Merchandising is the purchase, distribution and display of goods. The goal is to provide the right products at the right time for when your customers will need them.
A well-executed merchandising strategy is a great way to grow your business and build customer loyalty. And create a strong foundation from which your business can grow and expand.
Let’s dive into what a merchandising strategy is and how to build one.
What is a Merchandising Strategy?
Merchandising strategy is a set of choices that will be made in order to position you in the best way to achieve business goals. Merchandising strategies predominantly focus on 4 key elements, product, price, placement and promotion. And ensures the management systems and capabilities are in place to deliver on each at the right time for the customer.
A WSSI is a vital part of a merchandising strategy. And is used to plan, monitor and manage the overall execution.
Now let’s talk about why it’s important to have a merchandising strategy in the first place.
Why have a Merchandising Strategy?
A merchandising strategy helps you achieve specific goals with coherent, doable and tangible actions. These actions will be informed by the collective influence of products, price, promotion and placement to determine the environment needed for the strategy to be successful.
This is a more effective way to achieve business outcomes. That has benefits for both the business and the customer.
4 Elements of a Merchandising Strategy
For a merchandising strategy to be successful. It should to use the use the collective influence of these 4 elements.
- Product
- Price
- Placement
- Promotion
Let’s see why these elements are essential and how they inform a successful merchandising strategy.
1. Product
It’s difficult to make a sale if you don’t have anything to sell. This is true whether you’re new to business or more established. That’s why the first step is to identify the products you’d like to sell, or sell more of.
If you are new to business there are a few things to consider when deciding on what products to sell. You will want to consider what pain point the product solves, or what kinds of products appeal to hobbyists, your personal passions or professional experience.
If you are more established in business – this can be from 6 months to 60+ years – you’ll want to analyse your current and historical product performance. By analysing what types of products sell best at different times of the year, you’ll be able to identify growth opportunities that can be used to inform your merchandising strategy.
2. Price
Often when price is mentioned the focus is on retail price. The price you intent to sell the item for. However, it is as important to consider how much it will cost for you to source and produce the products you’re wanting to sell. If a product costs more to produce than to sell, it will put pressure on cash flow. Which can result in there being a limited amount of money available to reinvest to purchase more products.
Regularly reviewing the margin impact of products bought and sold is an important process for businesses of all sizes. Doing so will help to identify if products need to be repriced, or resourced, to enable you to increase your cash flow so that you achieve the desired outcome of your merchandising strategy.
3. Placement
As part of a merchandising strategy, placement refers to the various touchpoints a customer or potential customer can have with your product.
The way we, and our customers, shop and interact with businesses has changed. Sales channels have progressed past the traditional brick and mortar store. With many businesses having an own brand website, along with marketplace stores – such as Amazon, ebay or Etsy. As well as concession or wholesale partnerships with other brands such as ASOS, John Lewis or Zalando.
Each touchpoint a customer has to interact with your business is equivalent to a window display. Analysing the performance of each channel will identify a variety opportunities that can be used as part of your merchandising strategy. This could include changes to the types of products sold via each channel, to the timing for when seasonal products should be launched.
4. Promotion
The final element of a merchandising strategy is promotion. In this case promotion is referring to the discounting of products to sell through terminal stock so that new stock can be brought in.
Discounting to incentivise a purchase has become a prominent part of retail business. In order to do it in a way that helps achieve overall business goals, it needs to be a part of the merchandising strategy.
Analysis of historical sales performance can identify opportunities when tactical promotions can help boost sales when there are natural lulls in performance. And reduce the number of sporadic promotions that negatively impact margin and cash flow.
Steps to Creating a Merchandising Strategy
Now you have an outline of each of the elements needed, to achieve a specific outcome. It’s time to establish the framework that can to bring the strategy to life.
Your merchandising strategy should be a one page document that includes:
- The specific opportunity you are going after
- How you will take advantage of that opportunity
- What you will need to be able to be successful
- The processes to plan, track and monitor progress
What needs to be included in the one page document will become clear once the performance analysis of the 4 key elements has been completed.
The performance analysis of the 4 key elements will establish what conditions need to be true, for the strategy to succeed. Which in turn will identify what changes need to be made, within your organisation, to be able to act on the opportunity and monitor its progress.
The final requirement to plan, track and monitor progress. Will require a framework to be established where performance, and progress of the strategy, is routinely reviewed against key performance indicators – KPIs. This will be what is needed to ensure the choices and actions the strategy has started need to be taken. Are delivering the intended outcome. Failure to review performance regularly, will prevent the ability to spot any anomalies that require addressing in order for the strategy to be successful.
Closing
It is important to remember that a strategy dictates the final destination a business wants to achieve. It is the actions and collaboration of the collective that determines how long that journey takes. If there is lack of clarity as to why the strategy has been put in place. It can cause a breakdown in collaboration and cause the path to veer off course.
I am passionate about helping businesses use their data to inform effective merchandising and ecommerce strategies. Strategies that play to their strengths and outline tangible, doable, actions that can deliver a successful outcome.
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