I’ll admit it, when I started out, I didn’t pay much attention to merchandising. I just thought it was for brick-and-mortar retail stores and didn’t think it was relevant to eCommerce. But as I delved deeper into the world of merchandising, I realised I couldn’t have been more wrong.
Not only had I underestimated the power of merchandising within eCommerce, but it turned out I was already using many merchandising principles without even realising it. And I bet I’m not the only one who’s found themselves in this situation. So let’s jump right into the deep end and see how merchandising can help your business.
What is eCommerce merchandising?
When you think of merchandising, the first thing that comes to mind is probably the traditional visual merchandising of brick-and-mortar stores. Don’t get me wrong, the visual aspect does play a big part in merchandising, but merchandising is so much more than that. Encompassing other major aspects of your business, merchandising is cross-functional, covering decisions relating to inventory, product launches, pricing, and more.
More than just making your site look pretty, merchandising uses a range of strategies to build seasonality and newness into your brand. This keeps your business up to date with trends, looking fresh, and encourages customers to make further purchases of new/seasonal products.
Traditional vs. eCommerce merchandising
When it comes to merchandising, the core principles and strategies remain the same whether you’re managing a traditional brick-and-mortar store or an eCommerce site. However, with the latter, you can’t physically feel the products, as everything is digital rather than physical.
The main differences arise within the visual aspect of merchandising. In a physical shop, merchandisers are responsible for things like planning shop floor layouts, window designs, and product displays. When applied to eCommerce, this translates to the visual merchandising of the site design as a whole, especially optimising the images, videos, and layout on the home page and product pages.
Why is it important?
Making data-driven strategic merchandising decisions uses the psychology of customers and the goals of the business to increase revenue. Decisions like discounting a product size due to excess inventory and featuring this product more prominently in collection pages and site-wide banners. Or selecting which products will drive new customer acquisition on marketplaces and encourage returning customers to explore your full product range on your own site. These merchandising decisions will not only boost revenue, but also increase customer lifetime value (LTV).
The 4 Ps of Merchandising
Now that you understand how important merchandising is to your eCommerce business, it’s time to look at how to implement a merchandising strategy. It all breaks down into the 4 Ps of merchandising – product, price, place, and promotion.
- Product
You may be surprised that something so important as deciding what products to launch, along with their designs, sizes, and inventory numbers, is a merchandising decision. This is especially the case for fashion brands, which have more regular seasonal product changes and launches.
To keep on top of this, you’ll need to create a line plan so you know what you’re selling and when. As well as identifying what’s in line and should be added to your site, it’s just as important to identify what’s out of line and should be removed from your site. You can then build your product launch campaigns and campaign messaging around your line plan. These seasonal changes of products are what good merchandising is based on.
Seasonal changes are more prominent in the fashion industry. Levi’s is a great example with their ‘end of season sale’ as well as their ‘new arrivals’ sections. Another example is Jacadi with their new spring collection launch.
- Price
Merchandising also comes into the pricing aspect of eCommerce. Are you going to position your product at the premium end of the market with a higher price, or are you going to go for the lower end? What margin profile do you want the product to have, and does this allow for discounts? These are the types of questions you need to be asking yourself as part of product development and merchandising.
An example of this is making merchandising pricing decisions on a SKU variant level based on product popularity. Nike did this with the white and red variant of their Nike Air Force 1 ‘07 shoes which were on sale with 40% off, while all other colour variants of the shoes were at full price. This decision was likely made because the sell-through rate of this colour version of the shoe is probably not high enough, meaning they’re sitting on too much stock and want to reduce their inventory position.
A good merchandising pricing strategy to encourage a higher AOV is the good, better, best approach. This strategy caters to customers with different budgets, offering progressively better deals as they spend more. By leveraging the psychology of price anchoring, it prompts customers to consider, “I could get one for this price, or I could get more for just a bit more.” While the more expensive ‘best’ deal generates higher revenue per transaction, the more affordable ‘good’ deal typically sees higher sales volume. As a result, sales revenue often balances out, with each tier contributing roughly a third of the overall revenue.
Oodie uses the good, better, best approach with their three bundle packages with increasing savings whether you get the bundle including two Oodies, four Oodies, or six Oodies.
An example of another way of taking the good, better, best approach is by offering product price differentiation. Rapha Pro does this by offering three versions of a product at different prices to meet different customer budgets with the good product at £110, the better product at £170, and the best product at £300.
- Place
It’s important to know what channels and markets your products are going to be placed into, as you’ll need to tailor your merchandising efforts based on this.
A common mistake is attempting to apply a one-size-fits-all merchandising approach across all sales channels and markets. This can lead to underperformance and missed opportunities. Instead, each channel should have its own optimised line plan that considers its unique characteristics and customer base. Additionally, international and domestic markets will likely have different consumer behaviours and regulations, making it crucial to customise your strategies accordingly.
For example, channels like Amazon are more price sensitive so I recommend only selling some of your products here and a full range of your products on your website. This way, you can gain traction with new customers on Amazon and gain LTV from returning customers on your website. Hexclad takes this approach with all 19 of their sets on their website but only 5 of their sets on Amazon due to pricing issues.
As well as the channels and markets you sell on, place also covers where you’re offering your products on your website. Choosing the placement of products on your site can have a big impact on the product’s success. For example, are your category pages sorted by price, flagship offer, or popular products? You need to organise your site so different elements are placed where customers are most likely to see and engage with them.
An example of this is Pandora who automatically show their bestseller products first on their category pages but offer different options for the results to be shown like new arrivals and price.
- Promotion
The promotion aspect of merchandising looks at the marketing strategies of current and new product launches. Stepping into the more creative side of merchandising, this stage covers the creative elements of your products and site.
Merchandising is responsible for deciding on what product images and videos to include on your product listing and other pages of your site. Similarly to preparing items to be displayed on the shop floor in the most appealing way possible, you need to plan how you’re going to best display your items on your website.
One of the biggest disadvantages of online shopping for customers is that they can’t physically interact with the products before purchasing. To counteract this, you need to provide as much information and virtual interaction with the product as possible in order to make customers feel confident enough to purchase.
Depending on your product type, consider using demos, 360-degree photography, videos and images from different angles, an image for each colour of the product, and give your customers the opportunity to zoom in on each image.
For example, on their Powershot G1 X Mark III product page, Canon includes a full camera specification, highlighted features, and an interactive 180-degree photo of the product.
Who’s responsible for merchandising?
Unlike the first three Ps (which are primarily the responsibility of a merchandiser and product team), the merchandising in promotion tends to be carried out by a marketer. However, you’ll probably have realised by now that you’re likely already doing a lot of these merchandising tasks without help from a merchandiser. This goes to show that merchandising tasks can be broken down and carried out by a range of people in different roles, coming together to produce excellent merchandising.
The main industry where this may be different is in the fashion industry or if your company is doing around 75M or more. Due to the constant seasonality and newness of the fashion industry, having one person to take on the specific merchandising role can be helpful.
Merchandising Tactics:
Here are some simple techniques that you can implement now to start benefiting from merchandising. I recommend taking a holistic view and using techniques that best fit your brand and business strategy.
Automation tools can be used to complete some merchandising processes, and I’ll include some automation tools examples for the tactics below (all of which are compatible with Shopify). Although this can be really helpful for larger retailers, it can be costly without much benefit for smaller businesses with fewer SKUs or single SKU brands. And if you’re starting out, using manual methods can improve your grasp of customer behaviour and offer valuable insights into your business. So if you run a smaller eCommerce business, I recommend starting with manual methods, then building up to using automated tools.
Category and search merchandising:
Unlike brick-and-mortar stores, people will often go to your site from an ad or from search and look for a specific product rather than browsing. Making it easy for the customer to find this product and have all the information they need to purchase is essential.
If customers are familiar with your brand, they might search for products by looking through your category pages or using the search bar. When the category or search results page comes up, you can take control of how the products are ordered. This could involve giving extra priority to the items you want users to notice and engage with, such as trending products, seasonal items, related products with higher profit margins, and those that generate the most revenue.
When it comes to out-of-stock products, you don’t want your customers to come to your page, fall in love with a product, and leave disappointed that it’s out-of-stock. But you also don’t want to remove the out-of-stock products from your results and category pages, as customers should be able to sign up for back-in-stock email notifications. Therefore, the best solution is to move your out-of-stock products to the end of any category pages and site-search results pages.
If you want to use an automated tool for category and search page organisation, check out Kimonix, Nosto, Tagalys, or Hawksearch.
For example, Lucy and Yak have organised their search results page so that all the out-of-stock products appear at the end of the 3 page results for the search term “top”.
Use cross-merchandising
Cross-merchandising is all about encouraging the customer to make a larger purchase increasing AOV. Here are three ways you could do cross-merchandising:
- Similar products – If the customer wants to buy a product, they may also be interested in another similar item. For example, similar styles or designs of dresses could be placed together.
- Complementary products – The customer may want to buy items that go with their other items. For example, placing different elements of an outfit together, like a cardigan and shoes next to a dress.
- New products – Increase the visibility of new products by cross-merchandising them with popular products. For example, if your bird duvet set is a popular item, cross-merchandising it with seasonal duvet sets like a Christmas bird set.
Once you’ve decided on what type of cross-merchandising you’re going to do (or a combination of all), you need to decide where to implement these strategies. My favourites are suggesting related products in the shopping cart or looking at customer purchase data and seeing what people usually buy together to create bundled offers.
If you want to use an automated tool for cross-sell merchandising, check out Insider or Yieldify.
For example, when an item is added to the basket on the Arran Aromatics website, a sidebar appears with a preview of the basket and a few recommended products based on what’s been added to the basket.
The product page for this Arran Aromatics candle also has an upsell section on the product page, promoting a frequently bought together bundle of products with the same scent.
Highlight on-sale products:
There’s no point in running a sale if your customers don’t know about it. Feature your most important offers prominently on your homepage, as it’s often the first page customers visit. It’s also important to keep your homepage fresh for returning visitors by simply rotating your homepage visuals and highlighting different products.
Use bright colours, bold fonts, and language that creates a sense of urgency and excitement (like “just arrived”, “limited edition”, or “exclusive”). This will help make the offer stand out on the page. It might also be worth adding the sale announcement to your site banner so it can be seen from every page of your site.
For example, Monsoon are highlighting their sale in the hero section of their home page as well as in a sitewide banner.
A useful tool for running sales is the Shopify Flow app. Once set up, flow can automatically pull products through to your sales collection when you mark them as on sale, saving you the time and hassle of having to manually do this for every sales product.
Product page merchandising:
I’ve already talked about the importance of images, videos, and messaging on your product pages. But once your customer has had a good look at the product, they will likely move on to see how others have got on with the real physical product. Good merchandising means providing customers with this information in an appealing way. Consider adding ratings, reviews, and user-generated content under the ‘add to cart’ button to provide that extra level of trust and encourage customers to purchase.
If you want to use an automated tool for your product reviews, check out Reviews.co.uk or Trustpilot Reviews.
For example, Hiveology include a reviews section on each of their product pages, providing star ratings and reassuring social proof.
Ready to take your eCom business to the next level? Get in touch for an initial free call to discuss how I can help you.