What is merchandising?
Merchandising is finding or creating supporting or related products to sell alongside your main product range.
Merchandising helps sustain commercial activity related to the main product or products of mainly retail businesses.
Cash flow is important for all businesses. Without merchandising, most businesses would quickly run out of capital.
Who uses merchandising?
Retailers most commonly use merchandise to support their brand. Their brand is the main product and merchandise is all the products that support the brand.
Most successful businesses use merchandising - even if they know don't know they do!
Merchandising can be "service based" or "product based".
An example of a service based merchandise is for example "boiler service" by a gas and electric company.
A simple example of product based merchandise is selling baseball caps at a baseball game.
Even Dentists sell merchandise - for our dentist sells $5 "special" toothbrushes at the checkout desk. If they have 100 customers a month - $500 might pay the electricity bill! That's merchandising at work!
Merchandising is difficult because choosing the right products is tough. These products should support the main product and the brand.
Benefit of Merchandising
Merchandising's main benefit is to provide the core business with cash flow.
Visual merchandising is different to merchandising in that:
- Visual merchandising is about creating visually alluring shop fronts
- Visual merchandising is about presenting merchandise in the context of the brand
- Visual merchandising is about creating in-store displays for the purpose of selling more merchandise!
A successful merchandising strategy depends on successful visual merchandising strategy.
Without merchandising it may be difficult for a business to remain in business selling its main products as these products may be low-volume high-margin items.
Low-volume means low sales volumes. For example, 1 item sold per month.
High-margin means the profit on an item is high compared to its cost. For example, $500 item which costs $50 to make is a high-margin item.
Sell other products along with the main product.
Surprisingly, the main product might never get sold and all the cash flow comes from low margin high volume products.
Simple Example: Gas Stations
A simple example of merchandising which we see every day is how petrol stations (which we'll call gas stations from here on). Gas stations have evolved to sell groceries! How did this happen? In the beginning, gas stations were pretty much all about filling up with gas and then getting oil and water checked by an attendant. These days, petrol stations have had a complete visual merchandising and merchandising make-over, making them lucrative and self-sustaining businesses that just happen to sell fuel. Fuel is the main product of a gas station, but gas stations make most of their income from groceries and snacks. In fact, we recently witnessed a local gas station shut-down when a grocery store opened next door.
Benefits of Merchandising
Merchandising gives consumers more choice when they visit a website or brick and mortar establishment. Merchandising gives businesses supplying the merchandise a larger consumer base or more supply-chains, decreasing the merchandiser's overall dependency on their existing supply-chain - creating a more stable operating environment for the merchandise supplier. Merchandising gives the owner of the business selling their primary product (e.g. fuel, as in the above example) increased foot-traffic or in the case of the web - increased click-traffic. With smart visual merchandising and careful design and layout of a website, visitors won't feel overwhelmed by choice, but instead they will feel they have made an informed decision, compared prices, won't feel like they've been forced into a buying decision, and feel much happier with their purchase.
Foot traffic or web page hits
To be successful in traditional brick and mortar retail operation you need a combination of good merchandising, visual merchandising and store location.
To be successful in web retail you need a combination of good merchandising, visual merchandising, and brand awareness.
Merchandising Strategy Ideas
Start a "merchandise strategy document".
Standardise product layout throughout the shop - in terms of the websites, this means keep the site looking consistent.
Put the best selling stock at eye-level or make it easy to find. In the retail business, this is using the senses such as sounds, smells and signs. For websites ensure your search and navigation works and your checkout process works.
Know the seasonal changes that affect your product.
Use bright primary colours.
Simple sells - finding and buying should be easy.
Group by brand for expensive items and group by product-type for less-expensive items.
Cross-merchandise - putting different products next to each other for example expensive shower soap and trendy running shoes.
Keep it interesting.