what is effective retail merchandising

Off the Rack: What Is Effective Merchandising?

Damien Deem, Implementation Specialist
Anthony Henry, Customer Program Manager
Mauricio Guerra, Implementation Specialist 

What is effective merchandising? Effective merchandising means getting the most out of your retail selling space, whatever type of retailer you are, whether grocery, convenience, apparel, you name it. Your merchandise—the products you offer for sale—are not only your biggest cost and most important financial asset; they are why you exist. If you are not effectively arranging these products, communicating their value, and creating an optimal customer experience, you are literally leaving money on the table.

“Advertising moves people toward goods; merchandising moves goods toward people.” – Morris Hite

In this series, we will discuss how you can improve your merchandising to drive sales and realize other benefits such as reducing shrink. Effective merchandising, together with precise forecasting, will allow you to minimize backstock, resulting not only in a reduction in shrink but also less labor having to handle excessive backstock. We begin this series by examining the differences between direct and indirect merchandising, giving examples of both, and how they can impact your merchandising effectiveness.

Direct merchandising

By “direct merchandising” we mean actions that relate to specific items offered for sale. Examples include planograms that establish usable space within the store that optimizes the placement of the items and accommodates likely purchasers. Merchandising endcaps create a one-stop shopping location, making it easier for customers to quickly scan and make selections. Optimal placement of sale and companion items on endcaps and or standalone displays can be the difference between success or failure to your sales strategy. Other examples and aspects of direct merchandising include:

  • Aisle attraction. Aisles that begin and end with rounded gondolas may entice customers and act as a prelude to what they will find in the aisle. Items set up on an endcap in an aesthetically pleasing way allows customers to build their basket as they journey through the store.
  • Cross-merchandising. Cross-merchandising increases sales of non-sale items by displaying them next to sale items. For example, if strawberries are on sale, it makes sense to have the bakery department place sponge cake next to the strawberries and the grocery department to display whipped toppings nearby.
  • Seasonal merchandising. Changing your stores’ setups throughout the year is a critical part of effective merchandising. Your shelving displays should look different every season. A mix of seasonal products keeps your store looking fresh. Display shelving reflecting excitement for all your seasonal products enhances the overall customer experience. Steel peg units are an easy and versatile way in which to change the look of your displays each season and draw customers in to shop your specific seasonal offerings.
  • Active sampling. Active sampling usually requires one-on-one interaction with the customer. This can be done by having a third-party rep come in to sample new products or by store-level associates offering samples of their product. The cost of this second option is minimal as there is always some downtime that, with good planning, can be utilized. Consider the deli department where the clerk offers a sample of a new deli meat or a deli meat that may be on sale. Sampling allows the customer to have a positive interaction with the associate, thus providing good customer service as well as driving sales.
  • Silent sampling. This is leaving samples out for customers to try as they journey through the store. This can be done with very little cost because it requires minimum amounts of labor to display. The tradeoff is that active engagement with the customers is reduced because there is not a person present to explain the quality and characteristics of the product, but it can still be quite effective.

Indirect merchandising

Indirect merchandising means general operating procedures and strategies that improve the overall customer experience, making shoppers more likely to purchase a product. Examples of indirect merchandising include:

  • Cleanliness and organization. A clean, well-organized store is fundamental to effective merchandising and something any retailer can achieve, no matter the industry or store size. A clean facility with first-to-market offerings and clearly marked aisles are primary quality drivers of the customer’s shopping experience. Customers should not have to look too hard to find what they need.
  • Signage. Colorful attention-grabbing signs can be very effective. The placement of those signs can be extremely important as well. Putting them in locations that are uniform and at eye level helps customers know where to find things throughout the store. These signs can also tell the story of the product, such as locally grown produce items, new items just arrived in store, and other information to help drive sales.
  • Fresh departments. If you have a fresh department, are you using it to trigger and stimulate your customers’ senses? Examples include the smell of warm bread or rotisserie chicken coming out of the ovens, and fresh produce cut and wrapped and displayed to show product quality. This creates an inviting atmosphere that leads customers to buy more, build loyalty and become a long-term customer.

In summary

Whether you utilize direct or indirect merchandising techniques, the main purpose is to drive sales. Through proper product and item placement, you will be able to tell a story about your offerings. You will make your products more attractive, improve customer service and reduce shrink. Effective merchandising is not just instinct or art. Having systems in place to work collaboratively with your merchandising teammates will help you achieve higher sales and profitability. In the second part of this series, we will discuss this systematic approach, focusing on merchandising patterns and their importance to effective merchandising.