Merchandising: Everything You Need to Know!

  • Brandon Boushy by Brandon Boushy
  • 2 months ago
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Clothes in the store

Merchandising like the retail store above doesn’t work. Take pride in how you represent yourself and your business.

The number one shed dealer, Susan Frair, is on track to turn Shed Gal into a million-dollar-per-year business. She started Shed Gal because she didn’t like how shed dealers sold their products. Instead, Susan focuses on educating, customer service, and brand messaging as the primary means of merchandising.

Whether you own a retail location, online business, or service business, these merchandising strategies will help you maximize sales.

What Is Merchandise?

Merchandise is simply the products you carry for customers to buy.

What is the difference between inventory and merchandise? For example, a restaurant’s merchandise is food and beverages because customers purchase those. Merchandise does not include items that customers cannot buy, like plates.

When checking inventory, a restaurant would also include things that people don’t buy at the restaurant like toilet paper. So, merchandise will always be inventory, but inventory is not always merchandise.

What Is Merchandising?

Couple of people working on a table

Merchandising is a broad term that includes most business actions. From marketing strategies to packaging, pricing, temperature, store layout, and loss prevention. Merchandising is the art of creating a cohesive package that makes people want to buy your products or services.

Here’s a more full list of the aspects covered under merchandising:

  1. Pricing Strategies
  2. Packaging
  3. Store Lighting, Music, Scents, and Temperature
  4. Brand Logos
  5. Store Displays and Window Signs
  6. Marketing Strategies 
  7. Color Schemes
  8. Store Layout
  9. Product Selection
  10. Loss Prevention
  11. Customer Loyalty
  12. Cleanliness

The truth is that most people won’t do all these tasks themselves because you can’t possibly be a master of all of them. You’ll definitely want a good team to help you master merchandising. Whether you build the team or hire a team that does it all is up to you. 

There are a few different kinds of merchandising we should cover before we dig into each of the areas listed above. We’ll discuss:

  • Retail Merchandising
  • Visual Merchandising
  • Fashion Merchandising
  • Cross Merchandising

What is retail merchandising?

Retail merchandising is the practice of setting up a retail store so items are visually accessible, offering something that shopping online does not. Some examples of merchandising in a store might include:

  1. Setting up electronics where the user can try them
  2. Creating whole outfits to inspire the customer on matching tops and bottoms
  3. Offering free samples in a grocery store next to the product display (I love free samples.)

What is visual merchandising?

American coffee company and coffeehouse

Visual merchandising is used in a retail setting to help make it more pleasant for shoppers. Four elements to enhance visual merchandising, including:

  1. The exterior of the store: The shell of the building is the first part of a building you see. Keep the outside well lit, equipped with a brand logo and window signs, and free of clutter.
  2. The store’s interior: Once you walk inside, customers want to see a friendly face, a clean space, and a readily identifiable store layout.
  3. The store’s layout: The layout needs to have store displays in places that attract attention. If it’s a large store, you might also want signs to help people find what they want.
  4. The displays within the store: Displays should be for bestsellers, great deals, and high-profit margin items.

What is fashion merchandising?

Fashion store with elegant clothes

Fashion merchandising focuses on increasing retail sales for clothing. That’s why layaway sections are always hidden somewhere out of the way, but the newest trends are right there when you walk in the door. 

Make sure you’re showing off your high-profit and most desirable products near walkways and entrances, but make sure no one can steal them. We’ll talk about security later.

What is cross merchandising?

Cross merchandising is when you try to sell multiple products together. When you see a mannequin with several items on display or shampoo and conditioner combos, that’s cross marketing. It can be either multiple products from the same brand or you could be pairing multiple brands together.

The owner of Throwback NW discussed some ways he approaches merchandising in the video below.

Now that you understand that merchandising refers to the process of creating a strategy to sell your products that encompasses marketing, branding, communication, and more, it’s time to learn the benefits of merchandising.

Benefits of Merchandising

Some of the benefits of merchandising include:

  • Higher profits from increased customer lifetime value
  • Customers more likely to check out sales offers
  • People spend more time in-store or online
  • Sell inventory faster
  • Customers purchase more often
  • More customer awareness

Create a Merchandising Strategy

Man holding a mobile phone

A merchandising strategy is simply a business plan about how to present your brand and products. It will cover a large variety of subjects.

You’ll want to document:

  1. Where will you sell your products or services? In-store? Online? At other retailers? At customers’ homes? Delivery? Pickup?
  2. What kind of logo, font, language tones, and colors will be used in your merchandising process?
  3. What will the packaging look like? 
  4. What locations will you be in? Do you want higher traffic because shoppers come to your store, or would you prefer a warehouse where you ship to people? Do you want your own space or to outsource fulfillment?
  5. Do store associates have uniforms with a logo or wear their own clothes?
  6. What merchandising tools will you use? Will you do your own merchandising or hire a merchandising business to set up a product display in retail store environments? Do you have to pay a merchandising fee?
  7. Are you selling your own products or licensed merchandise for other businesses? 
  8. What style guides do you have for writing a retail newsletter and product descriptions? How do you verify the communication is on brand?
  9. When will you have a sale? Choose your holidays. Don’t forget Father’s Day.
  10. How will customers pay when they are ready to purchase products? In-store payments? Online shoppers’ checkout process? 

11 Types of Merchandising Strategies

Now, let’s look at all the various elements that go into marketing. We’ll share some of the top resources for learning more about each aspect of merchandising starting with pricing strategies.

I hope you like psychology because merchandising is full of psychologists working to get people to spend more money. Well, we’re going to show you how to rock your online and in-store merchandising.

Pricing Strategies in Merchandising

Price tags with two different text

Stores use psychology all the time to maximize their profits. Some of them are obvious, but some are not. Here are some of the pricing strategies merchandisers use:

  • Using “9” in the price helps products sell more. Even if the price is $44 or $49, people will more often go for the $49 price. Check out this survey on favorite numbers to get some interesting insights.
  • Markdowns sell even more. Especially if you make the lower price a larger font.
  • Premium items make your lower-cost items more attractive, but sometimes just raising the price creates more demand.
  • Using cents impacts sales positively over a round number.
  • Avoid meaningless price points. If you have three tiers, make sure they are substantially different. Neil Patel shares an example of bad price tiers.
  • Make references to time. 
  • Don’t hide your pricing. It wastes everyone’s time. This is especially important in service companies that tend to hide their pricing, which is discussed in Harvard Business Revenue.

Packaging in Merchandising

Colored sand on table

How you package your products matters. If you’ve ever bought a ticket to a concert, I bet it didn’t look like this. The design definitely impacts your perception of what to expect, right?

A Swedish study found that if you are a brand, the expectations for packaging are higher than for resellers. Meanwhile, other studies found that better packaging increases the perceived value by 49% even if it only costs $.19 more.

Phase1 Prototypes suggests a few strategies to help increase the perceived value:

Screenshot of Phase1Prototypes website

Store Lighting, Music, Scents, and Temperature in Merchandising

During my engineering degree, we spent a lot of time learning about the impacts of lighting and temperature and how they impact people.

Berkeley’s Center for the Built Environment (CBE) provides a table that makes it easy to compare how different types of attire and activity impact your comfort zones. Most are good in the 72° to 78° Fahrenheit level, but some activities suggest higher or cooler temperatures.

Likewise, slower-paced music with a consistent volume tends to increase impulse buyers’ spending, while citrus scents impact non-impulse buyers’ spending.

Brand Logos in Merchandising

Business branding logo

If you are a brand, your logo should be a central focus in your merchandising. You want it to be simple but meaningful. It doesn’t have to be perfect from the start, but it should represent your brand and your values.

Effective merchandising has a logo on everything. From a retail display to your business’s online store to the products and packaging, everyone should be able to tell what company you are. If they can’t, then the merchandising strategies aren’t working.

Check out some of the logos for these companies: 

Product Displays and Window Signs in a Retail Store

In-store displays and window displays are part of effective merchandising strategies for retail sales. A small business should focus on effective merchandising tactics for window displays because it can help bring people into the physical store.

That’s why almost every clothing company you see has retail merchandise on mannequins in the window displays. They’ll normally put high-value, trending products in the merchandising displays, and then they might have a window sign promoting a sale to lure in shoppers.

Shelf Signage Impact on Sales

According to Harvard Business Review (HBR), “People are more likely to consume a product if they’re aware of its cost.” HBR established this by comparing a gym’s participation based on how often the members paid. They found that people who paid monthly kept going because they were more aware of the cost. 

Granted that’s not shelving signage, but if someone can’t see the price they assume it is expensive (or going to subject them to high-pressure sales). Make it a point to have clear signs that tell the exact price. If it’s a sale price, show them the original price and the percentage they are saving with the sale.

Check out the picture below for a great merchandising example of why people are hesitant when they can’t see the price.

Restaurant order menu without price

Merchandising Is Built on Marketing Strategies 

While merchandising includes so much more, businesses often begin merchandising with marketing and branding initiatives. If you haven’t started working on these initiatives, you might find product placement, table displays, and other methods of presenting products difficult. 

It might also create a lot of rework if you change your brand strategies frequently. Just look at how much time you see people changing product placement at Walmart. Another aspect you might change is your color schemes, which we’ll discuss next.

Merchandising Uses Color Schemes

People working together for brand color

A small business can use color palettes in merchandising to create different atmospheres. Most brands use two or three colors in their logos and will commonly use those colors in their merchandising.

Colors tend to be associated with emotions, and you can use that to your store’s advantage. Check out these resources about color:

Store Layout Impacts Merchandising

In a retail setting, the store layout can help encourage customers to spend money. For instance, the owner of Pooch Selfie told us:

We encourage pet stores to carry our products near the register because we have found that it drives sales.

In addition to placing splurge items near cash registers, retailers put popular brands where customers are likely to see them. This encourages people to come into the store.

Ikea is a master merchandiser

If you truly want to see some masterful layouts, go into an Ikea store. If you’ve never been, it takes a unique approach to presenting products. The display design groups product categories together to create rooms. In fact, it is one of the top 10 employers of interior designers

The picture below shows how the showroom and furniture areas are set up. As you can see, the showroom is a maze with hidden passages for employees and customers wanting to make a beeline for a specific area. 

Ikea floor map design

They offer good quality at competitive pricing, use a unique in-store layout to encourage purchases, create a customer experience that is one of a kind, and have nearly four times the sales as their largest competitor.

Check out the CNBC case study on Ikea below:

Screenshot of CNBC case study website

Merchandising & Product Selection

Merchandising companies will often help retail locations keep well-stocked shelves, but how does a store decide what products to carry and where to offer them?

That depends on what kind of store you run. Successful brands work to build brand loyalty, which makes it almost essential for retailers to carry them. Can you imagine going into a gas station that does not carry Coca-Cola products?

On the other hand, many products sell in stores just because they look cool. Major retail locations decide what to keep on the shelves based on what makes the most profit per square foot. Products that have a higher sales volume and take up less space are preferable over slower sales and bulky packages.

Shoppers also expect seasonally relevant products. During mid-winter you don’t want to sell shorts in Michigan. Nor would you want to sell fur coats when it’s 105 degrees in Texas. Make sure to have a prominent section for every major holiday. Check out timeanddate.com for a full list of holidays.

If a product doesn’t sell well, don’t order more. There’s no point in tying up space and expenses on products that don’t drive sales.

Loss Prevention Protects Your Merchandising 

Merchandising in retail often has higher prices than online because people steal products in physical locations. That’s why many retailers purchase security cameras, theft detection devices, and even security guards. 

For small businesses, you might want to have your store associate and cash register near the front door to save costs instead of hiring a security guard. There’s no reason not to have cameras and alarms as inexpensive as they are now. It will protect your well-stocked shelves.

Customer Loyalty Programs in Merchandising

All retailers should have customer loyalty programs. Customers expect them, use them, and retailers will benefit from increasing the lifetime values of customers.

They can be as simple as asking for referrals and giving a $10 discount for each referral like Alan does at GoDetail. Watch his interview below:

Cleanliness is Also Merchandising

Another aspect of merchandising that people forget about is the cleanliness of a store. When you go into a restaurant and every table is dirty, do you really want to eat there? Make sure you keep your space clean.

In Merchandising, What Does POG Stand For?

POG stands for planogram, a merchandising tool that helps visualize the space before setting up the display. I couldn’t find any that meet our Trustpilot requirements, but Movista has a list of planogram software providers that look like they’d be beneficial. 

I’d specifically check out the drag-and-drop providers, which makes it where you can do work without specialized skills. Make sure to ask your suppliers which software they use. If you use the same ones, they might save you a lot of time by sending you the product files to input into the software.

Get Merchandised!

We’ve provided you with information on product merchandising, merchandising examples, and other information that will help you with merchandising. Now it’s time for you to apply the information. 

Go to your store and evaluate the customer experience. Check and see if there is anything you can improve. Whether it’s shelf signage, the store layout, the pricing standpoint, or the checkout process, I’m sure you can find a few ways to improve the experience and get higher sales. What do you expect to be your top-selling item this quarter? 

 

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