Merchandising is the act of promoting and selling goods or services through retail. There could be different strategies at play when merchandising. These could be appealingly displaying the products to encourage purchase. Offers and discounts and all efforts to promote a product also fall under the broad umbrella of merchandising. Merchandise refers to the products itself. Thus, when we say merchandising, it is generally referred to as everything that requires you to sell products or services. Often, merchandising can be done through physical brick and mortar stores. But it has seen a spike in the e-commerce sector as well.
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This guide is designed to inform you about everything there is to know about merchandising – from the strategies, the types, its role in E-commerce, and more. So, with that, let us get started.
Merchandise: Definition, Job Description, Types and Strategies
Responsibilities & Requirement to Become a Merchandiser
The role of a merchandiser is quite an important one. Their performance can directly impact the performance of a business. Their responsibilities include:
- Ensuring that there are enough products in inventory
- Negotiating with the buyers and suppliers.
- Promoting the right products the right way
- Looking after how the store should look to entice customers to make a purchase
- Collaborating with display managers to make sure that the right products are displayed
- Keep an eye on goods that are not performing well. (Slow sellers are a burden to a company’s bottom line. So, having a complete grasp of what sells and what not is crucial)
- In charge of the pricing of the products, from negotiating prices with the supplier to the prices charged to the customers themselves.
Market analysis is another important one. In today’s modern world, a lot of decisions are driven by data. Merchandisers are required to:
- Stay updated on competitors
- Create forecasts including sales, profits, etc.
- Conduct budget planning
- Work closely with suppliers and distributing – acting much as a liaison between the company selling the products and the suppliers.
History of Merchandise
Merchandising has existed for a long time before the 1800s. The early forms were very simple displays of merchandise. Later, this had changed due to the introduction of technology. It can have different meanings in different fields of business.
The concept of visual merchandising is to present the products in a visually appealing way. This strategy is put in place to encourage customers to make a purchase.
Since many customers first ‘shop with their eyes,’ visual merchandising is very important to get the customer’s attention. In visual merchandising, goods should not be just displayed appealingly. The display should also highlight the benefits and features of the product. This tactic increases the number of sales as customers understand the value a particular product may bring to their lives.
A tactic mostly used in physical retail stores, visual merchandising is also gaining a lot of popularity in e-commerce. It should also be cohesive with the brand itself. The brand’s strategy and personality should match the design of the store or site.
Evolution of Visual Merchandise
Visual merchandising has seen many changes and evolved to what we know it to be today. The early days’ visual display of products and goods were crucial.
Of course, the displays were not that complicated. At the time, simple block signs would do the trick. Slowly, however, retail has moved more and more towards a luxurious side.
Retail is not just about displaying products anymore. It has become an experience. The invention of the glass panel marked a great shift in visual merchandising during the industrial revolution.
New and elaborate ways of grabbing the customer’s attention were introduced. Even in today’s market, the visuals at the front of a store play a huge role.
Visual merchandising in today’s world, as mentioned before, has become more of an experience. Brands use cutting technology, such as display panels, to display products and promotional messages to the customers.
Specific products are placed in strategic positions that lure the customers into the store. The displays are meant to encourage the customer to purchase something in this way.
Over the years, as more and more transactions are moving online, companies try new and innovative ways to increase in-store sales through visual merchandising.
Visual Merchandising and The Retail Space
Depending on the type of business, visual merchandising can play a very significant role, especially for industries like apparel.
To reiterate, retail is now more of an experience. Customers want to have an engaging and fun shopping experience when they visit a brick and mortar store. Visual merchandising achieves just that.
By implementing proper visual merchandising strategies, companies can entice customers to enter the product. Then the products and in-store design should engage the customers, which ultimately leads to a sale.
Tactics like window displays and all its various forms are used to put the most attractive product’s front and center. The most effective visual merchandising strategies can stop a customer on their tracks when they are walking past your store.
Imagine this, a character walks past a storefront, and they immediately stop and return to look at a product that caught their eyes – immediately awed by how good the product looks. Does this scene seem familiar?
That is the power of visual merchandising. With proper use of color, layout, and lighting, brands try to get customers into the store and purchase a product. These are not just limited to physical products, either. Services can be promoted and sold through visual merchandising.
Types of Merchandise
Merchandising can be of many types, all with their own unique and overlapping elements. But, at the end of the day, they aim to achieve the same thing – engage customers and entice them to purchase by creating a seamless experience.
There are primarily 5 types of merchandise, which are:
Product merchandising is exactly that – efforts in selling and promoting a product. A common mistake many people make is to use product merchandising synonymously with service merchandising. That is not quite right although product merchandising applies to products sold both in-store and online.
One thing to note here is that, if the good itself is not physical but is still a product, it falls under the heading of product merchandising. For example, an e-book, although isn’t something physical, will still fall under product merchandising.
All efforts to promote the sale of said products, whether in-store or online, are therefore also under product merchandising. Thus, products such as the site design of or the catalog on an online store are all parts of the concept.
Product merchandising is one of the most common forms of merchandising and has been in practice for many years. The idea is to get as many items on the shelves. Shelf space is pretty important as well – but more on that a bit later on the guide.
In simple terms, any visual effort made to sell and promote is visual merchandising. All the techniques used to make products and services appealing come under the heading.
Here is our first difference from product merchandising. While product merchandising is a direct form of merchandising, visual merchandising is also a tactic. This can be used to promote both physical goods and services. Visual merchandising also includes all design elements and efforts made in the physical retail space and online.
In the physical retail space, elements such as spacing of the product, the store layout, lighting, shelf lighting, and even color palette play a big role.
The latest color science research shows that colors can have emotional responses and associated feelings. Thus, playing with the color and lighting is a great strategy to entice customers to purchase. On the other hand, the web design, promotional videos, or images used to showcase the benefit of a particular product is visual merchandising in the online space.
Customers are constantly bombarded with marketing messages nowadays. That is why it has become quite tricky to get more customers into the store and to retain attention. Stunning visual merchandising can break them away from the noise and clutter and grab their attention effectively, which may, in turn, lead to a sale.
Visual merchandising, therefore, can be used alongside product merchandising to sell. It enhances the chances of a sale. A key thing to note is that all visual efforts must be on-brand. The look and feel, form the store layout, color palette, window display messaging should follow the brand guideline and brand personality.
With online transactions and e-commerce booming nowadays, retail is becoming tougher and tougher to crack into. Retail aims to create a hands-on experience for the customers and sell as many goods to as many customers possible.
So, the action of promoting and selling goods through retail is known as retail merchandising.
There can be some overlap between retail merchandising and product merchandising and even visual merchandising. The products are the highlight. The benefits of the products are put front and center.
Special products are displayed prominently. The outside is also kept in mind to get customers in. The in-store layout is also a crucial element in retail merchandising.
In the store, the elements of visual merchandising such as lighting, shelf space, signs, and the overall design of the store play a role.
Another added element in retail merchandising is the concept of the customer journey in the store. The layout of the products and the store itself can guide your customer through the store. This is an important element of retail merchandising. Mapping out the customer journey can lead to a more streamlined process, which will increase sales and provide a fulfilling shopping experience.
There are many different strategies you can implement when retail merchandising like displaying products by brands, by price, or by category. You can also layout the store and the customer journey in such a way that complementary products come naturally one after the other. For example, you can have a tie display after dress shirts.
Online stores are slowly taking over. That is not a bad thing. But it does require merchandisers to change the ways of merchandising.
The internet has given millions of people access to information. With this and the advancement of technology, customers have more choices when deciding what to buy. The internet and other technologies have also given merchandisers access to powerful tools to implement the craft of merchandising in the digital space.
Online merchandising is simply the efforts made to promote and sell products and services online. This can be done in various ways and by implementing different tactics and strategies.
Online merchandising revolves around making use of technology and data to push products to the right people and making a compelling case for customers to buy.
Having an online merchandiser for an online store is crucial. By making use of different tools such as web design, promotional videos, product comparisons, reviews, merchandisers can increase conversions and thus, sales.
The outlook of the website and the ease of buying are all parts of merchandising. The use of data and customer insights are crucial in product placement and also pricing.
This is one of the greatest advantages of online merchandising. With Big Data, you have more insight into your customer behaviors, likes and dislikes. The products can be targeted to specific customer segments and at different offers as well.
Omnichannel merchandising is creating a seamless customer journey across all touchpoints for the customer. This idea is gaining more and more popularity, and more research is being done.
If you think about it, it makes a lot of sense from the customer’s point of view. If you are a seller of goods, you would want to make the process of selling your goods as easy and as seamless as possible – no matter which channel the customer is using.
This is the essence of omnichannel merchandising – providing the customer with a cohesive experience, whether it be in-store, online, or through other channels.
The customer can see product ads on a social media site, they then search for the product and land on your store from where they make the purchase – this is an example of Omnichannel merchandising.
The customer journey here should be seamless and fluid. All elements and all touchpoints should work in conjunction to achieve sales.
There are many tried and tested merchandising strategies that brands use to promote and sell their products, from different inventory management strategies to grouping category products together. Here are some key merchandising strategies you can use to increase sales and retain customers!
Window display featuring the merchandise
Window displays are a key strategy in merchandising – a primary element of visual merchandising. Since you want to get as many customers to walk into your store, creating elaborate and eye-catching window displays can do wonders.
Products are displayed in windows right front and center and are laid out in a way to grab attention.
Windows are the first touchpoints for a potential customer with your store. So, when they are walking past an elaborate window display, it can turn heads and also convert. Do not forget the product as well – or in other words, the merchandise.
The merchandise should be in the front and center. The goods should draw the main attention with the help of the lighting, stands, or mannequins if you are an apparel business.
You need to have a focal point – the item you want people to concentrate on and draw attention to. That should be at eye level. Other elements should complement it.
Proper planning beforehand will result in a more cohesive and smooth window display design process. Another thing to note is always to try to find ways of improving.
Remember, the idea or goal here is to catch the attention of a passerby. So, think of ways to entice them to stop and hopefully come in and make a purchase.
Grouping related products together
Grouping related products together can give your customers a seamless shopping experience. They do not have to search for related items all over the store. The layout of the store is also made efficient and easy to navigate.
Remember, good merchandising is all about efficiency, and promoting and selling products. When you group related products, you not only make it easy for the customers but also yourself.
You can make it easy to track inventory as well.
Category grouping is a very popular method. Here, similar category products are put in close proximity to each other. So, if you are running a brick and mortar clothing store, men’s clothes will be in one section.
This can be further broken down by subcategories, with shirts and tops in one section while pants and shorts at another.
Clothing for girls can be grouped at a different part of the store altogether for easier navigation of the store.
You can even categorize in terms of sales volumes, like bestsellers.
Every retailer or brand wants to generate more revenue. One way of doing is, of course, to sell to more people. Another way is to sell more to individual customers.
Cross merchandising is great tactic merchandisers use to generate extra revenue. You simply display different products from related categories or complimentary products together.
The great thing about this strategy is there are no seasonal requirements. You can implement cross-merchandising all year round and all across your store. Make sure the merchandise you chose to display together are complementary and make intuitive sense.
By doing this, you entice customers to buy more goods and products than originally intended. This drives up sales and, in turn, generates more revenue.
It can save customers time and also make the shopping experience better. You can even put up a small demonstration of the product beside the shelves to entice more customers and make them purchase more items.
Make the experience seamless and pair up complementary products from different categories together to get more revenue and profits.
Research Retail Merchandising Trends
Retail merchandising is a growing and dynamic field. The trends and practices change, and as we collect more and more customer insights, more effective strategies are discovered and implemented.
You should be on top of the new trends and studies that emerge. New trends and strategies might be just what you need to put some extra flair into your retail space.
Keep an eye out for changing consumer behaviors and preferences. These can be key indicators if you should change something about your existing system. Also, embrace digital! Brick and mortar stores are going to stay for a while. However, that is no excuse not to embrace the digital revolution. Customers now look more for convenience. One way of providing that is through digital and also in-store innovations.
Trends like these are important if you want to stay ahead of competitors. So, make sure to research retail merchandising trends that are shaping the future of retail and merchandising itself.
This is one of the best strategies to stay ahead of the game and beat your competitors and/or generate more revenue for yourself.
The benefits and impact of well-stocked shelves are significant. As a retailer or a brand, you want the shelves to be stocked at all times. Having said that, you do not want excess inventory piling up either.
This is where inventory management and lean inventory management come in. More and more companies now implement just-in-time inventory systems where they refresh the inventory in micro sessions.
Empty shelves are also a serious turn off for customers. A survey done showed 70% of adults in the US would avoid shopping at a particular store if they see empty shelves. This can be for many factors. Customers value their time. So, the notion of empty shelves can be a sign of the lack of products. When customers are out shopping, the last thing they want is to visit a store and not find what they are looking for.
It wastes their time and just generally leaves them with a bad experience. That is why when it comes to merchandising, well-stocked shelves are super important.
Inventory management, as a whole, should be taken very seriously. Efficient and proactive inventory management practices can help in reducing lead times, costs, and make customer journeys more pleasant as well.
Maintain Relationship with Retailers
A big part of merchandising is also maintaining relations with the retailer if you are the manufacturer of a good. Retailers play a role in marketing your products. They also have a business to run just like you. So, if you take an interest in their business and maintain good relations with retailers, they can help you push your products to more customers.
Retailers work at ground level and have the closest proximity to customers. They can provide you with key insights into customer preferences and new trends.
So, make sure to do a retail visit when a manager is present. There is no point if you can’t get in touch and build rapport with someone that can make decisions about what products to promote and stock.
Better relations can also help you get better shelf space. Products that are at an eye-level have significantly high chances of being sold than those that are up too high or below.
Gross Merchandise Value
Gross Merchandise Value (GMV) is the total sum value of all the goods sold during a period. It can be used as a metric for growth. Companies can choose to calculate GMV once a year or quarterly.
Primarily used by e-commerce sites, GMV can be used to gauge the health of the site. However, using GMV solely to measure performance and growth can paint a distorted picture. It can also be used as a measure to compare past performances with the present.
GMV is calculated without taking into account the expenses of the business. For running any business, you need to be on top of the financials. How much you are spending and how much revenue you are earning are both crucial. Gross Merchandise Value can give you a picture of the value of the products that are going off the line and to the hands of the customers.
How to Calculate Gross Merchandise Value
Companies can use multiple methods to calculate Gross Merchandise Value. However, the most common method is given below:
Gross Merchandise Value = Sale price of each good / Number of goods sold.
The formula is straightforward and easy to understand. This formula can also be used to calculate gross revenue.
Here is an example of how you might calculate GMV:
Say, a company sells customized phone cases. If they are selling each customized phone case for $20 each and have sold 150 cases, then the GMV would be:
20 X 150 = $3000.
That’s basically it! Calculating GMV can be a quick and easy way to gauge how a company or an e-commerce site is doing. Having said that, there are a couple of downsides to GMV.
Disadvantages of Using GMV
GMV has a couple of downsides. Although it can give you a basic idea of the value of the goods being sold, it gives you an incomplete picture.
Unfortunately, GMV does not take into account a lot of other factors – factors such as advertising costs, production and even discounts or returns.
Your GMV could show a very high value, but if the costs associated with making and selling those products are also very high or even higher than the revenue, you might not be in much of a favorable position. For this reason, the net profit can be misinterpreted. Many now do not solely rely on GMV when making financial decisions and gauging the performance of a business.
The GMV can still be used to get a broad idea of the revenue figures and growth of a business over a period of time.
Merchandising in E-commerce
E-commerce merchandising is a new and effective way of selling goods and services online. Since the internet has gifted consumers with ease and convenience, the main focus should be the customer’s journey.
Ensuring all your touchpoints deliver the perfect and appropriate experience to customers is crucial for your brand. You can create a sophisticated sales funnel to ensure that you map out the proper customer journey for your customers.
There are many benefits of E-commerce merchandising as well. Here are some of the key ones!
Benefits of Merchandising in E-commerce
- No need to run a physical store – If you are going for an all e-commerce model, you have the advantage of not needing to run a physical store. This means you can save money on rent for showrooms and stores.
- Increase top-of-funnel engagement – E-commerce merchandising can increase your top-of-funnel engagement. This can promote more sales since now more people are coming through your sales funnel.
- Ability to use data and customer insights – You can make use of customer data to map out their customer journey and also know what their likes and dislikes are. Your product and promotional strategies can then be tailored according to the data.
- Increase retention – With e-commerce merchandising, you can increase customer retention. By presenting more relevant products in a more personalized and appealing way, you cause the customers to invest more time and effort on your site, thus making them loyal advocates.
Merchandising in Grocery
The grocery merchandising scene is changing rapidly. Companies in this space are using innovative tactics to boost sales.
Customer demands and preferences are changing.
Consumers now are more health-conscious than before. Naturally then, health has become a great focus in grocery merchandising. Consumers rank groceries with a wide variety of healthy options highly.
The Checkout Counter
Checkout counters are a great opportunity to increase your sales. This is done by allowing customers to impulse-buy. Your goal should be to make it as easy for the customer to make purchases impulsively.
You can include seasonal and/or colorful items at the checkout counter to encourage this behavior. Also, be careful of what you feature. You certainly do not want to feature something too expensive. Expensive items do not trigger an impulse buy.
The entrance of a retail store can be used to entice customers in. Make sure the area is spacious with proper lighting. Digital signs tastefully placed here can also help you get more customers to walk through the door.
You can also display packaged goods that are easy to grab and go close to the entrance. Customers who are in a hurry will find this a great convenience.
Fresh Food Display
As we have mentioned before, customers are now more inclined toward healthy options. Thus, having a fresh food display is very important if you want your customers to keep coming back.
What you need to keep in mind is that you want to display all the freshest produce. However, you do not want to put them on display so much that some go bad, and you have to throw them away.
You can use merchandising software to manage inventory better and also use digital displays to create eye-catching food displays to get you more sales.
Retail merchandising is the practice of promoting and selling products through a retail store. This includes the strategies used in promotions, pricing, and also related to the products that are being sold as well.
As more and more transactions are happening online, retail merchandising has seen many advances and innovations to keep up. A mistaken notion is that brick and mortar is dying. That is not completely true. A large portion of commerce is still done through physical retail stores.
To give your customers the best retail experience, there are a couple of rules of thumb brands and companies follow.
6 Rules of Retail Merchandising
These rules of retail marketing help create a seamless experience. This, in turn, boosts the brand image and also increases customer retention.
Creating Memorable Experiences
What makes a customer choose your retail store over others? It is the brand and also the experience you give them. Creating memorable experiences for your customers is of the utmost importance.
Your retail store is one of the most, if not the most important, touchpoints for the customer. Creating a memorable experience that resonates with your customer will go a long way in building trust and brand equity.
Consider the Line of Sight
When organizing and deciding how to place products, make sure to keep the line of sight of your customers in mind. The line of sight includes the places where your customer’s eyes will be naturally drawn to.
These are places where you would want to keep the most attractive products. The visibility of products in the right place is generally a highly discussed and important topic when it comes to retail merchandising.
Shelf space, for example, is a top priority for brands that want their products sold. Items on the eye-level shelves have a much higher rate of purchase compared to others.
Displays Matter in Merchandising
Aspects of visual merchandising plays a big role in retail merchandising. Ideally, you want to display products enticingly and attractively. Make it easy for customers to find and buy.
You can do this by implementing proper lighting, playing with the in-store layout, and also the color palette. The goal here is to create a display that is attractive and draws the attention of the customer.
It should encourage the purchase of the product. Make sure to not only make it visually appealing; displays should also tell the customer the benefits of a product.
Experiment until You Find the Best Merchandising Pricing
Pricing is important in merchandising. You need to balance the pricing to have both ends meet.
It should not be too inflated that it drives customers away but also needs to be at a level where it is profitable to sell the product. You can implement different pricing strategies, depending on the type of product you are selling, whether it be predatory or premium pricing.
The best option here is to experiment until you find the perfect balance of perceived value for the consumers and also the pricing you set for the merchandise.
Abide by the Rule of Threes (expensive, affordable, least expensive)
Using proper techniques when displaying items can increase sales. It also makes it easier for the customer to decide on a purchase. When displaying products, use the rule of three.
The rule of three states that the products should be displayed across three tiers. The expensive ones should be the focus. You want these to sell the fastest! After that comes the affordable ones and then the least expensive ones.
The expensive products are the ones that drive up revenue while the affordable products can help you take care of your bottom line.
Three Month Seasons
Inventory cycles should last for 90 days. This is simply because of the fact that seasons last three months. If you are retailing specialty items, habits and trends can change every three months. For high volume retailers, this is not as important, though.
For medium-size retailers, following the three-month seasonal rule will take off some risks of unsold inventory on the shelves.
In Conclusion, The retail scene and e-commerce scene has seen many advancements, changes, and breakthroughs. This guide to merchandising aims to provide a comprehensive guide on all you need to know about this realm.
Customer preferences and demands are ever-changing. With so much competition in the market, brands and retailers cannot afford to hold onto old ways and strategies of retailing.
Although some strategies are timeless, new, and innovative strategies have helped merchandisers a lot in today’s highly competitive world. By implementing proper merchandising strategies, you can get your business running more smoothly and efficiently. This will, of course, result in lower costs, better brand equity due to the seamless customer experience, and, ultimately, higher profits.
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