media to create brand awareness, inform customers of the
unique offering and generate a desire to visit or book an event.
1214 • Outdoor signage

As Jam and Daisies is situated in a suburban house away from the main streets, it was necessary to
1215
inform potential clients of the “new place” and where it is located. To achieve this, Jam and Daisies ran
a six-month street-pole advertising campaign on nearby busy roads, specifically Middel Street and
George Storrar Road – main roads into the Nieuw Muckleneuk/Brooklyn area. The posters featuring
images of popular dishes and necessary contact information were designed to draw attention.
1216 • Outdoor signage on boundary property wall

Jam and Daisies is situated on a corner property, which receives high-visibility from passing traffic
1217
en-route to nearby schools and the business/shopping district. Thus the corner boundary wall was
used for well-placed street signage, featuring a large-scale logo, web address and enticing specials
board – all of which proved useful in creating interest and enticing customers to come in and visit.
1218 • Free marketing

1219 Jam and Daisies received free publicity such as the following:
1220 • Pretoria News newspaper (27 February 2012)

1221 • Tuine & Tossels television programme on kykNET (1 August 2012)
1222 • Beeld newspaper (21 September 2012)
1223 • Leef met Hart en Siel magazine, My Lewe in ’n Plakboek (October 2014)
Since the business only had a small advertising budget during the early years, the above exposure
1224
assisted in getting feet through the doors, which in turn generated valuable, positive word-of-mouth.
1225 • Print advertising

Jam and Daisies has also run paid-for advertisements in several magazines and special newspaper
1226
publications. This advertising specifically targeted an identified niche market, that is, customers in
search of a venue for bridal showers and baby showers. Coverage included the following:
1227 • The Wedding Design Magazine (2012 edition)
1228 • Wedding Ideas Magazine (2013 Edition)
1229 • Ideas Magazine, entrepreneur issue (February 2014)
1230 • Pretoria News restaurant guide (2014)
1231 • Finesse magazine (June 2014)
1232 • Pretoria Child Magazine (June 2015)
Many guests invited to special events at Jam and Daises travel from further afield than the immediate
1233
area for a party. Thus hosting functions for large groups provides added exposure to clients that may
not have heard of the business.
1234 • Newsletters
A database of customer names and e-mail addresses were collected in-store as well as through
1235
a newsletter subscription button on the website. New menu items, seasonal drinks, recipes and
inspirational verses were featured in the newsletter, along with photographs. This served as an
advertising reminder to existing customers and encouraged them to return. The newsletters were
issued quarterly, from February 2012 to December 2014.
Source: Adapted from Nieuwenhuizen & Van Heerden (2016)
199
QUESTIONS
1236
1 What sales promotion methods would you suggest to the owners of Jam and Daisies?
2 Do you think that personal selling could play a role in improving the sales of the Jam and
Daisies servers? Motivate your answer.
8.7 REFLECTION
1 Do you have a clearer understanding of what retail communication is and the
process that retailers should follow when communicating with customers?
2 Do you have a practical understanding of the two types of objectives that retail-
ers could set when establishing communication objectives?
3 Do you understand the various methods of retail communication and why each
could contribute to the overall success of a retailer’s communication strategy?

QUESTION 1
50 In the communication channel, the … decodes the message sent.
1 sender
2 receiver
3 channel
4 company
QUESTION 2
51 Newspapers and magazines are examples of … advertising types.
1 digital interactive
2 electronic
3 print
4 out-of-home
QUESTION 3
52 How many of the following are strengths of using magazines for advertisements?
53 a usually has a loyal reader base
54 b longer lifespan compared to other mediums
55 c short time to convey the message
56 d many other advertisers to compete with
1 One
2 Two
3 Three
4 Four
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QUESTION 4
57 Which ONE of the following is a short-term objective in promotion?
1 creating a positive store image
2 increasing patronage from existing customers
3 public service promotion
4 attracting existing customers
QUESTION 5
58 A … entails offering customers an additional product as an incentive to buy the
original product.
1 competition
2 premium
3 sample
4 gift
1237 MEMORANDUM
1239 QUESTION 1
Option 2 is correct as the receiver decodes the message that is sent. Option 1 is incorrect as
1241
the sender encodes the message. Option 3 is incorrect as a channel cannot decode a message.
Option 4 is incorrect as a company does not form part of the communication channel.
1242 The answer can be found in section 8.2.
1243 QUESTION 2
Option 3 is correct as newspapers and magazines are examples of print advertising. Options 1,
1245
2 and 4 are therefore incorrect as they do not include newspapers and magazines.
1246 The answer can be found in section 8.4.1.
1247 QUESTION 3
1248
Option 2 is correct as a and b are advantages of magazines, while c and d are disadvantages of
1249
magazines. Options 1, 3 and 4 are therefore all incorrect.
201
1251 QUESTION 4
Option 2 is correct as increasing patronage from existing customers is a short-term objective.

1253
Options 1 and 3 are long-term objectives, while option 4 is not an objective at all.
1254 The answer can be found in section 8.3.
1255 QUESTION 5
Option 4 is correct as a premium occurs when a customer is offered an additional product as an

1257
incentive to buy. Options 1, 3 and 4 are therefore incorrect.
202
Learning unit 9
Pricing merchandise
Contents

Learning outcomes
Key concepts
9.1 Introduction
9.2 Pricing objectives
9.2.1 Categories of pricing objectives
9.3 Elements of pricing
9.4 Pricing strategies
9.5 Pricing adjustments
9.6 Factors influencing the pricing strategy
9.7 Summary
9.9 Reflection

To many people, the price of products or services indicate their value in relation to other products
1259
or services. For example, when you are shopping for a new electronic product, be it a washing
machine, toaster or television, have you ever wondered if the quality of one product is as good
as another because of a big price difference? The price of a product or service offering therefore
helps customers evaluate its quality (Terblanche et al., 2016:177). Customers also consider the
price of an item when choosing which retailer to visit, and often return to the same retailer if
they feel the specific retailer is offering better prices than its competitors are. Pricing can create
certain perceptions about products or services as well as the brand, the manufacturers and the
retailers selling the merchandise. Price should be determined correctly to attract customers, but
also for retailers and companies to be profitable. It is therefore equally important for companies,
manufacturers and retailers to understand the pricing of products and services, to know what
aspects to consider when setting prices, and to understand the various pricing strategies and
tactics they can use to achieve their objectives.
In this learning unit, we focus on the pricing of merchandise. We discuss the importance of correctly
1260
pricing merchandise and service offerings, and establishing the pricing objectives based on the
three broad categories of setting pricing objectives. We explain the key elements of pricing with
calculations and examples on how to establish the cost price, selling price and desired mark-up
of an item. Then, we discuss the most common pricing strategies retailers can implement to
attract customers and to reach their set pricing objectives. The learning unit concludes with a
discussion on some of the most commonly used pricing adjustment methods and the factors
that can possibly influence the overall pricing strategy companies or retailers use.
203
1262
LEARNING OBJECTIVES
• explain the concept of pricing in retailing and discuss the various pricing objectives
retailers can use
• critically discuss the three broad categories of pricing objectives and be able to practically
apply each
• provide the key elements of pricing and explain the important concepts in pricing products
and services
• calculate the cost price, selling price and mark-up of products and services and be able
to practically apply the formulas
• differentiate between fixed and variable costs with examples
• discuss the various pricing strategies retailers and companies can use in an attempt to
sell their products and/or services and practically apply these strategies
• do various calculations to set prices based on information provided
• discuss the various price adjustments retailer can implement and practically apply each
• list and discuss the factors that can affect the pricing strategy retailers or companies use
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KEY CONCEPTS
• Pricing • Cost-based pricing

• Pricing objectives • Competition-based pricing
• Profit-oriented objectives • Pricing adjustments
• Sales-oriented objectives • Supply and demand
• Status-quo-oriented objectives • Price ceilings and price floors
• Cost price • Multi-channel pricing
• Selling price • Mark-up
• Fixed cost • Demand-based pricing
• Variable cost
9.1 INTRODUCTION
The pricing of a product or service is a key element in determining the profitability of a retailer,
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and is often its only source of revenue. As a result, it is crucial to properly price merchandise and
use the correct pricing strategies to entice customers to purchase the product or service and
still be profitable. If the price is too high, the demand for the product/service decreases and the retailer
could lose valuable customers. If the price is too low, sales volumes may not generate sufficient revenue
to cover the retailer’s expenses, to break even or to make a profit. Collectively, the price of products or
services are an indicator of whether the store appears to be expensive, reasonably priced or inexpensive,
and potentially not of good quality (Kent & Omar, 2003:350). The price of a product or service allows the
customer to make judgements about the value and quality, and it provides a convenient measure of
profitability for companies and retailers (Kent & Omar, 2003:350).
“Pricing is the process of determining the value of a product that consumers will be willing
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to pay under particular circumstances at a particular time” (Wiid, 2012:124).
Pricing is also important since it can directly assist in achieving the objectives of the retailing
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business. Retailers should also have pricing objectives that are in line with the overall objectives
of the company. In the next section, we discuss the various pricing objectives by looking at the
three categories of pricing objectives.
9.2 PRICING OBJECTIVES

Pricing is not a straightforward task as many aspects need to be considered before deciding
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on a price for a product. In addition to the company’s overall goals, the retailer’s position in the
market, current profits, sales and potential return on investment should be considered when
setting prices. The lowest price is not necessarily the best price; the best price is the one that
considers all the necessary aspects and ensures that the firm makes a reasonable profit at the
end of the day.
The retailers should align the pricing strategy with the company strategy after setting out
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objectives. For example, if the strategy is to obtain the largest market share, then perhaps a lower
price may be suitable. However, if the company aspires to be seen as a technological thought
leader and trendsetter, a higher price could perhaps be more appropriate. While deciding on
pricing objectives the retailer must keep in mind that the pricing strategy must, at all times,
reflect the company’s overall goals.
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1269 Pricing objectives are therefore the goals that give direction to
the entire pricing process (Wiid, 2012:125). For retailers to set the
correct selling price for their merchandise, they must set pricing
objectives that are SMART (LearnMarketing.net, ND):
• Specific – The objective should specify exactly what the company would like to achieve. For
example, the company would like to increase its market share or profitability.
• Measurable – The company should have a way to measure completion to determine whether
the objective has been achieved. For instance, increase market share by 3%. The percentage
increase provides a means to measure whether the objective has been achieved.
• Achievable – The company should be able to reach the set objective; it should be plausible
for the company to achieve an objective.
• Realistic – Companies should take relevant factors, such as time and resources, into account
to ensure that the set objective is realistic. For example, it may not be realistic for a company
to achieve a 10% increase in its market share within 12 months, but rather a 3% increase.
• Timely – The set objectives and measures should be achievable within a certain period. For
example, within 12 months, or three years.
9.2.1 Categories of pricing objectives

As previously mentioned, the pricing objectives should be consistent with the marketing objectives
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and the overall objectives of a company. The various pricing objectives that a company can use
are classified into three broad categories. We show the categories in figure 9.1 and then discuss
them below.
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Figure 9.1: Categories of pricing objectives
1272 • Profit-oriented pricing objectives

Profit-oriented pricing objectives are primarily aimed at pricing products so that the desired
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profits are met. In a nutshell, these pricing objectives involve setting prices that ensure the
retailer makes money on each sale (Johnston, ND). Profit-orientated objectives therefore include
profit maximisation, satisfactory profits and target return on investment. The retailer therefore
determines the cost of manufacturing or acquiring each product, then adds a percentage for profit.
1274 • Sales-oriented pricing objectives

Sales-oriented pricing objectives are set to establish growth in sales or to maintain the current
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sales levels (Wiid, 2014:126–127). These objectives can be expressed in terms of sales volume
and market share – in rand or unit value (Terblanche et al., 2016:178). The purpose of setting
sales-oriented pricing objectives is to attract and build long-term relationships with customers
(Wiid, 2012:127). These pricing objectives are set to boost sales volumes or the market share.
Sales volume can be measured in terms of a company’s own sales during a certain period. On
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the other hand, market share can be measured by comparing the company’s sales against the
industry’s sales.
1276 • Status-quo oriented pricing objectives

This type of pricing objective seeks to maintain existing price levels or to meet the competitor’s
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prices. It requires little planning as it is a passive policy employed by a company (Lamb et al.,
2010:258). Status-quo pricing objectives are generally directed at meeting or preventing competition
(Wiid, 2012:127). These pricing objectives are set to avoid price wars with competitors and, as
a result, companies quickly respond to price changes from competitors (Boundless.com, 2016).
For instance, if Checkers advertises a sale on a box of 30 large eggs, Spar and Pick n Pay would
also have a sale on their eggs to match the price offered by Checkers.
Activity9.1
Explain to the pricing manager what the differences are between increasing profit, increas-
ing sales and increasing market share. Discuss how these different objectives of a firm could
possibly affect the pricing strategy.
21 Feedback
Profit is defined as the difference between the selling price and the cost price of a product. Sales are
defined as the amount of products that are being sold. Market share is the amount of customers
that buy a specific firm’s product versus that of a competitor. For example, if a firm’s objective is
to increase profit it needs to either lower costs or increase the selling price to ensure that profit
is higher. However, if it wishes to increase sales it could use a discounted price to get rid of stock
and sell more of a specific product. Lastly, if the objective is to gain a larger market share, the firm
could use promotional pricing to introduce the product to a larger group of customers to convince
them to switch brands.
9.3 ELEMENTS OF PRICING

To arrive at the retail selling price, we first need to consider the elements that go into the making
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of the price. These key elements include cost price, fixed cost, variable cost, mark-up and selling
price, and we use them throughout this learning unit.
Determining the cost of an individual product can be a complex process. A retailer needs to
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consider the amount it costs to make the product (cost price), the fixed and variable costs of
the company, as well as the mark-up it wishes to add ultimately to reach its selling price. We
discuss each element in more detail.
1280 • Cost price and selling price

Firstly, the retailer needs to consider the cost price of a product item. The cost price is the amount
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of money it costs a manufacturer to produce a specific product or provide a service (WhatIs.com,

2017). In other words, the cost price is the price that it costs to make one product without adding
any profits (Cambridge Dictionary, 2017a). For example, it may cost a manufacturer R7.00 to
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produce a 2-litre bottle of fizzy drink. You may have heard retailers saying that products are sold
at cost price – for instance at a factory shop where items are sold at cost.
Cost price is the amount of money it costs a manufacturer to produce a specific product or
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provide a service, without any profits being added (WhatIs.com, 2017).
The selling price is the actual and final price of a product or service that a company or retailer
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charges a purchaser to buy the item (InvestorWords, 2017).
While the cost price is the price a merchant pays for the product, the selling price is the price that
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the customer pays for the same product (Pasewark, 2012:40). The selling price can be calculated
by adding the cost price to the mark-up the retailer wishes to attain. The formula for calculating
the selling price is therefore:
Selling price = Cost price + Mark-up

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For instance, if a retailer wants to add a 30% mark-up on its cost price of R120, the retailer would
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need to sell the product for R156 [(R120 x 30 ÷ 100) + R120]. We discuss calculating the mark-up
in detail below.
1290 • Fixed costs

Fixed costs do not change and are not influenced by the amount of products produced or the
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number of items sold (Investopedia, 2017). For example, a manufacturer of biscuits that has just
built a new manufacturing plant needs to cover the monthly payments for the plant whether it
produces one packet of biscuits or millions of packets. Fixed costs are also referred to as overhead
costs. The costs are fixed because the company needs to commit to these costs irrespective of
production or sales levels. The marketing department also incurs fixed costs in the form of sales
personnel salaries, advertising campaigns or website hosting. Fixed costs generally increase
annually and has an impact on the price that is charged for products. The increase in production
plant costs, rent or advertising costs, in turn, has an impact on the pricing decision.
Fixed costs are costs that do not change with the increase or decrease in the amount of
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products or services produced or sold. Fixed costs are expenses such as rent, that have to be
paid by a company and which are independent of any business activity (Investopedia, 2017).
1294 • Variable costs

Variable costs are directly associated with the manufacturing and sales of products and change as
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the level of production or sales changes (Investopedia, 2017). Typically, variable costs are evaluated
on a per-unit basis since the cost is directly associated with individual items. Generally, variable
costs are costs of products that are physically part of the product (e.g. parts, packaging) or are
directly associated with creating the product (machine maintenance, labour costs and material
costs). Variable costs, especially for physical products, tend to decline as more units are produced.
This is due to the producing company’s ability to purchase product components for lower prices
since component suppliers often provide discounted pricing for large quantity purchases.
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Variable costs are a corporate expense that vary with production output. Variable costs are
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dependent on the production volumes of a company – they rise as production increases and
fall as production decreases (Investopedia, 2017).
In figure 9.2 below, we see how variable costs change in relation to the number of products
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produced or sold. When the quantity of products that the manufacturer produces, increases,
the total rand value or cost to produce the products, increases. For instance, if the company
produces 500 units per month, it costs R10 000; if it produces 700 units in the next month, it
would cost R13 000.
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Figure 9.2: Fixed versus variable costs
Variable costs can therefore more easily be allocated on a per-unit basis, but applying fixed
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costs to products are more complicated. For example, if a company manufactures five different
products in one plant or factory, how would it distribute plant costs (e.g. salaries, rent) over the
five different products? However, the actual material used for the product can be attributed to
a product.
1301 • Mark-up
Now that the retailer knows the cost price and the fixed and variable expenses, it can determine
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the mark-up it needs to add on a product. The mark-up is the amount added to the cost price
of the goods to ensure that the retailer covers its overhead and makes a profit. Mark-up is also
defined as the increase on the original selling price and is often expressed as a percentage of
the retail price or as percentage of the cost price. The mark-up can also be referred to as the
profit margin or the margin.
The mark-up is the difference between the retail selling price and the cost price that is
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retained by the retailer (Goworek & McGoldrick, 2015:147).
If the retailer knows the cost price and what mark-up it needs to add to a specific product to
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cover all other fixed and variable expenses, it can calculate the selling price per item. The mark-
up can be expressed as either a percentage or unit cost (Dunne et al., 2014:427):
• Mark-up = Selling price – Cost price

• Mark-up % = [(Selling price – Cost price) ÷ Selling price] x 100
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Consider the following example. Assume that it costs Astandile, a small retailer in Johannesburg,
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R60 for a handbag. Astandile then sells the handbags for R140 each. What percentage mark-up
did Astandile add per handbag?
1308 Mark-up = Selling price – Cost price
1309 = R140 – R60
1310 = R80
1311 Use the following formula to calculate the mark-up percentage:

1312 Mark-up = [(Selling price – Cost price) ÷ Selling price] x 100
1313 = [(R140 – R60) ÷ R140] x 100
1314 = (R80 ÷ R140) x 100
1315 = 57.14%
1316 Astandile therefore adds a R80 (or 57.14%) mark-up on a handbag.
1317 Determining cost price, selling price and mark-up

https://www.youtube.com/watch?v=bOpjE42tKVk
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The URL link above includes a tutorial on calculating the cost price, selling
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price or the mark-up or margin, based on the information provided. Use this table to calculate
the information required. Remember that we may ask you to calculate the cost price, selling
price or the mark-up in an examination.
Once a retailer understands the pricing objectives and knows the various elements that make
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up a price, it can decide which pricing strategy to implement to attain the set objectives. Pricing
strategies can be broadly divided into three broad categories, namely demand-based, cost-based
and competition-based pricing. In the next section, we discuss these in more detail.
9.4 PRICING STRATEGIES

Once the retailer understands the pricing objectives, the various pricing elements to consider and
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the mark-up it needs to add to be profitable, it can select a pricing strategy for its merchandise.
Retailers therefore choose a variety of pricing strategies depending on their own unique marketing
goals and objectives (Richards, ND). The chosen pricing strategy influences how to meet objectives
and how to position the product or service in the market.
To appeal to its various target markets and customers, a retailer may need to implement various
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pricing strategies and tactics to sell its merchandise. A retailer may implement pricing strategies
based on the estimated amount that customers are willing to pay (demand-based pricing) or
the retailer may simply multiply the cost price of the product from the manufacturer by a set
percentage (cost-based pricing) (Goworek & McGoldrick, 2015:140). Alternatively, a retailer may
implement pricing strategies comparable to those of similar products sold by competitors
(competition-based pricing) (Goworek & McGoldrick, 2015:140). It is therefore evident that we
can group the various pricing strategies into three broad categories, namely demand-based,
cost-based or competition-based pricing.
Demand-based pricing (or customer-based pricing) strategies are based on the level of demand
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for the product. When retailers use demand-based pricing strategies, customers pay more for a
particular product when demand for the product is higher. Alternatively, customers pay a lower
price when the demand for a particular product is lower (Pride & Ferrell, 2010:586). To implement
demand-based pricing strategies successfully, retailers need to accurately determine the demand
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for a particular product and customer willingness to pay that price (Pride & Ferrell, 2010:586).
The various demand-based pricing strategies retailers can implement include the following:
• Price skimming – Price skimming means to set a high initial price for a product or service
when it is first launched, then lowering the price over time to attract other customers (Wiid,
2012:131). A price-skimming strategy focuses on maximising profits by charging higher
prices for early adopters of a new product, then steadily lowering the price to attract all
other customers (Mack, 2016).
• Penetration pricing – Penetration pricing strategies are the opposite of price-skimming
strategies. With penetration pricing, a marketer charges a very low price for its product to
lure customers away from competitors’ product offerings (Chand, 2016). Penetration pricing
can be an advantage since many customers are attracted by low prices or value for money
and brand switching can easily occur as a result of lower prices being offered (Chand, 2016).
• Price lining – Price lining, also known as product line pricing, is a strategy where products in
a specific group are set at different price points, usually according to the levels of quality
(Anderson, 2017). As there are diverse categories, it helps make purchasing decisions easier. It
is easier for customers to identify which products are superior even if they are unfamiliar with
the specific product. The higher the price, the higher the perceived quality to the customer.
• Multiple pricing – Multiple pricing, or multiple unit pricing, is a pricing strategy that specifies
the item price for multiple items (SAP, ND). For example, products that sell at four for R10,
instead of one item for R2.50. In this example, R10 is the multiple unit price and four is the
multiple unit quantity. In using this pricing method, customers think they are paying less
for multiple items, which is not necessarily the case (Wiid, 2012:132). This pricing strategy is
generally used for products with a low unit value, which are frequently bought, or to clear
stock at the end of a sales season (Wiid, 2012:132).
• Discount pricing – Discount pricing involves having sales and offering sales promotions, such
as coupons, rebates and seasonal pricing or any other promotion-related markdowns. We
discussed these sales promotional techniques in detail in the previous unit. Refer to this
learning unit to see how discount pricing strategies can be used with these sales promotional
techniques
• Unit pricing – In this pricing strategy, prices are set per unit of measure, for example, per
kilogram, litre, metre. (Wiid, 2012:133). Unit pricing is therefore the system of indicating the
cost of products in terms of a standard unit of measure (Dictionary.com, 2017).
• Bundle pricing – Bundle pricing, or a package deal, is when a retailer sells a package of
products or services for a lower price than it would charge if all the items had to be purchased
individually (Merritt, 2016). In other words, bundle pricing is when two or more complementary
products or service offerings are put together to be sold at a single price (Pride & Ferrell,
2014:716). For customers, the overall cost of the purchase shows a saving compared to
purchasing each product individually (Wiid, 2012:133).
• Premium pricing – Premium pricing, or prestige or image pricing, is used when the retailer
consistently prices at, or near the high end of the possible price range to help attract status-
conscious customers (Wiid, 2012:133). Retailers use premium pricing strategies to evoke
perceptions of the quality and prestige of the product. This pricing strategy is often used
and a higher price is charged for a unique brand such as Apple.
• Odd-even (or psychological) pricing – Odd-even pricing is when the retailer ends the price
with certain numbers to influence customers’ perception of the price of the product (Pride
& Ferrell, 2014:717). It is believed that customers perceive the item to be a bargain when
priced at R99.95 instead of R100. Evidently, this strategy was initially used to force retailers
to open cash registers to give customers change. Opening the cash register recorded a sale
and prevented sales personnel from keeping R5 or R10 for themselves without opening
the cash register.
Cost-based pricing is the second category of pricing strategies. With cost-based pricing, the
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retailer adds a rand amount or percentage to the cost of the product or service (Pride & Ferrell,
2010:585). This pricing strategy involves determining and setting a specific mark-up or profit.
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It is the easiest way to calculate at what to price a product or service. Three common types of
cost-based pricing can be implemented, namely cost-plus pricing, mark-up pricing and target-
return pricing:
• Cost-plus pricing – Cost-plus pricing is when the seller’s costs are determined and then a
specified rand amount or percentage of the cost is added to the seller’s cost to establish the
price (Pride & Ferrell, 2010:585). In other words, cost-plus pricing is when the manufacturer
calculates the cost of production incurred and adds a certain percentage of mark-up to it
to realise the selling price (Business Jargon, ND).
• Mark-up pricing – Mark-up pricing is a variation of cost-plus pricing where the percentage
of mark-up is calculated on the selling price (Business Jargon, ND). Mark-up pricing, which
retailers commonly use, is the method of adding a certain percentage of a mark-up to the
cost of the product to determine the selling price of a specific product (Business Jargon, ND).
• Target-return pricing – Target-return pricing methods involve the company setting the price
to yield a required rate of return on investment (ROI) from the sale of products and services
(Business Jargon, ND). This pricing method therefore prices a business based on what an
investor would want to make from any capital invested in the company (Investopedia, 2017).
By using this method of pricing, companies are able to set the price of a product at such
a level that its corporate profit objectives would likely be met if sales continue to run at or
above the amount specified (Business Dictionary, 2017).
Competition-based pricing is the last category of pricing strategies. Where the previous
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two categories focus on own costs or what the customer is willing to pay, competition-based
pricing methods benchmark the prices of a retailer’s competing products and services against
those of its competitors (Business Dictionary, 2017). Companies often set prices only after
researching competitors’ pricing, rather than considering the supply and demand of a product
(Agarwal, 2016). In other words, businesses study the prices of competitors’ products carefully
to benchmark close to competitors. This is done to ensure that a retailer’s prices are competitive
for its customers (Goworek & McGoldrick, 2015:141). When retailers follow a competition-based
approach, they can implement one of the following pricing methods:
• Leader pricing – Leader pricing is a competitive-based pricing strategy aimed at attracting
customers by selling a product or service near the cost of competitors’ prices in the hope
that shoppers would buy other items once they are in the store (Lamb et al., 2009:496). In
other words, leader pricing is used to attract customers to a retail store by advertising and
charging relatively low prices on specific items (Wiid, 2012:137). Market leaders typically
adopt this pricing tactic and expect other companies to follow the benchmark price they
initially set for a product or service (Rao, 2009:33).
• Private label pricing – Private label brands (also known as retailer or store brands), are
typically those products and services manufactured or provided according to the retailer’s
specifications and bear the name of the retailer (Poloian, 2013:59). This approach is more
cost effective and allows retailers more freedom in setting the price of their products.
Well-known private label brands in South Africa include Pick n Pay’s “No Name” brand and
Checker’s “House Brand”.
• Parity pricing – Parity pricing is the practice of setting a price for the product that is comparable
to that of the market leader or price leader in the market (Rao, 2009:30). In other words, parity
pricing is a pricing tactic retailers and companies use to set the prices of their products or
services close to the prices set by the biggest players in the industry (i.e. the market leaders)
(Rao, 2009:30). A parity pricing strategy typically involves setting the prices of products
a little lower or higher than the prices of competitors’ products in the market (Kivirist &
Ivanko, 2015:77).
If you would like to learn more, and better understand how the various pricing strategies are
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used in practice, visit the document below. This attachment contains a detailed explanation of
each of the pricing strategies discussed above, with examples.
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Apart from the various pricing strategies that retailers can implement, they can also use price
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adjustment tactics to attract customers or to create lasting relationships with them. We next
discuss these pricing adjustment methods.
9.5 PRICING ADJUSTMENTS

Once they have chosen and implemented the selling price of products, retailers can still make
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adjustments or changes to these set prices. They can adjust prices for numerous reasons, such
as seasonality, vacation times, creating lasting relationships, for loyal customers, and special
holidays – for instance, increasing the price of chocolates during Easter. Retailers and companies
can implement various pricing adjustment strategies or methods. These pricing adjustments are
listed in Figure 9.3 and we explain each briefly below.
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Figure 9.3: Pricing adjustments
• Markdowns – Retailers and companies commonly use markdowns to attract customers

to purchase a product or service. When the selling price of a product or service is reduced
below the original level, it is called a markdown. Markdowns can help a retail store achieve
its sales plans and objectives without hurting its gross margins (Poloian, 2013:463).
• Promotional pricing – Promotional pricing is a powerful pricing strategy in which the price
of a product or service is drastically reduced for a short period to attract customers and
increase sales volume (MBASkool, ND). Although promotional pricing is usually a short-term
approach, some retailers do use it periodically (Kokemuller, 2016). The primary purpose of
this pricing adjustment strategy is to attract customers to the retailer in the hope that they
would also purchase additional items (Poloian, 2013:458).
• Loss-leader pricing – Loss leading is when products are offered to customers at a price
that is not profitable for the company, but the product is sold at that price to attract new
customers or sell additional products (Investopedia, 2017). The rationale behind this pricing
strategy is to set low prices and reduce profits, but to introduce the product and create
interest among as many customers as possible (Kokemuller, 2016). A company following a loss
leader strategy attempts to introduce new customers to a product in the hope of building
a base for itself. The loss leader pricing strategy can be very successful if executed properly.
• Quantity discounts – Quantity discounts are incentives offered to a buyer that result
in a decreased cost per unit of product or material when purchased in larger numbers
(Investopedia, 2017). In a nutshell, quantity discounts are offered when a customer buys
larger numbers.
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• Cash discounts – Cash discounts are incentives that sellers offer to buyers in return for
paying a bill owed before the scheduled due date (Investopedia, 2017).
• Segmented pricing – Companies or retailers often adjust the price of products or services
to allow for differences in customer markets, products and location. They therefore sell the
same product at different prices in different segments, even though the price-difference is
not based on differences in the cost (Claessens, 2015). The importance of price varies among
customers, and companies often use this variation as a means for segmenting markets (Reid
& Bonjanic, 2010:569).
• Geographical pricing – Geographical pricing is when the price of a product or service is
adjusted based on the location of the buyer. Occasionally the difference in the selling price
is based on the cost of shipping the item to the location (Investopedia, 2017).
Companies can use the following different types of geographical pricing (Adeyemi, 2010;
Lamb et al., 2009:494–496; Wiid, 2012):
- Free-on-board (FOB) origin pricing – Also known as FOB factory or FOB shipping point,
“is a price tactic that requires the buyer to absorb the freight costs from the shipping
point (“free on board”)” (Lamb et al., 2009:494). In other words, the further the buyer
is from the seller, the more the buyer would pay as the shipping and transportation
costs generally increase with the distance merchandise is shipped.
- Uniform delivery pricing – Also known as postage stamp pricing, is when the same price
is charged to all customers. This pricing tactic is used when the manager wants the
total cost of the products, including freight, to be equal for all purchases of identical
products. The seller therefore pays the actual freight charges and bills every purchase
an identical, flat freight charge irrespective of the distance.
- Zone pricing – Zone pricing is a modification of uniform delivery pricing. Instead of using
a unified rate for all deliveries in South Africa, the company divides it into segments or
zones and charges a flat freight rate to all customer in a given zone. When the shipping
distance increases, the price of the product also increases.
- Freight-absorption pricing – This is a geographical pricing strategy in which a company
absorbs all or part of the freight charges in delivering the products (OxfordIndex, 2016).
The seller therefore pays all or part of the actual freight charges and does not pass
them on to the buyer.
- Basing point pricing – With this pricing tactic, “the seller designates a location as a
basing point and charges all buyers the freight cost from that point, regardless of the
city from which the goods are shipped” (Lamb et al., 2009:495).
If you would like to learn more, and better understand how the various pricing adjustment tactics
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are used in practice, visit the document below. This attachment contains a detailed explanation
of the various pricing adjustment tactics with examples.
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Retailers should keep in mind certain factors that can affect the pricing strategy. In the next
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section, we discuss these factors in more detail.
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9.6 FACTORS INFLUENCING THE PRICING STRATEGY

Various factors, both internal and external, can influence the pricing strategy a retailer chooses
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to implement. These factors should also be considered and included when setting the price of
products. We summarise these factors in figure 9.4 and look at each separately in more detail
(Agarwal, 2016; Ghose, 2016).
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Figure 9.4: Factors influencing the pricing strategy
1337 • Supply and demand

Supply and demand refers to the amount of a product or service available and the desire of the
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buyers for it. Therefore, supply represents the amount of products or services that the market
can offer, while demand refers to how much of a product or service is desired by customers
(Investopedia, 2017).
Supply is the amount of products that are available in the market to buy. Demand is the
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number of people who want to buy those products (Adil, 2006:4).
The laws of supply and demand should always be considered when setting the price for products
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and services. If a product or service offering is in high demand, especially if the demand is higher
than the supply, a higher price can be charged (Wickford, 2017). On the other hand, if demand
declines, customers are not willing to pay too much for the product or service and hence the
price of the merchandise is lower (Wickford, 2017). Figure 9.5 below illustrates the concept of
supply and demand when setting the price of a product or service.
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Figure 9.5: Supply and demand curve
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In essence, the price of a product or service is determined by the interaction of supply and
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demand in the market as can be seen from figure 9.5. As the demand for a product increases,
so does the price of the item. Alternatively, if the demand for a product or service were low, the
price of the item would also be lower. When the new iPhones are launched, they have a higher
price tag, since the supply is less than the demand. In this case, Apple can charge a premium
price for its products. Alternatively, if a customer purchases an older version of an iPhone, the
costs would be much lower since the demand is no longer high.
Pricing should remain relatively stable over time. However, promotions can be used to adjust
1344
prices according to the market demand. Once demand has died down and consumers are no
longer interested, retailers can use promotions such as discounts to entice consumers to continue
to buy its product.
1345 Supply and demand in practice:

https://www.youtube.com/watch?v=LwLh6ax0zTE and https://www.
1346
youtube.com/watch?v=ewPNugIqCUM
The above two videos explain the concept of supply and demand with the use of examples.
1347
In these videos, it is clear how the supply and demand of products increase and decrease as
the price of the items increases or decreases.
1349 • Customers
The pricing of merchandise largely depends on the income class of customers a retailer targets.
1350
Retailers can potentially target three types of people, broadly defined as the higher, the middle
and the lower-income class (MyTopBusinessIdeas.com, ND). Low-income earners are generally
the majority of most populations – according to a study done by Standard Bank, 53% of South
Africa’s population are considered lower-income earners (Business Tech, 2016). A product aimed
at the higher-income groups would most likely have a higher price, while products targeted
at the middle class or low-income earners would be priced lower. Higher income-generating
customers may even see products with a low price as not valuable.
When pricing a product it is important to consider into which income group your targeted
1351
customer falls. For instance, cars, such as Porsche, are aimed at the higher-income groups, whereas
certain Kias are aimed more at middle-class customers. These cars are not sold with the same
product pricing, as the consumers’ income class influences the pricing strategy. Higher-income
customers may be more brand conscious, whereas lower-income consumers may be more price
conscious.
In addition to the income class of customers, the demographics also influence the pricing of
1352
products. Demographic factors to consider are the age, gender, location and educational status
of the target market. Demographics are all about who the targeted customer is. For example,
a retailer selling backpacks should consider the age and gender of its target market. Females
between the ages of 13 and 15 have different needs than males between the ages of 60 and 70
(MyTopBusinessIdeas.com, ND).
1353 • Competitors
Competitors are not all the same and their reactions to pricing strategies could be very different
1354
in the market place. The first level of competitors are those that offer technically similar products,
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for example, Sony and Samsung both offer high-definition televisions. There is direct competition
between brands and customers, and pricing can be very competitive. The reactions of these
types of competitors are usually swift – it is necessary to study the major competitors and find
out their objectives to remain competitive in the market. Competitors with similar objectives, for
example to increase market share, swiftly reduce prices to undercut a competitor. For example,
Cell C, MTN and Vodacom regularly try to offer similar products and services often at lower prices
than the other does.
The second level of competition is when products are different, but they serve a similar need that
1355
customers may have. These companies are usually affected less by the pricing of competitors,
but it could affect their strategies negatively. Companies like Canon or Nikon, which provide
cameras, can experience competition from smartphones with good-quality cameras at a lower
price. Even though the products are different, they both serve a similar need – customers can
use the products to take pictures instantly and upload them to computers.
The third level of competition is when different products solve problems in different ways. Companies
1356
may not believe that they would be affected by pricing changes made by competitors, but they
should always stay alert. For example, customers can choose to communicate via WhatsApp calls
instead of data or use e-mails instead of data provided by cellular companies.
A company should take into account all three levels of competition and anticipate reactions
1357
of competitors to its pricing strategies. Learning how to create a competitive product pricing
strategy can ensure that a company stays one step ahead of competitors, and product pricing
can in itself be a competitive advantage.
1358 • Government bodies and laws

When setting prices, marketers must consider and be aware of any laws that are applicable in the
1359
country where the product is being sold. There are often regulations in countries that influence
how prices are set in the market. Since governments and or other regulatory bodies usually
set these regulations, there may be legal consequences for not adhering to the standards or
guidelines. For example, the National Energy Regulator of South Africa (NERSA) aims to regulate
the price of pipeline gas and petroleum. Providers of gas and petroleum have to adhere to the
prices that this government institution sets (Energy.gov.za, ND).
There are typically two types of regulations set by governments, namely price ceilings and price
1360
floors. Price ceilings refer to how high a price may be set. Examples of price ceilings in South Africa
are interest rates charged on credit cards and loans; or fees charged at maximum rates set by
legislation or regulations. The second type of regulation that may occur is price floors, which is
how low a price may be set. The purpose of price floors are to protect the employees who work
for retailers that produce goods and services. Minimum wages are an example of price floors.
Price ceilings are a legal maximum on the price at which a product or service can be set.
1361
Price floors are the legal minimum on the price at which products or services can be sold
(Mankiw & Taylor, 2006:110).
Regulations can also affect the pricing decisions of products sold internationally or imported
1363
from abroad. For instance, the South African Revenue Service (SARS) requires custom duties and
value-added tax (VAT) to be paid on all imported products, which influence the final price of
goods. Failure to adhere to regulations internationally can lead to severe penalties.
217
South Africa has certain legislation in place to protect consumers, such as the Consumer Protection
1364
Act 68 of 2008 and the National Credit Act 34 of 2005. These Acts ensure that consumers have
the right to information and education about the products they buy. We discussed the effect
of the government on businesses in detail in learning unit 1. Refer to this unit to refresh your
memory and see how the government can influence the price you charge for your products.
1365 • Distribution channels

When products go through a variety of intermediaries in the distribution channel, it affects the
1366
price that the final customer pays. Each intermediary adds margins to the price, which pushes it
up, and the final consumer must ultimately absorb it. Consider, for example, the bread you buy at
a local convenience store. Firstly, farmers sell the grain and other ingredients to a producer such
as Sasko Sam. It, in turn, manufactures bread from all the relevant ingredients. Once it completes
the final product, a wholesaler such as Makro may purchase it. Only then does the owner of the
local convenience store buy it. Each intermediary adds its own profit, and you finally pay a higher
price for the bread at your local convenience store.
Retailers that manufacture some of their own products can reduce prices are they do not need
1367
to pay additional margins to middlemen in the process. They in turn pass on their margins to the
final customer. For example, street vendors who make key chains from scrap metal can sell the
product at a higher price, since there are fewer intermediaries that have already inflated the price.
It is evident that direct distribution channels ensure that prices are kept low. Once more wholesalers
1368
and distributors are used, the price gets pushed up for the final consumer. We end this learning
unit, by briefly looking at some of the trends in retail pricing strategies. We discussed the various
distribution channels in detail in learning unit 5 – refer to this unit and consider how the pricing
of the product or service offering can be affected by the type of distribution channel used.
9.7 SUMMARY
Pricing products and services is a complex procedure and is not set in stone. Companies and
1369
retailers use a variety of pricing strategies and tactics, and pricing adjustments to attract customers,
lure them to make a purchase and reach their set objectives. Companies and retailers should
keep in mind the various factors that influence the price of a product or service when setting
the price of these items. As seen from this learning unit, pricing is a difficult task for both the
manufacturer and the resellers (e.g. retailers).
In this learning unit, we discussed the importance of pricing in retailing and the pricing objectives
1370
retailers can set for themselves that should be in line with their overall marketing and business
objectives. We discussed the various pricing strategies retailers can use to lure customers into
purchasing their products or services and still reach their set objectives and be profitable. We
divided these pricing strategies into three broad categories, namely demand-based, cost-based
and competition-based pricing strategies. We discussed the various pricing adjustment tactics
that can be used to further entice customers to purchase the product or services from a specific
seller. We also discussed the factors that influence the pricing of products and services as these
can drastically affect the profitability of a retailer or company.
In the next learning unit, we discuss the evaluation of merchandise performance. We evaluate
1371
all the strategies, tactics, processes and procedures that have been discussed up until now to
establish its success.
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1372 Read the following case study and answer the questions that follow.
1373 MOOKI
A new soft drink brand in a saturated market. Using pricing to enter a new market
1374
Since 2015, top South African soft drink brand Mooki, has been trying to approach the East African
1375
market with initial focus on Tanzania. As part of market research and strategy, it has analysed
its competitors and the kind of soft drinks already available in the market. The Tanzanian soft drink
market is already very saturated, as there is an array of different soft drinks on offer in different flavours
and sizes. Despite some differences in taste and design, Mooki does not have a unique offering to
distinguish it from the existing brands in the market. Mooki had to come up with a unique strategy
to capture the attention of customers and lure them into purchasing its brand instead of the many
other soft drink brands in the market.
Mooki decided to enter the market through a penetration pricing strategy, by offering its soft drink at
1376
a low price during the initial launch phase of the product in the Tanzanian market. The main purpose
was to increase market share and sales volume. In the long term, Mooki’s plans were to reduce the
production costs of the product. However, an increase in the sales volumes did not lead to high
profits, as prices were too low. The result was that the product failed to integrate correctly into the
Tanzanian market. The wrong utilisation of the penetration pricing strategy accompanied by other
factors, such as small investment in creating brand awareness and unreliable distribution partners,
have led to a complete failure of the South African soft drink in the Tanzanian market.
1378 QUESTIONS
1 Explain penetration pricing and provide the advantages and disadvantages of penetration
pricing.
2 Discuss another pricing strategy that the manufacturers of Mooki could have utilised to
increase the market share in Tanzania. Motivate your answer.
9.9 REFLECTION
1 What is pricing and why is it important in retailing?
2 Do you know what elements make up a price?
3 Can you name some of the objectives that an organisation may have when set-
ting prices?
4 Do you know all the factors that can influence the pricing strategy a retailer
or company may use?
5 Are you familiar with the different pricing strategies that are available, and would
you be able to recommend one based on the specific objectives an organisation
may have.
6 Do you understand the various price adjustments retailers and companies can
implement in their daily operations?
219
QUESTION 1
61 Which ONE of the following is NOT a category of pricing objectives?
1 competition-oriented objectives
2 profit-oriented objectives
3 sales-oriented objectives
4 status-quo-oriented objectives
QUESTION 2
62 Fixed costs are …
1 directly associated with the manufacturing and sales of products.
2 not influenced by the amount of products produced or sales levels.
3 evaluated based on per-unit calculation of the stock sold.
4 directly influenced by the percentage of mark-up that is added to the price.
QUESTION 3
63 Pricing a product at R199 instead of R200 is an example of …
1 penetration pricing.
2 odd-even pricing.
3 price skimming.
4 price lining.
QUESTION 4
64 Premium pricing is also known as … pricing.
1 cost-plus
2 discount
3 prestige
4 psychological
QUESTION 5
65 A price tactic that requires the buyer to absorb the freight costs from the ship-
ping point, is BEST referred to as … pricing.
1 free-on-board origin
2 freight-absorption
3 uniform delivery
4 zone
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MNM1506/1
MEMORANDUM
1379
1381 QUESTION 1
Option 1 is correct as competition-oriented objectives are not one of the categories of pricing objectives.
1383
Options 2, 3 and 4 are all incorrect as the categories of pricing objectives are profit-oriented, sales-
oriented and status-quo-oriented objectives.
1385 QUESTION 2
Option 2 is correct as fixed costs are not influenced by the amount of products produced or sales
1387
levels. Option 1 is incorrect since variable costs are directly associated with the manufacturing
and sales of products. Option 3 is incorrect because variable costs are evaluated on a per-unit
basis. Option 4 is incorrect as adding mark-up to the price is not influenced by fixed costs.
1389 QUESTION 3
Option 2 is correct since odd-even (or psychological) pricing encourages customers to respond
1391
on an emotional level. For example, setting the price of a watch at R199 instead of R200. Option
1 is incorrect as penetration pricing is initially setting a lower price than the competitors Option 3
is incorrect because price skimming is charging a high price for exceptional products; customers
are willing to pay a premium to get the product first. Option 4 is incorrect as price lining is a
strategy where products in a specific group are set at different price points, usually according
to the levels of quality.
1393 QUESTION 4
Option 3 is correct as premium pricing, or prestige or image pricing, is used when the retailer consistently
1395
prices at, or near, the high end of the possible price range to help attract status-conscious customers.
Option 1 is incorrect as cost-plus pricing is when the seller’s costs are determined and then a specified
rand amount or percentage of the cost is added to the seller’s cost to establish the price. Option 2
is incorrect as discount pricing involves having sales, offering sales promotions, such as coupons,
rebates and seasonal pricing or any other promotion-related markdowns. Option 4 is incorrect
as odd-even (or psychological) pricing encourages customers to respond on an emotional level.
221
1397 QUESTION 5
1398
Option 1 is correct as free-on-board origin pricing is a price tactic that requires the buyer to absorb
1399
the freight costs from the shipping point (“free on board”). In other words, the further the
buyer is from the seller, the more the buyer would pay as the shipping and transportation costs
generally increase with the distance merchandise is shipped. Option 2 is incorrect as freight-
absorption pricing is a geographical pricing strategy in which a company absorbs all or part of
the freight charges in delivering the products. Option 3 is incorrect as uniform delivery pricing
is when a company charges all customers the same price. Option 4 is incorrect as zone pricing
is a modification of uniform delivery pricing. Instead of using a unified rate for all deliveries in
South Africa, the company divides it into segments or zones and charges all customers in a given
zone a flat freight rate.
222
TOPIC 5
Merchandise evaluation
AIM
To understand the various means of evaluating the performance of merchandise in a retailing
1401
environment in a practical and relevant manner.
LEARNING OUTCOMES
• explain the importance of evaluating a merchandise strategy and discuss and apply the
relevant measurement tools for this purpose
TOPIC CONTENT
1403 Learning unit 10: Evaluating merchandise performance
223
Learning unit 10
Evaluating merchandise performance
Contents

Learning outcomes
Key concepts
10.1 Introduction
10.2 The characteristics of product performance evaluation
10.2.1 Product profit
10.2.2 Profitability
10.2.3 Sales volume
10.2.4 Markdowns
10.2.5 Productivity
10.2.6 Shrinkage
10.2.7 Cost reduction
10.2.8 Negotiation
10.2.9 Availability
10.3 Qualitative product performance measures
10.4 Summary
10.6 Reflection

In the previous learning units, we discussed in depth how to plan and source merchandise,
1404
by discussing merchandise planning and selection (learning unit 3), category management
(learning unit 4), and merchandise logistics and supply (learning unit 5). To determine whether
the merchandise that you have selected and sourced, and supply in your store is doing well, you
need to evaluate and measure its performance. It is necessary to gain an understanding of the
merchandise that has performed well and the merchandise that has not performed according to
the set objectives. In this learning unit, we conclude with a discussion about the measurement
and evaluation of merchandise performance.
In this learning unit, we discuss the various means of measuring and determining the performance
1405
of merchandise. We can measure the success of merchandise by means of numerous characteristics,

namely product profit, profitability, sales volume, markdowns, productivity, shrinkage, cost
reduction, negotiation and availability of stock. We consider how each of these characteristics can
be used to measure and evaluate the performance of products – whether it is viable for retailers to
keep the specific item in stock, or perhaps to remove the item from the assortment completely. The
learning unit concludes with a brief discussion about the various qualitative product performance
measures retailers can implement to evaluate the performance of products from the customers’
point of view.
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1407
LEARNING OBJECTIVES
After completing this study unit, you should be able to
• identify and critically discuss the characteristics of evaluating the performance of a product
• explain product profit and calculate the gross and net profit margin of a product
• explain profitability as a means of evaluating the performance of a product and calculate
the gross margin return on investment (GMROI)
• define sales and sales volumes and explain how sales volumes can be used as a means
to evaluate the performance of a product
• discuss markdowns and explain how these can be used to increase the sales volume and
profitability of the retailer
• explain profitability as a means of evaluating the performance of products in a retail
environment and calculate the productivity of a product
• explain the impact of shrinkage and cost reduction on the success of a retailer
• explain how negotiations can be used to reduce the cost of products and evaluate the
performance of products
• discuss the importance of stock availability to the success of a retailer
• list and explain the qualitative performance measures retailers can use to evaluate the
performance of the product item
225
KEY CONCEPTS
• Product profit • Sales volume

• Gross profit margin • Price elasticity
• Net profit margin • Markdowns
• Cost price • Productivity
• Selling price • Shrinkage
• Profitability • Cost reduction
• Stock-keeping unit (SKU) • Negotiation
• Gross margin return on investment • Availability
(GMROI) • Stock cover
• Direct product profitability (DPP) • Qualitative product performance
• Activity-based costing (ABC) measures
• Sales
10.1 INTRODUCTION
To be successful, a retail organisation that operates in a highly competitive market environment,
1408
should manage the products it carries in its stores in a way that is consistent with the organisation’s
overall corporate objectives. For this reason, organisations should strive to provide product
ranges that appeal to customers, who could in return offer these retail organisations a satisfactory
level of profitability and high sales volumes. It is also vital that levels of return are achievable
and sustainable in both the short-term and long-term – this is a desirable result of the product
management process for any retail outlet wishing to survive the competition.
As previously mentioned, it is imperative that retailers stock the correct merchandise, assortment
1409
and quantity at the right price to be profitable. We discuss the characteristics for evaluating the
performance of products in a retail environment in this learning unit. These characteristics include
product profit, profitability, sales volume, markdowns, productivity, shrinkage, cost reduction,
negotiation and the availability of stock. We describe each characteristic and discuss how each
can be used practically to evaluate the performance of merchandise. Should products not
perform well in the specific retail outlet, retailers should consider removing the item from their
assortment, or implement cost reductions or markdown tactics to lure customers into the store,
or negotiate with suppliers for better prices. The learning unit concludes with a brief discussion
about the qualitative ways to measure the performance of products.
10.2 THE CHARACTERISTICS OF PRODUCT PERFORMANCE

EVALUATION
For a retailer to be successful, it needs to produce, sustain and grow its levels of return in terms
1410
of profitability, sales, increased productivity, reduced shrinkage and operational costs. However,
retailers need to focus on other areas if they are to remain afloat. We summarise the characteristics
of product performance evaluation in figure 10.1 below and then discuss them in detail.
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MNM1506/1
1411
Figure 10.1: Characteristics of product performance evaluation
10.2.1 Product profit

The first characteristic in product performance evaluation entails looking into the profit margin
1412
earned on each product item that the retail outlet carries in its product or merchandise mix. Most
retail outlets opt to use the less-complicated profit analysis tool, namely gross margin. Schindler
(2011) defines the gross margin (or gross profit margin) of a product as the amount of a company’s
sales revenue that remains after subtracting the cost of goods sold. Thus, gross margin is the
difference between the cost price and the selling price of the same product item – the retailer
should aim for the margin to be as big as possible. Moles et al. (2011) define the net profit margin
as the percentage of sales remaining after all the company’s fixed expenses, including interest
and tax, have been deducted. We discussed this in detail in learning unit 8 – refer to this unit to
refresh your memory.
We show the formulas for calculating the gross margin, as well as the gross and net profit margin
1413
below. Make sure you know how to apply these formulas practically.
1414 Gross margin (gross profit or mark-up) = Selling price – Cost price
Sales (revenue) – Cost of sales
Gross profit margin =
1415
1416
Sales (revenue)
Net income (profit for the year)
1417 Net profit margin =
1418
Net sales
Gross profit margin (or the gross margin) is the difference between revenue and cost before
1420
accounting for certain other costs. Generally, it is calculated as the selling price of an item,
less the cost of goods sold (AMA, 2016).
Net profit margin (or net profit) is the profit or loss at the end of the financial period. It is the
1421
operating profit plus other expenses (Wiid, 2012:98).
A high ratio of gross profit to sales is a sign of good management as it implies that the cost of
1423
production of the company is relatively low (Khan & Jain, 2010). You also need to distinguish
between the cost price, which is the price a retailer pays a supplier, and the selling price, which
is the price the customer pays the retailer. Note that in a retail business, gross margin can also
227
be referred to as the mark-up price of the product item. Product profit is usually expressed as
a percentage. An example would be a shoe store with a pair of red sneakers selling for R1 000,
while the cost price for the shoes is R800. To determine the gross margin, deduct the cost price
from the selling price. The gross profit is thus, R1 000 – R800 = R200.
Cost price is the amount of money it costs a manufacturer to produce a specific product or
1424
provide a service, without any profits being added (WhatIs.com, 2017).
The selling price is the actual and final price of a product or service that a company or retailer
1425
charges a purchaser to buy the item (InvestorWords, 2017).
10.2.2 Profitability
Profitability is the characteristic that is used as an instrument to monitor and evaluate product
1427
management performance. Profitability refers to activities that a retail outlet undertakes in

achieving long-term profits from the sales of its product or merchandise mix and to secure a
steady recovery of the cash invested in the retail outlet’s stock (Botha et al., 2011:71). We now
focus on the profit a product generates to contribute to the costs of running a retail outlet. Note
that the profit generated by each product usually depends on the following two key variables:
the first has to do with the gross profit margin applied per item, based on the selling price set,
while the second is concerned with the amount of products of a particular type that is sold.
This is usually referred to as the sales volume and is expressed as the number of items sold in a
particular period (Botha et al., 2011:71).
Using profitability as the tool for monitoring product performance has enabled most retailers
1428
to conduct profit margin analysis at stock-keeping unit (SKU) level or department level – they are
able to understand the contribution of every single product item in the store to profits and to
set prices for each individual item (Botha et al., 2011:71). When selling products, retailers need
to realise that some products sell frequently and only generate a tiny profit margin, whereas
others are slower sellers, but yield a higher profit margin. To compare the overall profitability of
its products with differing rates of sale and profit margins, a retail outlet should calculate and
apply a measure referred to as the gross margin return on investment (GMROI) (Botha et al., 2011:71).
GMROI is a less complicated calculation – when a retailer multiplies a product’s margin by its rate
1429
of sale within a certain period (sales turnover), it allows the retailer to compare the amount of
profit generated on a product line with the level of investment made in the stock (Botha et al.,
2011:71). Varley (2006) agrees that the GMROI calculation is a simple analysis that indicates the
products making the largest contribution to the retailer’s overall gross profits in relation to the
financial investment made in that stock. We can draw the following conclusion by analysing the
GMROI calculations: the higher the GMROI, the more satisfactory the contribution of the product
item to the retail outlet’s profitability.
Total gross margin (rand) x 100

1430 GMROI =
1431
Average inventory at cost (rand)
GMROI is an inventory profitability evaluation ratio that analyses a company’s ability to turn
1433
inventory into cash above the cost of the inventory (Investopedia, 2017).
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GMROI is a simple analysis that helps the retailer identify products that make the largest contribution
1435
to its overall gross profits in relation to the financial investment made in that stock. However,
two additional refined retail product profitability measures usually take into consideration the
costs that can be attributed to the various areas of product management, namely direct product
profitability (DPP) analysis and activity-based costing (ABC) analysis.
DPP is a method to measure a product’s handling costs from the time it reaches the warehouse
1436
until a customer buys it in the retail store (Marketing Binder, ND). DPP is normally used in grocery
stores to measure a product’s handling costs – it takes into account every aspect of product
costs, including receiving, moving to storage, paperwork, selecting, checking, loading and space
costs. (Marketing Binder, ND). This analysis method can help increase a retailer’s profitability by
calculating all costs associated with a product. DPP analysis represents a product’s adjusted gross
margin less its direct product costs (Farris et al., 2015).
ABC analysis, on the other hand, focuses on the activities performed to produce products. With
1437
this costing analysis, the costs are first traced to the activities and then to products. Activities
therefore become the focal point of cost accumulation. The ABC analysis assumes that activities
are responsible for the incurrence of costs and products create the demand of activities (Lal &
Srivastava, 2009:324). The ABC method therefore considers the resources used per activity to
determine the selling price of the merchandise (CGMA, 2013).
Activity 10.1
Simply Delicious is a home industry store in a busy mall. Its biggest seller is a milk tart using a
50-year old recipe. It costs R11 to make the milk tart. If the store sells the milk tart for R18.50,
how much gross profit would the store make per milk tart sold?
22 Feedback
Gross margin (gross profit or mark-up) = Selling price – Cost price

= R18.50 – R11.00
= R7.50
Simply Delicious would therefore make R7.50 profit from each milk tart it sells.
10.2.3 Sales volume

The next characteristic that can be used to evaluate product performance, is the sales volume
1438
– the amount of items being sold in a certain period. A sale can be described as a transaction
between two parties where the buyer receives goods, services and/or assets in exchange for
money (Investopedia, 2017). A sale can also refer to an agreement between a buyer and seller
on the price of commodities or terms of the transaction. A sale is in essence a contract between
a buyer and seller of the selected products and/or services. The sales volume is the quantity or
the number of products sold or services provided by a company or retailer in a particular period
(Cambridge Dictionary, 2017b). For instance, a retailer sells 50 units of milk a day, or 100 loaves
of bread a week.
229
Retailers can use the sales volume as a tool to monitor the performance of a specific product item.
1439
Selling large quantities of a specific product helps the retailer generate an increased quantity of
cash flow – this facilitates the payment of daily expenses, because there is cash in hand (Botha
et al., 2011:70). Another benefit of a high sales volume is that it enables a retailer to move stock
quickly off the shelves, thus avoiding stock becoming outdated. It also facilitates the process of
stock assortment based on seasonal demand. Bear in mind that the retailer uses sales figures to
keep track of product performance by making comparisons over time (Botha et al., 2011:70). For
instance, a retailer can compare the sale of Easter eggs in 2016 to the sale of Easter eggs over the
same period in 2017, to determine whether there was a positive growth in sales.
A retailer has to decide whether to sell its products at a high or a low price, which usually
1440
determines and influences the rate of demand at which these products are bought. Retailers
need to consider the price elasticity of the items, which has to do with the extent to which the
demand for a product item responds to a change in the price (Botha et al., 2011:70). Tucker (2008)
explains that price elasticity measures the degree of consumer responsiveness, or sensitivity, to
a change in price. Price elasticity is therefore the relationship between a change in the quantity
demanded of a particular product and a change in its price (Investopedia, 2017). We discussed
pricing merchandise in learning unit 9 – refer to the learning unit to refresh your memory on
the various strategies and tactics of setting retail prices.
10.2.4 Markdowns
A markdown is the next characteristics that retailers can consider to evaluate the performance
1441
of a product item. Donnellan (2014:246) defines a markdown, or price reduction, as a downward

reduction of the retail price. Retailers and companies generally use markdowns to attract
customers and entice them to make a purchase. A markdown usually entails the retailer reducing
or decreasing the original retail price to stimulate the sale of the merchandise mix that it carries
in the store (Botha et al., 2011:72).
A retail organisation uses markdowns or price reductions to monitor its prices according to the
1442
sales pattern of the merchandise its keeps in the store. For example, if the sales patterns were
subject to fashion trends and seasonality, the retailer would reduce the price to clear out the
old season’s stock to make room for the new season’s stock. In addition, when the retail store
anticipates a new fashion trend that is expected to take consumers by storm, the retailer applies
the measure of reducing prices on old fashion merchandise to create space for the new fashion
items. An example would be end-of-season sales in retail stores. Markdowns lead to lower profits
as the products are sold at a lower price, but could increase sales as the aim is to clear excessive
stock. Clodfelter (2012) states that for a markdown to be effective, it must be large enough
to encourage the customers to buy the product. We discussed markdowns and calculating
markdowns in learning unit 9.
10.2.5 Productivity
To monitor and evaluate the performance of products, the retailer has to consider the productivity
1443
of space used in selling certain product items (Botha et al., 2011:72). Sales volume and profits in
retailing are often expressed in terms of the productivity of space, of which the most commonly
used measure is the amount of the total sales generated per square measure of space (Botha et
al., 2011:72). The basic objective of any institution, to operate optimally, would be to obtain the
highest possible return with the lowest possible use of production resources (Hugo & Badenhorst-
Weiss, 2004). The goal should therefore be to function as productively as possible. A retail store
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is able to achieve this by ensuring that it sells enough stock in the retail space. Dunne et al. (2014)
confirm that most retailers that decrease their shop size do so due to a decrease in productivity, so
the aim is to grow productivity.
1444 The formula for determining the productivity of retail space is as follows:
Productivity = Total sales ÷ Square metres of store

1445
For example, assume that the total floor size of a spaza shop in Johannesburg is thirty square
1447
metres (30m2). The spaza shop sells 30 bags of 2.5k g maize meal per day, equating to R800 in
rand value. The product performance can therefore be evaluated by means of the productivity
of the maize meal sales in the 30m2 spaza shop and calculated as follows:
1448 Productivity = Total sales ÷ Square metres of store
1449 = R800 ÷ 30m2
1450 = R26.67
Therefore, the productivity of maize meal sales in the spaza shop is R26.67 per square metre of
1451
store space. In other words, if the store sold more 2.5kg bags of maize meal, it would result in
higher productivity.
10.2.6 Shrinkage
The next characteristic that retailers can consider to evaluate the performance of a specific product
1452
is the impact of shrinkage on the overall sales and profitability of the retail store. Shrinkage has
to do with part of the stock removed from a retail outlet without any payment received for the
item (Botha et al., 2011:72). Shrinkage can occur due to theft, and may involve damage to goods
that can either be sold at reduced prices or have to be destroyed. Shrinkage can therefore occur due
to damage, pilferage or theft. For instance, a chocolate bar stolen by a customer in a convenience
store – the retailer would not receive any money or profit from the item.
The impact of shrinkage involves the value of stock shrinking or being reduced with no compensating
1453
income from sales (Botha et al., 2011:72). This reduces the profitability of the retailer – it invested
cost and certain resources to buy the product, but is unable to receive any return for its investment.
According to Dempsey (2011), shrinkage results in numerous losses, including a revenue shortfall,
an inventory shortage, loss of the cash invested in the merchandise, freight charges, productivity
on the part of the people processing the shipments, and a portion of any other fixed or variable
costs incurred to sell the items.
Nowadays, retailers can use closed-circuit television systems (CCTVs) and electronic tagging to
1454
avoid the shrinkage of merchandise. For example, a jewellery store has cameras that monitor the
movements of customers in the store, as well as electronic tags on watches that trigger the alarm
if not removed before leaving the store.
1455
231
10.2.7 Cost reduction
Cost reduction refer to the process of looking for, finding and removing unwarranted expenses
1456
from a business to increase profits without having a negative impact on the product quality
(Business Dictionary, 2017). Here we focus on a number of areas where the retailer can reduce
costs in its buying and merchandising functions. We look at a few many ways a retailer can reduce
its costs (Botha et al., 2011:72):
• The costs of developing new products – In this instance a company would develop new
products that cost less than its existing products.
• The costs of undertaking promotional activity – This is where a retailer would consider
implementing promotional activity at the supplier’s cost to reduce the amount of money
the retailer has to invest. This would also draw more customers that would increase sales.
• The costs associated with poor replenishment – It is vital that there should be sufficient stock
on the store’s shelves, as empty shelves result in no sales.
• The costs resulting from poor assortment – The store needs to carry the range that its customers
would want to buy. If it does not carry the correct assortment, the customers are not able
to buy what they want/need. It is vital to carry the correct range, and not invest capital in
products that would only sit on the shelf.
Another way to improve profit margins without the need to increase the price of merchandise
1457
is to reduce the buying-in price of a product, or from an alternative point of view, squeeze the
supply base. In other words, the buyer (the retailer) can request a lower cost price to keep the
selling price as is after a price increase from the supplier. According to Bragg (2010), cost reduction
is the easiest and most certain way to increase profits in the short term, and can be a major driver
of long-term growth if handled properly. One of the primary responsibilities of the retail buyer is
to source the best deals from its suppliers. For example, a restaurant gets quotations from more
than one supplier for steak and then chooses the most affordable quotation – this allow the chef
to prepare quality dishes, but makes more profit for the restaurant.
10.2.8 Negotiation
According to Dunne et al. (2014), the climax of a successful buying plan is active negotiation, which
1458
involves finding mutually satisfying solutions for parties with conflicting objectives. The conflict
usually arises from the buyer wanting the lowest price possible, while the supplier prefers the
highest price to ensure that its company banks enough profit. The retail outlet should be able to
negotiate skilfully for the merchandise it intends buying from the supplier. Usually negotiations
occur between two people representing the retail buyer and the retail supplier. Conversely, the
negotiation may involve a group of people, including product developers, product managers,
logistics managers and marketing managers. There are three stages involved in the negotiation
process. The first is the informal or informal preparation between the two parties. The second
stage involves the actual meeting between the buyer and seller. In the third stage, the retail
buyer and supplier have a series of meetings about the implementation of the agreement and
prepare contract documents about the supply of the right goods, at the right time and place,
with the agreed price on the invoice.
Wiid (2012:76) lists the following purchase terms that should be considered when negotiating
1459
the purchase:
• The delivery date of the store’s deliveries – Suppliers usually have strict ordering and delivery
days for its customers to maximise efficiency. For example, a beverage truck only delivers
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during a short time frame on a Tuesday and Friday. The buyer needs to ensure that it orders
on the correct, nominated day to receive delivery on the specified delivery day.
• The quantity purchased – The buyer and supplier should agree on the quantity that the
store would order. The amount is not set in stone, and can fluctuate as demand increases
or decreases. The supplier often sets growth targets to incentivise the store to grow.
• Price and payment arrangements – The payment terms should be determined. The buyer and
supplier would decide either on cash on delivery payments or extended payment terms,
for instance 30 days after delivery of stock.
• Discounts – The supplier may offer the store a bulk discount if it orders more than a specific
number of cases of stock.
• The form of delivery – The method of delivery should be decided, for example, by train or truck
• The point of transfer of ownership – This is where the stock responsibility shifts from the
supplier to the store – usually on acceptance of the delivery.
To enable the retailer to evaluate a product’s contribution to its profitability in comparison with
1460
other products in a range, the cost price of all products should start on an equal playing field.
The retailer should take into account that the prices quoted by suppliers may be subject to a
great deal of variation, because of discounts, the cost of additional services and allowances for
promotional activities. It is imperative that any profit comparison undertaken should calculate
the cost price in the same way and include the pricing variables listed in the preceding sentences
in the individual product profit equation (Botha et al., 2011:72–73).
For example, a new hardware store will be opening in Soweto in April. Many different suppliers
1461
supply hardware to the store, however, Whale Building Suppliers wants to be the chosen supplier.
To become the chosen supplier, John, the sales manager of Whale Building Suppliers responsible
for the Soweto area, needs to follow certain steps. John should set up a formal meeting. In
preparation for the meeting, John should consider the ideal product mix, the best possible pricing
and rebates he could offer. In the formal meeting, John should propose the product mix, pricing
and discounts. As the owner of the hardware store may not be happy with the proposal, a series
of meetings should take place until the store and John are both happy and reach an agreement.
Activity10.2
Fruit Palace is a fruit and vegetable store that operates in Bloemfontein. The store has been
open for seven years and enjoys immense support from the local community. Recently the
store has received complaints about the quality of the apples it sells in the store. The owner
of the store, Themba, decides to source apples from an alternative supplier. Peter, the owner
of Fruit4Africa, supplies fruit and vegetables in the Gauteng area and wants to expand to the
Free State. Themba puts a lot of effort into preparing for the negotiations. Name and discuss
the terms that Themba should prepare for her meeting with the owner of Fruit4Africa.
23 Feedback
Themba should prepare the following for her discussion with Peter:
 The delivery date – Seeing that Bloemfontein is 400 km away from Gauteng, Peter would
not be able to deliver fresh produce every day.
 The quantity purchased – Peter and Themba need to negotiate the minimum order
quantity as they are quite far apart geographically. The order needs to be big enough to
enable Themba to achieve an acceptable profit.
233
 Price and payment arrangements – Themba wants to pay 60 days from being invoiced,
while Peter prefers cash on delivery. The two of them agree on a 30-day after-invoice
payment.
 Discounts – Peter is willing to offer a 5% discount if the order exceeds 100 cases of prod-
ucts. Themba agrees to this.
 Form of delivery – Themba and Peter agree on the form of delivery that is suitable for
both parties.
10.2.9 Availability
Availability is referred to as a number of product items that are immediately obtainable on the
1462
shelves in the retail outlet at any one time – it indicates the extent to which an intended product
assortment is in stock for customers to buy (Botha et al., 2011:73). It is vital that the store has
products on its shelves at all times to meet the demand of its customers. This form of stock
availability means that the retailer always has to strive for high availability of stock. Bear in mind
that in terms of monitoring and evaluating product performance, retailers are increasingly using
availability as a performance tool in a saturated and competitive market environment (Botha
et al., 2011:73).
The other availability measure is often referred to as a stock cover – in other words, the amount
1463
of stock of a product line currently on the shelf or in the supply chain, say, at a distribution
centre, in comparison with the rate of sales. A retailer should aim to have stock of all products
at all times. This is not always possible due to various reasons, for instance, the supplier being
out of stock, the supplier delivering late or the store experiencing higher sales volumes than
expected (Botha et al., 2011:73). An example is Rooibos tea being out of stock due to the recent
South Africa drought.
Availability as a measurement tool focuses on the perspectives of both the retailer and the
1464
consumer as an evaluation method. For example, poor availability of merchandise affects retail
sales and profits in the short term, and customers’ loyalty to the outlet in the long term. Apart from
measuring the success of products from the retailer’s perspective, retailers should also consider
the consumer’s perspective on the success of a product. In the next section, we briefly discuss
the qualitative performance measures that retailers can consider in evaluating the performance
of their merchandise.
10.3 QUALITATIVE PRODUCT PERFORMANCE MEASURES

In our previous discussion, we focused on the sales volume and profitability of the retailer to
1465
evaluate the performance of the merchandise sold in stores. These measures are from the retail
outlet’s perspective of the performance of the merchandise. However, the customer does not
care about the sales figures and profitability of a product. It is essential for the retail outlet to
monitor its product performance from the customers’ perspective, not only by focusing on the
availability factors, but also by taking into consideration other characteristics that appeal to the
customer. Note the following ways of expressing the customer’s perspective of retail performance
(Botha et al., 2011:73):
• The retailer’s reputation – The retailer’s reputation entails the opinion a customer has of the
retailer.
• The retailer’s image – The image is the way the customer sees the retailer, thus very similar
to the reputation.
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MNM1506/1
• The retailer’s brand value or equity – The brand value entails how recognisable and memorable
the retailer is in the customer’s mind.
The above items have something in common – performance from a customer’s point of view
1466
is broadly defined, and is measured on a number of attributes that contribute to the overall
evaluation. For example, in looking at the store’s image, different elements can be used for
general evaluation, some of which are in the direct control of product management, such as
the price, quality and range of merchandise. Other areas are indirectly associated with product
management, and include factors relating to promotions and advertising, store atmosphere and
layout, and reputation for adjustment. To evaluate consistency or focus on any problem areas,
a retailer needs to consider customer impressions not only in relation to the whole product
range, but also on a category or department basis. Bear in mind that customer impressions,
unlike profit margins and sales figures, are difficult to quantify. Consumer research techniques,
such as focus groups or surveys, would help a retailer develop an objective understanding of
customer perceptions. When the product manager of a retail organisation makes decisions
about the assortment and quality of merchandise to be sold in the store, it should base these
deliberations on the corporate overall positioning strategy, for example, the option of whether
to charge a premium price or everyday low price (EDLP) orientation.
In the process of monitoring and evaluating product performance, many retail product managers
1467
face one of their primary challenges in that they have to give meaning to and make sense
of the various performance indicators in whatever form of feedback that occurs. The retail
product manager may be required to work through a detailed set of sales figures, direct product
profitability (DPP) reports or letters of complaint from customers because their favourite brand
has been withdrawn. Retail product managers have challenging jobs – they need analytical
skills and objectivity when optimising product ranges to achieve both short-term and long-term
performance objectives.
10.4 SUMMARY
Throughout the study guide, we discussed various factors that can be implemented to increase
1468
the success of a retailing business. In this learning unit we identified nine characteristics that
retailers should consider to evaluate the performance of the specific product item, namely
product profit, profitability, sales volume, markdowns, productivity, shrinkage, cost reduction,
negotiation and availability of stock. We also briefly discussed qualitative performance measures
where the performane of products are considered from the customer’s point of view. After a
retailer has evaluatated the performance of each product item in its store, it should decide
whether to keep the item, implement alternative strategies or tactics in an attempt to further
increase sales, or remove the item from the assortment completely. It costs the retailer money
to acquire and keep stock of products, even if they do not sell will. The performance of products
should therefore be carefully considered.

1469 Read the case study below and answer the questions that follows:
Read the “Building Brand equity at Heinz” article that is available online on http://businesscasestudies.
1470
co.uk/heinz/building-brand-equity-at-heinz/#axzz4ObqLwmdJ and see how Heinz used its brand

reputation to evaluate performance.
235
1472 QUESTIONS
1 What effect did Heinz’s brand image have on its performance?
2 How can Heinz as a supplier assist the retail store to be more profitable?
10.6 REFLECTION
Before you conclude the learning unit, reflect on the following questions:
1 Do you have a clearer understanding of the characteristics of product perfor-
mance evaluation?
2 Do you understand profit and GMROI and are you able to calculate both?
3 Do you understand the negotiation process?
4 Do you understand the qualitative performance measures that have an impact on
the retail organisation and understand the importance of these?
5 What did you find interesting in this learning unit? Why?

QUESTION 1
68 If a store sells a bunch of flowers for R100, and the cost price is R70, what would
the gross profit of the bunch of flowers be?
1 R100
2 R30
3 R70
4 R170
QUESTION 2
69 Assume that the total floor size of a spaza shop is eight square metres (8 m2). The
spaza shop sells 50 loaves of white bread per day, equating to R300 in rand value.
Calculate the product performance by means of the productivity of the sales.
1 R400
2 R6.00
3 R6.25
4 R37.50
QUESTION 3
70 Sarah own a small bakery where she sells sweet and savoury items. Her biggest
seller is a chocolate brownie. It costs Sarah R15 to make the chocolate brownie
and she sells it for R28.50. How much gross profit would Sarah make per choco-
late brownie sold?
1 R15.00
2 R13.50
3 R43.50
4 R7.50
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MNM1506/1
QUESTION 4
71 Which of the following options are reasons why shrinkage occurs?
72 a damage to packaging
73 b late delivery
74 c pilferage of products
75 d theft of stock
1 ab
2 bd
3 abc
4 acd
QUESTION 5
76 Which ONE of the following options is NOT a qualitative measure to determine
the performance of products?
1 the retailer’s brand value
2 the retailer’s image
3 the retailer’s profitability
4 the retailer’s reputation
1473 MEMORANDUM
1475 QUESTION 1
1477 The gross profit can be calculated as follows:
1478 Gross profit = Selling price – Cost price

1479 = R100 – R70
1480 = R30
1482 QUESTION 2
1484 Option 4 is correct as the productivity can be calculated as follows:
1485 Productivity = Total sales ÷ Square metres of store

1486 = R300 ÷ 8 m2
1487 = R37.50
The productivity of white bread sales in the 8 m2 spaza shop is R37.50 per square metre of store
1488
space.
237
1490 QUESTION 3
1492 The gross profit can be calculated as follows:

1493 Gross profit = Selling price – Cost price
1494 = R28.50 – R15.00
1495 = R13.50
1497 QUESTION 4
Option 4 is correct as shrinkage can occur because of theft, and may involve damage to goods that
1499
can be sold either at reduced prices or have to be destroyed. Shrinkage can therefore occur due to
damage, pilferage or theft. Late deliveries is therefore not a reason for stock shrinkage.
1501 QUESTION 5
1502
Option 3 is correct as using the profitability of a retailer is a quantitative means of determining the
1503
performance of a product, not a qualitative means. Options 1, 2 and 4 are all incorrect as qualitative
measures to determine the performance of a product include examining the retailer’s reputation, image
and brand value.
238
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APPENDIX A: GLOSSARY
AANHANGSEL A: GLOSSARIUM
1505
1506 SEHLOMATHISO SA A: TLELOSARI
Learning unit 1 / Leereenheid 1 / Yuniti ya ho ithuta ya 1 / Iyunithi yesifundo 1

• Retailing refers to a set of business activities carried out to accomplish the exchange of goods
and services for the purpose of personal, family or household use, whether performed in a
store or by some form of non-store retailing (AMA, 2016). Retailing refers to a commercial
transaction in which a buyer intends to consume the goods or service through personal,
family or household use (Business Dictionary, 2016).
• Kleinhandel verwys na ‘n stel sake-aktiwiteite wat uitgevoer word vir die ruil van goedere
en dienste vir persoonlike, gesins- en huishoudelike gebruik, hetsy gedoen in ‘n winkel of
deur niewinkelkleinhandel (AMA, 2016). Kleinhandel verwys na ‘n kommersiële transaksie
waarin die koper beoog om goedere of dienste deur persoonlike, gesins- of huishoudelike
gebruik te verbruik (Business Dictionary, 2016).
• Ho rekisa (Retailing) ho bolela sehlopha sa ditshebetso tsa kgwebo tse etswang ho fihlella
phetisetsano ya thepa le ditshebeletso bakeng sa ho sebediswa ke motho, lelapa kapa ho
sebediswa ko ntlung, di kaba di etswa ka lebenkeleng kapa ka mokgwa o mong wa thekiso
e seng ya ka lebenkeleng (AMA, 2016). Ho rekisa ho bolela tshebetso ya kgwebo eo ho yona
moreki a ikemiseditseng ho sebedisa thepa kapa tshebeletso ka boyena, lelapeng la hae
kapa ntlong ya hae (Business Dictionary, 2016).
• Intengiso ichaza uhlu lwemisebenzi yebhizinisi eyenziwayo uma kuthengiselwana
izimpahla nezinsiza/amasevisi ukuze zisetshenziswe umuntu, umndeni noma umuzi, lokhu
kuthengiselana kungezeka esitolo noma ngendlela ehlukile engeyona isitolo (AMA, 2016).
Intengiso ichaza uhwebo, lapho umthengi ehlose ukuthenga impahla noma isevisi ukuze
isetshenziswe umuntu, umndeni noma umuzi (Business Dictionary, 2016).
• Supermarkets are large self-service retail outlets that offer a complete range of food and
beverage products, as well as general household items, such as cosmetics, linen or non-
prescription drugs (Pride et al., 2015:380).
• Supermarkte is groot selfdienskleinhandelwinkels wat ‘n volledige reeks eet-
en drinkgoedprodukte aanbied, insluitend algemene huishoudelike items soos
kosmetiekprodukte, linne en nievoorskrifmedisyne (Pride et al., 2015:380).
• Disuphamakete ke mabenkele a maholo moo motho a ithusang a fanang ka letoto le
felletseng la dihlahiswa tsa dijo le dino, hammoho le dintho tse tlwaelehileng tsa tshebediso
ya ka ntlung, jwaloka ditlolo, mealo kapa meriana e sa fanweng ka lengolo la ngaka (Pride
et al., 2015:380).
• Amasuphamakethe lezi yizitolo ezinkulu lapho umthengi azithathela lokho akufunayo,
kanti lolu hlobo lwezitolo zithengisa inhlobonhlobo yokudla kanye neziphuzo, kanye
nezinto ezisetshenziswa endlini, okunjengezinto ezigcotshiswayo, izimpahla zamalineni
yemibhede kanye namakhambi ehlukahlukene (Pride et al., 2015:380).
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• Department stores are large retail organisations characterised by wide product mixes that
are organised into separate departments, such as houseware, furniture, appliances and
apparel (Pride et al., 2012:345).
• Afdelingswinkels is groot kleinhandelorganisasies wat gekenmerk word deur wye
produkmengsels wat in afsonderlike afdelings soos huisware, meubels, toebehore en
klere georganiseer word (Pride et al., 2012:345).
• Mabenkele a makala (department stores) ke mekgatlo e meholo ya thekiso e tsejwang ka
mathathamo a maholo a dihlahiswa tse fapaneng a hlophisitsweng ka makala a fapaneng,
jwaloka disebediswa tsa ntlo, feneshara, diaplaense, diaparo, jj. (Pride et al., 2012:345).
• Izitolo ezinamadiphatimenti ehlukene amabhizinisi amakhulu athengisayo abonakala
ngokuthi axube impahla ehlukahlukene ehlewe ngokuhlukaniswa ngamadiphatimenti
afana nempahla yasendlini, ifenisha, izixhobo zikagesi kanye nempahla yokugqoka kanye
nokunye kanjalo-njalo (Pride et al., 2012:345).
• Hypermarkets are very large self-service retail stores offering a wide range of products,
such as groceries, clothing, appliances, houseware, linen, electronics and furniture.
• Hipermarkte is baie groot selfdienskleinhandelwinkels wat ‘n wye reeks produkte soos
kruideniersware, klere, toebehore, huisware, linne, elektronika en meubels aanbied.
• Dihaephamakete ke mabenkele a mahalo haholo a fanang ka mathathamo a maholo a
dihlahiswa tse fapaneng, jwaloka dikrosari, diaparo, diaplaense, disebediswa tsa ntlo, mealo,
dielektroniki le feneshara.
• Amahayiphamakethe ayizitolo ezinkulu kakhulu lapho umthengi azikhethela lokho
akuthengayo, kanti aphatha izimpahla ezehlukahluekene ezinjengegrosa, okokugqoka,
izixhobo zikagesi, impahla yasendlini, kanye nempahla yelineni, impahla yama-elektroniki
asebenza ngogesi kanye nefenisha.
• A convenience store is a small self-service retail outlet that is generally open for long hours
and carries a narrow assortment of products (Pride et al., 2012:345). Convenience stores
usually carry convenience or staple merchandise, such as milk, bread, soft drinks, snacks
and newspapers.
• ‘n Geriefswinkel is ‘n klein selfdienskleinhandelwinkel wat gewoonlik vir lang ure oop is en
’n nou produkverskeidenheid aanhou (Pride et al., 2012:345). Geriefswinkels hou gewoonlik
geriefs- of stapelhandelsware soos melk, brood, koeldrank, versnaperinge en koerante aan.
• Lebenkele le haufi la selehae ke lebenkele le lenyane la thekiso leo hangata le bulwang
nako e telele mme le tshwara dihlahiswa tse seng ngata haholo (Pride et al., 2012:345).
Mabenkele a haufi a selehae hangata a tshwara dihlahiswa tse nolofatsang bophelo kapa
tsa motheo, jwaloka lebese, bohobe, dinomaphodi, le dikoranta.
• Isitolo esiseduzane sendawo esilusizo uhlobo lwesitolo esincane, lapho umthengi
azikhethela akufunayo, kanti lesi sitolo sivulwa isikhathi eside kanti futhi siphatha izimpahla
ezehlukahlukene futhi ezincane ngenani (Pride et al., 2012:345). Izitolo eziseduzane zendawo
ezilusizo ngokuvamile ziphatha impahla ehlala idingeka noma ukudla okuyinsika okufuna
nobisi, isinkwa, iziphuzo ezimnandi, amasneki kanye namaphephandaba.
• A discount store is a self-service, general merchandise retail store that regularly offers brand
name and private brand products at lower prices (Pride et al., 2012:345).
• ‘n Afslagwinkel is ‘n selfdiens-, algemenehandelsware-kleinhandelwinkel wat dikwels
handelsnaam- en privaat handelsnaamprodukte teen laer pryse aanbied (Pride et al.,
2012:345).
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• Lebenkele la diskhaonte ke lebenkele le ba ikgethelang ditheko le rekisang dihlahiswa
tse akaretsang tseo hangata di rekisang dihlahiswa tsa mabitso a tumileng le tsa mabitso
a poraefete ka ditheko tse theotsweng (Pride et al., 2012:345).
• Isitolo sesaphulelo lesi yisitolo lapho umthengi azikhethela akufunayo, kanti lolu hlobo
lwesitolo luphatha yonke impahla ethengiswayo, futhi kuyimpahla yamabhrendi aziwayo
nalawo angadumile kakhulu, kanti le mpahla ithengiswa ngentengiso ephansi (Pride et
al., 2012:345).
• Warehouse showrooms are retail facilities in large, low-cost buildings with large on-premises
inventories and minimal services (Pride et al., 2015:381).
• Pakhuisvertoonkamers is kleinhandelfasiliteite in groot, laekostegeboue met baie voorraad
en minimale dienste op die perseel (Pride et al., 2015:381).
• Di-showroom tsa warehouse ke dibaka tsa thekiso tse meahong e meholo, ya theko e tlase
tse nang le setoko se sengata hona moo le ditshebeletso tse seng kae (Pride et al., 2015:381).
• Izitolo zama-warehouse ezikhangisa impahla lezi yizitolo ezinkulu zezakhiwo ezithengisa
izixhobo zokwakha, kanti lezi zakhiwo ngezentengo ephansi, kanti zinamagceke abanzi
kanti abathengi bayazibhekela bona ngokwabo izinto abazifunayo (Pride et al., 2015:381).
• Traditional speciality stores are commonly retail outlets that offer a narrow product mix
with deep product lines (Pride et al., 2012:348).
• Tradisionele spesialiteitswinkels is gewoonlik kleinhandelafsetpunte wat ‘n nou
produkmengsel met diep produkreekse aanbied (Pride et al., 2012:348).
• Mabenkele a ikgethang hangata ke mabenkele a rekisang dihlahiswa tse mmalwa feela
tse nang le tshebetso tse tebileng tsa tlhahiso (Pride et al., 2012:348).
• Izitolo ezithengisa impahla ekhethekile lezi yizitolo ezivamise ukuthengisa impahla
eyehlukahlukene kodwa encane ngenani (Pride et al., 2012:348).
• Off-price retailers or stores, are speciality retailers that provide high-quality products at
lower prices than those typically charged by retail businesses (Economic Times, ND). These
retailers normally purchase overstocked products, or products for which the demand is low,
such as seasonal products, in order to lower expenses enough to sustain lower average
prices (Business Dictionary, 2017).
• Verlaagdepryskleinhandelaars of -winkels, is spesialiteitskleinhandelaars wat
hoëgehalteprodukte teen pryse aanbied wat laer is as die pryse wat kleinhandelaars tipies
vra (Economic Times, ND). Hierdie kleinhandelaars koop gewoonlik oortollige produkte, of
produkte met lae vraag, soos seisoenale produkte om uitgawes genoeg te verlaag om laer
gemiddelde pryse te kan handhaaf (Business Dictionary, 2017).
• Barekisi ba off-price, kapa mabenkele a ikgethang, ke bareki ba ikgethang ba rekisang
dihlahiswa tsa boleng bo hodimo ka ditheko tse tlase ho tse lefiswang ke dikgwebo tsa
thekiso ka tlwaelo (Economic Times, ND). Barekisi bana hangata ba reka dihlahiswa tse o
setoko sa tsona se leng sengata haholo, kapa dihlahiswa tse sa rekweng haholo, jwaloka
dihlahiswa tsa sehla, ele ho ka theola ditheko ele ho ka ba le ditheko tse tlase ho tsa palohare
(Business Dictionary, 2017).
• Izitolo zamanani aphansi noma izitolo ezithengisa izimpahla zekhwalithi ephezulu
ngentengiso ephansi ukudlula inani lentengiso elivamile elibizwa ngamabhizinisi athengisa
le mpahla (Economic Times, ND). Lezi zitolo zivamise ukuthenga impahla estokwe kakhulu,
noma engadingwa kakhulu ngabathengi, enjengempahla ethengwa ngesikhathi esithile
sonyaka, lokhu kwenzelwa ukwehlisa izindleko zokukhiqiza ngokuthengisa ngentengiso
engabizi kakhulu (Business Dictionary, 2017).
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• Category killers are large speciality retail stores that concentrate on a major product
category and compete on the basis of low prices and enormous product availability (Pride
& Ferrell, 2017:386).
• Kategorieveroweraars is groot spesialiteitskleinhandelwinkels wat op ‘n hoofprodukkategorie
konsentreer en meeding op grond van lae pryse en enorme produkbeskikbaarheid (Pride
& Ferrell, 2017:386).
• Babolai ba mekgahlelo ke mabenkele a maholo a dihlahiswa tse ikgethang a shebaneng
le mokgahlelo o moholo wa sehlahiswa mme a hlodisana ka ditheko tse tlase le boteng bo
boholo haholo ba sehlahiswa (Pride & Ferrell, 2017:386).
• Izitolo eziyizingcweti kwimikhakha ethile yemikhiqizo lezi yizitolo ezinkulu ezithengisa
imikhiqizo ekhethekile kanti lezi zitolo zincintisana ngokuthi zithengisa ngentengiso ephansi
kanti nesitoko sibe siningi (Pride & Ferell, 2017: 386).
• Direct marketing is a form of marketing communication that allows retailers to communicate
their products and services to customers by means of various media, including catalogues,
direct mail, telemarketing or the internet.
• Direkte bemarking is ‘n bemarkingskommunikasievorm wat kleinhandelaars in staat stel
om hulle produkte en dienste aan klante te kommunikeer deur middel van verskeie media,
insluitend katalogi, direkte pos, telebemarking of die internet.
• Ho maketa ka kotloloho ke mokgwa wa kgokahanyo ya ho maketa e dumellang barekisi
ho bua ka dihlahiswa le ditshebeletso tsa bona ho bareki ka mokgwa wa dikhathaloko,
poso, le ho maketa ka mohala kapa inthanete.
• Ukumaketha ngokuqonde ngqo kubathengi lolu wuhlobo lokuxhumana nabathengi, lolu
hlelo luvumela abathengisi ukuthi bathengise izimpahla namasevisi abo kumakhastama
ngokusebenzisa imigudu ehlukahlukene ebandakanya amakhathalogi, ngeposi, ngocingo
noma nge-inthanethi.
• Direct selling is a personal form of selling that involves meeting with the customer face-
to-face (Poloian, 2013:162). Direct selling therefore refers to the door-to-door selling activity
undertaken by the retailer and involves personal contact with consumers in their homes
and/or telephone or mobile solicitations.
• Direkte verkope is ‘n persoonlike verkoopsvorm wat behels om die klant van-aangesig-
tot-aangesig te ontmoet (Poloian, 2013:162). Direkte verkope verwys dus na die deur-tot-
deur-verkoopsaktiwiteit wat die kleinhandelaar onderneem, en behels persoonlike kontak
met verbruikers in hulle huise en/of telefoon- of mobiele werwing.
• Ho rekisa ka kotloloho ke mofuta wa ho rekisa o kenyeletsang ho kopana ka kotloloho le
moreki (Poloian, 2013:162). Ho rekisa ka kotloloho ho bolela thekiso ka ho kokota mamating
ho etswang ke morekisi mme ho akga ho kopana le bareki mahabona le/kapa ho thaotha
ka mohala.
• Ukuthengisa ngokuqonde ngqo kumthengi le yindlela yokuthengisa ngokuqondana
nomuntu siqu, kanti ibandakanya ukuhlangana mathupha ubuso nobuso namakhastama
(Poloian, 2013:162). Ukuthengisa ngokuqonde ngqo kumthengi kuchaza ukuthengisa
ngokuthi ungene umuzi nomuzi, okwenziwa abathengisi kanti lolu hlelo lubandakanya
ukuxhumana mathupha nabathengi emakhaya abo futhi/noma ngocingo noma ngokuhamba
uncenga nokunxenxa amakhastama.
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• The macro-environment, otherwise known as the external environment, consists of all the
variables and factors on a national and international level that affect retailers. The retailer
has little effect on and no control over the macro-environment (Avon College Press, 2015:34;
Cant, 2016:37; Strydom, 2014:36).
• Die makro-omgewing, ook bekend as die eksterne omgewing, bestaan uit al die veranderlikes
en faktore wat kleinhandelaars op ‘n nasionale en internasionale vlak beïnvloed. Die
kleinhandelaar het min invloed op en beheer oor die makro-omgewing (Avon College Press,
2015:34; Cant, 2016:37; Strydom, 2014:36).
• Tikoloho e kgolo ya kantle, eo hape e bitswang tikoloho e kantle, e kenyeletsa dintlha tse
ka fetohang boemong ba naha le ba matjhaba tse amang barekisi mme tseo morekisi a se
nang taolo ho tsona (Avon College Press, 2015:34; Cant, 2016:37; Strydom, 2014:36).
• Isimosizinda esinabile sangaphandle kwibhizinisi kanti futhi esibuye saziwe ngokuthi
yisimo sangaphandle, lesi simo siqukethe zonke izinto eziwumthelela zezwe kanye namazwe
angaphandle, ezingathinta ezentengiso kanti futhi abamabhizinisi abangakwazi ukuzilawula
noma ukushintsha lezo zimo (Avon College Press, 2015:34; Cant, 2016:37; Strydom, 2014:36).
• The market environment, also known as the task or operating environment, is where
a retailer conducts its business and refers to those factors and variables that cannot be
controlled by a retailer but can be partially influenced by its strategies (Cant, 2016:34; Varley
& Rafiq, 2014:81).
• Die markomgewing, ook bekend as die taak- of bedryfsomgewing, is waar ‘n kleinhandelaar
sy sake doen en verwys na daardie faktore en veranderlikes wat nie deur ‘n kleinhandelaar
beheer kan word nie, maar gedeeltelik deur sy strategieë beïnvloed kan word (Cant, 2016:34;
Varley & Rafiq, 2014:81).
• Tikoloho ya mmaraka, eo hape e bitswang tikoloho ya tshebetso, ke moo morekisi a
etsetsang kgwebo ya hae teng mme e bolela dintlha tse fetohang tse sa laolweng ke
morekisi empa tse ka angwang ka tsela e itseng ke maano a hae (Cant, 2016:34; Varley &
Rafiq, 2014:81).
• Isimosizinda esithinta izimakethe esaziwa njengomsebenzi noma isimosizinda lapho
amabhizinisi asebenzela khona, kulapho umthengisi aqhuba khona ibhizinisi lakhe kanti
sichaza lezi zinto umthengisi angeke akwazi ukuzilawula, kodwa zingaguqulwa kancane
amasu osomabhizinisi (Cant, 2016:34; Varley & Rafiq, 2014:81).
• The micro-environment refers to the controllable factors in an organisation and the
inspection of the internal characteristics and internal resources of an organisation (time,
money, expertise) to optimise the organisation (Jooste et al., 2012).
• Die mikro-omgewing verwys na die beheerbare faktore in ‘n organisasie en die inspeksie
van die interne eienskappe en interne hulpbronne van ‘n organisasie (tyd, geld, kundigheid)
om die organisasie te optimaliseer (Jooste et al., 2012).
• Tikoloho ya kahare e bolela dintlha tse laolehang kahara mokgatlo mme e bua ka tekolo
ya dintlha tse kahare le mehlodi ya kahare ya mokgatlo (nako, tjhelete, tsebo) e le ho ka
ntlafatsa mokgatlo oo (Jooste et al., 2012).
• Isimosizinda sangaphakathi kwebhizinisi sichaza izinto ezingaphakathi kwibhizinisi kanti
futhi sichaza ukubhekisiswa kwezimpawu zangaphakathi kanye nemithombo yangaphakathi
yebhizinisi (isikhathi, imali, ubungcweti), ngenhloso yokuthuthukisa ibhizinisi (Jooste et al.,
2012).
253
• Merchandising is “an integrated, end-to-end business process that runs from planning
the assortment, to sourcing, to distribution, to the allocation of the goods to the stores, to
promoting and selling the assortment to the customers and finally to replenishing inventory
as necessary” (Aufreiter in Pradhan, 2010:4).
• Bevoorrading is ‘n geïntegreerde, kop-aan-kop-sakeproses wat verloop van beplanning
van die verskeidenheid, na verkryging, na verspreiding, na toewysing van die goedere aan
die winkels, na promosie en verkoop van die verskeidenheid aan die klante en ten slotte na
die aanvulling van die voorraad soos nodig (Aufreiter in Pradhan, 2010:4).
• Kgothaletso ya thekiso (Merchandising) ke tshebetso “e hokahaneng, ya kgwebo e qalang
ho thero ya tlhophiso, patlo, ho hasanya, ho isa ho peho ya thepa ka mabenkeleng ho ya
ho nyollo le kgasanyo, ho peho ya thepa ka mabenkeleng, nyollo le thekiso ya thepa ho
bareki le ho reka setoko hape kamoo ho hlokehang” (Aufreiter ho Pradhan, 2010:4).
• Ukuhweba ngempahla lena “yinqubo ehlangene, eqala emsebenzini othile ukufika
emsebenzini othile, le nqubo iqala ngokuhlela imisebenzi ibe yizigaba ezehlukahlukene,
inikezele imisebenzi yokukhiqiza, isabalalise imikhiqizo, ithumele imikhiqizo ezitolo, ikhangise
futhi ithengise imikhiqizo eyehlukahlukene kumakhastama kanti okokugcina ingezelele
isitoko uma kunesidingo” (Aufreiter in Pradhan, 2010:4).
• Retail merchandising is “the process of developing, obtaining, pricing, supporting
and communicating the retailer’s merchandise offering” (Lewison in Pradhan, 2010:3).
• Kleinhandelbevoorrading is die proses om die kleinhandelaar se handelsware-aanbieding te
ontwikkel, te verkry, te prys, te ondersteun en te kommunikeer (Lewison in Pradhan, 2010:3).
• Thekiso mabenkeleng (Retail merchandising) ke “tshebetso ya ho hlahisa, ho fumana,
ho beha theko, ho tshehetsa le ho tsebahatsa sehlahiswa sa thekiso” (Lewison ho Pradhan,
2010:3).
• Intengiso yohwebo lena “yinqubo yokwenza, ukuthola, ukubeka amanani entengiso,
ukuxhasa kanye nokumemezela ngezinto umhwebi azidayisayo” (Lewison in Pradhan, 2010:3).
• Inventory is defined as the physical stock of goods that are kept in store to meet the
anticipated demand of customers (Vrat, 2014).
• Voorraad word omskryf as die fisiese voorraad van goedere wat in die winkel gehou word
om aan die verwagte vraag van klante te voldoen (Vrat, 2014).
• Inventhori e ka hlaloswa jwaloka setoko sa dihlahiswa tse bolokwang ka lebenkeleng ho
kgotsofatsa ditlhoko tsa bareki (Vrat, 2014).
• Isitokwe singachazwa njengesitokwe semikhiqizo ongasibona ngamehlo, kanti leso sitokwe
sigcinwa esitolo ukuhambisana nezidingo zamakhastama ezingavela (Vrat, 2014).
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• Merchandise management is defined as the analysis, planning, acquiring, handling and
controlling of merchandise investments in a retail operation (Dunne et al., 2014:349).
• Handelswarebestuur word omskryf as die ontleding, beplanning, verkryging, hantering en
beheer van handelsware-investering in ‘n kleinhandelonderneming (Dunne et al., 2014:349).
• Tsamaiso ya thekiso e hlaloswa jwaloka manollo, thero, ho fumana, ho tshwara le ho laola
ditsetelo tsa thepa ho tshebetso ya lebenkele (Dunne et al., 2014:349).
• Ukuphathwa kwempahla yesitokwe kuchazwa njengokuhlaziya, ukuhlela, ukutholakala,
ukuphathwa nokulawulwa kohlelo lotshalo-mali kwimisebenzi yebhizinisi yokuhweba
(Dunne et al., 2014:349).
• Inventory investment involves the planning of total rand investment in merchandise
inventory so that the retailer can reach its financial objectives. Inventory assortment refers
to the planning of various product items in a particular product line that the retailer should
keep in stock. Inventory support involves the planning of the number of units of each
product item the retailer would need to meet its sales forecast (Wiid, 2012:51).
• Voorraadinvestering behels die beplanning van die totale randwaarde in handelswarevoorraad
sodat die onderneming sy finansiële doelwitte kan bereik. Voorraadverskeidenheid
verwys na die beplanning van verskeie produkitems in ‘n bepaalde produkreeks wat die
kleinhandelaar in voorraad moet hou. Voorraadondersteuning behels die beplanning
van die aantal eenhede van elke produkitem wat die kleinhandelaar sou benodig om te
voldoen aan sy verkoopsvooruitskatting (Wiid, 2012:51).
• Tsetelo ya inventhori e kenyeletsa thero ya tsetelo yohle ya ranta ho setoko sa dihlahiswa
tse rekiswang hore morekisi a tle a fihlele ditabatabelo tsa hae tsa ditjhelete. Peho ya setoko
e bolela thero ya dintho tse fapaneng tsa dihlahiswa tseo morekisi a lokelang ho di boloka
setokong ho sehlopha se itseng sa dihlahiswa. Tshehetso ya setoko e kenyeletsa thero ya
palo ya diyuniti tsa sehlahiswa ka seng eo morekisi a ka e hlokang ho fihlella morero wa
hae wa thekiso (Wiid, 2012:51).
• Utshalo-mali kwisitokwe lokhu kubandakanya ukuhlela utshalo-mali kwisitokwe, ngesizathu
sokuthi umthengisi afinyelele izinhloso zemali. Ukwehlukanisa isitokwe lokhu kuchaza
ukuhlela imikhiqizo eyehlukahlukene, leyo umthengisi okufanele agcine isitokwe sayo
sihlale sikhona ohlwini lwemikhiqizo. Ukusekela ngesitokwe kubandakanya ukuhlela
inani lamayunithi omkhiqizo omunye nomunye umthengisi angadinga ukuthi uthengiswe
ukuhlangabezana nezinga lentengiso elihleliwe esikhathini esizayo (Wiid, 2012:51).
• A stock-out situation means that a retailer did not anticipate the amount of sales of a
specific product correctly and consequently ran out of stock. To ensure that this does
not happen, inventory levels should be sufficient to cover the demand of a specific item
(Schönsleben, 2016:464).
• ‘n Uitvoorraadsituasie beteken dat ‘n kleinhandelaar nie die hoeveelheid verkope van ‘n
spesifieke produk korrek vooruitgeloop het nie en gevolglik uit voorraad geraak het. Om
te verseker dat dit nie gebeur nie, moet voorraadvlakke voldoende wees om die vraag na
‘n spesifieke item te dek (Schönsleben, 2016:464).
• Maemo a phelo ya setoko (Stock-out) e bolela hore morekisi o ne a sa bala palo ya dithekiso
tsa sehlahiswa se itseng ka nepo yaba o fellwa ke setoko. Ho netefatsa hore sena ha se
etsahale, maemo a palo ya setoko kapa inventhori a tlameha ho lekana ele ho ka kgotsofatsa
ho rekwa ha ntho e itseng (Schönsleben, 2016:464).
• Isikhathi sokuphelelwa yisitokwe lokhu kuchaza ukuthi umthengisi wehlulekile ukubona
ngaphambilini ukuthi kuzodingeka inani elingakanani lesitokwe kanti wagcina ngokuthi
aphelelwe yisitokwe. Ukuqinisekisa ukuthi lokhu kungenzeki, isitokwe kufanele sibe kwinani
eligculisayo ukuhambisana nenani elifunekayo lomkhiqizo othile (Schönsleben, 2016:464).
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• Markdowns refer to the selling of merchandise at lower rates to sell them quicker or to
make space on the shelves for new stock (Dunne & Lusch, 2008:344).
• Prysverlagings verwys na die verkoop van handelsware teen laer koerse om hulle vinniger
te verkoop of om plek op die rak te maak vir nuwe voorraad (Dunne & Lusch, 2008:344).
• Ditheolelo di bolela thekiso ya thepa ka dikgahla tse tlasana ele ho di rekisa ka potlako
kapa ho etsa sebaka bakeng sa setoko se setjha dirakeng (Dunne & Lusch, 2008:344).
• Ukuthengisa ngamanani aphansi lokhu kuchaza ukuthengisa imikhiqizo ngamanani
aphansi, ukuze imikhiqizo ithengwe ngokushesha noma ngenhloso yokwenza isikhala
sesitokwe esisha kumashalofu (Dunne & Lusch, 2008:344).
• Planning in rand means that you have a certain amount of money to spend on buying
merchandise. This amount is calculated by looking at past sales figures and factors such
as consumer trends and other internal and external factors. Planning in units means that
now that you have a specific amount that you are allowed to spend, you must allocate the
amount of money to specific products (or units).
• Beplanning in rand beteken dat u ‘n bepaalde bedrag geld het om op handelsware te bestee.
Hierdie bedrag word bereken deur vorige verkoopsyfers en faktore soos verbruikerstendense
en ander interne en eksterne faktore te oorweeg. Beplanning in eenhede beteken dat
noudat u ‘n spesifieke bedrag het wat u kan bestee, u die bedrag aan spesifieke produkte
(of eenhede) moet toewys.
• Ho rera ka diranta ho bolela hore o na le tjhelete e itseng eo o ka e sebedisang ho reka
thepa e rekiswang. Palo ena e balwa ka ho sheba dipalo tsa thekiso tse fetileng le dintlha tse
jwaloka ditlwaelo tsa bareki le dintlha tse ding tsa kahare le tsa kantle. Ho rera ka diyuniti
ho bolela hore jwale o na le palo e itseng eo o dumelletsweng ho e sebedisa, o tlameha
ho arola tjhelete eo ho latela dihlahiswa tse itseng (kapa diyuniti).
• Ukuhlela ngokwesimo serandi kuchaza ukubekela eceleni inani elithile lemali yokuthenga
isitokwe. Leli nani lemali libalwa ngokubheka inani lempahla esithengisiwe ngesikhathi
esedlule kanye nezinto ezivamise ukuthengwa ngabathengi futhi nezimpawu zangaphandle
nangaphakathi kwebhizinisi. Ukuhlela ngokwamayunithi kuchaza ukuthi njengoba
unenani elithile lemali ovumeleke ukuyisebenzisa, kufanele ukuthi wehlukanise le mali
ngokwemikhiqizo eyehlukahlukene (noma ngamayunithi).
• Merchandise control can be explained as the determination and direction of merchandise
activities, both in terms of rand control and unit merchandise control (AMA, 2016).
• Handelswarebeheer kan verduidelik word as die bepaling en rigting van handelsware-
aktiwiteite, beide ingevolge randbeheer en handelsware-eenheidsbeheer (AMA, 2016).
• Taolo ya thepa e rekiswang e ka hlaloswa jwaloka phumano le tsela ya ditshebetso tsa
thepa, bobedi ho latela taolo ya ranta le taolo ya thepa ya yuniti (AMA, 2016).
• Uhlelo lokulawula impahla lokhu kungachazwa njengendlela yokwazi nokulawula
imisebenzi emayelana nempahla yesitokwe, yonke le misebenzi yokulawula ngokwesimo
serandi kanye nangokwempahla yesitokwe noma ngokwamayunithi (AMA, 2016).
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• Inventory management is the process of acquiring and maintaining proper assortment of
merchandise while keeping ordering, shipping, handling and other related costs in check
(AMA, 2016).
• Voorraadbestuur is die proses om handelsware te verkry en behoorlike verskeidenheid
daarvan te handhaaf terwyl bestel-, verskepings-, hanterings- en ander verwante koste
beheer word (AMA, 2016).
• Tsamaiso ya lenane la setoko ke tshebetso ya ho fumana le ho boloka tlhalohanyo ya
thepa e rekiswang ha o ntse o beile leihlo hodima ditjeo tsa ho odara, ho romela, tshwaro
le tse ding tse amanang tshenyehelo ya ho reka thepa (AMA, 2016).
• Ukuphathwa kwesitokwe lena yinqubo yokuthola kanye nokugcina isitokwe semikhiqizo
eyehlukahlukene, kanti lokhu kungenziwa ngokugcina, ngoku-oda, ngokuthumela,
ngokuphathwa kwemikhiqizo kanye nokubhekisisa nokunye okuhambisana nezindleko
zalokhu (AMA, 2016).
• Inventory valuation refers to the monetary value associated with the merchandise contained
in a retailer’s inventory (Averkamp, ND).
• Voorraadwaardasie verwys na die geldwaarde wat geassosieer word met die handelsware
wat ‘n kleinhandelaar se voorraad bevat (Averkamp, ND).
• Boleng ba lenane la setoko e bolela boleng ba tjhelete bo amanang le thepa e teng ho
lenane la setoko la morekisi (Averkamp, ND).
• Uhlelo lokuhlola izinga lempahla noma lomkhiqizo lokhu kuchaza isilinganiso semali
uma siqhathaniswa nomkhiqizo oyisitokwe somthengisi (Averkamp, ND).
• Category is used to describe a group of merchandise items that are either substitutes
or complement each other, for instance pasta and pasta sauce, or dairy products is a category
• Kategorie word gebruik om ‘n groep handelsware-items te beskryf wat óf plaasvervangers
is óf mekaar komplementeer, byvoorbeeld pasta en pastasous, of suiwelprodukte in ‘n
kategorie (Terblanche et al., 2013:197).
• Mokgahlelo ke sehlopha sa dintho tse rekiswang tse ka nkang sebaka sa tse ding kapa tse
tsamaellanang, ka mohlala pasta le sose ya pasta, kapa dihlahiswa tsa lebese ke mokgahlelo
• Isigaba somkhiqizo leli gama lisetshenziswa ukuchaza iqoqo lezimpahla ezingafakwa
endaweni yomkhiqizo ongekho noma ukufaka umkhiqizo ofana nalowo ongekho,
njengesibonelo ipasta kanye nesosi yepasta, noma imikhiqizo yobisi, nayo iwela ngaphansi
kwesigaba esithize (Terblanche et al., 2013:197).
• A stock-keeping unit (SKU) is a single item of merchandise which is described in detail
to differentiate it from other SKUs, and for inventory control purposes (Terblanche et al.,
2013:197).
• ‘n Voorraadhoudingseenheid is ‘n enkel handelsware-item wat in besonderhede beskryf word
om dit te onderskei van ander voorraadhoudingseenhede, en vir voorraadbeheerdoeleindes
• Yuniti ya poloko ya setoko (SKU) ke ntho e le nngwe ya thepa e rekiswang e hlaloswang
ka botlalo ho e hlalohanya ho diSKU tse ding, le bakeng sa mabaka a taolo ya lenane la
setoko (Terblanche et al., 2013:197).
• Iyunithi yokugcina isitokwe (SKU) umkhiqizo wenhlobo eyodwa ochazwa
ngokwemininingwane ukuwehlukanisa kweminye ngenhloso yokulawula isitokwe
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• Category management can be defined as “the strategic management of product groups
through trade partnerships, which aims to maximise sales and profits by satisfying consumer
needs” (Varley, 2014:57).
• Kategoriebestuur kan omskryf word as die strategiese bestuur van produkgroepe deur
handelsvennootskappe met die doel om verkope en winste te maksimaliseer deur aan
verbruikersbehoeftes te voldoen (Varley, 2014:57).
• Taolo ya mokgahlelho e ka hlaloswa jwaloka “tsamaiso ya dihlopha tsa dihlahiswa ka
dikamano tsa kgwebo, e ikemiseditseng ho nyolla dithekiso le phaello ka ho kgotsofatsa
ditlhoko tsa moreki” (Varley, 2014:57).
• Uhlelo lokulawula izigaba zomkhiqizo lungachazwa “njengamasu okulawula izinhlobo
zemikhiqizo ngohlelo lokusebenzisana kwabahwebi, lokhu kuhlose ukukhulisa intengiso
kanye nokukhulisa inzuzo, lokhu kungenziwa ngokwenelisa izidingo zabathengi” (Varley,
2014:57).
• The breadth of assortment refers to the number of product lines or categories a business
produces or a retailer carries (Betancourt, 2004:148; Study.com, 2016). The length of a
product assortment refers to the number of products in a particular product line or
category (Study.com, 2016). The depth of an assortment refers to the different versions or
variations of the same product that may exist in each product line or category (Betancourt,
2004:148; Study.com, 2016).
• Die breedte van verskeidenheid verwys na die aantal produkreekse of -kategorieë wat ‘n
onderneming produseer of ‘n kleinhandelaar hou (Betancourt, 2004:148; Study.com, 2016).
Die lengte van ‘n produkverskeidenheid verwys na die aantal produkte in ‘n bepaalde
produkreeks of -kategorie (Study.com, 2016). Die diepte van ‘n verskeidenheid verwys na
die verskillende weergawes of variasies van dieselfde produk wat in elke produkreeks of
-kategorie mag voorkom (Betancourt, 2004:148; Study.com, 2016).
• Bophara ba tlhophiso bo bolela palo ya mela ya dihlahiswa kapa mekgahlelo eo kgwebo e
e hlahiswang kapa e jarwang ke morekisi (Betancourt, 2004:148; Study.com, 2016). Bolelele
ba tlhophiso ya sehlahiswa e bolela palo ya dihlahiswa tse moleng o itseng wa sehlahiswa
kapa mokgahlelo (Study.com, 2016). Botebo ba tlhophiso bo bolela mefuta e fapaneng
ya sehlahiswa se le seng e ka bang moleng wa ka mong wa sehlahiswa kapa mokgahlelo
(Betancourt, 2004:148; Study.com, 2016).
• Inani lezigaba zemikhiqizo eyehlukahlukene lokhu kuchaza inani lezigaba zemikhiqizo
ekhiqizwa yibhizinisi noma eliphathwa umthengisi (Betancourt, 2004:148; Study.com, 2016).
Inani lemikhiqizo eyahlukahlukene lokhu kuchaza inani lemikhiqizo kwisigaba esithile
semikhiqizo (Study.com, 2016). Izinhlobo ezehlukene zomkhiqizo lokhu kuchaza izinhlobo
ezehlukahlukene zomkhiqizo owodwa, lowo ongatholakala kuzo zonke izigaba zemikhiqizo
(Betancourt, 2004:148; Study.com, 2016).
• “Product assortment refers to the extent of different product types offered by a retailer,
which is usually either ‘narrow and deep’ or ‘broad and shallow’ ” (Goworek & McGoldrick,
2015:334).
• Produkverskeidenheid verwys na die mate waarin verskillende produktipes deur ‘n
kleinhandelaar aangebied word, wat gewoonlik nou en diep of breed en vlak is (Goworek
• “Tlhophiso ya sehlahiswa ke bongata ba mefuta e fapaneng ya sehlahiswa e rekiswang
ke morekisi, tseo ka tlwaelo e leng ‘e tshetshane mme e tebileng’ kapa ‘e sephara mme e
sa tebang’” (Goworek & McGoldrick, 2015:334).
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• Izinhlobo ezehlukahlukene zomkhiqizo lokhu kuchaza iqoqo lwemikhiqizo eyehlukahlukene
ethengiswa ngumthengisi, noma ‘ukuncipha nobunzulu’ ‘ububanzi nokungajuli’ (Goworek
• Gondola ends (or end-of-aisle-displays) are located at the end of each aisle in a retail store
and spans the two rows of back-to-back shelves (Koekemoer, 2005:308).
• Gondelrakke of (uitstallings op die punt van die gangetjie) is geleë op die punt van elke
gangetjie in ‘n kleinhandelwinkel en strek oor twee rye rug-aan-rugrakke (Koekemoer,
2005:308).
• Gondola ends (kapa dipontsho tsa peletso ya paseje) di bewa qetellong ya paseje ka nngwe
ka lebenkeleng mme di nka mela e mmedi ya dishelefo tse bapileng (Koekemoer, 2005:308).
• Amaphethelo wamashalofu amise okweGondola (ukukhangisa emaphethelweni eshalofu)
le mikhangiso itholakala ekugcineni kwemigqa yonke yamashalofu esitolo, uma imigqa
emibili yamashalofu imi ifulathelene (Koekemoer, 2005:308).
• Segmentation involves dividing the mass market (also known as a population) into smaller
groups of individuals with similar characteristics and expectations who may be seeking a
particular benefit from a product (Parumasar & Roberts-Lombard, 2014:242).
• Segmentering behels die verdeling van die mark (ook bekend as ‘n populasie) in kleiner
groepe of individue met soortgelyke eienskappe en verwagtinge wat na ‘n bepaalde
voordeel van ‘n produk soek (Parumasar & Roberts-Lombard, 2014:242).
• Karohanyo e kenyeletsa ho arola mmaraka o moholo (o boetseng o bitswa setjhaba) ka
dihlopha tse nyane ka motho ka mong ka dintlha tse tshwanang le ditebello tsa bareki ba
batlang molemo o itseng ho sehlahiswa se itseng (Parumasar & Roberts-Lombard, 2014:242).
• Uhlelo lokwehlukanisa abathengi ngezigaba (ababuye baziwe ngaso sonke isibalo
sabathengi) lokhu kubandakanya iningi labathengi lihlukaniswe ngezigaba zabantu
abanezimpawu nezinhloso ezifanayo, ngoba belindele ukuthi bazuze kulowo mkhiqizo
(Parumasar & Roberts-Lombard, 2014:242).
• Targeting looks at evaluating each segment and targeting the most appropriate segment
through the tailoring of the marketing mix for that particular segment (Parumasar & Roberts-
Lombard, 2014:253).
• Teikenmarkkeuse kyk na die evaluering van elke segment en om die mees geskikte
segment te teiken deur die bemarkingsamestelling vir daardie bepaalde segment aan te
pas (Parumasar & Roberts-Lombard, 2014:253).
• Tsepamiso e shebana le ho etsa tekanyetso ya karolo ka nngwe le ho tsepamisa hodima
karolo e loketseng ho feta tsohle ka ho lokisa motswako wa ho maraka bakeng sa karolo
eo (Parumasar & Roberts-Lombard, 2014:253).
• Ukuthagetha abathengi abathize lokhu kumayelana nokuhlola zonke izigaba zabathengi
ukuze ukwazi ukuthagetha abathengi abasezingeni elithize lempilo, lokhu kwenziwa
ngokubheka abathengi abaxubene besigaba esithile (Parumasar & Roberts-Lombard,
2014:253).
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• Efficient consumer response (ECR) describes an all-encompassing supply chain
management system, which encompasses buying activities, promotional activities and
product development; replenishment systems; logistics operations; and suppliers and their
manufacturing facilities (Varley, 2014:67). ECR is furthermore a “managerial process that starts
with consumer demands, and then gears the whole of the supply chain to responding to
that demand” (Varley, 2014:67).
• Doeltreffende verbruikersrespons (DVR) beskryf ‘n allesomvattende voorsieningsketting-
bestuurstelsel wat koopaktiwiteite, promosie-aktiwiteite en produkontwikkeling;
aanvullingstelsels; logistieke bedrywighede; en verskaffers en hulle vervaardigings-fasiliteite
behels (Varley, 2014:67). Doeltreffende verbruikersrespons is ook ‘n bestuursproses wat
begin met verbruikersvraag, en dan die hele voorsieningsketting inspan om op daardie
vraag te reageer (Varley, 2014:67).
• Karabelo e sebetsang ya moreki (Efficient consumer response (ECR)) e hlalosa sistimi ya
tsamaiso ya motjha wa phepelo e kenyelletsang tsohle, e akgang mesebetsi ya ho reka,
mesebetsi ya nyollo le tlhahiso ya sehlahiswa; disistimi tsa ntjhafatso; mesebetsi ya tlhophiso;
le bafani le disebediswa tsa bona tsa tlhahiso (Varley, 2014:67). ERC ho feta moo ke “tshebetso
ya tsamaiso e qalang ka ditlhoko tsa bareki, ebe e fetola motjha ohle wa phepelo hore o
arabele tlhoko eo” (Varley, 2014:67).
• Uhlelo olumayelana nokuthi abathengi bayibona kanjani imikhiqizo (ECR) lapha
kuchazwa yonke inqubo emayelana nokuphathwa kohlelo lokwenziwa kwemikhiqizo,
ukuthengwa kuze kufike esigabeni sokusetshenziswa komkhiqizo, le nqubo ibandakanya
umsebenzi wokuthenga; ukukhangisa; ukuthuthukisa umkhiqizo; ukungezela isitokwe;
imisebenzi yokuthuthwa komkhiqizo kanye nabasabalalisi bomkhiqizo kanye nezixhobo
zokukhiqiza (Varley, 2014:67). I-ECR ngokunabile ingachazwa “njengenqubo yokuphatha
ukuqala ngokubheka izimfuno zabathengi, kanti nokulandela lonke uhlelo lwemisebenzi
yokukhiqiza ukwenelisa izidingo zabathengi” (Varley, 2014:67).
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• Supply chain management includes all the activities and exchanges involved in the
extraction, processing, manufacturing and distribution of products and services from raw
materials through to the end consumer for consumption (Wiid, 2012:67).
• Voorsieningskettingbestuur sluit al die aktiwiteite en uitruilings in wat betrokke is by
die ekstrahering, verwerking, vervaardiging en verspreiding van goedere en dienste uit
grondstowwe deur na die eindverbruiker vir verbruik (Wiid, 2012:67).
• Tsamaiso ya motjha wa phepelo e kenyeletsa mesebetsi le diphetisetsano tse teng ho
kgulo, tshebetso, tlhahiso le kgasanyo ya dihlahiswa le ditshebeletso ho tswa ho dimateriale
tse se fetolwe ho ya ho moreki bakeng sa tshebediso (Wiid, 2012:67).
• Ukuphathwa kwayo yonke inqubo yezokukhiqizwa nokusetshenziswa komkhiqizo,
lokhu kubandakanya yonke imisebenzi emayelana nokukhishwa, ukwakha, ukukhiqiza
kanye nokusatshalaliswa kwemikhiqizo kanye namasevisi, lezi zinto zenziwa ngematheriyeli
eluhlaza esigabeni sokuqala zize zifike esigabeni sokugcina lapho zisetshenziswa ngabathengi
(Wiid, 2012:67).
• Logistics is the aspect of supply chain management that refers to the planning, implementation
and controlling of the efficient flow (transportation) and storage of products, services and
related information, from the point of origin to the point of consumption to meet customer’s
needs (Levy & Weitz, 2012:255). Logistics can be defined as all aspects involved in the planning
and implementation of any physical movement of products from the manufacturer to the
customer (Terblanche et al., 2016:215).
• Logistiek is die aspek van voorsieningskettingbestuur wat verwys na die beplanning,
implementering en beheer van die doeltreffende vloei (vervoer) en berging van produkte,
dienste en verwante inligting, van die uitgangspunt tot die verbruikspunt om aan die klante
se behoeftes te voldoen (Levy & Weitz, 2012:255). Logistiek kan omskryf word as al die
aspekte wat betrokke is in die beplanning en implementering van enige fisiese beweging
van produkte van die verbruiker na die klant (Terblanche et al., 2016:215).
• Tsamaiso ya thepa ho bareki (Logistics) ke karolo ya tsamaiso ya motjha wa phepelo e
buang ka ho rera, ho kenya tshebetsong le ho laola phallo e sebetsang (dipalangwang) le
poloko ya dihlahiswa, ditshebeletso, le tlhahisoleseding e amehang ho tloha ntlheng ya
sethatho ho ya ntlheng ya tshebediso ho kgotsofatsa ditlhoko tsa moreki (Levy & Weitz,
2012:255). Tsamaiso ya thepa e ka hlaloswa jwaloka dikarolo tsohle tse amehang ho thero
le ho kengwa tshebetsong ya ho tsamaiswa ha dihlahiswa ho tloha ho moetsi ho ya ho
moreki (Terblanche et al., 2016:215).
• Ezamalojistiki lo ngomunye umsebenzi wohlelo lwezokukhiqizwa nokusetshenziswa
komkhiqizo, kanti lokhu kubandakanya ukuhlela, ukwenziwa kanye nokulawula ukuhanjiswa
kahle (ezokuthutha) kanye nokugcinwa kwemikhiqizo, amasevisi kanye nolwazi oluhambisana
nokudingekayo, ukusukela esigabeni sokuqala kuze kube sesigabeni sokugcina lapho
umkhiqizo wanelisa izidingo zabathengi (Levy & Weitz, 2012:255). Inqubo yezamalojistiki
ingachazwa njengemisebenzi yonke ebandakanyeka ekuhleleni nasekwenziweni
kwemikhiqizo ukusukela kumkhiqizi ukufikela kumthengi (Terblanche et al., 2016:215).
• The logistics infrastructure is the method of transport or delivery a retailer can use to
move products from the point of origin to the point of consumption – whether it is by rail,
air, road or sea. Logistics infrastructure also includes the condition, efficiency or standard
of the infrastructure, such as the condition of the roads, or accessibility.
• Die logistieke infrastruktuur is die metode van vervoer of lewering wat ‘n kleinhandelaar kan
gebruik om produkte van die uitgangspunt na die verbruikspunt te beweeg – hetsy per spoor,
lug, pad of see. Logistieke infrastruktuur sluit ook die toestand, doeltreffendheid of standaard
van die infrastruktuur in, byvoorbeeld die toestand van die paaie, of toeganklikheid.
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• Disebediswa tsa tsamaiso ya thepa ke mokgwa wa sepalangwang kapa tsamaiso eo
morekisi a ka e sebedisang ho tlosa dihlahiswa ho tloha ntlheng ya sethatho ho ya ntlheng
ya tshebediso – hore na ke ka seporo, moya, mmila kapa lewatle. Disebediswa tsa tsamaiso
ya thepa di boetse di kenyelletsa boemo, tshebetso kapa maemo a disebediswa, jwaloka
maemo a mmila, kapa phihlelleho.
• Ingqalasizinda yezamalojistiki le yindlela yokuthutha noma yokuthumela imikhiqizo
engasetshenziswa ngumthengisi, le ndlela ingasetshenziswa ukuthumela imikhiqizo
ukusukela esigabeni sokuqala ukufikela kwesokugcina sokusetshenziswa kwawo – ngisho
noma umkhiqizo uthunyelwa ngololiwe, ngendiza, ngemigwaqo noma ngemikhumbi.
Ingqalasizinda kanti ibandakanya isimo, ukusebenziseka kahle noma izinga lengqalasizinda,
okunjengesimo semigwaqo noma ukufinyeleleka.
• Inventory management is the process in the supply chain where the retailer keeps track
of the inventory and inventory levels.
• Voorraadbestuur is die proses in die voorsieningsketting waar die kleinhandelaar tred hou
met die voorraad en voorraadvlakke.
• Tsamaiso ya lenane la setoko ke tshebetso e motjheng wa phepelo moo morekisi a lekolang
lenane la setoko le maemo a lona.
• Ukuphathwa kwesitokwe yinqubo kuwo wonke umgudu womkhiqizo, lapho umthengisi
abhekisisa isitokwe futhi agcina isitokwe ukuthi sibe sezingeni elifanele.
• Integrated logistics means that the entire supply chain must work together – the functions
in the supply chain must work together in harmony to be successful. Han (2009:66) explains
integrated logistics management as increased logistics-related communication and greater
coordination of the focal business activities in the business and in those of its suppliers
and customers. In this way, the retailer can provide the customer with even better service.
• Geïntegreerde logistiek beteken dat die hele voorsieningsketting saam moet werk – die
funksies in die voorsieningsketting moet in harmonie saamwerk om suksesvol te wees. Han
(2009:66) verduidelik geïntegreerde logistieke bestuur as verbeterde logistiekverwante
kommunikasie en groter koördinering van die fokussake-aktiwiteite in die onderneming
en in dié van sy verskaffers en klante. Op hierdie wyse kan die kleinhandelaar selfs beter
diens aan die klant voorsien.
• Di-logistic tse kopaneng e bolela hore motjha ohle wa phepelo o tlameha ho sebetsa
mmoho mesebetsi e motjheng wa phepelo e tlameha ho sebetsa mmoho ka kutlwano hore
e atlehe. Han (2009:66) o hlalosa tsamaiso ya di-logistic tse kopaneng jwaloka kgokahano
e eketsehileng ya tse amanang le tsamaiso ya thepa ho bareki, tlhophiso e eketsehileng
ya mesebetsi ya bohlokwa ya dikgwebo kahare ho kgwebo le ya bafani ba bona le bareki.
Ka tsela ena moreki o tla kgona ho fa moreki tshebeletso e ntle le ho feta.
• Inqubo yezamalojistiki ehlangene ichaza ukuthi yonke inqubo yezokukhiqiza
nokusetshenziswa komkhiqizo ifanele isebenzisane – yonke imisebenzi ngaphakathi
kuchunge-chunge lwenqubo kufanele isebenzisane kahle ukuze kube nempumelelo. U-Han
(2009:66) uchaza ukuphathwa kwenqubo ehlangene kwezelojistiki njengokuxhumana
okuhlobene nelojistiki, njengenqubo equkethe ukusebenzisana kakhulu kwemisebenzi
ehloswe yibhizinisi ngaphakathi kwebhizinisi kanye nasemisebenzini yabasabalalisi
kanye namakhastama. Lokhu kusho ukuthi umthengisi uzokwazi ukuhlinzeka ikhastama
ngomsebenzi omuhle.
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• The supply chain is a “set of institutions that move goods from the point of production to
the point of consumption” (Wiid, 2012:66).
• Die voorsieningsketting is ‘n stel instellings wat goedere van die produksiepunt na die
verbruikspunt beweeg (Wiid, 2012:66).
• Motjha wa phepelo ke “sete ya ditsi tse tlosang thepa ho tswa ho ntlha ya tlhahiso ho ya
ho ntlha ya tshebediso” (Wiid, 2012:66).
• Uchunge-chunge lwezokukhiqiza nokusetshenziswa kwemikhiqizo leli yiqoqo
lwezikhungo ezithutha imikhiqizo ukusukela esikhungweni sokukhiqiza ukufikela
esikhungweni sokusetshenziswa komkhiqizo ngumthengi (Wiid, 2012:66).
• In a direct channel the products and services are distributed directly from the manufacturer/
producer to the end consumer. In an indirect channel, on the other hand, the products
pass through various intermediaries or middlemen before reaching the final consumer. In
some cases retailers use two or more channels to distribute the same product to the same
target market – this is known as dual distribution (Hatten, 2016:318).
• In ‘n direkte kanaal word die produkte en dienste direk van die vervaardiger/produsent
na die eindverbruiker versprei. In ‘n indirekte kanaal, daarenteen, gaan die produkte deur
verskillende tussengangers voordat dit die finale verbruiker bereik. In sommige gevalle
gebruik kleinhandelaars twee of meer kanale om dieselfde produk aan dieselfde teikenmark
te versprei – dit staan bekend as dubbelverspreiding (Hatten, 2016:318).
• Tsela e otlollohileng ke moo dihlahiswa le ditshebeletso di hasangwang ho tswa ho moetsi/
mohlahisi ka kotloloho ho ya ho moreki. Tsela e sa otlolohang, ka nqa e nngwe, ke moo
dihlahiswa di fetang hara bakeni-dipakeng ba fapaneng pele di fihla ho moreki wa ho
qetela. Maemong a mang barekisi ba sebedisa tsela tse pedi kapa ho feta sehlahiswa se
tshwanang ho mmaraka o tshwanang wa tsepamiso – sena se bitswa kgasanyo e habedi
(Hatten, 2016:318).
• Indlela eqondile kulapho imikhiqizo kanye namasevisi kuthunyelwa ngendlela eqondile
ukusukela kumkhiqizi ukufikela ekugcineni kumthengi. Indlela engaqondile ngqo,
ngakolunye uhlangothi, kulapho imikhiqizo yenziwa ngokuthi idlule isigaba sabanye
abaphakathi naphakathi kwezokukhiqiza noma umkhiqizo ngaphambi kokuthi umkhiqizi
ufike esigabeni sokugcina okungumthengi. Kwezinye izimo, abathengisi basebenzisa imigudu
emibili noma ngaphezulu ukuthumela umkhiqizo ofanayo kwimakethe efanayo – lokhu
kwaziwa njengenqubo yokuthumela embaxambili (Hatten, 2016:318).
• An intermediary is an individual or a business that acts as a link between the producer and
the final consumer to effectively supply the products and services to the end user.
• ’n Tussenganger is ‘n individu of ‘n onderneming wat optree as ‘n skakel tussen die produsent
en die finale verbruiker om die produkte en dienste doeltreffend aan die eindgebruiker te
verskaf.
• Mokeni-dipakeng ke motho a lemong kapa kgwebo e sebetsang jwaloka sehokelo pakeng
tsa mohlahisi le moreki wa ho qetela ele ho ka fana ka dihlahiswa le ditshebeletso ho
mosebedisi.
• Osesigabeni sesibili sokukhiqiza kungaba umuntu noma ibhizinisi elisebenza phakathi
komkhiqizi kanye nomthengi, ngenhloso yokuthumela kahle imikhiqizo namasevisi
kumsebenzisi wawo.
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• Grey market sourcing refers to the practice of obtaining branded merchandise from traders
who do not have a licence from a manufacturer to sell its goods.
• Grysmarkverkryging verwys na die praktyk om handelsmerkhandelsware van handelaars
te verkry wat nie ‘n lisensie van die vervaardiger het om sy goedere te verkoop nie.
• Grey market sourcing e bolela tlwaelo ya ho fumana thepa e nang le mabitso a tummeng
ho tswa ho borakgwebo ba senang lengolo le tswang ho moetsi la ho rekisa thepa ya bona.
• Indlela yangasese yokuthola umkhiqizo yinkambiso lapho abathengisi abangenayo
ilayisensi yokuthola umkhiqizo obhrendiwe kubakhiqizi abathengisa impahla yabo.
• Alliances and concessions: A concession is a business within a business, or a shop within
a shop. A set area or a predetermined amount of space is demarcated to a specific range of
products, the supply of which is controlled by an entity/retailer other than the host retailer.
Alliances enable a host retailer to enter a new product market by allocating store space to a
product specialist retailer, while it is in the process of building up its own product expertise.
• Alliansies en konsessies: ‘n Konsessie is ‘n onderneming in ‘n onderneming, of ‘n winkel
in ‘n winkel. ‘n Vasgestelde area of voorafbepaalde ruimte word afgebaken vir ‘n spesifieke
reeks produkte, waarvan die voorsiening deur ‘n entiteit/kleinhandelaar anders as die
gasheerkleinhandelaar beheer word. Alliansies stel ‘n gasheerkleinhandelaar in staat om
‘n nuwe produkmark te betree deur winkelruimte aan ‘n produkspesialis-kleinhandelaar
toe te wys terwyl die gasheerkleinhandelaar in die proses is om sy eie produkkundigheid
op te bou.
• Ditswalle le dikhonseshene: khonseshene ke kgwebo kahara kgwebo, kapa lebenkele kahara
lebenkele. Sebaka se itseng kapa sebaka sa boholo bo itseng se a hlauwa mme ho sona ho
kengwe lethathamo la dihlahiswa tse itseng, tseo phepelo ya tsona e laolwang ke motho/
morekisi eo e seng morekisi ya faneng ka sebaka. Ditswalle di dumella morekisi ya fanang
ka sebaka ho kena mmarakeng o motjha wa dihlahiswa, ka ho fana ka sebaka sa lebenkele
ho morekisi wa dihlahiswa tse ikgethileng, ha a ntse a hodisa tsebo ya hae ya dihlahiswa.
• Inhlanganisela yamabhizinisi kanye namakhonseshini Ikhonseshini ukuba nelungelo
lokuvula ibhizinisi ngaphakathi kwebhizinisi, njengesibonelo ukuba nesitolo ngaphakathi
kwesinye isitolo. Indawo ebekiwe noma isikhala esibekiwe ngaphambilini sabekelwa
eceleni ukuze sihlale imikhiqizo ethile, kanti ukuthunyelwa kwaleyo mikhiqizo kulawulwa
ngulowo ovule ibhizinisi ngaphakathi kwebhizinisi. Inhlanganisela yamabhizinisi isiza
umnikazi wendawo yebhizinisi ukuthi angene kwimakethe entsha yomkhiqizo, lokhu
ukwenza ngokunikezela ngendawo kumthengisi oyingcweti yomkhiqizo othize, ngesikhathi
umthengisi ekwinqubo yokuthuthukisa ubungcweti bomkhiqizo.
• Supply chain length refers to how many parties/links there are involved in the selling process.
The supply chain can be either direct or indirect. The supply chain width is usually described
in terms of intensive, selective or exclusive distribution width (Dunne et al., 2011:164).
• Voorsieningskettinglengte verwys na hoeveel partye/skakels by die verkoopsproses betrokke
is. Die voorsieningsketting kan óf direk óf indirek wees. Die voorsieningskettingwydte word
gewoonlik beskryf aan die hand van intensiewe, selektiewe of eksklusiewe verspreidingswydte
(Dunne et al., 2011:164).
• Bolelele ba motjha wa phepelo e bolela hore na ke baamehi/dihokelo tse kae tse nkang
karolo tshebetsong ya thekiso. Motjha wa phepelo e ka ba o otlolohileng kapa o sa otlolohang.
Bophara ba motjha wa phepelo hangata o hlaloswa ho latela bophara ba kgasanyo bo
tebileng, bo kgethang kapa bo ikgethang (Dunne et al., 2011:164).
• Ubude bochunge-chunge lwezokukhiqiza nasekusetshenzisweni komkhiqizo lokhu
kuchaza ubude bochunge-chunge lokuxhumana olubandakanyekayo kwinqubo
yokuthengiswa komkhiqizo. Le nqubo yochunge-chunge yenzeka ngendlela eqonde
ngqo noma engaqondile ngqo. Ububanzi bochunge-chunge lwezokukhiqiza
nasekusetshenzisweni komkhiqizo ngokuvamile lokhu kuchazwa ngendlela yokujula,
ekhethekile noma ehlukile yokuthunyelwa komkhiqizo (Dunne et al., 2011:164).
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• Visual merchandising is the art and science of presenting products in the most visually
appealing way that creates a positive image of the store and results in getting the attention
of the customer (Bhalla & Anuraag, 2010:20; Ebster & Garaus, 2011:77).
• Visuele bevoorrading is die kuns en wetenskap om produkte op die mees visueel aantreklike
wyse uit te stal wat ‘n positiewe beeld van die winkel oordra en die aandag van die klant
trek (Bhalla & Anuraag, 2010:20; Ebster & Garaus, 2011:77).
• Thekiso ka pono ke bonono le saense ya ho hlahisa dihlahiswa ka tsela e kgahlisang mahlo
haholo hoo di hlahisang lebenkele le le letle ho lebisang ho ho lemouwa ke bareki (Bhalla
& Anuraag, 2010:20; Ebster & Garaus, 2011:77).
• Ukukhangiswa komkhiqizo ngendlela ebonakalayo lobu ubuciko kanye nesayensi
yokukhangisa imikhiqizo ngendlela yobuchwepheshe obuhehayo, kanti yakha isithombe
esihle sebhizinisi, lokhu kwenziwa ngenhloso yokuheha amakhastama (Bhalla & Anuraag,
2010:20; Ebster & Garaus, 2011:77).
• Store design refers to the interior and exterior appearance of a retail store where products
are sold to individual customers. The purpose of store design is to create an attractive and
appealing environment that entice customers to enter the store, to browse and ultimately
to make a purchase.
• Winkelontwerp verwys na die voorkoms van die interieur en eksterieur van ‘n
kleinhandelwinkel waar produkte aan individuele klante verkoop word. Die doel van
winkelontwerp is om ‘n aantreklike omgewing te skep wat klante lok om in die winkel in
te kom, rond te snuffel en uiteindelik iets te koop.
• Moralo wa lebenkele e bolela tjhebeho ya kahare le ya kantle ya lebenkele moo dihlahiswa
di rekisetswang bareki ka bo mong. Sepheo sa moralo wa lebenkele ke ho theha tikoloho e
ntle e kgahlisang e hohela bareki ho kena ka lebenkeleng, ho boha le ho qetella ba rekile.
• Idizayini yesitolo lokhu kuchaza ukubukeka kwangaphakathi kanye nengaphandle lesitolo,
lapha imikhiqizo ithengiselwa abantu abangamakhastama. Inhloso yokudizayina isitolo
ngendlela enhle nehehayo, ukwakha isithombe sendawo esihehayo kanye nesikhangayo,
lokho kuheha amakhastama ukuthi angene ngaphakathi esitolo, ukuze abuke futhi agcine
ngokuthenga.
• Planograms are visual diagrams or plans indicating the physical allocation of product
display space within a product grouping used for standardising merchandise presentation
(AMA, 2017). Planograms are therefore visual representations of where and how to place
retail products on the shelves or in display areas to increase awareness and maximise sales
(Wiid, 2012:83).
• Planogramme is visuele diagramme of planne wat die fisiese toewysing van
produkuitstalruimte in ‘n produkgroepering aandui en gebruik word om handelsware-
aanbieding te standaardiseer (AMA, 2017). Planogramme is dus visuele verteenwoordigings
van waar en hoe om kleinhandelprodukte op die rakke of in uitstalareas te plaas om
bewustheid te verbeter en verkope te maksimaliseer.
• Di-planogram ke ditshwantsho kapa merero e bontshang sebaka sa pontsho ya sehlahiswa
kahara sehlopha sa sehlahiswa se sebedisetswang ho etsa tlhahiso ya thepa e tshwane
(AMA, 2017). Di-planogram ka hoo ke dipontsho tsa hore na thepa e rekiswang e lokela ho
bewa kae le jwang dishelefong kapa dibakeng tsa pontsho ele hore di bonahale mme di
rekwe haholo (Wiid, 2012:83).
• Amaplanogramu lokhu kuyimifanekiso noma amapulani aveza isikhala esibonakalayo
sokukhangisa imikhiqizo, ngaphakathi kohlelo lokuhlukanisa imikhiqizo ngamaqembu,
lokhu kusetshenziselwa ukuthi ukukhangiswa kwemikhiqizo kufane (AMA, 2017). Ngalokho,
amaplanogramu achaza imikhangiso yezithombe ekhombisa ukuthi imikhiqizo kufanele
ibekwe kuphi kanti kufanele ibekwe kanjani kumashalofu esitolo noma ezindaweni
zokukhangisa, ukuqwashisa amakhastama amaningi ngomkhiqizo kanye nokukhulisa
izinga lentengiso (Wiid, 2012:83).
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• The exterior of a store has a powerful impact on the image of the store and should be
planned accordingly. The storefront side of a store is referred to as the exterior part of the
store. It includes the marquee (sign displaying the store’s name), the entrance, the windows,
the exterior lighting, and construction material (referring to the actual building materials).
• Die buitekant/eksterieur van ‘n winkel het ‘n sterk invloed op die beeld van die winkel en
moet dienooreenkomstig beplan word. Daar word verwys na die winkelfront van ‘n winkel
as die eksterieur van die winkel. Dit sluit die markee (reklamebord wat die winkel se naam
vertoon), die ingang, die vensters, die eksterieurbeligting, en konstruksiemateriaal (die
werklike boumateriaal) in.
• Bokantle ba lebenkele bo na le matla a maholo hodima ponahalo ya lebenkele mme bo
lokela ho rerwa ka nepahalo. Lehlakore le kapele la lebenkele le bitswa karolo e kantle ya
lebenkele. Le kenyeletsa le tente (le nang letshwao le bontshang lebitso la lebenkele),
monyako, difenstere, mabone a kantle, le matheriale wa ho aha (e leng matheriale wa ho
aha ka bo ona).
• Ingaphandle lesitolo linomthelela onamandla kwisithombe sesitolo kanti lifanele lihlelwe
kahle. Ingxenye engaphambili yesitolo ithathwa njengalo ingaphandle lesitolo. Lokhu
kubandakanya ithende elikhulu (elinophawu oluveza igama lesitolo), indawo yokungena,
amafasitela, ukukhanya kwangaphandle kanye nezixhobo ezisetshenziswe ekwakheni
(lapha kuchazwa imetheriyeli yangempela esetshenziswe ekwakhiweni kwesitolo).
• The interior design of a store plays a key role in the shopping experience of customers as
customers experience certain emotions or feelings when entering the store (Wiid, 2012:109).
Interior design includes factors such as the type of flooring, the different colours that are
used, the type of lighting, the sounds in the store as well as scents.
• Die interieurontwerp van ‘n winkel speel ‘n sleutelrol in die koopervaring van klante
aangesien klante bepaalde emosies of gevoelens ervaar wanneer hulle in die winkel
inkom (Wiid, 2012:109). Interieurontwerp sluit faktore in soos die tipe vloerbedekking, die
verskillende kleure wat gebruik word, die tipe beligting, asook die klanke en reuke in die
winkel.
• Moralo wa bokahare ba lebenkele o bapala karolo e bohlokwa tshebetsong ya ho reka
bakeng sa moreki jwalokaha moreki a tla ba le maikutlo a itseng ha a kena ka lebenkeleng
(Wiid, 2012:109). Dintlha tsa moralo wa bokahare tse jwaloka mofuta wa matheriale o
sebedisitsweng fatshe, mebala e fapaneng e sebedisitsweng, mofuta wa mabone, medumo
e ka lebenkeleng hammoho le menko.
• Idizayini yangaphakathi yesitolo idlala indima enkulu kwizinqumo ezithathwa abathengi,
njengoba abathengi kukhona imizwa abanayo uma bengena esitolo (Wiid, 2012:109). Idizayini
yangaphakathi efana nokufakwe phansi, imibala ehlukahlukene esetshenzisiwe, uhlobo
lwezibani, uhlobo lomculo kanye nephunga elimnandi elingaphakathi esitolo.
• Formal or symmetrical balance involves positioning items on either side of a central line
so that they are equally weighted optically (Poloian, 2013:322). Informal or asymmetrical
balance is the positioning of items on either side of centre line so that they are not equally
weighted optically (Poloian, 2013:322).
• Formele of simmetriese balans behels om items aan weerskante van ‘n sentrale lyn
te posisioneer sodat hulle opties ewe veel gewig dra (Poloian, 2013:322). Informele of
asimmetriese balans is die posisionering van items aan weerskante van ‘n sentrale lyn
sodat hulle nie opties ewe veel gewig dra nie (Poloian, 2013:322).
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• Botsitso bo hlophisitsweng kapa bo lekalekanang bo kenyeletsa ho beha dintho ka
mahlakoreng ka bobedi a mola o bohareng hore di bonahale di na le boima bo lekanang
(Poloian, 2013:322). Botsitso bo sa hlophiswang kapa bo sa lekaneng ke ho beha ntho
ka mahlakoreng ka bobedi a mola o bohareng hore di se bonahane eka di na le boima bo
lekanang (Poloian, 2013:322).
• Isilinganiso esihlelekile noma esifanayo sifaka indlela yokubeka umkhiqizo ngakwizingxenye
ezibhekene, ukwenzela ukuthi le mikhiqizo yenze isisindo esibonakala silingana (Poloian,
2013:322). Isilinganiso esingahlelekile noma esingafani ukubeka umkhiqizo ezingxenyeni
ezingabhekene, ukwenzela ukuthi le mikhiqizo ingenzi isisindo esibonakala sifana (Poloian,
2013:322).
• Feature areas are those areas in a store that are specially designed to draw customers’
attention (Levy, Weitz & Beitelspacher, 2012:479) and they include windows, entrances,
freestanding displays, promotional aisles or areas, walls, dressing rooms and point-of-
purchase counters.
• Fokusareas is daardie areas in ‘n winkel wat spesifiek ontwerp is om klante se aandag te trek
(Levy, Weitz & Beitelspacher, 2012:479), en sluit vensters, ingange, losstaande uitstallings,
promosiegangetjies of -areas, mure, aantrekkamers en aankooppunttoonbanke in.
• Dibaka tsa tshobotsi ke dibaka tseo ka lebenkeleng di reretsweng ho hohela bareki
(Levy, Weitz & Beitelspacher, 2012:479) mme di kenyeletsa difenstere, menyako, dipontsho
tse ikemetseng, dibaka kapa dipaseje tsa phahamiso, mabota, dikamore tsa ho apara, le
dikhaonthara tsa thekiso.
• Izindawo ezihehayo yilezo zindawo ezidalelwe ukuheha amakhastama ngaphakathi
esitolo (Levy, Weitz & Beitelspacher, 2012:479) kanti zona zibandakanya amafasitela,
indawo yokungena, imikhangiso ezimele yodwa, amaphaseji noma izindawana, izindonga,
amagunjana okulinganisa impahla kanye namakhawunta okukhokhela intengo.
• End-caps are a form of display that is normally located at the end of an aisle using a grid
layout. These end-caps are very easy to see and increases the sales of products that are
displayed here.
• Endrakke is ’n vorm van uitstalling wat normaalweg aan die end van ‘n gangetjie geleë
is wat ‘n roosteruitleg gebruik. Hierdie endrakke is baie maklik om te sien en verhoog die
verkope van produkte wat hier uitgestal word.
• Di-end-cap ke mofuta wa pontsho eo hangata e leng qetellong ya phaseje e sebedisa
moralo wa griti. Ho bonolo haholo ho e bona mme kahoo thekiso ya dihlahiswa tse beilweng
mona e tla eketseha.
• Imikhangiso esekugcineni kwephaseji lokhu kuchaza ukubeka izixhobo zokukhangisa
ekupheleni kwephaseji ngokubeka izinto kwizitendi ezinamagridi. Le ndlela yokukhangisa
ibonakalisa izinto lula kanti lokhu kukhulisa inani lentengiso yaleyo mikhiqizo ekhangiswayo.
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• Promotional displays are used when the retailer’s objective is to increase the sales of specific
products or services. The attractiveness of the display on which the products are presented
motivate customers to buy the products (Wiid, 2012:171).
• Promosie-uitstallings word gebruik wanneer die kleinhandelaar se doelwit is om die verkope
van spesifieke produkte of dienste te verhoog. Die aantreklikheid van die uitstalling waarop
die produkte uitgestal word, motiveer klante om die produkte te koop (Wiid, 2012:171).
• Dipontsho tsa nyollo di sebediswa ha maikemisetso a morekisi e le ho eketsa thekiso ya
dihlahiswa kapa ditshebeletso tse itseng. Botle ba dipontsho tseo dihlahiswa di beilweng ho
yona bo tla hohela le ho susumetsa bareki ho reka dihlahiswa (Wiid, 2012:171).
• Imikhangiso yepromoshini yemikhiqizo isetshenziswa umthengisi ngenhloso yokukhulisa
izinga lentengiso yemikhiqizo ethile. Ukuheha komkhangiso wemikhiqizo kuzokhuthaza
amakhastama ukuthi athenge imikhiqizo (Wiid, 2012:171).
• When the retailer’s objective is to promote the store’s image instead of specific products,
then institutional displays are used (Wiid, 2012:171). Displays about issues of public interest
(e.g. HIV/Aids, global warming, breast cancer, rhino poaching) indicate that the retailer cares
about the community’s welfare and promote the image of the retailer.
• Wanneer die kleinhandelaar se doelwit is om die winkel se beeld in plaas van spesifieke
produkte te bevorder, word instellingsuitstallings gebruik (Wiid, 2012:171). Uitstallings oor
kwessies van openbare belang (bv MIV/Vigs, aardverwarming, borskanker, renosterstropery)
dui aan dat die kleinhandelaar omgee vir die gemeenskap se welsyn en bevorder die beeld
van die kleinhandelaar.
• Ha maikemisetso a morekisi e le ho nyolla hlompheho ya lebenkele sebakeng sa dihlahiswa
tse itseng, ho sebediswa dipontsho tsa setsi (Wiid, 2012:171). Dipontsho tse mabapi le
dikgahleho tsa setjhaba (HIV Aids, Ho Futhumala ha Lefatshe, Mofetshe wa Letswale, Ho
Bolawa ha Ditshukudu jj.) di supa hore morekisi o tsotella boiketlo ba setjhaba mme di tla
ntlafatsa ponahalo ya morekisi.
• Imikhangiso ephakamisa igama lebhizinisi kulapho umthengisi ekhangisa isithombe
sesitolo, ngaphezu komkhiqizo othile, kulesi simo kusetshenziswa umkhangiso okhuphula
igama lebhizinisi (Wiid, 2012:171). Imikhangiso emayelana nezindaba ezisematheni
emphakathini (Isandulela Ngculazi neNgculazi, Ukuguquka kwesimo sezulu nezinga
eliphezulu lokushisa, Ukuqwashisa ngomdlavuza Wamabele, Ukubulawa kobhejane kanye
nokunye okunjalo-njalo) kubonisa ukuthi umthengisi unakekela inhlalakahle yabantu kanti
lokhu kuphakamisa igama lebhizinisi.
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• On-shelf displays refer to the “normal” types of in-store displays that show different
types of products in a logical order (Varley, 2014:231). Off-shelf displays are used to add
extra impact by showing products as they could be used, or next to other products to
influence complementary purchases, for example, placing coffee mugs next to a coffee
display.
• Op-die-rak-uitstallings verwys na die “normale” tipes op-die-rak-uitstallings wat verskillende
tipes produkte in ‘n logiese volgorde wys (Varley, 2014:231). Uitstallings van die rak af word
gebruik vir ekstra invloed deur produkte te wys soos hulle gebruik kan word, of langs ander
produkte om komplementêre aankope te beïnvloed, byvoorbeeld om koffiebekers lang ‘n
koffie-uitstalling te plaas.
• Dipontsho tse dishelefong di tsebahala ka hore ke mofuta o “tlwaelehileng” wa dipontsho
tsa kahare ho lebenkele tse bontshang mefuta e bontshang mefuta e fapaneng ya dihlahiswa
ka tatellano e hlophisehileng (Varley, 2014:231). Dipontsho tse seng dishelefong di sebediswa
ho eketsa tshusumetso e eketsehileng ka ho bontsha dihlahiswa jwalo ka ha di ne di ka
sebediswa, kapa pela dihlahiswa tse ding ho susumetsa ditheko tse tlatsetsang, mohlala,
ho beha mabekere a matle pela pontsho ya kofi.
• Imikhangiso esemashalofini ithathwa njengohlobo “olujwayelekile” lomkhangiso
wangaphakathi esitolo okhombisa izinhlobo ezehlukahlukene zomkhiqizo, kanti zibekwa
ngokuthi zilandelaniswe kahle (Varley, 2014:231). Imikhangiso eyenziwa ngaphandle
kwamashalofu isebenza ukongeza inhlansi ngokukhombisa ukuthi imikhiqizo
ingasetshenziswa kanjani, noma eduze neminye imikhiqizo ukukhuthaza umoya wokuthenga
izinto ezihambisanayo, njengesibonelo ukubeka izinkomishi ezinhle eduzane nomkhangiso
wekofi.
• Point-of-purchase (POP) displays are regarded as the most effective display that a self-
service retailer can use, for example in a grocery or department store. POP displays used
to be associated with products sold at the checkout counter. However, today POP displays
can be displays or fixtures used to assist retailers in selling their products (Hefer, 2012:100).
• Aankooppuntuitstallings word beskou as die mees effektiewe uitstalling wat ’n kleinhandelaar
kan gebruik, byvoorbeeld in ‘n kruideniers- of afdelingswinkel. Aankooppuntuitstallings
is voorheen geassosieer met produkte wat by die betaalpunt verkoop is. Vandag kan
aankooppuntuitstallings uitstallings of vaste toebehore wees wat kleinhandelaars help om
hulle produkte te verkoop (Hefer, 2012:100).
• Dipontsho tsa Sebaka sa theko (POP) di nkwa ele pontsho e atlehang ka ho fetisisa eo
morekisi wa self-service a ka e sebedisang, mohlala lebenkeleng la korosari kapa lefapheng la
lebenkele. Dipontsho tsa POP di ne di amahanngwa le dihlahiswa tse rekiswang khaontareng
ya ho patala, leha ho le jwalo, kajeno dipontsho tsa POP e kaba dipontsho kapa diyuniti tse
sebediswang ho thusa barekisi ka ho rekisa dihlahiswa tsa bona (Hefer, 2012:100).
• Imikhangiso ebekwa ngalapho kukhokhwa khona ithathwa njengomkhangiso omuhle
kakhulu ongasetshenziswa umthengisi, isibonelo, njengesitolo segrosa noma isitolo
esineminyango ehlukahlukene. Imikhangiso ebekwa ngalapho kukhokhwa khona ivame
ukuhlobana nemikhiqizo ethengiswa lapho kukhokhwa khona esitolo, namhlanje lolu hlobo
lwemikhangiso kungaba yimikhangiso noma izinhlelo ezisetshenziswa ukusiza abathengisi
ekuthengiseni imikhiqizo yabo (Hefer, 2012:100).
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• Mannequins are regarded as a prop instead of a display type. However, in apparel stores
mannequins are the main feature used to display clothes as they would look in “real life”
and therefore it is discussed as a display tool in this section. However, mannequins are one
of the main elements of visual merchandising.
• Winkelpoppe word beskou as ‘n dekorstuk eerder as ‘n uitstaltipe. In klerewinkels is
winkelpoppe egter die hooffokuspunt wat gebruik word om klere uit te stal soos dit werklik
sou lyk, daarom word dit as ‘n uitstalhulpmiddel in hierdie afdeling bespreek. Winkelpoppe
is egter een van die hoofelemente van visuele bevoorrading.
• Dipopi tse sebediswang e le dipontsho di nkwa ele ditshehetso bakeng sa ho nkwa e le
mofuta wa pontsho. Leha ho le jwalo mabenkeleng a diaparo dipopi tse sebediswang e le
dipontsho ke tshobotsi e ka sehloohong e bontshang diaparo jwalo ka ha di tla shebahala
“bophelong” mme kahoo e sekasekwa e le sesebediswa sa pontsho karolong ena. Leha ho le
jwalo, dipopi tse sebediswang e le dipontsho ke tse ding tsa dielemente tse ka sehloohong
tsa thekiso ka pono.
• Imikhangiso yokugqokisa onodoli abakhulu lokhu kubonakala njengezimpahla
zokukhangisa. Kodwa ezitolo, imikhangiso yokugqokisa onodoli abakhulu isetshenziswa
kakhulu ukukhangisa izimpahla zokugqoka, ikakhulukazi ezitolo zezimpahla zokugqoka,
njengoba umkhangiso ubonakala “njengento yangempela empilweni”, ngalakho ithathwa
njengethuluzi lokukhangisa kulesi sigaba. Umkhangiso wokugqokisa onodoli abakhulu
ngomunye wezinto ezibalulekile ekukhangiseni ngokubonakalayo impahla ngokubonakalayo.
• Non-store retailing simply refers to those retailers or retailer outlets that do not have a
physical brick-and-mortar store (traditional retail store). Non-store retailing, also referred
to as e-tailing (electronic retailing) takes place via catalogues sent to consumers and the
internet.
• Niewinkelkleinhandel verwys bloot na daardie kleinhandelaars of kleinhandelafsetpunte
wat nie ‘n fisiese winkelgebou (tradisionele kleinhandelwinkel) het nie. Niewinkelkleinhandel
ook bekend as e-kleinhandel (elektroniese kleinhandel) vind plaas via katalogi wat aan
verbruikers gestuur word en die internet.
• Thekiso eo eseng ya lebenkeleng e bolela feela sebaka se kantle sa barekisi kapa morekisi
seo e seng lebenkele le entsweng ka ditene le seretse (lebenkele le tlwaelehileng). Thekiso
eo eseng ya lebenkeleng, e bolelwang hape e le e-tailing (thekiso ka elektroniki) e nka
sebaka ka dikhatalokong tse romellwang ho bareki ka inthanete.
• Intengiso ngaphandle kwesitolo kalula nje kuchaza labo bathengisi abangathengiseli ezitolo
zangempela (izitolo ezivamile) njengegumbi ongalibona ngamehlo. Intengiso yalolu hlobo
ibizwa ngokuthi yi e-tailing ukuthengisa nge-inthanethi (intengiso ngendlela ye-elektroniki),
kanti lentengiso yenzeka ngamakhathalogu athunyelwa kubathengi nange-inthanethi.
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• Store atmospherics can be defined as the physical characteristics of a store that are
used to develop an image to attract consumers (Nell, 2013:21). Kotler (2001) defines store
atmospherics as the design of a buying environment in which specific buying emotions
are created through the senses (sight, sound, scent and touch) to enhance the consumer’s
likelihood of purchasing (in Nell, 2013:21).
• Winkelatmosfeer kan omskryf word as die fisiese eienskappe van ‘n winkel wat gebruik
word om ‘n beeld te ontwikkel om verbruikers te lok (Nell, 2013:21). Kotler (2001) omskryf
winkelatmosfeer as die ontwerp van ‘n koopomgewing waarin spesifieke koop-emosies
deur die sinne (sig, klank, reuk en tas) geskep word om die koopwaarskynlikheid van die
verbruiker te verbeter (Nell, 2013:21).
• Ditikoloho tsa lebenkele di ka hlaloswa e le ditshobotsi tsa kantle tsa lebenkele tse
sebediswang ho hlahisa setshwantsho e le ho hohela bareki (Nell, 2013:21). Kotler (2001) o
hlalosa ditikoloho tsa lebenkele e le boqapi ba tikoloho ya ho reka boo ho bona maikutlo
a theko a ikgethileng a boptjwang ka tshebediso ya dikutlo (pono, kutlo, monko, le ho
tshwara) e le ho ntlafatsa monyetla wa hore moreki a reke (ho Nell, 2013:21).
• Isimo sesitolo esivusa umoya wokuthenga sona singachazwa njengezimpawu ezibonakalayo
ezisetshenziswa ukuthuthukisa isithombe ngenhloso yokuheha abathengi (Nell, 2013:21).
UKotler (2001) uchaza lolu hlobo lwesitolo njengendlela yokwakha isimosizinda sokuthenga
lapho imizwa ethize yokuthenga ivuswa khona ngokusebenzisa imizwa (yokubona, ukuzwa
ngendlebe, ukuzwa ngekhala, nokuzwa ngokuthinta) ukwenzela ukukhuthaza umoya
wokuthenga kumthengi (in Nell, 2013:21).
• The hue or shade of the colour refers to the name of the specific colour or the actual
appearance of the colour. The value of the colour refers to the lightness or darkness of a
colour that can change. The intensity or chroma refers to the purity, strength or brightness
of a colour (the chromaticity), for example “royal blue”, “dull grey”, “bright red” or “bottle
green”.
• Die skakering of tint van die kleur verwys na die naam van die spesifieke kleur of die ware
voorkoms van die kleur. Die waarde van die kleur verwys na die ligtheid of donkerheid
van ‘n kleur wat kan verander. Die intensiteit of chroma verwys na die suiwerheid, sterkte
of helderheid van ‘n kleur (die chromatisiteit), byvoorbeeld “koningsblou”, “vaalgrys”,
“helderrooi” of “bottelgroen”.
• Sehalo sa mmala le hore na mmala o tebile kapa o hlakile hakae ho bolela lebitso le
fuwang mmala o itseng kapa ponahalo ya sebele ya mmala. Boleng ba mmala bo bolela
ho hlaka kapa ho teba ha mmala o ka fetohang. Botebo ba mmala kapa chroma ho bolela
ho hloka sekodi, matla kapa ho kganya ha mmala (chromacity), mohlala “bolou bo tebileng”,
“bothokwa bo thothofa”, “bokgubedu bo hlakileng” kapa “botala bo fifetseng”.
• Inhlanganisela noma iqoqo lemibala ichaza igama elisetshenziswa ukudalula umbala
othile noma ukubonakala kombala. Ubunjalo bombala lichaza ukukhanya noma ubunyama
bombala okungashintsha. Injula noma ukucweba kuchaza izinga lokucweba, amandla noma
izinga lokukhanya kombala (ukucweba), njengesibonelo, “okuluhlaza okwesibhakabhaka”,
“ubumpunga obungakhanyi kakhulu”, “ububomvu obukhanyayo” noma “ubuhlaza okotshani
okukhanyayo”.
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• A monochromatic colour scheme only uses one colour and adds white or black to create
different values and intensity.
• ‘n Monochromatiese kleurskema gebruik slegs een kleur en voeg wit of swart by om
verskillende waardes en intensiteite te skep.
• Sekimi sa mmala o le mong ke ha o sebedisa feela mmala o le mong ebe o eketsa ka
bosweu kapa botsho ho hlahisa boleng le botebo bo fapaneng.
• Ibhande/uqweqwe lombala owodwa kulapho usebenzisa umbala owodwa futhi wongeze
ngombala omhlophe noma omnyama ukwakha ubunjalo nokucweba kombala.
• An analogous or adjacent colour scheme uses more than one colour that are next to
each other on the colour wheel (or analogous) and it creates a harmonious balance in
visual communication.
• ‘n Analoë of aangrensende kleurskema gebruik meer as een kleur wat langs mekaar op
die kleurwiel is en skep ‘n harmonieuse balans in visuele kommunikasie.
• Sekimi sa mmala se tshwanang kapa se pela se batlileng se tshwana ke moo ho feta
mmala o le mong o sebedisitsweng pela e meng lebiding la mebala (kapa analogous) mme
o etsa hore ho be le ho leka-lekana ho dumellanang kahare ho puisano ya pono.
• Ibhande/Uqweqwe lwemibala efanayo noma ehambisanayo kuchaza lapho imibala
engaphezu kowodwa isetshenziswa ndawonye kolunye uqweqwe lwemibala (noma
lwemibala efanayo) ukuze kwakheke umbala ohlelekile kanti nemibala ekhangayo.
• Complementary colours, also known as contrasting colours, are opposite each other on the
colour wheel, for instance green and red, blue and orange, or purple and yellow.
• Komplementêre kleure ook bekend as kontrasterende kleure is oorkant mekaar op die
kleurwiel, byvoorbeeld groen en blou, blou en oranje, of pers en geel.
• Mebala e tlatsanang e tsejwang ka hore ke mebala e fapaneng, e shebane lebiding la mebala,
mohlala botala le bokgubedu, bolou le bolamunu kapa boperese le bosehla.
• Imibala eyakha omunye futhi le yimibala ejwayeleke njengemibala ephikisanayo, kanti
kuyimibala engahlobene kwixhama lemibala, njengesibonelo umbala oluhlaza kotshani
nobomvu, oluhlaza okwesibhakabhaka no-olintshi noma ophephuli nophuzi.
• A split-complementary colour scheme is a combination of three colours on the colour
wheel. This colour scheme includes a main colour and the two colours on each side of
its complementary colour on the colour wheel.
• ’n Verdeelde komplementêre kleurskema is ‘n kombinasie van drie kleure op die kleurwiel.
Hierdie kleurskema sluit die hoofkleur en twee klere aan weerskante van sy komplementêre
kleur op die kleurwiel in.
• Dikimi tsa mebala tse tlatsanang feela di arohane ke motswako wa mebala e meraro
lebiding la mebala. Sekimi sena sa mebala se kenyeletsa mmala o ka sehloohong le mebala
e mmedi mahlakoreng a mabedi a mmala o tlatsang lebiding la mebala.
• Ibhande lemibala emithathu le yinhlanganisela yemibala emithathu kubhande lemibala.
Lolu hlobo lwenhlanganisela libandakanya umbala ogqamile owodwa kanye neminye
emibili ezingxenyeni ezimbili zebhande lemibala.
• The tetradic (or double split-complementary) colour scheme uses four colours arranged into
two complementary colour pairs on the colour wheel.
• Die tetradiese (of dubbelverdeelde komplementêre) kleurskema gebruik vier kleure wat in
twee komplementêre kleurpare op die kleurwiel gerangskik is.
• Sekimi sa mebala sa tetiadic (kapa se tlatsanang feela se arohane habedi) se sebedisa mebala
e mene e behilweng ka dipara tse pedi tsa mebala e tlatsetsang lebiding la mebala.
• Ibhande lemibala emine (noma isakhiwo semibala emine) lapha kusetshenziswa imibala
emine ehlelwe yaba ububili bemibala kwibhande lemibala.
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• The triadic colour scheme (also known as the triadic colour harmony) uses three colours
that are spaced equally and form an equilateral triangle on the colour wheel. For example
yellow, red and blue.
• Die triadiese kleurskema (ook bekend as die triadiese kleurharmonie) gebruik drie kleure
wat ewe ver van mekaar af is en ‘n gelyksydige driehoek op die kleurwiel vorm. Byvoorbeeld
geel, rooi en blou.
• Sekimi sa mebala sa triadic (se tsejwang hape e le mebala e tsamaellanang ya triad) se
sebedisa mebala e meraro e arotsweng ka ho lekana mme e theha kgutlotharo e nang le
mahlakore a lekanang kaofela lebiding la mebala. Mohlala bosehla, bokgubedu le bolou.
• Ibhande lemibala kanxantathu (futhi elaziwa njengemibala ehlobene emithathu) lapha
kusetshenziswa imibala ehlukaniswa ngezikhala ezilinganayo kanti futhi igcina ngokwakha
unxantathu wezingxenye ezilinganayo ebhandeni lemibala. Njengesibonelo, umbala ophuzi,
obomvu kanye noluhlaza okwesibhakabhaka.
• The square colour scheme uses four colours spaced evenly around the colour wheel.
• Die vierkantige kleurskema gebruik vier kleure wat eweredig op die kleurwiel gespasieer is.
• Sekimi sa mebala se sekwere se sebedisa mebala e mene e arohantsweng ka ho lekana
e potapotileng lebidi la mebala.
• Ibhande lemibala kanxanne lakhiwa ngemibala emine ezungeza ibhande lemibala.
• The tempo of music influences how long customers tend to stay inside the store (Dunne
et al., 2014:569). The type or genre of music retailers play in-store can be just as influential
on how much customers spend (Dunne et al., 2014:569).
• Die tempo van musiek beïnvloed hoe lank klante in die winkel wil bly (Dunne et al., 2014:569).
Die tipe of genre musiek wat kleinhandelaars in die winkel speel, kan net so ’n groot invloed
hê op hoeveel geld klante bestee (Dunne et al., 2014:569).
• Sefutho sa mmino se susumetsa hore na bareki ba atisa ho dula kahare ho lebenkele nako e
kae (Dunne et al., 2014:569). Mofuta kapa mofutakwalo wa mmino oo barekisi ba o bapalang
kahare ho lebenkele o ka ba le tshusumetso ya hore na bareki ba sebedisa tjhelete e kae
(Dunne et al., 2014:569).
• Isigqi somculo yiso esenza ukuba amakhastama ahlale ngaphakathi esitolo isikhathi eside
(Dunne et al., 2014:569). Inhlobo yomculo odlalwa ngaphakathi esitolo ingenza amakhastama
ukuba athenge kakhulu (Dunne et al., 2014:569).
• Product congruency refers to the natural and obvious scent that is associated with a product.
• Produkkongruensie verwys na die natuurlike en gewone reuk wat geassosieer word met
die produk.
• Tsamaellano ya dihlahiswa e bolela monko wa tlhaho kapa o totobetseng o amahanngwang
le sehlahiswa.
• Iphunga lomkhiqizo lokhu kuchaza iphunga elimnandi elihambisana nomkhiqizo.
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• The promotional mix is a subset of the marketing mix, where the marketer attempts to create
the most favourable combination of different personal and non-personal selling elements
to achieve certain marketing objectives (Kurtz & Boone, 2016:522). The promotional mix is
therefore a combination of advertising, sales promotions, public relations, direct marketing,
sponsorships and new media – these are known as the promotional mix elements (Van
Niekerk, 2014:xvii).
• Die promosiemengsel is ‘n subgroep van die bemarkingsmengsel waar die bemarker
probeer om die gunstigste kombinasie van verskillende persoonlike en niepersoonlike
verkoopselemente te skep om bepaalde bemarkingsdoelwitte te bereik (Kurtz & Boone,
2016:522). Die promosiemengsel is dus ‘n kombinasie van reklame, verkoopspromosies,
openbare betrekkinge, direkte bemarking, borgskappe en nuwe media – dit staan bekend
as die promosiemengsel-elemente (Van Niekerk, 2014:xvii).
• Motswako wa papatso ke karolo ya motswako ya mebaraka, moo motho ya maketang a
lekang ho bopa motswako o tshwanelehang ka ho fetisisa wa dielemente tsa thekiso tse
fapaneng tsa botho le tseo e seng tsa botho ho fihlella maikemisetso a itseng a mebaraka
(Kurtz & Boone, 2016:522). Kahoo motswako wa papatso ke motswako wa ho bapatsa,
diphahamiso tsa thekiso, dikamano tsa setjhaba, mebaraka e tobileng, botshehetsi ba
ditjhelete le phatlalatso e ntjha – tsena di tsebahala e le dielemente tsa motswako wa
papatso (van Niekerk, 2014:xvii).
• Inhlanganisela yezinhlelo zepromoshini lokhu kuyiqoqwana eliyinhlanganisela yezinhlelo
zokumaketha, lapha umthengisi uzama ukwakha iqoqo elihle lezimpawu ezehlukahlukene
zabantu nezinto ngenhloso yokufinyelela izimpokophelo ezithile zokumaketha (Kurtz &
Boone, 2016:522). Le nhlanganisela yezinhlelo zepromishini ibandakanya ukukhangisa,
ukwenza ipromoshini yemikhiqizo, ukusebenzisana nabathengi, ukumaketha ngokuqonde
ngqo, izinhlelo zemixhaso yezinto ezithile, kanye nabezindaba – Lokhu konke kwaziwa
njengenhlanganisela yezinhlelo zepromoshini (van Niekerk, 2014:xvii).
• Communication can be seen as the sharing or spreading of information and aims to create
mutual understanding between the retailer and its customers (Cant, 2010a:69).
• Kommunikasie kan beskou word as die deel of verspreiding van inligting en die doel
daarvan is om ‘n wedersydse verstandhouding tussen die kleinhandelaar en sy klante te
skep (Cant, 2010a:69).
• Kgukahano e ka bonwa e le ho arolelanwa kapa ho jalwa ha tlhahisoleseding mme e
ikemiseditse ho bopa kutlwisisano dipakeng tsa morekisi le bareki ka bobedi (Cant, 2010a:69).
• Ukuxhumana kungathathwa njengokwabelana noma ukusabalalisa ulwazi kanti lokhu
kuhlose ukwakha indlela yokuqondisisana phakathi komthengisi namakhastama (Cant,
2010a:69).
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• Retail advertising includes all paid forms of non-personal communication about stores,
merchandise and service by an identified retailer. Its purpose is to inform the consumer
and to favourably influence consumers' attitudes and perceptions about the store, its
merchandise and activities, and to induce sales directly or indirectly (Cant, 2010a:80).
• Kleinhandelreklame sluit alle betaalde vorms niepersoonlike kommunikasie oor winkels,
handelsware en diens deur ‘n geïdentifiseerde kleinhandelaar in. Die doel daarvan is
om die verbruiker in te lig en om verbruikers se houdings en persepsies oor die winkel,
sy handelsware en aktiwiteite gunstig te beïnvloed, en om verkope direk of indirek te
veroorsaak (Cant, 2010a:80).
• Papatso ya thekiso e kenyeletsa mekgwa yohle ya tefo ya puisano e seng ya botho ka
mabenkele, thepa le tshebeletso ke morekisi ya tsejwang. Morero wa yona ke ho tsebisa
moreki le ho susumetsa ka mokgwa o amohelehang moya le maikutlo a bareki ka lebenkele,
thepa ya lona le mesebetsi ya lona, le ho susumetsa thekiso ka tsela e tobileng le e sa
tobang (Cant, 2010a:80).
• Ukukhangiswa kwesitolo kubandakanya zonke izindlela zokuxhumana zesitolo
ezingasebenzisi umuntu siqu, ezimayelana nesitolo, impahla kanye namasevisi, kanti lezi
zindlela zisetshenziswa umthengisi othile. Inhloso enkulu yalokhu, ukuphakela umthengi
ngolwazi futhi nokushintsha izifiso kanye nomqondo wabathengi ngesitolo, ngomkhiqizo
waso kanye nezinto ezenziwa yisitolo, kanti futhi nokuqikelela nokucindezela abathengi
ngendlela eqonde ngqo kanye nengaqondile ngqo (Cant, 2010a:80).
• Sales promotion can be defined as “a blend of marketing activities and materials designed
to intensify the effort of the sales force and also to persuade customers to buy the product
offering within a limited time” (Erdis & Cant, 2015:123).
• Verkoopspromosie kan omskryf word as ‘n mengsel bemarkingsaktiwiteite en -materiale
wat ontwerp is om die pogings van die verkoopspersoneel te intensifiseer en ook om klante
te oorreed om die produkaanbieding binne ‘n beperkte tyd te koop (Erdis & Cant, 2015:123).
• Phahamiso ya thekiso e ka hlaloswa e le “motswako wa mesebetsi ya mebaraka le
disebediswa tse reretsweng ho ntlafatsa boiteko ba lebotho la thekiso le ho susumetsa
bareki ho reka sehlahiswa se teng nakong e itseng” (Erdis & Cant, 2015:123).
• Ipromoshini yentengiso yemikhiqizo lokhu kungachazwa “njengenhlanganisela yemisebenzi
yokumaketha kanye namametheriyali eyenzelwe ukuqinisa imizamo yentengiso yemikhiqizo
futhi nokuheha abathengi ukuba bathenge imikhiqizo ethengiswa ngesikhathi esibekiwe
(Erdis & Cant, 2015:123).
• Public relations (PR) is the “unpaid, non-personal influencing of the consumer by making
available (to publicity media) the current news value of the store (including its products or
services) and obtaining a favourable review in these media” (Fourie, 2014b:84).
• Openbare betrekkinge is die onbetaalde, niepersoonlike beïnvloeding van die verbruiker
deur die huidige nuuswaarde van die winkel (insluitend sy produkte of dienste) beskikbaar
te stel (aan publisiteitsmedia) en om gunstige kommentaar in hierdie media te kry (Fourie,
2014b:84).
• Dikamano tsa setjhaba (PR) ke “tshusumetso e sa lefellwang, eo e seng ya botho ya moreki
ka ho fumahantsha (phatlalatsong ya metjha ya ditaba) boleng ba ditaba tsa hajwale tsa
lebenkele (ho kenyeletswa dihlahiswa tsa lona le ditshebeletso) le ho fumana tlhahlobo e
tshwanelehang metjheng ena ya diphatlalatso” (Fourie, 2014b:84).
• Uhlelo lokuxhumana nabantu le yindlela yokusebenzisa uhlelo lwezindaba lokukhangisa
ngokubhala, lokhu kwenziwa ngokwazisa abantu ngemikhiqizo yasesitolo (imikhiqizo noma
amasevisi) kanye nokuthi abezindaba babhale izindaba ezinhle ngalesi sitolo ezindabeni
(Fourie, 2014b:84).
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• Personal selling can be defined as the process of assisting and persuading a prospect to
buy a product or a service or to act on an idea through the use of interpersonal (person-
to-person) communication (Cant, 2010a). Personal selling attempts to inform customers
and to persuade them to purchase products or services in an exchange situation (Lamb
et al., 2013:353).
• Persoonlike verkope kan omskryf word as die proses om ‘n voornemende kliënt te help en
te oorreed om ‘n produk of diens te koop of om op ‘n idee te reageer deur die gebruik van
interpersoonlike (persoon-tot-persoon-) kommunikasie (Cant, 2010a). Persoonlike verkope
poog om klante in te lig en hulle te oorreed om produkte en dienste in ‘n ruilsituasie te
koop (Lamb et al., 2013:353).
• Thekiso e etswang ke batho e ka hlaloswa e le mokgwa wa ho thusa le ho susumetsa
tebello ya ho reka sehlahiswa kapa tshebeletso kapa ho nka kgato maikutlong ka tshebediso
ya puisano e dipakeng tsa batho (kgukagano ya motho le moto) (Cant, 2010a). Thekiso ye
tswang ke batho e leka ho tsebisa bareki le ho ba susumetsa hore ba reke dihlahiswa kapa
ditshebeletso boemong ba phapanyetsano (Lamb et al., 2013:353).
• Uhlelo lokuthengisa ngokusebenzisa umuntu lokhu kungachazwa njengohlelo lokuncenga
nokunxenxa abathengi ukuthi bathenge umkhiqizo noma amasevisi noma ngokusabalalisa
komunye umuntu (ukukhuluma komuntu nomuntu) (Cant, 2010a). Uhlelo lokuthengisa
ngokusebenzisa umuntu lungathathwa njengemizamo yokwazisa kanye nokuncenga
amakhastama ukuba athenge imikhiqizo noma amasevisi endaweni lapho kuthengiselwana
khona (Lamb et al., 2013:353).
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• “Pricing is the process of determining the value of a product that consumers will be willing
to pay under particular circumstances at a particular time” (Wiid, 2012:124).
• Prysing is die proses om die waarde te bepaal wat verbruikers bereid sal wees om in
bepaalde omstandighede en op ‘n bepaalde tydstip vir ‘n produk te betaal (Wiid, 2012:124).
• Ho beha theko ke tshebetso ya ho beha boleng ba sehlahiswa seo bareki ba tla beng ba
ikemiseditse ho se lefella ka tlasa maemo a itseng nakong e itseng” (Wiid, 2012:124).
• “Uhlelo lokubeka amanani entengiso yomkhiqizo lolu wuhlelo lokuveza izinga lomkhiqizo
lowo umthengi azimisele ukulikhokha ngaphansi kwesimo esithize ngesikhathi esithize”
(Wiid, 2012:124).
• The primary aim of profit-oriented pricing objectives are to price products to meet the
desired profits. In a nutshell, this category of pricing objective involves setting prices that
ensure you make money on each sale (Johnston, ND). Profit-orientated objectives therefore
include profit maximisation, satisfactory profits and target return on investment.
• Die primêre doelwit van winsgeoriënteerde prysingsdoelwitte is om produkte te prys
om die gewenste winste te bereik. Om op te som, hierdie prysingsdoelwitkategorie
behels om pryse te maak wat verseker dat u op elke transaksie geld maak (Johnston, ND).
Winsgeoriënteerde prysingsdoelwitte sluit dus maksimalisering, bevredigende winste en
teikenopbrengs op belegging in.
• Maikemisetso a ho beha theko a sekametseng phaellong a reretswe ka ho kgetholoha
ho beha theko dihlahisweng e le hore diphaello tse lakaditsweng di fihlellwe. Ka
bokgutshwanyane, morero wa karolo ena ya ho beha theko o kenyelletsa ho beha ditheko tse
tla etsa bonnete ba hore o etsa tjhelete thekisong ka nngwe (Johnston, ND). Ka lebaka leo,
maikemisetso a sekametseng phaellong a kenyelletsa sephetho sa phaello e phahameng,
diphaello tse kgotsofatsang le poello e rerilweng matseteng.
• Izinhloso zokubeka amanani entengiso ngokubhekela inzuzo eqinisweni, lokhu kuhlose
ekubekeni amanani entengiso yemikhiqizo, ukuze kufinyelelwe inzuzo ehlosiwe. Ngamafuphi,
lesi sigaba sokubeka amanani entengiso sibandakanya ukubeka amanani ezintengo
azoqinisekisa ukuthi umthengisi uthola inzuzo kuyo yonke imikhiqizo edayiswayo (Johnston,
ND). Izinhloso zokuthola inzuzo zibandakanya ukukhulisa izinga lenzuzo, inzuzo egculisayo
kanye nokufinyelela imbuyiselo yotsholo-mali ehlosiwe.
• Sales-oriented pricing objectives are set to establish growth in sales or to maintain the
current sales levels (Wiid, 2014:126-127). These objectives can be expressed in terms of sales
volume and market share – in rand or unit value (Terblanche et al., 2016:178).
• Verkoopsgeoriënteerde prysingsdoelwitte word gestel om groei in verkope te bewerkstellig
om die huidige verkoopsvlakke te handhaaf (Wiid, 2014:126-127). Hierdie doelwitte
kan uitgedruk word aan die hand van verkoopsvolume en markaandeel – in rand- of
eenheidswaarde (Terblanche et al., 2016:178).
• Maikemisetso a ho beha theko a sekametseng thekisong a behilwe e le ho theha kgolo
dithekisong kapa ho boloka maemo a ha jwale a thekiso (Wiid, 2014:126-127). Maikemisetso
ana a ka bontshwa ho ya ka dipehelo tsa bophahamo ba thekiso kapa kopanelo ya mebaraka
– ka ranta kapa ka boleng ba yuniti (Terblanche et al., 2016:178).
• Izinhloso zokubeka amanani entengiso ngokubhekela intengo yemikhiqizo izinhloso
zibekelwa ukukhulisa izinga lentengo noma ukugcina izinga lentengo yangaleso sikhathi
lisezingeni elifanayo (Wiid, 2014:126-127). Lezi zinhloso zingavezwa ngendlela yevolumu
yentengo noma ubuningi bentengiso nangendlela yesabelo sezimakethe – lokhu
kungakhonjiswa ngokwesilinganiso serandi noma seyunithi (Terblanche et al., 2016:178).
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• Status-quo pricing objectives seek to maintain existing price levels or to meet the competitor’s
prices. This type of pricing objective requires little planning as it is a passive policy employed
by a company (Lamb et al., 2010:258). Status-quo pricing objectives are generally directed
at meeting or preventing competition (Wiid, 2012:127).
• Status-quo prysingsdoelwitte poog om bestaande prysvlakke te handhaaf of om die
mededinger se pryse te ewenaar. Hierdie tipe prysingsdoelwit vereis min beplanning
aangesien dit ‘n passiewe beleid is wat ‘n maatskappy toepas (Lamb et al., 2010:258). Status-
quo prysingsdoelwitte is oor die algemeen gemik daarop om mededinging te ewenaar of
te verhoed (Wiid, 2012:127).
• Maikemisetso a ho beha theko ka maemo a leng teng hona jwale a batla ho boloka maemo
a teng a theko kapa ho kopana le ditheko tsa mohlodisani. Mofuta ona wa maikemisetso a ho
beha theko o hloka thero e fokolang jwalo ka ha e le leano le sa sebetseng le sebediswang
ke khamphani (Lamb et al., 2010:258). Maikemisetso a ho beha theko ka maemo a leng teng
hona jwale ka kakaretso a reretswe ho kopana kapa ho thibela tlhodisano (Wiid, 2012:127).
• Inhloso yokugcina izinga elithile elikhona okwamanje lentengo lolu wuhlelo oluhlose
ukugcina izintengo zisezingeni elithize elikhona noma ukuhambisana nezintengo zamanye
amabhzinisi okuqhudelwana nawo. Lolu hlobo lokubeka amanani entengo ludinga ukuhlela
okuncane, njengoba lokhu kungumgomo ofihlekile osetshenziswa yinkampani (Lamb
et al., 2010:258). Lezi zinhloso zokubeka amanani entengo zalolu hlelo ngokujwayelekile
ziqonde ukuhambisana nohlelo lokuncintisana kwamabhizinisi noma ukuvimbela uhlelo
lokuncintisana.
• The cost price is the amount of money it costs a manufacturer to produce a specific product
or provide a service, without any profits being added (WhatIs.com, 2017).
• Die kosprys is die bedrag wat dit ‘n vervaardiger kos om ‘n spesifieke produk of diens te
produseer, sonder om enige winste by te voeg (WhatIs.com, 2017).
• Theko ke bongata ba tjhelete e hlokwang ke mohlahisi ho hlahisa sehlahiswa se ikgethileng
kapa ho fana ka tshebeletso, kantle ho diphaello dife kapa dife tse eketswang (WhatIs.com,
2017).
• Inaani lentengo yezindleko zomkhiqizo leli yinani lemali yezindleko esetshenziswa
ukukhiqiza umkhiqizo othile noma amasevisi athile, lokhu akubandakanyi ukungezela
inzuzo (WhatIs.com, 2017).
• The selling price is the actual and final price of a product or service that a company or
retailer charges a purchaser to buy the item (InvestorWords, 2017).
• Die verkoopsprys is die werklike en finale prys van ‘n produk of diens wat ‘n maatskappy
of kleinhandelaar ‘n koper vra om die item te koop (InvestorWords, 2017).
• Theko ya ho rekisa ke theko ya sebele le ya ho qetela ya sehlahiswa kapa tshebeletso eo
khamphani kapa morekisi a e qosang moreki hore a reke ntho (InvestorWords, 2017).
• Inani okuthengiswa ngalo umkhiqizo leli yinani lokugcina lentengiso yangempela
yomkhiqizo elishajwa ngumthengisi kumthengi ukuthenga (InvestorWords, 2017).
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• Fixed costs are costs that do not change with the increase or decrease in the number of
products or services produced or sold. Fixed costs are expenses, such as rent, that a company
has to pay and are independent of any business activity (Investopedia, 2017).
• Vaste koste is koste wat nie verander saam met die toename of afname in die aantal produkte
of dienste wat geproduseer of verkoop word nie. Vaste koste is uitgawes, soos huur, wat ‘n
maatskappy moet betaal en is onafhanklik van enige sake-aktiwiteit (Investopedia, 2017).
• Ditjeo tse tsitsitseng tse sa fetoheng ho latela keketseho kapa phokotseho palong ya
dihlahiswa kapa ditshebeletso tse hlahiswang kapa tse rekiswang. Ditjeo tse tsitsitseng ke
ditshenyehelo tse kang, rente, tse lokelwang ho patalwa ke khamphani mme tse ikemetseng
kathoko ho mosebetsi wa kgwebo ofe kapa ofe (Investopedia, 2017).
• Izindleko ezingaguquki lezi yizindleko ezingaguquki ngokwenyuka noma ukwehla
kwenani lemikhiqizo noma amasevisi athengiswayo. Izindleko ezingaguquki yilezo zindleko
ezinjengerenti okufanele ikhokhwe yinkampani kanti lolu hlobo lwezindleko luzimele geqe
aluhlangene nezindleko zemisebenzi yebhizinisi (Investopedia, 2017).
• Variable costs are a corporate expense that varies with production output. Variable costs
are dependent on the production volumes of a company – they rise as production increases
and fall as production decreases (Investopedia, 2017).
• Veranderlike koste is ‘n korporatiewe uitgawe wat met produksie varieer. Veranderlike
koste is afhanklik van die produksievolumes van ‘n maatskappy – dit styg soos produksie
toeneem en daal soos produksie afneem (Investopedia, 2017).
• Ditjeo tse fapanang ke ditshenyehelo tsa khamphani tse fapanang le kgumo ya bohlahisi.
Ditjeo tse fapanang di itshetlehile hodima bongata ba bohlahisi ba khamphani – di ya hodimo
ha bohlahisi bo eketseha mme di ya tlase ha bohlahisi bo fokotseha (Investopedia, 2017).
• Izindleko eziguqukayo lezi yizindleko ezilawulwa yizindleko zokukhiqiza zomkhiqizo.
Izindleko ezihlukahlukene zincike kwinani lemikhiqizo yenkampani – lezi zindleko
ziyakhuphuka uma inani lomkhiqizo liya phezulu, kanti zibuye zehle uma inani lomkhiqizo
liya phansi (Investopedia, 2017).
• Demand-based pricing (or customer-based pricing) strategies are based on the level of
demand for the product. When retailers use demand-based pricing strategies, the customer
pays more for a particular product when demand for the product is higher. Alternatively,
the customer pays a lower price when the demand for a particular product is lower (Pride
& Ferrell, 2010:586).
• Vraaggebaseerde prysing- (of klantgebaseerde prysing-) strategieë is gebaseer op die vlak
van of vraag na die produk. Wanneer kleinhandelaars vraaggebaseerde prysingstrategieë
gebruik, betaal die klant meer vir ‘n bepaalde produk wanneer vraag na die produk hoër
is. Daarenteen, betaal die klant ‘n laer prys wanneer die vraag na ‘n produk laer is (Pride &
Ferrell, 2010:586).
• Mawa a theko e thehilweng hodima tlhokeho (kapa theko e thehilweng hodima moreki)
a thehilwe hodima boemo ba tlhokeho ya sehlahiswa. Ha mawa a theko e thehilweng
hodima tlhokeho a sebediswa ke barekisi, moreki o tla lefa ho feta sebakeng sa sehlahiswa
se ikgethileng ha tlhokeho ya sehlahiswa e phahame. Ho seng jwalo, moreki o tla lefa theko
e tlase ha tlhokeho ya sehlahiswa se ikgethileng e le tlase (Pride & Ferrell, 2010:586).
• Amasu okubeka amanani entengiso ngokulandela ukudingeka komkhiqizo (noma
amanani entengiso alawulwa ukuziphatha kwamakhastama) alawulwa yizinga lokufuneka
komkhiqizo. Uma amasu okubeka amanani entengiso encike kwizinga lokudingeka
kwemikhiqizo esetshenziswa ngabathengisi, amakhastama azokhokha kakhulu uma ethenga
umkhiqizo othile ofunwa kakhulu. Ngakolunye uhlangothi, ikhastama lizokhokha kancane
uma lowo mkhiqizo ungafunwa kakhulu (Pride & Ferrell, 2010:586).
279
• With cost-based pricing a rand amount or percentage is added to the cost of the product
or service (Pride & Ferrell, 2010:585). This pricing strategy therefore involves determining
and setting a specific mark-up or profit. It is the easiest way of calculating what the price
of a product or service should be.
• Met kostegebaseerde prysing word ‘n randbedrag of persentasie by die koste van die
produk of diens gevoeg (Pride & Ferrell, 2010:585). Hierdie prysingstrategie behels dus
om ‘n spesifieke prystoeslag of wins te bepaal en te stel. Dit is die maklikste manier om te
bereken wat die prys van ‘n produk of diens moet wees.
• Ka ho behwa ha theko ho thehilweng hodima tjeo palo ya ranta kapa peresente e eketswa
tjeong ya sehlahiswa kapa tshebeletso (Pride & Ferrell, 2010:585). Ka lebaka leo, lewa lena
le kenyelletsa ho lekanngwa le ho behwa ha theko e itseng e phahameng kapa phaello.
Ke tsela e bonolo ka ho fetisisa ya ho bala hore na sehlahiswa kapa tshebeletso di lokela
ho behwa theko jwang.
• Ukubeka amanani entengo ngokwezindleko zomkhiqizo lapha isilinganiso serandi noma
sephesenti singezelwa phezu kwezindleko zomkhiqizo noma zamasevisi (Pride & Ferrell,
2010:585). Leli lisu lokubeka amanani entengo libandakanya indlela yokuthola nokubeka
indleko ethile noma inzuzo ethile. Le yindlela elula kakhulu yokuthola intengo okufanele
ibekwe emkhiqizweni noma kwisevisi.
• Companies use competition-based pricing methods to benchmark the prices of
their competing products and services against those of their competitors (Business Dictionary,
2017). Companies often set prices only after researching the competitor’s pricing rather than
considering the supply and demand of a product (Agarwal, 2016).
• Maatskappye gebruik mededingingsgebaseerde prysingsmetodes om die normbepaling
van hulle produkte en dienste te doen teenoor dié van hulle mededingers (Business
Dictionary, 2017). Maatskappye stel dikwels slegs pryse nadat hulle die mededinger se
prysing nagevors het eerder as om die aanbod van en vraag na ‘n produk in ag te neem
(Agarwal, 2016).
• Mekgwa ya ho behwa ha theko e thehilweng hodima tlhodisano e hlahloba ditheko
tsa dihlahiswa tse tlhodisanong le ditshebeletso kgahlanong le tse hlodisanang le tsona
(Business Dictionary, 2017). Dikhamphani di atisa ho beha ditheko feela kamora ho etsa
dipatlisiso ka ditheko tsa mohlodisani ho ena le ho nahana phepelo le tlhokeho ya sehlahiswa
(Agarwal, 2016).
• Izindlela zokubeka amanani entengo ngokulandela ezokuncintisana ukubeka isilinganiso
esithile samanani entengo ngokulandela ukuthi ngabe labo ibhizinisi encintisana nabo
bathengisa imikhizo yabo namasevisi ngamalini, la manani ezintengo aqhathaniswa nalawo
ezinkampani ezincintisana nebhizinisi (Business Dictionary, 2017). Ngokuvamile izinkampani
zibeka izintengo ngemuva kokwenza ucwaningo ngamanani ezintengo zezinye izinkampani
ezincintisana nazo, lokhu kwenzeka ngaphandle kokubheka amazinga okudingakala
nokutholakala kwemikhiqizo (Agarwal, 2016).
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• Gross profit margin (or the gross margin) is the difference between revenue and cost before
accounting for certain other costs. Generally, it is calculated as the selling price of an item,
less the cost of goods sold (AMA, 2016).
• Bruto winsmarge (of bruto wins) is die verskil tussen inkomste en koste voordat boekhouding
van bepaalde ander koste gedoen word. Gewoonlik word dit bereken teen die verkoopsprys
van ‘n item, min die koste van goedere verkoop (AMA, 2016).
• Moedi wa phaello e felletseng (kapa moedi wa phaello) ke phapang dipakeng tsa matlotlo
le tjeo pele ho boikarabello ba ditjeo tse ding tse itseng. Ka kakaretso, e balwa e le tjeo ya
thekiso ya ntho, ho tlositswe tjeo ya thepa e rekisitsweng (AMA, 2016).
• Inzuzo/iprofithi ephelele kungakakhishwa zonke izindleko (noma inani lengeniso
eliphezulu), lo umehluko ophakathi kwemali yonke engenayo kanye nezindleko ngaphambi
kokuthi kukhishwe ezinye izindleko. Ngokuvamile, le nzuzo ibalwa njengenani lentengo
efakwa emkhiqizweni othile othengiswayo, lapha kukhishwa izindleko zempahla edayisiwe
(AMA, 2016).
• Net profit margin (or net profit) is the profit or loss at the end of the financial period. It is
the operating profit plus other expenses (Wiid, 2012:98).
• Netto winsmarge (of netto wins) is die wins of verlies aan die einde van die finansiële
tydperk. Dit is die bedryfswins plus ander uitgawes (Wiid, 2012:98).
• Moedi wa phaello ya ha ho se ho tlositswe ditshenyehelo tsohle (kapa phaello e setseng)
ke phaello kapa tahlehelo ya pheletsong ya nako ya ditjhelete. Ke phaello e sebetsang e
kopantswe le ditshenyehelo tse ding (Wiid, 2012:98).
• Inzuzo/iprofithi esikhishelwe izindleko (noma inani lenzuzo/leprofithi), le yinzuzo noma
ukulahlekelwa okutholakala ekupheleni kwesikhathi sonyaka wezimali. Le yinzuzo etholakala
uma ibhizinisi lisebenza kanye nezinye izindleko ngaphezulu (Wiid, 2012:98).
• Profitability refers to activities that a retail outlet undertakes to achieve long-term profits
from the sales of its product or merchandise mix and to secure a steady recovery of the
cash invested in the retail outlet’s stock (Botha et al., 2011:71).
• Winsgewendheid verwys na aktiwiteite wat ‘n kleinhandelafsetpunt onderneem om
langtermynwinste uit die verkope van sy produk- of handelswaremengsel te verkry of
om ‘n bestendige verhaling van die kontant wat in die kleinhandelafsetpunt se voorraad
geïnvesteer is, te verseker (Botha et al., 2011:71).
• Dipoello di bolela mesebetsi eo morekisi wa kantle a e etsang ho fihlella diphaello tsa nako e
telele ho tswa dithekisong tsa sehlahiswa kapa motswako wa thepa le ho boloka ka botsitso
ho kgutla ha tjhelete e tsetetsweng thepeng ya thekiso ya kantle (Botha et al., 2011:71).
• Ukwenzeka kwenzuzo/kweprofithi lokhu kuchaza imisebenzi eyenziwa yisitolo ukufinyelela
izinzuzo ezitholakala esikhathini eside ngentengiso yemikhiqizo noma izimpahla
ezehlukahlukene futhi nokubuyisa imali etshalwe ngokuthenga isitokwe sesitolo (Botha
et al., 2011:71).
281
• Gross margin return on investment (GMROI) is a less complicated calculation whereby a
product’s margin is multiplied by its rate of sale in a certain period (sales turnover). It allows
retailers to compare the amount of profit generated on a product line with the level of
investment made in the stock (Botha et al., 2011:71).
• Bruto marge-opbrengs op belegging (BMOB) is ‘n minder gekompliseerde berekening
waarvolgens ‘n produk se marge vermenigvuldig word met sy verkoopskoers in ‘n bepaalde
tydperk (verkoopsomset). Dit stel kleinhandelaars in staat om die bedrag wins wat op ‘n
produkreeks gegenereer word, te vergelyk met die investeringsvlak wat in die voorraad
gemaak is (Botha et al., 2011:71).
• Phaello ya nako e beilweng ya kgutliso ya tsetelo (GMROI) ke ho bala ho seng thata
haholo moo moedi wa sehlahiswa o atiswang ka sekgahla sa thekiso ya sona nakong e
itseng (tjhelete ya thekiso e bokellwang nakong e itseng) mme e dumella barekisi ho bapisa
palo ya phaello e etswang ke mola wa sehlahiswa le boemo ba ho tsetela bo etswang ke
thepa (Botha et al., 2011:71).
• Inzuzo yesikhathi esibekiwe eyimbuyiso yotshalo-mali (GMROI) le yindlela elula yokubala
inzuzo, lapha inani lomkhiqizo liphindaphindwa ngenani lentengiso yemikhiqizo edayisiwe
esikhathini esibekiwe (inani lonke lentengiso yemikhiqizo ethengisiwe) kanti lokhu kuvumela
abathengisi ukuthi baqhathanise inani lenzuzo/leprofithi etholakele ngenani elithize
lemikhiqizo, kanti lokhu kwenzeka ngezinga lotshalo-imali lokuthenga isitokwe (Botha et
al., 2011:71).
• Price elasticity refers to the relationship between a change in the quantity demanded of
a particular product and a change in its price (Investopedia, 2017).
• Pryselastisiteit verwys na die verhouding tussen ‘n verandering in die hoeveelheid wat van
‘n bepaalde produk gevra word en ‘n verandering in sy prys (Investopedia, 2017).
• Tenyetseho ya theko e bolela kamano dipakeng tsa phetoho bongateng bo hlokwang ba
sehlahiswa se itseng le phetoho ya tjeo ya sona (Investopedia, 2017).
• Inani lentengo eliguqulwa yizinga lokudingeka komkhiqizo lokhu kuchaza ubudlelwane
phakathi kwenguquko yenani elidingekayo ngomkhiqizo othile kanye nokuguquka
kwamanani entengiso okubangwa yizinga lokudingeka komkhiqizo (Investopedia, 2017).
• Cost reductions refer to the process of looking for, finding and removing unwarranted
expenses from a business to increase profits without having a negative impact on the
product quality (Business Dictionary, 2017).
• Kosteverminderings verwys na die proses om te soek na ongemagtigde uitgawes van ‘n
onderneming, dit te vind en te verwyder om winste te verhoog sonder om ‘n negatiewe
invloed op die produkgehalte te hê (Business Dictionary, 2017).
• Diphokotso tsa ditjeo di bolela ho batla, ho fumana le ho tlosa ditshenyehelo tse sa
lokafalang kgwebong ho eketsa diphaello kantle le ho ba le tshusumetso e mpe ho boleng
ba sehlahiswa (Business Dictionary, 2017).
• Ukunciphisa izindleko lokhu yinqubo yokucinga, yokuthola nokususa izindleko
ezingenasidingo ebhizinisini, ngenhloso yokwengeza inzuzo ngaphandle kokwenza
umthelela omubi kwikhwalithi yomkhiqizo (Business Dictionary, 2017).
282
MNM1506/1

• Availability is referred to as a number of product items that are immediately obtainable
on the shelves in the retail outlet at any one time, which indicates the extent to which an
intended product assortment is in stock for customers to buy (Botha et al., 2011:73).
• Daar word na beskikbaarheid verwys as die aantal produkitems wat onmiddellik te eniger
tyd op die rakke in die kleinhandelafsetpunt verkrygbaar is, wat die mate aandui waarin ‘n
beoogde produkverskeidenheid in voorraad is vir klante om te koop (Botha et al., 2011:73).
• Phumaneho e bolela palo ya dihlahiswa e fumanehang hang-hang dishelefong sebakeng
sa thekiso lebenkeleng nako efe kapa efe, e tla bontsha tekanyo eo mefuta ya sehlahiswa se
reretsweng bareki se fumanehang bakeng sa hore bareki ba se reke (Botha et al., 2011:73).
• Ukutholakala komkhiqizo lokhu kuchaza inani lemikhiqizo ekhona kumashalofu esitolo
ngaso sonke isikhathi, lokhu kuzoveza ukuthi lingakanani inani lezinhlobo zemikhiqizo
esesitokweni esilindelwe ukuthi sithengwe amakhastama (Botha et al., 2011:73).
283

Introduction To Merchandising

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Introduction To Merchandising

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TOPIC 1: FUNDAMENTALS OF MERCHANDISING 1

It is a great pleasure to welcome you to this module on Introduction to Merchandising (MNM1506).

LEARNING OUTCOMES AND ASSESSMENT CRITERIA

Outcomes Assessment criteria

Outcomes Assessment criteria

have to master and demonstrate.

that you will come across in the chapter concerned

suggested website. Website links are provided as additional reading or videos

to help you understand concepts or theory better.

of the learning material.

activities throughout the study guide.

dealt with in the learning unit.

CRITICAL SUCCESS FACTORS

suggest that you do the following:

34 You can expect us to do the following:

35 As lecturers, we expect you to do the following:

framework for this module is as follows:

37 TOPIC 1: FUNDAMENTALS OF MERCHANDISING

41 TOPIC 2: MERCHANDISE PLANNING AND SOURCING

46 TOPIC 3: THE RETAIL STORE ENVIRONMENT

50 TOPIC 4: COMMUNICATING THE RETAILER’S MERCHANDISE

54 TOPIC 5: MERCHANDISE EVALUATION

African retail and marketing environment.

Overview of this learning unit

OVERVIEW OF THIS LEARNING UNIT

64 This learning unit unfolds as follows:

After completing this learning unit, you should be able to

• define the concept of retailing

• Retailer • Convenience store

1.2 NATURE OF RETAILING

or service through personal, family or household use” (Business Dictionary, 2016).

types of retailers next.

1.2.1 Characteristics of retailers

80 We now look at the different types of retailers.

1.2.2 Types of retailers

1.2.2.1 Store retailers

Figure 1.1: Type of general retailers

87 We first look at the various general retail stores:

99• Warehouse showrooms

Figure 1.2: Type of speciality retailers

103 • Traditional speciality stores

Traditional speciality stores are sometimes referred to as limited-line retailers. Alternatively, if

107 • Off-price retailers

109 • Category killers

look at the non-store retailer classification.

1.2.2.2 Non-store retailers

Figure 1.3: Type of non-store retailers

114 • Direct marketing

116 • Direct selling

119 • Vending machines

121 • Markets, stalls and carts

123 • Online retailing

1.3 THE RETAILING INDUSTRY

1.3.1 The African retail industry

changing constantly and rapidly.

1.3.2 The South African retail industry

1.4 THE RETAIL ENVIRONMENT

short or long-term consequences, it is necessary to understand what the retail environment