Retail Merchandising 101: New to In-Store Merchandising? Start Here

Retail merchandising is used to engage shoppers who visit a retail store. The way products are displayed, the store layout, and even the sound and smell all contribute to the experience customers have when they visit your store.

The Amazons of the world make it possible for customers to buy whatever they want in just a few clicks. Shoppers no longer need to visit retailers in person if they don’t want to, but people still shop in stores.

In fact, consumers are spending more per visit in-store than online and according to Drapers, 85% of UK shoppers prefer shopping in-store.

Why do people still go to stores? They want to interact with the product before buying it. Also, some people use “retail therapy” as a way to relieve stress. According to Forbes, a whopping 74% of people say they have “stress-shopped” in the past.

People still shop in-store, and retail merchandising done well leads customers from your door, to product displays, to the fitting room, and finally to the checkout counter.

This article will help you get a deeper understanding of retail merchandising, the elements of a retail merchandising plan, and how to succeed in merchandise management. 

What is retail merchandising?

Retail merchandising is the way retailers and brands organize merchandise in stores. Store design and fixtures like racks, shelving, and tables are components of retail merchandising.

However, retail merchandising also involves selecting the right products and buying the right amount of SKUs and stock at the right time.

The main objective of retail merchandising is driving in-store sales—careful planning, management, and analysis are important steps in creating a successful business. 

Online (ecommerce) merchandising 

In omnichannel retailing, merchandising helps to connect an online brand experience with a physical retail store. The goal is to create a consistent and seamless experience, no matter which platform a customer uses to shop.

Merchandising vs marketing 

Retail merchandising can also be a form of marketing when it’s used to display promotional, seasonal, or add-on items in your store. Creating a merchandise marketing calendar helps you plan campaigns and what merchandise you’ll highlight on specific days. This strategy is more commonly used online but can also be implemented in-store to create an omnichannel shopping experience. 

The importance of retail merchandising 

When done right, retail merchandising helps guide shoppers around your store—it eliminates confusion and converts shoppers into paying customers. 

It also prevents you from carrying too many SKUs and randomly placing them around your store in the hopes that they will sell.

Shoppers feel overwhelmed if they have too many choices, and retail merchandising helps avoid this by letting customers relax and make purchases quicker. The more time you spend arranging products in your store, the less overwhelmed shoppers will feel. 

Confusing product displays, where products are randomly sitting together, is mind-boggling for shoppers, and can make them leave your store. Too many bad in-store experiences can leave merchandise sitting for a long time.

Old stock is like spoiled milk—if it goes bad, it gets tossed. I’m not saying you’ll throw away dead stock, but getting rid of old inventory can lead to extreme markdowns hurting your retail margins. Selling something for less than you bought it for is essentially like tossing money out the window.

Great in-store merchandising helps shoppers focus their eyes on specific displays throughout the store. Lighting attracts them to fixtures and signage can spark ideas or curiosity. Subsequently, all these elements combined can make people want to buy more.

A solid retail merchandising plan requires an understanding of trends, color theory, and the negative effect of stale inventory. Creativity matched with strategic thinking is key to design an exciting in-store shopping experience. 

What should an in-store merchandising plan include? 

When you’re working on your retail merchandising plan, consider the best layout to guide customers through your store and to the products you want to sell. Depending on your space, you may go with a grid, loop, circular, or free-form layout. 

Here are a few things to consider when creating a merchandising plan:

• Choose the products you want to promote. In most cases, you’ll want to focus on your newest products, bestsellers, and core products that have a higher profit margin. From month to month—or even week to week—change the products you promote based on the merchandise you want customers to notice. 
• Decide on the store layout and plan how traffic will flow. Your store layout impacts the shopping experience. A retail store overflowing with merchandise on crowded racks and disorganized shelves will attract customers who don’t mind hunting for a bargain. On the other hand, a well-organized, minimal store does a better job of highlighting specific products and their value. You may choose something in between to show a bountiful but not overwhelming product assortment. 
• Create a budget for in-store displays. Once you’ve nailed down your store layout, you’ll need product displays, signage, lighting, fixtures, and other props to showcase your products. Set a budget so you have money left to purchase inventory and spend on marketing efforts to get people in your store.
• Consider seasons, holidays, and special occasions. Displaying Christmas sweaters in the middle of summer won’t make any sense to shoppers. Develop your retail merchandising plan in advance so you can take advantage of seasonal, holiday, and other special occasion displays.
• Factor in the time it takes to get merchandise on the floor. The time it takes to merchandise a store depends on circumstances including how many SKUs you have, whether displays have special requirements (like security), how easily you can move fixtures, and the size of your window displays. 

Aside from planning your in-store retail merchandising displays, a merchandise plan is crucial for streamlining retail merchandising, reducing out-of-stock occurrences, minimizing the need to mark down inventory, and increasing margins.

You can also use an open-to-buy plan (OTB) to better manage retail inventory. An OTB plan is a budget for real-time inventory expenses to make sure you have money available to purchase more inventory at any moment. 

Image source: BEIJOS Shop Spotlight - Pigment  

Elements of retail merchandising

Visual merchandising is a main element of retail merchandising, and cross-merchandising in retail helps build customer loyalty and increase sales. Another component of an in-store retail merchandising strategy is product displays. 

Here’s an overview of the elements to consider once you’ve decided on your store layout: 

Interior design

Decor creates an immersive experience and helps shoppers relate to your brand. It also assists in showcasing products. For example, if you sell pajamas, create an area in your store with a sofa, throw blanket, and rug that gives customers the feeling of being cozy at home (in their pajamas). 

Lighting

Lighting helps shoppers focus on specific merchandise and primary product displays. You can put spotlights on new products or items you’re trying to move.

Aside from focused lighting, set the mood with decorative in-store lighting. For example, in the scenario mentioned above, setting a small low-light lamp on a table next to the sofa creates a relaxing atmosphere.

Signage

Signage helps bring customers inside and guides them around the store. Use signs to indicate product categories or pricing, or to highlight a sale.

Directional signs for the fitting room or cashier help make the trying and buying experience easier and faster. Signs are also a great way to explain the benefits of products.

Fixtures

The right combination of fixtures can complement your space and store layout. Depending on your products, decide whether they should hang from racks or get folded or stacked on shelves.

Display delicate or expensive items in glass cases and place items that customers might want to engage with before buying on display tables. 

Image source: United Colors of Benetton

Retail merchandising tips to increase sales 

Forty percent of shoppers change their minds about a purchase because of something they see, learn, or do when interacting with products in-store. This can be attributed to packaging, merchandise placement, or engagement with salespeople. 

Here are retail merchandising strategies to help keep your customers’ eyes on the prize: 

Map out the customer journey 

People shop in person because they want to see and touch the products before they make a purchase. 

Figure out how physically interacting with your products adds value to the in-store shopping experience: how can you delight customers the moment they walk in the door? Then guide them through your store so they can find the things they need and discover new products while they’re at it.

Tell your story 

As online and mobile commerce continues to grow, strong product branding and storytelling is crucial. Even if you don’t sell online, paying attention to omnichannel marketing and how it influences customer expectations is important. Whether it’s online or in-store, shoppers expect a high level of education and satisfaction. This is an opportunity to add an extra element to the customer’s experience at your brick-and-mortar store. 

Use branding and decor throughout your store, including small details on your packaging and displays that add to the bigger story you’re telling.

Group merchandise for displays

Grouping merchandise per display is another way to tell a story. You can group products by: 

• Brand
• Price (under or over a certain amount)
• Purpose (workout gear, self-care, etc.)
• Target customer 
• Theme

Grouping items can spark ideas for how the customer might use a product or how a product might work well with things they already own. 

No matter how you set up your displays, it’s important to get the customer’s attention. The goal is to get people to stop, take a look, and hopefully buy. Even if they don’t purchase during their first visit, customers can be encouraged by attractive displays to spend more time in your store and return.

Use the rule of three 

An abundance of choices can stall shoppers’ decision making and even wear away at their well-being. It also can lead to lost sales. 

Stick to the rule of three while planning your retail merchandising strategy. Decide on three core product categories that you’ll offer on a quarterly basis to generate demand and align with changing consumer trends. Seasonal merchandise that changes on a monthly or quarterly basis should be well -thought- out, so it doesn’t overwhelm customers.

I’m not saying you should only have three products in your store at all times. You may have a main product assortment that is available all year round. 

You can also display products using the rule of three—grouping three products together on one display to draw the eye.

Embrace asymmetry

Vary the size and height of products on your displays to keep the customer’s eye moving around your store. If everything is located at the same level, it may be difficult for shoppers to visually break up the merchandise and differentiate between various product displays.

Make a focal point

Succeed at cross merchandising and retail upselling by creating a focal point for each product display. Place one core item at the focal point with complementary merchandise around it. 

For example, place three pajama sets at the center of a display table and place eye masks and slippers next to the pajamas. As a result, the customer may increase their purchase size by picking up the supporting items. 

Strategically place high-margin and popular products 

Part of merchandise planning is looking at your profit margin for each product you plan to stock. Retailers generally want customers to buy the products with the highest profit margin (these may also be your most popular products).

Make it easy for shoppers to find high-margin and popular products by putting them in the front of your store or in window displays. 

Change displays regularly

Keeping your product displays and assortment up-to-date encourages customers to come back regularly to see what’s new in-store. Keep a calendar so you can stay on track and remind yourself when to switch things up. 

Figure out why customers don’t buy 

Knowing what your customers like and buy is one piece of the puzzle. Understanding what and why they don’t buy is also vital. 

Are you losing sales because the customer connects more with a competitor? Can shoppers get answers about your products from the packaging? Are they leaving your store before they even have a chance to see all the products you offer? 

Try to understand what is stopping customers from buying. Take a look at where you might have holes in your customer journey and purchase funnel. Engage with your customers and ask them questions about the in-store experience and how you can improve it to make the experience better.

Complement retail merchandising with outstanding customer service

The products you sell are two-thirds of the equation. The other portion is customer experience.

Merging the physical and digital shopping experiences is one way to boost customer satisfaction. Do this by offering buy online, pick up in-store (BOPIS)—people can shop online, check out, and then pick up their order in-store. 

Personalizing your sales approach can also lead to a better experience and can result in more sales and brand loyalty. 

Not all customers are the same and treating them that way could lower your chances of converting a person who’s browsing into a paying customer. Some shoppers are interested in chatting and some want to be left alone until they’re ready to ask a question or pay. As you greet customers that walk into your store, pay attention to their behavior and try to mimic it. 

Here are a a few more ways to maximize the in-store customer experience:

• Offer shoppers a glass of water.
• Be there for them when they need another size or color in the fitting room.
• Treat them like a friend to help them relax.

How to succeed in retail merchandise management

The beauty of owning a retail store is that you wear many hats and get to switch between being creative and strategic on any given day. Retail merchandising is not only visual. There is an operational element that involves, planning, budgeting, buying, and inventory management. 

Image source: SlideShare

Here are retail merchandise management tips to keep in mind: 

Retail assortment strategy

Planning for the type and quantity of products you will carry is referred to as retail or product assortment strategy. You can plan for how many variations of a product you’ll carry and how many types of products you’ll stock overall. To do this, you need to analyze consumer trends, budget, and what you’re capable of generally achieving in your store. 

Merchandise planning

Running a retail business is expensive. Retail merchandise planning is crucial for keeping an eye on your operating expenses and margins. Large retailers have employees who focus specifically on merchandise planning. Their responsibilities include customer trend analysis, inventory planning, sales forecasting, visual merchandising, and store layout.

Merchandise budgeting

Buying and selling inventory is challenging. Especially when you’re also working on other facets of operating your retail business. The merchandise budgeting process includes projecting demand and sales, evaluating costs, and estimating markdowns.

Depending on the retailer, merchandise budgets can be rigid or flexible and are determined by the retail category, business history, and sales forecasts.

Inventory planning

It’s important to maintain inventory levels based on customer demand and operational capacity. The end goal is profitability, so you’ll want to make sure you have the right products at the right time and the right quantity. Create an OTB plan to ensure that you have money set aside for unexpected inventory purchases that may come up. 

Should I hire a merchandiser for my store or do it myself?

The answer to this question really depends on your budget. Outsourcing retail merchandising to a merchandising professional or company can alleviate you from having to deal with this fundamental element of a retail business. 

Merchandising services have experience and likely already have a Rolodex of suppliers for product displays and other in-store fixtures. They can also help you execute a strong retail merchandising strategy that results in a high ROI and is worth every penny. 

But if you’re not quite ready to outsource this task, that’s OK. The pros of doing it yourself are saving money and learning the ins and outs of retail merchandising. This way, when you’re ready to hire someone, you’ll already have experience and business history to help guide whomever you hire to handle your merchandising.