50% of consumers are likely to switch brands if a company doesn’t anticipate their needs via a proper merchandising strategy. Based on marketing research by San Diego State University Professor Iana Castro, even the slightest merchandising taboos convey a message to the shopper that your brand is undesirable. "People were less likely to buy the products when only a few products were left and they looked messy," Castro said. "They felt the products were contaminated even though they were packaged products."
Consequently, we see the importance of product merchandising in an overall solid retail execution strategy. In this post, we will discuss everything you need to know about merchandising -- from what it is and who does it, to tips and techniques to help you optimize your merchandising strategy.
Merchandising takes into account how your products come across to consumers as they interact with them in a retail setting, and applies certain techniques to make those interactions as impactful as possible. It can consist of activities carried out by both marketing and sales, such as organizing shelves, setting up promotional displays, and tracking results of merchandising efforts. Having a strong understanding of merchandising, how to execute it, and how it impacts your business is essential to growth.
Merchandisers are responsible for everything that happens to a product from the moment it is delivered to the store to the moment a shopper picks it up off the shelf. They monitor product appearance and supply in various stores throughout their designated geographic area. By working closely with both suppliers, retailers, and manufacturers, they make certain that the promotion of specific products will increase sales over a period of time.
Some of the responsibilities of a merchandiser include, but are not limited to...
Collaborating with suppliers, manufacturers, and retailers to ensure proper execution of merchandising plans
Ensuring retailer compliance with merchandising strategies
Creating and organizing promotions and advertising campaigns
Maintaining inventory of products
Gathering information on market trends and customers’ reactions to products
Analyzing sales data - reporting growth, expansion, and change in markets
Check out this merchandiser job description to take a more in depth look at what a merchandising job consists of.
Now that we understand what a merchandiser does, we can get into the more minute details of product merchandising. Below, we will discuss visual merchandising, a huge tool for brands that sell at retail. We’ll then describe various product merchandising display examples, as well as best practices for the ultimate product merchandising plan.
Merchandising Best Practices
Simply knowing how to set up a merchandising display doesn’t guarantee a successful merchandising strategy. There are certain merchandising best practices that any merchandiser should employ to maximize impact.
Properly Merchandising Shelves
A clean, well-stocked shelf will look more appealing to customers than a unkempt, nearly empty shelf. Merchandisers should pay special attention to the aesthetic of even their common shelf displays; while endcaps and dump bins are a great way to pull in some extra sales, your home shelf is where most customers will look for you. Simple fixes such as making sure there aren’t any gaps where your products should be on the shelf and making sure your products are all facing the correct way make a huge difference in the long run. As new products role in and merchandising resets take place, focusing on clean product presentation is an evergreen approach.
Staying On Top of Orders
Out-of-stocks result in a direct loss of brand loyalty and equity, and encourage shoppers to reach for competitors' products, Procter & Gamble found. This means that OOS instances not only cause brands to lose sales revenue in the short term, but also future sales revenue as long term customers find new favorites. Merchandisers can avoid these scenarios by staying on top of account orders, making frequent store visits, and communicating consistently with stores and the reps assigned to them.
Ensuring Retailer Compliance
With so many different products populating store shelves, sometimes retailers are understandably less concerned with perfect product presentation than they are with sales and profit. Where retailers fall short, merchandisers can pick up the slack by focusing on retailer compliance strategies. Merchandisers should make it a habit to monitor POP displays, check for product voids, and address any issues of product misplacement with a store manager.
Keeping an eye on your competition is necessary to remain relevant in the market. It also can provide you with insight and inspiration on new tactics to use with your audience. Have your merchandising team record your competitors' price, promotions, labels, shelf location, and packaging, as well as any other metrics you wish to keep tabs on. By collecting data on your competitors, you can practice competitive pricing and learn from their successes or losses.
Now that you’ve optimized your merchandising tactics, how can you measure their effectiveness? The answer is by using real time data analytics to take a data driven approach to merchandising. Encouraging merchandisers to log sales and marketing data as it comes in allows your team to have a constant stream of communication and creates an opportunity to see trends over a period of time. These observations can provide insight for strategic improvements going forward. Below we will discuss the three types of data that brands can track in order to guide their merchandising plans, followed by an explanation of one mode of collecting this data: merchandising audits.
Collecting and Analyzing Merchandising Data
Brands should always emphasize the importance of the three types of retail execution data: Activity Data, Sales Data, and Observational Data. Merchandising data most often falls under Observational Data: Store-level data that your team observes and records about your product in retail locations, such as the condition of your displays or position on the shelf.
The point of collecting this data is so that you can plug it into a cycle of continuous improvement that takes into account a wide range of factors. You can then derive insights from this data to inform future merchandising strategies. An example of this would be observing a difference in sales between a retailer where you occupy a bottom shelf vs. a retailer where you occupy an eye-level shelf. While common sense tells us that eye-level shelves equal more sales, you may find after analyzing the data that the increase in sales is pretty small compared to investing in POP displays within the store. Thus, paying close attention to merchandising data helps you make better-informed decisions in the future.
One core method of tracking merchandising data is through merchandising audits. Merchandising audits are essentially an official report on retailer compliance and rep efficiency. They measure the quality of the displays in the retailers you sell to and help identify successes and areas for improvement. Merchandising audits are typically performed on a periodic basis to make sure that the product is consistently available and managed well on the retail shelf. Performing merchandising audits answers questions such as, “what displays are most appealing to my audience?” “where am I selling the most of which products?” and “which retailers do I need to check in with more often to ensure retailer compliance?”
Visual Merchandising: Catching Consumers' Eyes
Visual merchandising is a merchandising tactic that focuses on visually appealing to the consumer. Some examples of visual merchandising displays include window displays, POP displays, and cross-merchandising displays. Factors such as display color, design, ambience, and theme are all extremely important to visual merchandising.
When designing and implementing a visual merchandising plan, it is important to consider a variety of things. “Who is my target customer?” “what is my target customer looking for?” and “what has worked for me in the past?” are questions you should be asking yourself. By defining your target customers and identifying their preferences, you can tailor your merchandising techniques to fit their tastes.
Using a Planogram
Merchandisers tailor displays to the specific dimensions of the shelves and products in order to optimize space. Doing this allows them to utilize every inch of the available space. With countless SKUs of varying sizes, how do they stay organized? Planograms.
Planograms are a visual representation of product shelving used to maximize capacity and aim for the most profitable product placement. Products might be grouped by type, size, popularity or other categorizations relevant within the market. The planogram may be schematic or have images of the actual products, depending on how it's designed.
To get started creating a planogram for your shelves, try using this free planogram template.
Visual Merchandising Display Trends
Depending on a multitude of factors, brands must decide what types of visual merchandising tactics will be most effective for their audience. Only you can determine the best modus operandi for your merchandising team by conducting market research before forming a strategy, but use these trends to guide your strategizing.
Neuromarketing addresses the psychology behind buying habits and preferences.The field is still young, but initial research can reveal how cues like color, visuals, audio frequency, light, and smell influence the buying experience on a neurological level. Getting to know the overall ambience of your store from the type of music to the warmth of lighting can cue shoppers to make a purchase. There are also options such as tracking consumer’s eye movements and psychological tricks like removing the dollar sign from price tags that might be more accessible than the more advanced analytics.
Cross merchandising is a strategy that boosts sales by placing complementary items alongside one another in stores. There are many classic cross merchandising examples, such as putting ketchup and mustard next to hamburger buns, placing dog food next to food dishes, and setting Halloween candy next to trick-or-treating buckets.
For some brands, there is opportunity for cross merchandising within their own product portfolio. For companies without this advantage, working with other brands can be a great option. Talk to other brands and store managers to come up with creative visual merchandising displays, such as this one spotted at a Trader Joe’s.
POP displays - which stands for “point of purchase” - capitalize on the impulses of shoppers to maximize sales. Point of purchase is defined as “the location or medium at which a product is purchased by an end-user.” A common misconception is that point of purchase refers only to the space within the store where the transfer of money for the goods occurs, such as the register. Point of purchase can be broader than this, and actually accounts for the entire store. Some common POP displays include shelf talkers, dump bins, and free standing displays. These 30 different POP display examples are sure to provide some inspiration when planning your next merchandising display investment.
Rule of Three
Three is the magic number when grouping products in a display. Not only does it catch the customer’s attention, it helps cement the product display in the customer’s mind. This is why many visual merchandising experts follow and preach the “Rule of Three.” If grouping by height, have short, medium, and tall. If by width, narrow, medium, and wide. If you truly want to capture the attention of price-conscious customers, arrange items in order from good, better, and best value to the customer.
If you made it this far, you now have a ton of information floating around in your mind. To help you organize your thoughts, here are some key takeaways from this merchandising guide:
Your merchandising strategy has major influence on consumer decisions.
Merchandisers have a responsibility to ensure retailer compliance and successful retail execution.
There are many different visual merchandising display trends to choose from, so the decision of which ones your brand will use needs to be informed by market research.
Simply setting up a display and expecting it to be a success isn’t sufficient; Merchandisers need to continuously monitor and maintain their displays in-store.
Collecting and analyzing merchandising data allows your team to discover insights that will refine your merchandising strategy.
Now that you’re an expert merchandiser, it's time to learn how to incorporate this knowledge into a higher level retail execution strategy. This retail execution eBook provides a detailed explanation of retail execution best practices, the three types of retail execution data, and how all of this fits into a cycle of continuous improvement when strategizing with your team.