Hello Anil, for a good explanation of Merchandise Category I suggest that you read my blog: Merchandise Category Hierarchy: WHY (Business View).
As answers for your specific and different questions ...
Material Group versus Merchandise Category
In SAP Retail, the term Merchandise Category replaces Material Group. Whereas, in SAP R/3 standard, Material Groups are defined in Customizing, in SAP Retail specific transactions enable the maintenance of Merchandise Categories purely as master data.
It is a mistake in an SAP Retail system to configure Material Groups.
Distribution Chains, not Sales Areas and not Division
A distribution chain is made up of a sales organization and a distribution channel. The purpose of a distribution chain is to structure sales within a retail company. Divisions are not used for any functions developed specifically for SAP Retail. However, a single dummy division is provided where necessary.
Customer relationships are important for controlling logistics processes. You maintain these according to sales area. A sales area is a combination of a sales organization, distribution channel, and division. Unlike in industrial companies, there is generally no differentiation made in SAP Retail between product-related divisions, therefore the distribution chain is definitive for the customer relationship.
Articles are assigned uniquely (client-wide) to one division. The significance of the distribution chain for logistics and price determination is also manifest in integrated article maintenance. In the distribution chain-related sales view you maintain data that is relevant for delivery, for example, the sales unit. For price determination, you maintain the actual sales price and other condition parameters but you also need to enter certain control data, such as the price fixing flag or the competition characterization of the article.
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