MERCHANDISING: Definition, Types and Benefits

A variety of merchandising techniques are used in both physical and digital stores to organize products, explain their worth, and provide an optimal consumer experience. Several disciplines belong under the banner of merchandising, and there are a multitude of merchandising types. Learn more about merchandising in this article.

What is Merchandising?

Merchandising is the display and promotion of items for retail and wholesale sales. This involves marketing strategy, exhibit design, and competitive price, including discounts. Merchandising is critical for retail businesses trying to build their brand, improve customer experience, compete with others in the industry, and, ultimately, increase sales.

How Does Merchandising Work?

Determining the optimal method for drawing customers to a physical or digital store’s merchandise is described in the Merchandising definition. It is a technique used by both brick-and-mortar and online stores that entails designing the store, showcasing products visually, using competitive pricing, conveying their worth, and delivering a seamless customer experience. For a corporation that sells tangible goods, the entire strategy may result in increasing labor and material costs.

When a customer walks into a physical store, the first thing that works is their vision. As a result, keeping products organized and presentable is vital. Customers are more likely to notice aesthetically appealing goods than those that are randomly stocked. Another method for persuading customers to buy items exhibited in the store is to employ shelf-signage advertisements and prizes.

When a new product hits the market, one of the first things that people notice is the price. The cost of incorporating production components and other strategies to build the product influences the pricing. When a product arrives at a retail store with appropriate packaging, it immediately draws customers. That is one approach of effectively implementing the merchandising plan. The second step is to post discount banners to ensure that shoppers visit the discount rows and purchase such items without hesitation.

In the case of online retailers, buyers must be able to make a purchasing decision based on the presentation and other details, such as pricing, materials, and ingredients. Above all, when it comes to internet shopping, dependable customer support is essential.

What Doesn’t Qualify As A Merchandising Business Service?

Companies that sell things to their customers to supplement their services are not in the merchandising business.
A barbershop, for example, provides a service to its customers even though that service requires the usage of certain materials.

The barbershop will not be deemed a service business as the products sold are given as part of the service.
Yet, if the barbershop provides both services and a variety of product lines for customers to purchase, the selling of goods might be classified as merchandising business.

Types of Merchandising

Depending on the strategy employed, a merchandising business can be of various types. But, here are a few examples to help you comprehend the concept:

#1. Product Promotion

These promotional activities are used by both in-store and online retailers to increase product sales. It is concerned with displaying physical or digital things in such a way that people will purchase them. This strategy may include properly packaging the product or displaying product photos on the website.

#2. Retail Merchandising

It refers to promotional and marketing methods used for product display in physical stores. Aside from salesperson behavior, putting things in an orderly manner is critical when it comes to exhibiting them within a retail store.

#3. E-commerce/Online Merchandising/Digital

Items on e-commerce websites, in contrast to those in traditional storefronts, are difficult to evaluate. As a result, online retailers concentrate on website functionality and present the required information alongside products. They also have an effective and immediate customer service to handle client inquiries. Social media and email marketing may also be used for promotion. As a result, digital platforms develop consumer trust and a loyal customer base.

#4. Visual Merchandising

Shops present the product design, packaging, benefits, and relevant information, such as pricing and discount, to entice people to buy instantly. Advertising banners and signage are the finest strategies to make this strategy effective for improved product sales. Additional presentation aspects utilized by physical and digital retailers can include spacing, color selection, lighting, web design, online movies, etc.

#5. Omnichannel Retailing

It entails offering strong customer assistance across all platforms (brick-and-mortar and online). As a result, it assists people in deciding whether to purchase a specific product or look for something different.

Business Models for Merchandising

Here are some examples to help you grasp the method:

Example #1

Seasonal holidays have always had a significant impact on retail sales in the United States. During festivals, several merchandising companies, like Best Buy, Walmart, and Macy’s, see a surge in product sales. The most recent addition to the list is Home Depot Inc., a home improvement retailer. A few years before 2020, the company began to rethink its strategy and provide enormous discounts on products, resulting in a significant boost in sales on Black Friday and other holidays.

Example #2

The National Basketball Association (NBA) and Nike Inc., an American apparel company, entered into a deal in June 2015. The eight-year deal, which began with the 2017-2018 season, made the company the NBA’s first official on-court apparel partner, with its logo appearing on team uniforms. It was part of their business plan to enhance sales of its sporting products across various consumer segments.

Benefits of Merchandising

#1. Cost-effectiveness

Merchandising is one of the most cost-effective promotional mix techniques, particularly if a corporation is knowledgeable and experienced in its application. It may be beneficial to businesses with limited promotional funds because strategies such as product facing control and improved shelf positioning may entail little to no additional expense. These responsibilities can also be carried out by sales people whose pay have already been paid.

#2. Influence at the point of sale

Merchandising influences buyers at the final stage of the purchasing process. As a result, marketers attempt to develop brand preference awareness before the buyer enters the business. This enables the target customer to specify brands at the time of sale.
A consumer franchise is used to attain the preference. It is a public relations and advertising component of the promotional mix used to generate brand preference.

Manufacturers who are unwilling to lose a sale at the store supplement their premium items with inexpensive merchandising, especially when competition is fierce.

What are the Five P’s of Merchandising?

Planning: Establishing the goals and objectives of the merchandising strategy and developing a plan to achieve them.
Positioning: Creating a clear, compelling positioning statement that distinguishes the product or service in the customer’s mind.
Promotion: Creating and implementing marketing strategies to increase awareness and demand.
Pricing: Establishing the appropriate price point to maximize profit while appealing to the target consumer.
Placement: Ensuring that the product is positioned in the best possible areas in order to optimize sales.

Merchandising Strategies

When it comes to merchandising techniques, a “one size fits all” approach will not suffice. Merchandising techniques should differ by category or even by segment to achieve a specific aim, such as establishing customer loyalty, improving sales, driving footfall/traffic, raising awareness of your brand, and so on, depending on the overarching objective for the retailer, brand, and category.
Some of the most common strategies used in retail to persuade customers to buy include:

Scent, sound, and motion technology is used in interactive displays.
Uniquely shaped in-store and window displays
Shelf signs
Developing themes to group products together (e.g. school lunch, barbecue season, Christmas, etc.)
Complimentary tastings and in-store presentations
Samples and giveaways
Product placement that is well-thought-out and at eye level
Displays and shelves that are well-stocked

The following are the most efficient strategies to encourage individuals to make a purchase in an eCommerce setting:

Customer buying decisions can be aided by live chat help.
Putting the search bar prominently on the website
providing free delivery
During checkout, a status bar will display the progress.
Seasonal and holiday collections, tailored landing pages, and special offerings
Images, copy, characteristics, videos, and other digital data are used in product descriptions.
Recommendations for products
Banner advertisements
Ratings and reviews
Cross-selling, upselling, and bundling
Product classification that works
Ribbon overlays that aesthetically highlight something unique about a product (bestseller, free shipping, sale, newly added, etc.)

Sales and Merchandising: What’s the Difference?

Although sales and merchandising are closely related, they are not the same thing. The term “sales” refers to a consumer actually selecting a product and completing a purchase transaction.

Merchandising is the process of guiding a customer to a sale. A prominently displayed banner leading to a special gift guide, for example, can inspire and attract a consumer to add a product to their shopping cart (merchandising), and when the customer completes checkout, it is categorised as sales.

Service Company vs. Merchandising Company

A merchandising company, as the name implies, sells tangible products to consumers. To show and ultimately sell things, these enterprises incur costs such as labor and materials.
Service businesses do not generate cash by selling tangible items; rather, they give services to consumers or clients who value their ingenuity and expertise. Examples of service companies include consultants, accountants, financial planners, and insurance providers.

Cycles and Diversity in Merchandising

Today’s merchandisers, like they have always done, are leaning into change rather than clinging to what is familiar. They are adopting new technologies while also listening to their customers. And they are shaping (and being affected by) the ongoing growth of digital merchandising.
To understand merchandising, however, it is necessary to grasp how cycles and variety play crucial roles.

Certain merchandisers, such as chocolate shops, may see up to 80% of their overall sales during the holiday season. For them, constantly inventing new chocolates, discounts, and tempting displays will not be as crucial as making sure they have a great merchandising plan for the months of October, November, and December.
Also, what merchandising is (and what form it takes) relies quite a bit on the variety (of geography and of the items and services themselves) (of geography and of the products and services themselves).

For instance, hardware stores in San Francisco are unlikely to stock bags of salt and snow shovels in the same way that they do in Chicago.
Hence, while the fundamentals of merchandising will not change, the methods and approaches of the practice will. This can include, among other things, changes to the following:

How first impressions are formed
How lighting is employed
How is traffic manipulated?
Which metrics are monitored?
Which scientific merchandising principles should be used?

Supply Chains In Merchandising

Finally, no study of the fundamentals of merchandising is complete without considering the merchandising supply chain.
While many students think of merchandising as the visual display and advertising of products, it also includes the behind-the-scenes work of making the products available, such as ordering from wholesalers and managing merchandise inventory, which includes elements of accounting and business management.

Is there anything else you’d like to learn more about that wasn’t included in this article? Tell us in the comments!