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Home»For Buyers»Marketing & Management»Back to Basics: Freshen Up Your Store with Merchandising 101
Marketing & Management

Back to Basics: Freshen Up Your Store with Merchandising 101

PublisherBy PublisherFebruary 14, 2019Updated:January 20, 20238 Mins Read
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Spring has sprung. Well… almost. There’s no better time than the present to freshen up your store for yourself, and for your customers. Having a great retail display can make all the difference. The way you display products and organize your store can be the difference between stellar sales or a deadbeat season. So, let’s take this opportunity to go back to our merchandising basics.

What is Merchandising?

Merchandising is how you promote retail goods inside your store including display features, design, packaging, lighting, pricing, and more. Think of it this way: when you receive a shipment of products — what is the first thing that you do? Take them out of the box. Why? Your customers need to see the products in order to buy them. Of course you’re not going to place your box of products on the floor and call it a day.

The very basic elements of retail merchandising are things any store owner would do instinctively. However, there is a lot of psychology and testing that goes into developing advanced merchandising strategies. But, it all comes back to the idea of making your products visible, accessible, and desirable.

Merchandising Terms to Know

Before we get into strategy, let’s break down some essential merchandising and general retail terms to know.

Action Alley. Sales area of the store that has wider aisles and typically separates different departments. Action alleys are generally found in larger stores and typically highlight promotions and discounts.

ASP. Average Selling Price. Refers to the average amount customers pay for a certain product over time.

Case Cards. Custom printed signage that is placed between cases of a particular product to help promote it. Typically used with energy drinks and alcoholic beverages.

Cash Wrap. Also known as your checkout counter, or register, the cash wrap is where customers go to pay for their merchandise. Cash wrap is important for merchandising because it is an optimal space for displaying impulse purchases.

Color Blocking. Also known as color breaking, color blocking is a merchandising technique that arrange products by color, usually in verticals.

Cross Merchandising. Cross merchandising is the practice of displaying products from different categories together with the goal of increasing revenue and add-on sales. For example, displaying batteries with electronic toys, bread at the deli counter, and gum with cigarettes.

Dead Inventory. Also known as dead stock, dead inventory are products that are simply not selling, and are often removed from the sales floor because they are outdated.

Endcap. Endcap is a product display that’s placed at the end of an aisle. Endcaps usually contain promotions or showcase a popular product.

Endless Aisle. Refers to the practice of using an in-store kiosk to let customers browse items that are out-of-stock, but available online or at another store. Endless aisles are usually used by chain stores or retailers that also sell online.

Inventory Turnover. Refers to how many times during a certain calendar period you sell and subsequently replace a product. This metric is used to help inform purchasing and merchandising decisions.

Keystone Pricing. Keystone pricing is when a storeowner sets the retail price of an item as double the wholesale price they paid for it, giving the store owner a 50% gross margin.

Loss Leader. A loss leader is a product that is sold at a price so low that the retailers actually loses money. Retailers sell loss leaders to attract new customers, such as when a store is first opening or expanding into a new product category. The idea is that these new customers will also buy other products that will make up the revenue from loss leaders.

Open-to-Buy. Open-to-buy is the amount amount left in your budget for purchasing products during a certain time period. In other words, how much product can you buy right now without getting into trouble?

Planogram. A planogram is a diagram that shows where and how specific products should be placed to maximise retail sales. These are typically used by large retailers with multiple locations for a season change or product launch.

Pop-Up. A pop-up, pop up store or flash retailing is opening up a short-term retail space or market. Pop ups can be one brand or multiple brands working together.

Pop-In. A pop-in store is similar to a pop-up shop. But, for a pop-in one brand opens a temporary display inside a larger store.

Point-of-Sale (POS). Point-of-sale is the time and place a retail transaction takes place. More colloquially, point-of-sale can also refer to your checkout area and the technology you use to process sales, like a POS system.

Prestige Pricing. Prestige pricing is the practice of setting prices at a high level to convey value and exclusivity.

Rule of Three. Rule of three is used in merchandising to capture shoppers attention and create visual interest with asymmetry.

Shelf Talker. A shelf talker is a custom printed advertisement that is attached to the shelf of the product it is showcasing.

Shrinkage. Shrinkage or shrink is loss of inventory due to causes including shoplifting, employee theft, accounting errors, damaged goods, vendor fraud, and errors at the point of sale. 

Showrooming. Showrooming is when a shopper visits a store to evaluate a product in person before purchasing it online.

SKU. SKU stands for Stock Keeping Unit, which is an alphanumeric code used for inventory tracking. Unlike UPCs, which are universal codes printed on products by the manufacturer SKUs are created by the retailer for internal tracking and are unique to each store.

Webrooming. Webrooming is when shoppers research products online before buying them in store. Webrooming is more or less the opposite of showrooming.

Tips to Freshen Up Your Store

Now that we have a handle on retail merchandising jargon, here are a few tips for putting these terms to work in your store.

• Create a Pricing Strategy

Now that we’ve defined keystone pricing, loss leaders, and prestige pricing, determine your goals for your store and set in place a pricing strategy that is in line with them. For example, if you are looking to drive traffic or build up your reputation for a certain product category, consider using a loss leader strategy. Amazon used this technique with their Kindle. Kindles were sold at a loss, but only so that Amazon could control the ebook industry and more than make up the lost revenue from Kindles with the ebooks over time. If you are looking to built your margins, establish your brand as an authority in an area or appeal to shoppers looking for top-notch quality, consider using prestige pricing.

• Use Signage

There’s a reason why so many of our merchandising terms have to do with store signage. In-store signs are still one of the easiest and most effective way to communicate with shoppers in your store. Not everyone will take the time to have a conversation with you, or want to hear your recommendations. But, more shoppers will notice signs in your store, especially if they are used effectively. Shelf talkers are super easy to make and are a great way to highlight features, benefits, and testimonials about certain products. Just remember to always have signage professionally printed.

• Start With the Front

The front of your store is where you make a first impression on each shopper. So, spend time getting the look, layout, and feel of the front of your store right. Make sure it’s open and inviting. Generally, you want to avoid cluttering the first 10 feet inside your store. This area is where shoppers transition from the outside world and into your store. This transition should be marked with a change in lighting, floor texture like a rug, and overall ambiance. Shopper should be able to relax and take in your store without being bombarded by products or associates.

• Less is More

Take a page out of Marie Kondo’s book, The Art of Tidying Up, and declutter your space. If you start at the front of your store and work your way back, the process will be easier. Create the feeling of tidiness and space by utilizing the full height of your store with displays that help draw the eye up and around the space. Use light colors on the walls and have plenty of mirrors. They encourage shoppers to test items, and also help reflect light around the space.

• Use the Rule of Three

The rule of three is one of the easiest merchandising tips that you can start using right away.  Three is a magic number in merchandising. Display products together in threes to capture shopper interest with asymmetry. If you have three mannequins, set them to three different heights. Display similar products by most affordable, mid-range, and high-end. This technique forces shoppers to consider each item individually instead of viewing the display as a whole. People are also most likely to remember things that are grouped in threes. If you think about it, we break down things like phone numbers and social security numbers into triplets and groups of three because they are easier to remember that way. Use this technique to make your products memorable, too.

brick and mortar February 2019 Issue inventory management marketing merchandising small business
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