What Is Merchandising

Merchandising is the art and science of promoting products in a way that influences customer behavior and increases sales. It is the foundation of any retail business and is something that any merchant should be warmly familiar with. These posts will help foster that familiarity.
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Merchandising is a retail strategy that promotes products and influences customer behavior in order to increase sales. Products can be displayed or presented in creative ways to entice customers to purchase. This can be through pricing, special offers, visual displays and other techniques.

Merchandising is not a one-size-fits-all system, the strategy should vary according to different variables. The product category makes a difference, for example; perishable goods, apparel and heavy machinery would all need different strategies. Similarly, different shoppers’ purchasing behavior such as repeat purchases throughout the year, once in a year purchase, or inspirational, would all require different merchandising. On top of this, specific business objectives are factored in, as well as other considerations. Examples of these objectives include increasing sales, improving customer loyalty, driving traffic or raising brand awareness.

Although the fundamentals of merchandising might stay the same, strategies and techniques will differ. How first impressions are made, which lighting is used, how traffic is manipulated, which metrics are tracked and which principles are considered are all down to the individual business.

History of Merchandising

Merchandising is as old as trade itself. In order to sell, sellers must inspire the buyer, gain trust, and prove enough value to buy. In old markets, visual merchandising was understood to be important; placing the freshest, most vibrant products most visible attracted sales. The importance of displays are important; whether this is for laptops or vegetables, people need to be attracted to the product

These displays have always been created depending on the business needs. For example, if a vegetable seller has a low inventory of apples, he may keep them at the back so they don’t run out. If he has highly priced watermelons, he might display it at the front to attract people to buy it. On the other hand, if he had a few cucumbers left and wanted to get rid of them, he could also display them at the front in order to get rid of them. 

These business considerations translate to any merchandising strategy in the following terms: low inventory, sale items, end of season items, closing down sale, new arrivals, etc. We have all witnessed some of these before.

Modern Merchandising

Today merchandising has grown in complexity, but remains true to the basics. Merchandising evolved to satisfy modern consumer demands. Inspirational merchandising has become very prominent, where shoppers are more likely to buy when inspired by a model or figure of interest to them. You may have heard of social media ‘influencers’ who inspire their followers to buy when displaying a high-quality promotional photo of them wearing a certain outfit or item.

Celebrity culture means that ‘Idol goods’ generate huge profits. Rather than merchandising being static; we now see influencers and product sponsorship as a new form of merchandising. When people see celebrities or people of influence wearing a certain product, for example, this can greatly increase sales of the item displayed in this way.

The 5 Rights of Merchandising

Merchandising can be achieved through a number of ways, such as appealing displays, shelf-signage, themes and bundles, free tasters, eye-placement sales, promotions, and more.

When done well, merchandising creates opportunities for cross-sell and upsell. It also demonstrates the options available, whilst steering customers in the direction that’s best for your business. In order to achieve this, bear in mind the five rights of merchandising:

  1. Right product
  2. Right store
  3. Right time
  4. Right quantity
  5. Right price

If all of these variables are considered, merchandising will provide great outcomes.

Visual Merchandising

Merchandising often begins with the eyes, as vision is the first thing that occurs when entering a store. It is crucial to present products in a visually favorable light in order to encourage purchases. The visual presentation needs to be appealing. Simple things that can be done to create this effect are making sure that products are clean, well organized and placed in a logical spot, spaced sufficiently (not crowded together) and creatively displayed. 

Visual display merchandising starts with the product itself. The product design and packaging have an immediate influence on the buyer. The store itself can determine the pricing and display that can stimulate customers to spend more. The physical presentations should be presented at the right time in the right way. Creatively tying in related products or accessories creates cross-sell and upsell opportunities to increase sales.

Depending on which products are being sold, the time between changing visual displays will change. For example, vegetable displays would be changed daily. Apparel displays may be changed every 6-8 weeks.

Merchandising Cycles

Merchandising cycles and variety play a key role in merchandising. Some retailers make upwards of 80% of their sales during the holiday season, which means that the decisions over which discounts and displays to use over the year are not of such importance. The merchandising strategy for the holiday season would be the main point of focus.

Depending on the geography, products and services, merchandising will change. Seasonality is one of the most important principles of merchandising. The cycles depend on location as they relate to cultural customs and holidays as well as seasonal events such as climate and sporting recreation. Weather patterns, school schedules and religious and secular holidays must all be taken into account.

For example, the US retail cycle contains familiar elements. Valentine’s Day is the first seasonal event of the year, with merchandising events starting from mid-January. Easter merchandising promotes springtime clothes and garden related products as the temperature starts to warm. In May, Mothers and Father’s Day sales emerge, along with graduation themes in June. Summertime merchandising plays a huge part throughout the summertime months, displaying all the accessories, apparel and food you associate with the summer.

After this, ‘Back to School’ products emerge as September rolls around. This is followed by Halloween, Thanksgiving and then the Christmas and New Year holidays. Traditionally the end of the year takes the most emphasis and planning from a merchandising perspective. 

These cycles can be found all over the world, according to the local custom. Each business can decide how much they want to emphasize certain holidays depending on their strategy, but it’s unlikely that no attention will be given to each.

Why Merchandise?

When done effectively, merchandising can boost sales, speed up inventory turnover and help businesses achieve their needs. From a customer perspective, the shoppers benefit from a smoother discovery journey that is also inspirational, increasing their satisfaction and boosting their customer loyalty.

Effective merchandising is a cost-effective way of boosting sales by optimizing the buying potential of shoppers who visit the store. The evolution of merchandising over the years it’s testament to the way the commercial culture and market has grown, but one truth remains glaring and constant over thousands of years: merchandising is a must.

Zohar Gilad is the CEO and Co-Founder of Fast Simon, with extensive experience in eCommerce for the past decade. His articles have been published in Forbes, VentureBeat, Total Retail, Martech Series, Retail Touch Points, and more.