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Merchandising
What is merchandising?
Merchandising is one of the marketing tools designed to build consumer loyalty to specific products and the company. More precisely, merchandising implies the practical demonstration of products to potential customers through product display and placement of related point-of-sale materials, such as price tags, shelf talkers, banners, and displays. All this arouses interest among consumers, informs them about the most favourable offers, encourages impulse purchases and increases brand recognition. However, the primary goal of merchandising is to increase sales and, consequently, profits.
Merchandising is orientated towards and most effective primarily in retail. However, with the development of e-commerce, so-called online merchandising has also appeared, which includes the interface and appearance of the website or marketplace, management of categories and product filters, and the use of attractive images of the products and services sold. The goal of online merchandising is to create a convenient and engaging platform for shopping.
Traditional and online merchandising cover almost all areas influencing the customer and forming their opinion of a product. It is not only the range of products and how they are displayed but also the general organisation of the sales area or other space, pricing, and other factors. The merchandiser - a specialist who represents the brand in retail chains and is responsible for the display of goods - needs to use the entire retail space competently, present the goods of their brand in a favourable light, inform consumers about discounts and loyalty programmes, and as a result, lead them to purchase. Therefore, the definition of merchandising includes complex work to facilitate the choice of consumers.
Why is merchandising important?
Merchandising helps distinguish a particular brand's products from the numerous competitors to make them more attractive in consumers' eyes and stimulate purchases. For example, suppose a product is sold on promotion and has a favourable position on the shelf. In that case, it encourages customers to find a solution in favour of buying this product.
Additionally, the correct positioning of goods favours spontaneous purchases. For example, if there are sauces and seasonings next to meat products, the customer will likely buy spices together with meat. They may not be on the list of products, but in most cases, we decide to buy things displayed on the shelf. Bright packaging, eye-catching price tags, discounts or promotions influence impulse purchases.
Merchandising also allows you to control inventory, monitor supplies, and prevent excess or shortage of products. Overall, merchandising is necessary to boost sales efficiency, improve customer experience and strengthen a brand's position in the market.
The benefits of merchandising
Merchandising has many advantages that significantly affect the success of a retail business:
1. Increased Sales and Profits
A key benefit of merchandising is its ability to drive sales. Competent and properly organised merchandising attracts customers' attention, convinces them to buy goods and even increases the average cheque.
2. Improving the Customer Experience
Merchandising helps to create a comfortable and convenient atmosphere for consumers. Attractively designed window displays, exhibition stands, and banners make the shopping process more pleasant. For example, the products in the shop windows should be placed facing the customer so they do not block each other. Then, the consumer will immediately see the whole product from the most attractive side. Additionally, all products should be easily accessible on the shelf and in the hall. In other words, nothing should block the passage to the product displays. It creates a comfortable space for consumers and increases their loyalty to the store or brand.
3. Increasing Brand Awareness
Merchandising also implies using the company's corporate style, logo and slogan, and colour scheme on product packaging, exhibition stands and showcases. All these form in the consumer's mind a unified and memorable image of a particular brand, allowing to strengthen the company's position in the market, increase customer loyalty and attract new customers.
4. Gaining a Competitive Advantage
Competent merchandising allows you to stand out from your competitors, attract the attention of more customers, and establish more robust and longer-term relationships with them. All this creates additional opportunities for business growth and development.
5. Cost Optimisation and Cost Reduction
Merchandising includes inventory control, as well as analysing sales, product popularity and seasonal trends. It helps to make a competent sales plan to avoid a shortage of demanded goods or, on the contrary, an overabundance of irrelevant products. Also, merchandising allows you to reduce the circulation cost and increase the overall work efficiency.
Types of merchandising
There are several main types of merchandising, but they all have the same goal - to increase sales. So, they are as follows:
- Cross-Merchandising
This type of merchandising involves displaying products in the sales area so that the goods complement each other. For this purpose, cross-selling techniques get used when related products get placed next to the main product - for example, shampoo and hair conditioner, phone and charger, or running shoes and sports bags.
Cross-selling techniques can often be seen in coffee shops, where cakes, buns and sandwiches are offered along with coffee, and in flower shops, where in addition to bouquets, they sell plush toys with the expectation that the customer will buy them together with flowers.
This technique aims to stimulate additional sales and increase the average customer's cheque by offering different products that increase the value and attractiveness of the main ones.
- Visual Merchandising
It also employs the peculiarities of human psychology, namely the visual perception of consumers. This type of merchandising involves the creation of a beautiful picture; that is, you must combine the goods on the shelves and attract customers' eyes. Also, visual merchandising is responsible for the sales area's general atmosphere, including music, lighting, and flavours.
A vivid example of visual merchandising is supermarkets on New Year's Eve. The most popular and topical holiday goods get illuminated in a particular way; the store plays thematic playlists and smells of pine needles and tangerines. All this encourages customers to make impulsive purchases, so customers leave the shop with all kinds of festive attributes, even if they plan to buy only champagne for the New Year's table.
- Technical Merchandising
This type of merchandising involves using special retail equipment and POS materials (posters, promotional stands, shelf talkers, wobblers, and so on). This retail equipment must be reliable, durable, fully operational and, most importantly, convenient for consumers.
It is also essential that any information on price tags, banners, discount coupons and leaflets should be up-to-date and valid. Only then will technical merchandising attract consumer attention, increase brand awareness, and boost demand and sales.
- Promotional Merchandising
The next type of merchandising is related to promotions, special loyalty programmes, and offering customers trial products. It can be particularly effective for promoting new products and increasing demand for seasonal goods.
- Communicative Merchandising
It involves communicating with customers, helping them to find and select products, and advising them on how to use them. Therefore, merchandisers need to be smart, improve their skills in sales, presentation of goods, and convincing customers to buy products of their brand, and know techniques they can use to increase the average cheque of consumers.
Thus, for the fastest and best results, a business can use all possible types of merchandising at once. You can also call them "strategies" because each of these varieties implies a particular plan and accompanying tools to achieve the main goal - to increase sales. However, if your brand has not been scaled yet, you can limit yourself to using one merchandising type or introducing them gradually.
Elements of merchandising
Merchandising, as a part of marketing, also consists of elements. Among them, the features include:
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Merchandising and Shelf Control
Firstly, merchandising starts with a product placement scheme in the display cases, considering the plan of the sales area. You can use several principles of product placement in planning, for example:
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The "Golden Triangle" is between the entrance to the sales area, the shelf with the most popular products and the cash register. The larger the area of the "golden triangle", the more products customers will see and the higher the probability they will buy something else.
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The "Focal Point." This principle suggests that the product should be centred with an offset to the right - this arrangement is called a focal point because it allows consumers to notice the product from a distance.
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According to the "Eye Movement" principle, goods should be placed according to their priority. The most promoted and essential goods get placed in the centre of the shelf or rack, and less demanded products get placed in descending order of importance, i.e., downwards and to the right. Such a trajectory resembles reading a book and sliding the gaze from top to bottom and left to right.
Thus, there are many different principles in merchandising. Some of them have no name but are intuitive. For example, it is desirable to place goods so the customer can easily take them off the shelf and touch them. As a result, tactile sensations and contact with the product contribute to its purchase. Famous and sought-after brands often get placed next to products of little-known companies. Buyers, having recognised a popular brand, will also pay attention to the product of an unknown brand, subconsciously putting it on par with the branded one.
Of course, not all merchandising principles are universal and suitable for all areas. However, this is the task of a merchandiser - to make competent solutions and use the most relevant principles of the display for certain businesses, to oversee the shelves and to monitor that competitors' products do not interfere with your sales. That's why another element of merchandising is product assortment.
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Product Assortment and Ensuring Full Availability
With their brand's merchandise and its wide range of products, the merchandiser attracts the customers' attention. They must ensure that the products get presented in sufficient quantity, competently arranged on the showcase, and combined with neighbouring products. The merchandiser should master this tool first of all because the correct placement of goods is the basis of their activity.
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POS Materials (Point of Sale)
They provide promotion of goods or brands at the point of sale. As mentioned above, POS materials are price tags and product packaging, posters and banners, product stands, light panels, etc. Their essential task is to attract additional attention from customers and inform them about the advantages of products of a particular brand. Therefore, such materials are often located at the entrance to the sales area or in the hall itself.
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Additional Equipment
Implementing promotional merchandising demonstration tables, shelves, refrigerators, and shopping baskets is necessary. Branded sofas and lounge chairs in brand colours in a shopping centre or hypermarket can also be considered additional equipment.
Learning by topic
Basic merchandising mistakes
Depending on the main types of merchandising, rules of goods display and other elements, the main mistakes made by inexperienced merchandisers are as follows:
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An arrangement of goods is based on the convenience of the merchandiser themselves, not the buyer.
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Poor lighting of the shelves with products or the whole rack.
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Clutter on the shelves and unpleasant odour.
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Narrow aisles in the sales area between shelves.
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Lack of necessary information on the product.
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Irrelevant information on price and other product features.
Summary
Thus, the success of merchandising is influenced by many factors - for example, the general atmosphere of the sales area, visual design, communication with staff and everything that can convince consumers to buy or refuse a particular product. Therefore, it is necessary to start with the layout of goods on the shelves and then monitor all the above factors, namely the observance of cleanliness on the shelves, good lighting, the presence of meaningful and relevant price tags and other POS materials. Remember that it is necessary to care, first, about the convenience and comfort of the client. In this case, satisfied consumers will become your regular customers and ensure a high level of sales!
