MARKET INSIGHTS

What is Merchandising?: Driving Success in Retail With an Effective Merchandising Strategy

August 30, 2021
What is Merchandising?: Driving Success in Retail With an Effective Merchandising Strategy

The field of merchandising encompasses all the activities that go into displaying, arranging, promoting, and selling your products to potential customers. But this description only scratches the surface.

Brands of all sorts need merchandising—from grocery and drug stores to ecommerce and wholesale brands. A huge number of functions upstream from merchandising can feed into and inform each approach. However, retail merchandising takes a unique approach to be successful and win.

Retail merchandising stretches beyond just displaying product and stocking shelves. Good merchandising makes great retailers. You’ll find merchandising at the heart of any guide to the essentials of retail. The extent to which you master this discipline will decide your success as a retailer, brand, and business.

So, what makes up the core activities of a merchandising program?

Mint and Rose Hudson Yards
Mint & Rose Hudson Yards, Powered by Leap

What is merchandising?: Key activities.

Ordering merchandise: It may seem like a no-brainer, but to merchandise you need merchandise. Choosing and replenishing that merchandise takes forethought, however. You need the right products for the right season and in the right location, and in the right distribution of different sizes to maximize sell-through. This critical function forms the foundation of a merchandising program.

Stocking shelves and displays: Simple, but crucial. Once merchandise arrives at your store, it needs to make it to the show floor. Easier said than done. It takes a plan and clear instructions to get the right product in the right place, and to ensure restocking and replenishment happens as required.

Store signage: Signage tells your shoppers what they need to know and puts your product in context. Whether they need to know about new sales, new styles, or where to find the product they need, signage informs customers so you can make the maximum amount of conversions and move the maximum amount of product.

Window displays: Your shoppers’ interaction with your retail store begins when they look through your windows. It grabs their attention, lets them see new products and changes of season, gives them ideas on how to wear your offerings, and provides them with a better sense of your brand and vision. Without effective window displays, it becomes less likely shoppers will enter your store in the first place.

Product arrangement: The proper placement of your products in-store helps maximize every visit. For example, placing high-demand product in the back of your store can encourage shoppers to see your full offering and pick up a few extra pieces along the way. Grouping related or complementary products near one another can have an outsize effect on average order size and volume.

In-store promotions: Deciding on the correct sales and promotions can have a huge impact on the velocity with which you sell through your current merchandise, as well as ensuring you maintain your margins and pricing integrity. Just as picking the right merchandise can decide your store’s success, the same holds true for your promotion strategy.

Goodlife Austin interior and merchandise display
Goodlife Austin, Powered by Leap

What benefits will merchandising have on your retail store?

Successful merchandising will do more than just keep your business humming along. It can drive positive results for a number of key performance indicators, all of which sit at the core of your business’s overall health.

More sales: Bottom line: effective merchandising drives sales. Productive merchandising means the product shoppers want is available in store—and that customers can easily find it—which equals more shoppers converting than if they struggled to find the size or SKU they needed.

Bigger sales: When shoppers can better imagine themselves buying and using your products, especially using multiple in combination or as a set, then they’re just that much more likely to check out with a full cart. One third of shoppers make an impulse purchase every week, and once they commit to buying one product, the likelihood they will buy another increases. Merchandising can become your secret weapon for driving multiple purchases.

Faster product turnover: When sweater weather ends and swimsuit season begins, your store needs to move out the old styles and bring in the new. If you can’t move your backstock of wools and cashmere in time, your only recourse becomes deep discounts or selling it off to wholesalers below cost. An effective merchandising strategy ensures you sell as much as you can with the highest possible profit margin so you always have room for new product.

More time spent in-store: The right product selection arranged throughout your store with intention will keep shoppers shopping longer. Longer shopping times correlate with larger purchases, increasing the number of chances that customers will convert. You want to create a “flow” in-store to lengthen the customer journey and keep them browsing as long as possible, and your layout and product selection influence that more than almost any other factor.

Maximized retail square footage: Whether large or small, you need to make the best possible use of your retail store’s space to turn a profit and offset the cost of rent. A store so crammed with product that shoppers can’t find anything, or so sparse that they won’t find what they need, can see its profitability totally turned around with a better merchandising program.

Increased productivity: Merchandising doesn’t just impact your shoppers. It makes the lives of your employees easier as well. When shoppers can find what they need with ease, it cuts down on associate’s time spent searching the stockroom, tidying up displays, or finding alternative styles, so they can focus on making sales and building relationships instead.

Rent the runway in-store photo
Rent the Runway Dallas, Powered by Leap

Merchandising tips, strategies, and techniques.

No two retail stores have the exact same clientele and experience, even within the same brand, and no two merchandising strategies should look the same. However, all of these retail stores have the same goal. Foot traffic, sales, and product velocity remain top priorities. With the right approach tailored to your specific audience and market, these merchandising strategies can yield massive returns with only a small investment.

1. Optimize your store layout

To make use of every square foot, unclutter your store and create a clear “flow” with ample space to move from one designated shopping area or group of products to another. Put yourself in the shoes of your shopper, and take a stroll down your aisles with fresh eyes. Moving desirable sale items to the back of your store, for example, will pull shoppers to the far end of your space so that they see and interact with more product, increasing the chance that they’ll buy.

2. Choose the right selection of products

You need to stock the right product categories and pieces that will sell in your market to your customers. If a product doesn’t sell, it shouldn’t stay on shelves. This means that SKUs and sales numbers require constant tracking, analysis, and translation into merchandising decisions on the sales floor. Otherwise, product that won’t sell takes up the space of product that will. Effective merchandising requires a strong grounding in data.

3. Broaden your pricing palette

Price forms the bedrock of any retail strategy. Retailers need a mix of prices and offerings to cast a wide net to pull in customers. Grab-and-go products can convert browsers as well as add to the cart size of shoppers buying big-ticket items. Layout and store design informs price as well. Sale zones and loss leader products, as in products that you sell at a lower margin to attract shoppers, can sit in the back of the store to draw shoppers through to see your full assortment. A dynamic pricing strategy will increase sellthrough and aid in moving seasonal product. Your pricing strategy should also apply to promotions. Test out BOGO offers, free gifts with purchase, buy more, save more deals and more to see which resonate with your unique shopper and product mix. Ultimately, your margins define pricing, and that relationship should inform your strategy and will define which products have the highest sales velocity.

Always make sure all inventory has a price clearly labeled. Without finding pricing information, shoppers have a higher chance of leaving a product behind than asking for help to get the answer.

4. Use omnichannel to increase conversions in-store

A fully integrated omnichannel program like one will find at a powered by Leap store has a massive effect on your merchandising proposition. Even if not in stock in-store, associates can order the correct product size or SKU on behalf of the shopper and ship it to their home or to the store itself. Alternatively, buy online pick up in-store capabilities translates into more foot traffic and more purchases as shoppers browse and add to their purchase once they see your merchandise in person. Research shows 45% of those who pick up in-store buy something else during their trip. Omnichannel provides a best-of-both worlds option for in-store and digital shoppers that can streamline merchandising as a strategy.

5. Make your store a feast for the eyes.

How you arrange your window displays, pair items in displays, and create your staff wardrobes all has a massive influence over what your customers buy. Anecdotally, we’ve seen that when customers see product styled on a staff member in motion, they are much more excited about buying and trying it on. Visual merchandising changes how shoppers think about your products. A combination of items—say a shirt, jacket, and accessory, may seem obvious—but once you display them together with a mannequin nearby, shoppers will be that much more inspired to buy them together.

Colors can have a huge impact on product awareness as well. In many of our stores, we’ll focus on displaying pops of seasonal tones to draw shoppers’ eyes around the showroom floor. Bright and unique colors don’t sell as quickly as basics and neutrals like blue, white, black, and grey, but they can draw in shoppers to try a wider assortment of products. Keep in mind that customers will only buy what they can see. Merchandise has to sit at eye-level whenever possible for this reason. The easier shoppers can find it, the easier they can buy it.

6. Keep it clean.

Your retail space must remain clean and organized—you already know this. This means folded and organized product, a tidy showroom floor, and spotless fitting rooms. This will invite shoppers in and ensure they make repeat visits. However, visual clutter must also stay at a minimum.

Sometimes less product on the floor can equal more sales. Less-crowded racks can help shoppers find what they’re really looking for. It also helps communicate price point. A minimalist, sparse boutique with only a few items predominantly displayed communicates high price and exclusivity. Tightly-jammed racks and overstuffed shelves feels like a discount or secondhand experience. The right look for your store can help communicate the right message to shoppers.

7. Know your local shopper.

To sell your product, you need to know your shopper. Merchandise will not be the same in every store for the same brand. What Faherty sells in Leap’s Chicago store and what they sell in Leap’s West Palm Beach location looks very different.

Merchandising requires curation based on each unique customer profile and location. Instead you need to iterate and build to customize each location. Your store should function like your website—its products, sales, imagery, and more changes based on where your shopper buys from. Powered by Leap stores use modular fixtures and a flexible strategy to adapt and interpret a brand in each of our locations. With the right data and merchandising strategy, you can build out your retail location to cement its appeal to local shoppers.

Mint and Rose associate helping customer
mint & rose Hudson Yards, Powered by Leap

Leap’s approach to merchandising.

Merchandising remains central to Leap’s process for every store we deploy. Our team leverages proprietary data and insights to work with every brand on the Platform to ensure each retail location has an optimized product assortment, breadth of styles, and depth of inventory on the floor and in the back of house.

It all comes down to data. Because our Platform stretches across a wide variety of brands and locations we have more data than most, and we can use it to make informed retail decisions.

Most brands launching their first handful of stores on their own just have no way to find or gain this kind of data and insight, meaning their early attempts at merchandising serve as little more than a guessing game.

To take the right merchandising approach, we compare a number of factors and data sources beyond what most brands have available. We consider things like the seasonality of the brand’s product offerings, current trends, their store location, and their unique customer demographics. We cross-reference these with inputs like their ecommerce sales, and what’s in-stock at similar stores in the area and on the platform. We then take a holistic view of the brand so that its messaging, point of view, and full range of products have accurate representation.

Leap’s promotion strategy also ties back to each brand’s goals and drives towards specific outcomes and KPIs. For example, if a brand needs more Units Per Transaction (UPT), then we’ll run a buy two, get one sale to build bigger baskets. As a season winds down, we can drive targeted markdowns on products that haven’t sold yet, or include those specific items in a buy one, save one sale. Because we have the data and experience to see what has worked across different brands, we can recommend creative promotions proven to deliver what brands need across a variety of applications.

Putting it into practice.

As we’ve said, your merchandising program mirrors the uniqueness of your own store and brand. One-size-fits-all might work for hats, but not for your merchandising strategy. However, by following these best practices, your store can succeed in its own way.

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