A merchandiser is an entity that acquires and resells inventory. The focus of this business model is to have an efficient inventory acquisition method and the ability to market and sell the goods to the end consumer.
There are several ways in which a merchandiser can obtain inventory, which are:
- Consignment. Goods can be held under a consignment arrangement, where they are owned by a third party. In this case, the merchandiser is the consignee, and only pays the consignor for the inventory when it is sold to a customer.
- Purchase from manufacturer. Goods are routinely purchased from manufacturers. The keys to success are to keep the payment terms long enough that the goods can be sold and cash collected before the manufacturer must be paid. Also, inventory levels must be kept low enough through frequent re-ordering that the total inventory investment is minimized.
- Self-produce. It is possible for a manufacturer to set up its own merchandising operations, where it sells its own goods through retail stores.
For a merchandiser to effectively market and sell goods to the end consumer requires attention to the following items:
- Retail locations. Retail stores must be situated as close to the target demographic as possible, and appropriately stocked to maximize sales of the most profitable goods.
- Marketing. A variety of marketing techniques can be employed to attract customers to the retail locations, such as coupons, billboards, Internet advertising, and radio advertising.
An overriding issue for the merchandiser is to design an inventory acquisition and selling system that minimizes the investment in cash. Otherwise, there is a significant risk of bankruptcy from having an excessive investment in inventory that cannot be readily sold.