Classes of merchandise
Merchandise means the goods a shop sells. Shops group them so they can buy, price and place them well.
- Convenience goods: cheap, bought often, little thought. Milk, bread, soap, a phone recharge. Placed where they are easy to grab.
- Shopping goods: people compare price, quality and style first. Shoes, clothes, phones, furniture.
- Specialty goods: special brands or rare items that people will travel for. A designer watch, a rare tea, a handmade guitar.
Shops also group stock by department (food, clothing, electronics), by staple vs fashion (always needed vs trendy), and by impulse goods (sweets at the checkout). A service business (salon, gym, bank) sells actions, not things, so its “merchandise” is shown through menus, price boards and demonstrations.
Store design, layout and visual display
Store layouts
- Grid: long straight aisles. Easy to find things and fits a lot of stock. Used by supermarkets and pharmacies.
- Loop (racetrack): one main path circles the store, leading shoppers past every section. Used by department stores and furniture stores.
- Free-form: fixtures placed in a relaxed pattern. Feels friendly, invites browsing. Used by boutiques and gift shops.
Tricks of design: everyday items (milk, bread) at the back so people pass other goods; checkout near the exit with impulse items; wide aisles for prams and wheelchairs.
Visual display techniques
- Eye level is buy level: best sellers and high-profit items at eye height.
- Focal point: a spotlit display that catches the eye.
- Window display: a theme (festival, season) that pulls people in.
- Colour blocking, grouping by threes, mannequins, signs and lighting.
- End caps: displays at the end of an aisle for offers.
Services use display too: a café shows its menu and fresh cakes; a salon shows before-and-after photos.
Inventory control and protecting the business
Inventory is the stock a shop holds. Too little = empty shelves and lost sales. Too much = cash stuck, goods expire or go out of fashion.
Purchasing methods
- Reorder point ordering: order when stock falls to a set level.
- Just-in-time (JIT): small, frequent deliveries; less storage, but risky if a delivery is late.
- Bulk buying: lower price per unit, but more storage.
- Seasonal buying: order ahead for festivals and seasons.
Reorder point = average daily sales × delivery (lead) days + safety stock.
Periodic vs perpetual counting
A periodic system counts stock by hand at set times (e.g. monthly). A perpetual system uses computers: each barcode or RFID scan at the till lowers the stock count instantly, and the system can send an order automatically. Technology also shows best sellers and slow sellers.
Protecting the business (loss prevention)
Shrinkage is stock lost to theft, damage or mistakes.
- External (against shoplifting, robbery, fraud): security tags, cameras, mirrors, guards, good lighting, card checks.
- Internal (against staff theft and errors): careful hiring, staff training, bag checks, till counts, stock audits, limited access to cash.
Human resources in retail and service
Organisation structure
A small shop may be just an owner and two helpers. A large store has levels: store manager → department managers → sales associates, cashiers, stock clerks. Chains add regional managers and a head office for buying, marketing and HR.
Remuneration (pay)
- Hourly wage: rate × hours; common for part-time staff.
- Salary: fixed pay; common for managers.
- Commission: a % of sales; common for car, phone and furniture sales.
- Salary plus commission and bonuses; also benefits such as staff discounts.
Example: 5% commission on 40,000 of sales = 0.05 × 40,000 = 2,000.
Labour and safety laws
Most countries set a minimum wage, maximum hours, breaks, rules for young workers, and workplace safety rules: safe lifting, clear fire exits, first aid, training on equipment and reporting accidents.
Diversity
A team of different ages, genders, cultures, languages and abilities understands more customers, brings more ideas and is fairer. Laws in many countries forbid discrimination in hiring.
Key formulas and definitions
- Reorder point = average daily sales × lead time (days) + safety stock
- Safety stock: extra stock kept in case of late delivery or a sales jump
- Shrinkage = stock recorded − stock actually present
- Commission = rate (%) × sales
- Perpetual inventory: stock count updated with every sale (scanner)
- Periodic inventory: stock counted by hand at set times
Worked examples
1. A shop sells 15 bottles of juice a day. Delivery takes 4 days and it keeps 20 as safety stock. Find the reorder point.
Reorder point = 15 × 4 + 20 = 60 + 20 = 80 bottles. Order when only 80 are left.
2. Records say 500 T-shirts are in stock, but a count finds 470. What is the shrinkage and its percentage?
Shrinkage = 500 − 470 = 30 T-shirts. Percentage = 30 ÷ 500 × 100 = 6%.
3. A phone salesperson earns a salary of 18,000 plus 2% commission. This month she sells 300,000 worth of phones. What is her total pay?
Commission = 0.02 × 300,000 = 6,000. Total = 18,000 + 6,000 = 24,000.
Common mistakes
- Mixing up shopping and specialty goods. Shopping goods are compared; specialty goods are sought out for a special brand or feature.
- Forgetting safety stock in the reorder point. Without it, one late delivery empties the shelf.
- Thinking loss prevention is only about shoplifters. Staff errors and internal theft also cause shrinkage.
- Thinking commission is a fixed amount. It is a percentage of sales, so it changes with sales.