Merchandising and Product Knowledge
What merchandising covers
Range planning, pricing, presentation and space allocation - all aimed at sales per square foot and margin per square foot. A SKU is the smallest sellable unit (brand + variant + pack size). Category roles: destination (drives footfall), routine (bought regularly), seasonal, and convenience.
The numbers the paper asks for
- Gross margin % = (Selling price − Cost) ÷ Selling price × 100
- Mark-up on cost % = (Selling price − Cost) ÷ Cost × 100
- Markdown % = (Original price − New price) ÷ Original price × 100
- Stock turnover = COGS ÷ average stock at cost
- GMROI = gross margin in rupees ÷ average inventory at cost
ABC analysis ranks SKUs by sales contribution; typically a small share of SKUs delivers most of the value, so A items get prime space and tighter stock control.
Product knowledge
Know features versus benefits (feature: 2-litre capacity; benefit: cooks for four without a refill). Know shelf life, storage conditions, warranty, size charts and the applicable HSN code and GST rate. Labels must show MRP inclusive of all taxes, net quantity, manufacturer/packer details, consumer-care contact, and expiry or best-before where applicable.
Worked example
An item costs ₹349 and sells at ₹499. Gross margin = (499 − 349) ÷ 499 = 150 ÷ 499 = 30.1%. Mark-up on cost = 150 ÷ 349 = 43.0%. If it is marked down to ₹449, new margin = 100 ÷ 449 = 22.3%, and markdown = 50 ÷ 499 = 10.0%. Reasoning: margin always divides by selling price; mark-up divides by cost; markdown divides by the original price.
Traps that cost marks
- Dividing by cost when the question asks for margin.
- Treating MRP as the shop's own price - MRP is the maximum retail price, taxes included.
- Confusing markdown with mark-up.
- Quoting stock turnover using selling price instead of COGS.