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What is merchandising?

Merchandising refers to the activities that involve promoting and selling products or services through effective presentation, pricing and placement in a physical retail or online store. It involves developing clear and effective business strategies for product selection, packaging, display and pricing to enhance customer appeal and ultimately drive sales. If you're starting a business where you plan to sell products, either online or in a brick and mortar store, you should know what merchandising is and how to use it effectively.

As an essential aspect of a business’s operations - product development and marketing - merchandising plays a crucial role in attracting customers and creating a positive brand image. Effective merchandising strategies help businesses increase sales, boost profits and gain a competitive advantage in their market. By also deploying visual merchandising, businesses can create an appealing shopping experience for customers that encourages them to make purchases.

History and evolution of merchandising

The concept of merchandising has been around for centuries. Originally, merchants would travel across different regions to sell their goods. As the retail industry evolved, so too did the concept of merchandising. In the 19th century, department stores emerged, and retailers started using window displays and other visual techniques to promote their products. Today, with the rise of e-Commerce, online retail and merchandising has become more critical than ever.


Key components of merchandising

The key components of merchandising include but may not be limited to some of the following:

  • Product selection and development, you can't market a bad product, or you can but it will be harder.

  • Pricing strategy, making sure your product is priced attractively to sell it and that you can make a product.

  • Visual merchandising to influence consumers to buy.

  • Promotions and advertising to draw attention to your product and trigger sales.

  • Inventory management, to keep up with demand, without creating a surplus.

  • Sales forecasting and analysis, to plan inventory and special offers.

5 benefits of effective merchandising

If done right merchandising can help spur business growth and profitability. Here are 5 reasons how,

01. Increased sales revenue.

02. Better customer experience.

03. Improved brand image and awareness.

04. Higher customer loyalty and retention.

05. Increased market share.

Examples of effective merchandising

Some examples of effective merchandising strategies include:

  • Creating eye-catching window displays to attract customers

  • Offering special promotions or discounts to encourage purchases - email blasts or flyers

  • Using product bundling to increase sales

  • Providing personalized recommendations through data analysis - so users on an eCommerce website could be offered products or deals based on their past behavior on the site.


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Best practices for effective merchandising

Merchandising is a crucial aspect of business success for retailers. By using effective merchandising strategies, businesses can attract customers, increase sales, and gain a competitive edge. Understanding the key components, and how to improve them, of merchandising can help businesses optimize their marketing efforts and achieve these goals. To succeed in merchandising, businesses should take into account the following;

  • Understand your target audience and their shopping behavior - this will allow you to better plan physical displays or eCommerce website pages around their behavior.

  • Create a consistent brand image across all channels, online and in-person. This will make your brand not only highly recognizable but build brand trust too.

  • Use data analysis to make informed decisions about product selection and pricing, work off past customer behavior to guide this.

  • Regularly update your visual merchandising displays to keep them fresh and appealing, plan around the holidays and other seasonal events.

  • Monitor inventory levels and sales performance to optimize stock levels, so you can respond to demand when you need to.

Challenges associated with effective merchandising

One of the biggest challenges of merchandising is keeping up with changing consumer preferences and trends. This then feeds into the challenge of managing inventory levels to avoid stock-outs or excess inventory. Businesses also need to be careful not to over promote products, as this can lead to consumer fatigue and ultimately decreased sales.

Merchandising FAQ

What's the difference between merchandising and marketing?

Merchandising involves promoting and selling products through visual displays and other techniques, while marketing is a broader term that encompasses various activities to promote products or services, including advertising, public relations, and sales promotions.

What is visual merchandising?

How can I improve my merchandising strategy?


Related Term

Last in First Out (LIFO)

Related Term

Online Retail

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