Merchandising is a term used to refer to a wide scope of business and marketing strategies involving the use of ambient tactics in presenting products or services to consumers in attractive, appealing ways to improve sales.
What Is Merchandising?
In the broadest sense, merchandising, also known as visual merchandising, display or marketing, is any practice contributing to the sale of products to retail consumers. At a retail in-store level, merchandising refers to the variety of products available for sale and the display of those products in a way designed to stimulate customer interest and entice purchase.
Who Uses It?
Merchandising is used primarily by brick-and-mortar retail stores, whether the retailer is independently owned or part of one of the largest retail chains. While many retailers may carry the same merchandise, merchandising strategies are what distinguish retail competitors. How branding, packaging, and visual display is or isn't used in a retailer's merchandising strategy has a direct impact on foot traffic, sales, customer loyalty, and general popularity. Merchandising can make a retail store a place where shoppers want to be...or don't.
Why It Is Important?
The products a retail store makes available to its customers are important, but the way those products are merchandised ultimately determines what moves out the door and how quickly it goes. A few merchandising best practice rules of thumb consistently motivate customers to spend money:
As a retailer, a consumer's option is your opportunity. Assuring a sufficient supply and variety of merchandise engages shoppers in an 'either-or' buying decision rather than a 'yes-or-no' decision. For instance, if Best Buy carried only one brand and one model of a laptop computer, the consumer would have only a 'yes-or-no' decision -- "Yes, I want this computer" or "No, I don't want this computer." But since Best Buy carries computers from Dell, Samsung, Apple, etc., consumers are immediately engaged in making a decision about which computer is best, bypassing the 'yes-or-no' debate altogether.
Apple Stores, on the other hand, carry only one brand of computer: Apple, of course. But the variety they provide comes from many different shapes, sizes, and capabilities of a wide variety of Apple computer models. No matter what the merchandising mix, retailers who provide variety to their shoppers are using a merchandising best practice to motivate customers to make a purchase before leaving.
Inventory rotation helps keep a retail store looking fresh and new. Rotating merchandise around the store gives shoppers the feeling that there is always something new to discover. Showcasing new arrivals in the front of the store lures shoppers in the door. Displaying clearance merchandise in the back of the store directs foot traffic past merchandise displays they might otherwise miss.
Using merchandising flexibility best practices, retailers can draw the attention of shoppers to seasonal merchandise, holiday-specific merchandise, and special promotional deals. The better a retailer is at capturing the attention of shoppers and focusing them on the newest merchandise, the most popular merchandise, and the best limited-time deals, the faster inventory converts to successful sales.
Branding, Co-Branding, and Product Placement
Branding identifies and differentiates a product. Good branding sets a product apart, making a distinct and indelible impression on consumers. Anyone seeing the swoosh instantly thinks, "Nike." One singly-bitten apple has defined the largest technology company in existence to a massive global audience for at least 30 of its 42 years, without saying a single word.
Co-branding can enhance the visual appeal of both specific merchandise and the look of a retail store overall. Department stores like Macy's and Nordstrom group branded merchandise together into their own mini-departments. Barnes & Noble Bookstores dedicate a portion of their stores to coffee shop brands like Starbucks. The Sephora brand has established stores within JCPenney stores.
Savvy product placement stands as another excellent opportunity to make your retailing mark. Reese's Pieces became 'a thing' because every kid on the planet fell in love with E.T.'s adorable enthusiasm for the chocolate peanut butter candy. 35 years later, kids still make videos of themselves sliding across the floor to "take those old records off the shelf" in Ray-Bans and button-down oxford shirts, just as Tom Cruise did in Risky Business.
But quieter, slicker versions of product placement don't cost millions of dollars, and you won't see them in a theater near you or on television. For the price of a nice handbag, a pair of shoes or a shirt, many of even the smallest-scale retailers give away or lend items to trendsetters in their own communities with the promise that they'll wear or use the items a certain number of times or to certain events, guaranteeing that someone is going to want to know where they got it.
Grouped Product Display
Sporting goods stores like Dick's Sporting Goods merchandise socks in the shoe department. Coffee shops like Starbucks merchandise coffee bean grinders and insulated travel mugs next to the coffee beans. Discount department stores like Kohl's merchandise oven mitts next to the cookie sheets. By grouping related products together, retailers make it easy for consumers to place themselves into a comprehensive 'scene', encouraging them to purchase products they might not have known they needed or wanted.
The way that merchandise is displayed should provide customers with easy access, making it easy for them to see and choose just the right merchandise for them. If merchandising displays make products difficult to reach, difficult to find, or difficult to sort through, many customers lose interest or lean toward frustration, often leaving without making a purchase.
Showcasing and featuring merchandise with special sales prices motivates many consumers to make purchases if for no other reason than to get a good deal.