MERCHANDISING EBOOK:

PERFORMANCE ENHANCING STRATEGIES

 INTRODUCTION

WHAT IS MERCHANDISING?
- The integrated relationship between merchandising and sales

MERCHANDISING STRATEGIES

1. Generate Increased Foot Traffic

- How to entice shoppers into your stores

2. Increase Transaction Sizes

CONTENTS - How to increase basket sizes

3. Pricing Optimisation
- How to use pricing to increase sales

4. Create Urgency In-store

- How to create urgency in-store

5. Product Placement and Segmentation

- How to use product placement to increase sales

6. Grouping Complementary Products

- How category-based space planning leads to improved sales

Conclusion
 WELCOME AND THANK YOU FOR DOWNLOADING OUR MERCHANDISING
EBOOK.

Once you have read this Ebook, you’ll have a better understanding of the strategies you can
implement to increase your sales. More importantly, the strategies that can help you to improve
the shopping experiences of your customers so that they’ll return.

INTRODUCTION We begin this Ebook by looking at the definition of merchandising. We also delve into the link
between merchandising and sales in this section. Since your customers shop with their eyes first,
appearance means everything. That said, the layout of your store is just as important.

From there, we unpack a half-dozen merchandising strategies that you can begin implementing
today to increase your sales and profitability. In that, we first name them before taking a deep
dive into how each should be approached. That includes unpacking various ways in which you can
meet these goals.

As a side note, all of the follow strategies encompass a variety of components including pricing,
promotion, product placement, ad support, consumer education and more. Together, the various
elements help achieve your end goal of increase sales and profit.
 As it stands, merchandising is a broad topic. You’d only need to look at the definition to
confirm that. If you were to try and pin it down to one definition, it would be this:
merchandising relates to any practice which contributes towards the sale of products
to a retail customer. The fact that we’d said ‘any practice’ indicates its broadness.

WHAT IS That said, while merchandising isn’t a new concept - anyone who works in the retail
industry has had at least some exposure - it's not uncommon to hear that retailers have
MERCHANDISING? overlooked it.

That simple truth is unfortunate, even more so when you consider that the average
merchandiser doesn't get the credit they deserve. Or, when you find the research that
indicates that the appearance and layout of your store are crucial to your success.
After all, if either of these two factors are not approached with care and attention, your
products won't sell.

That being said, we can argue that merchandising and sales are intrinsically linked.
 In today's environment where competition is fierce, and the market is
saturated, retailers rely on merchandising strategies. Of course, when it
comes to choosing an approach, you do need to consider the overall
objectives of the brand as well as the goals of the category itself. The type
of retailer that you are also plays a role.
MERCHANDISING & SALES:
A few common goals include:
An integrated relationship
● Increasing your foot traffic;
● Inviting new customers in to try your brand/product;
● Developing loyal, committed customers; and
● Improving overall sales.

For the sake of this Ebook, and because merchandising is such a broad
topic, we are only going to focus on a few strategies you can employ to
help you increase your sales.
MERCHANDISING STRATEGIES

1. GENERATE INCREASED FOOT TRAFFIC

2. INCREASE TRANSACTION SIZES

3. PRICING OPTIMISATION

4. CREATE URGENCY IN-STORE

5. PRODUCT PROMOTION AND SEGMENTATION

6. GROUPING COMPLEMENTARY PRODUCTS

GENERATE INCREASED FOOT TRAFFIC

A big part of merchandising revolves around creating an engaging in-store experience so that your customers will want to return. That's what
this strategy, also referred to as Traffic Building, allows you to do. It's used to draw your customers' attention towards your store, either by
offering them well-priced items or a unique experience.

As a result, you can turn first-time shoppers into repeat customers.

How to entice shoppers into your stores

If you want to entice shoppers into your stores, this question should always be in the back of your mind: what can you offer your customers that
they can’t get elsewhere. Considering the current saturation of the retail industry, it’s a question that needs answering now more than ever.

According to Shopify, cumulative data from Statista anticipates a 246.15% increase in worldwide e-commerce sales, reaching $4.5-trillion in
2021. That figure alone confirms the fight brick-and-mortar stores are in. Of course, that doesn’t mean that your customers won’t visit your
stores. You just need to find ways in which to entice them in. Fortunately, there are many ways to do just that.
GENERATE INCREASED FOOT TRAFFIC
1. Offer exclusive items in-store
The plethora of mobile shopping apps and courier services means that it’s
now easier than ever to do all your shopping online.
So how do you combat that?
Simple: offer your customers a product or products they can only get
in-store. A bonus of exclusivity is that it’s a great way in which to build
customer loyalty. As you increase the number of exclusive items, your
shoppers will come to rely on you because they can’t get these items
anywhere else.
Just to note, always focus on quality when offering exclusive items. Ask
yourself: Is it worth the customers’ time to come into your store for this
product. Answer honestly.
2. Run promotions
Any news of in-store sales or promotions spreads quickly. Be it, word of mouth or
even online chatter. There is nothing quite like the promise of a bargain or sale to
entice the public to visit your stores.
That said, when running a promotion, the price you do eventually choose must be
significantly lower than your regular price for the product. Determining the right
pricing strategy is critical to the success of any promotion you run.
As a side note, the best products for this strategy would be those that are
frequently purchased and have high sales in the category. That’s not to say that
you shouldn’t run a promotion for a low selling product. In the case of such
products, you could look at making them exclusive to your store.
GENERATE INCREASED FOOT TRAFFIC
3. Strengthen your customer service
While promotions help to entice your shoppers into your store, getting them in is only
one part of your battle. You should also ask yourself what you need to do to ensure they
spend now and return. In short, how are you going to please them so that they’ll become
repeat customers?
There are many ways to do that, one of which is to offer excellent customer service.
Of course, excellent customer service is subjective - what’s excellent for one customer
is deemed inadequate for another. Fortunately, it’s easier enough to determine what
works and what doesn’t. All you need to do is look to your customers and find out what
they expect. Ask them. By doing that, you’re showing that you’re putting them first.
As soon as you do place them first, you’ll notice the areas where you can improve.
Perhaps your sales staff need to brush up on their floor skills. Or, there is a policy that
isn’t customer friendly that needs to be rewritten.
When it comes to customer service, it’s the little details that make a difference. By
making improvements, you’ll please your customers, giving them a reason to return, if
only because they know they are more than just a number.
4. Embrace technology
It goes without saying that technology has transformed our lives. It can
transform your retail stores too if you let it. In fact, many retailers have used
different technology to reinvigorate interest.
Let’s take augmented reality as an example. L’Oreal offers a AR-focused app,
which allows for convenience and eliminates the mess of testing physical
products in their stores.
Artificial intelligence is another technology which is expected to gain traction.
As James Paine writes for Inc.com, for retailers it means you’ll be able to
uncover different ways to optimise your physical locations to increase revenue.
That said, whichever technology you choose, you need to ensure that it makes
sense to your customers and caters to their needs and wants.
INCREASE TRANSACTION SIZES

Enticing your customers into your stores using specific strategies is all good and well and it leads to more sales. However, you can’t stop there.
Now that you have customers coming in, you have to find out how they are spending in-store.

As you shift your focus, you should also ask yourself how you can convince them to buy more. In short, what can you do to increase basket sizes?

How to increase transaction sizes

1. Reward customer loyalty

Let’s make one thing clear: if you want customer loyalty, you have to work for it. Besides providing them with the right type of customer service,
you can also reward them for buying at your stores. An easy way to do that is to offer something back, like a rewards programme. Loyalty cards
work just as well.

Lately, you’d be hard-pressed to find a store that doesn’t have some form of loyalty card programme. That in itself speaks to the truth that it
works. You only need to do a little research online to find the proof. A global retail survey for 2016 found that of the total amount of people it
surveyed, 72% agreed that if all other factors were equal, they would buy from a retailer with a loyalty programme over another that didn’t have
one.

The bonus of implementing a loyalty card programme is the customer data that you can collect from it to improve your retail business.
INCREASE TRANSACTION SIZES
2. Upsell by cross promoting
Another way to increase the transaction sizes of your customers is to simply
persuade them to buy more. In short, upsell them to add products to their basket
as they walk through your stores.
One way of doing that is to make use of cross promotions. The reason it works so
well is that they give your customer’s the impression that you’re saving them time
when making a purchase. From one angle, you are doing just that.
For example, by promoting ice-cream cones, sprinkles and sauces besides your
ice-cream category, your customers will look to add them to their basket. That’s
four additional items in your basket from just one category. Do that often enough
in your store and you’ll have customers walking around with much larger baskets.
That said, when cross promoting products, they do need to make sense to your
shoppers. For example, merchandising your basting sauces besides your coffin
fridges is worth doing. However, it’s not worth merchandising braai equipment
next to your Cereal category.
3. Include salespeople at the end of your aisles
If you want to increase the basket sizes of your customers, and you have
already rewarded customer loyalty and tried cross promotions, there is a
third way: include salespeople at the end of specific aisles.
The reason it works so well is that it exposes your customers to products
and add-ons that they might not have considered before. Also, since
customers are generally sceptical when it comes to buying products they
know very little about, a salesperson can go a long way to providing them
with the necessary information.
More than that, you’ve given them an opportunity to try something new
without have to immediately buy. That creates a relaxed atmosphere and
leaves your customer feeling in control and educated. It can also lead to
them returning and purchasing that very product. Having a salesperson
allows for the touch and feel factor to be incorporated in the shoppers
journey.
PRICING OPTIMISATION

In simple terms, pricing optimisation is about choosing a price at which a product can be sold without negatively affecting customer demand while
simultaneously covering the costs of your business and making you a profit.

In saying that, it’s easy to argue that deciding on your price is tricky. In fact, we’d argue that it’s one of if not the toughest exercises you’d undergo
as a retailer. After all, your pricing creates a perception around your product as well as your stores and retail brand.

Then there is the point that price doesn’t remain static. While you introduce a product at an opening price, it changes depending on customer
demand and your competition.
PRICING OPTIMISATION

How to use pricing to increase sales

1. Consider the psychology behind finding the right price point

Professor William Poundstone, author of Priceless: The Myth of Fair Value (and How to Take Advantage of It) discusses a study on the purchasing
patterns of consumers over a variety of beer.

Here is his conclusion:

● Where there was an economy (standard) option and a premium option, shoppers were more inclined to purchase the premium option
● When adding a cheaper third option to the merchandise mix, the sales of the premium option dropped drastically, increasing the sales of
the economy option
● When adding a super-premium third option to the merchandise mix (economy being the cheapest) purchases of the premium option
suddenly escalated and sold more than in the first test.

The above is evident that it’s critical to trial different pricing brackets. While some customers prefer the premium option, you might not know
that you’re undercharging. Instead of playing it safe, use the opportunity to push your products.

Just to note, you do need to know your limits. You can find that limit at the point where you’re looking after your business’ bottom line while also
considering your customers’ needs.
PRICING OPTIMISATION

2. Choosing your pricing strategy

There are six main pricing strategies and each has a different goal. Of course, the pricing strategy you choose depends largely on your retail strategy as well as
your overall image. Very briefly, the pricing strategies are:

● Everyday Low Pricing: With this strategy, you can offer high value and reasonable prices. It can also vary between regular non-sale and low sale prices.
● High/Low Pricing: With this strategy, you’d mark up new season items. The advantage of it is that it creates excitement and increases profit.
● Price Bundling: With this strategy, you can create an impression of extra value. This is done by bundling items together to offer more than one item for
a set price.
● Odd Pricing: By listing both a sale price and the original price, you show your customers how much they are saving by making the purchase.
● Price Lining: With this strategy, you determine a set price for a specific category, which simplifies the pricing. It also helps your customer to make a
buying decision.
● Leader Pricing: Also known as a loss leader strategy, it lures your customers in with a product at a lower price and then benefiting from additional
purchases. It’s aimed at increasing traffic flow.

As a side note, there is no specific formula when it comes to calculating the retail price. The price you decide on depends on a full analysis of customer
behaviour, past sales data, projected expenses and both economic and market conditions.
CREATE URGENCY IN-STORE

Creating urgency and excitement is a crucial part of selling products. That’s especially true if you consider those products which only have a strict life cycle
(perishables) as well as those that are only available during certain periods through the year (seasonal).

And then there are the new products that you’ve just started stocking or others that you want to push (house brands).

How to create urgency in-store

To create urgency, it’s worth implementing an excitement generating strategy. The aim is as the strategy describes; to meet your customers’ needs by offering
fashionable and innovative products or promotions.

Since it’s your goal to maximise the selling potential of your retail space, you should look for every opportunity to do that.

One opportunity is to use your gondola ends. Their power is often overestimated but they have the ability to turn stock twice as fast as any other area in your
stores.
CREATE URGENCY IN-STORE

1. Cross merchandise your products

Cross merchandising is an effective way to create brand or product awareness. More than that, it also creates a sense of urgency or a limited-time sensitive
opportunity to your customers.

Besides that, it can create more enjoyable shopping experiences for your customers. When implemented correctly, it leads to increased profit margins and a
stronger customer loyalty.

Of course, if you want this to work properly, you do need to cross merchandise similar products or at least complementary ones. You can’t pick any random
products and merchandise them together.

The only time you should do that is if the product is part of a promotion you’re running and there is reasoning behind why you’ve put it besides a category or
product that, at face value, doesn’t make sense.
CREATE URGENCY IN-STORE

2. Use the gondola ends to stock impulse products 3. Tell a story about what is in the closest aisle

When customers shop for “purpose products”, and especially those placed at We’ve already mentioned in this Ebook that your customers shop with their eyes
the back of your stores, they have to walk past your aisle ends. As they do, they first. So why not take advantage of that by creating a display at the end of an aisle
may make an impulse buy. that tells a story?

That speaks to the point that you should use your gondola ends to stock What’s more, you can include signage along with it to indicate that it’s a one-off
products. But why should you use this space to place products that fall into the offer if they put it in their basket. In that way, you can use your gondola ends to
impulse buy category? Especially if your customers aren’t guaranteed to pick promote any specific offers. Similar to your salespeople at the end of your aisle, it
up the products? pushes product awareness, but subtly so.

Paco Underhill, author of Why We Buy: The Science of Shopping has the perfect That said, this isn’t only about creating urgency as it is also about presenting new
answer. He writes, “Two-thirds of the entire economy is impulse buying.” products to customers who wouldn’t have walked down that aisle. Both result in
increased sales.
There is also the point that impulse buys are never planned - hence the name.
Your customers see them and make an instant decision to pick them up. That’s
why the most important factor to consider if you want to sell them is to place
them in the right location.
PRODUCT PLACEMENT &
SEGMENTATION

Your shelf space is your biggest asset. That’s why you need to guard against misusing or letting others take control of it.

At the same time, you need to consider your customers and how they shop. As much as you might have customers who all fit into one or more shopper
personas, their needs are individually different. That’s why satisfying them may require different approaches.

It is possible to group your customers according to their needs so that you can recognise the differences between them. Once you’ve done this, you’ll know
who spends more and who spends as little as possible.

As a side note, you can also use this information to inform other aspects of your retail business. That includes offering better customer service, and finding
new opportunities to increase transaction sizes.as well as training your floor sales staff.
PRODUCT PLACEMENT &
SEGMENTATION
How to use product placement and segmentation to
increase sales
1. Take a customer’s view when shelf planning
The first step in the category management process is to define your category.
To do that, you need to place yourself in the shoes of your customer to see how
they perceive a particular category. Alternatively, you can look at your category
and attempt to figure out the customer need it would satisfy.
Either way, you need to know how your customer’s shop your stores so that
you can implement tactics to increase your sales.
One method is to merchandise your items into quality segments. For example,
it’s best practice to merchandise from premium to economy and left to right on
your gondola. Ideally, your House Brand should be between the brand leader
and secondary brand.
2. Take advantage of eye-level
The location of a product in your store makes a huge difference to its overall
sales. That’s particularly true if it’s a high-selling product. After all, if your
customers can’t find your most popular products, you can’t expect to make
money. Or, you will turnover a product, but not as much as you had initially
aimed to.
It’s here where the proper use of eye-level product positioning is so important.
Since eye-level is buy level - it generates the most sales in comparison to the
top or bottom of your shelf - it’s crucial you take proper care of it. More
importantly, that you place your best-selling products there.
There are a few smart ways that you can use your eye-level shelf space to good
effect. For example, you can use it to push additional sales of your house
brands, drive profitability by merchandising products with higher profit
margins, and showcase new product introductions.
GROUPING COMPLEMENTARY
PRODUCTS

By strategically merchandising complementary products or similar brands in close proximity, your customers are more inclined to buy products
connected to the one that they are shopping for.

How category-based space planning leads to improved sales

1. Cross merchandise products

Have you ever walked into a specific aisle looking for one product and then find that you have a desire to add a complementary product to your
basket? That’s thanks, in part, to your use of cross merchandising as a tactic.

For example, let’s say you walk down the meat aisle. Within the aisle, you might find a self-standing wine rack with wine that you could pair with
your meat. Or, if you want to buy a cool drink, you might find a suction cup placed on the fridge door with chocolates in it.

By grouping products that complement each other, you’re encouraging impulse buying decisions. More than that, you’re making the shopping
experience easier while increasing their basket size
GROUPING COMPLEMENTARY
PRODUCTS

2. Cross promotions and retail displays

As much as you need to consider which products to put in your store, you also need to pay careful attention to how you present them.

That’s where your retail displays can have such a massive impact. They have a specific purpose. For example, your windows displays are there to
draw your customers into your stores. As we’ve noted before in this Ebook, your gondola ends are used to draw your customers down those aisles
they might not have considered.

Also, both of these displays can be used to cross promote or clear products. In your window displays, if you’re a clothing retailer, you could use
mannequins to display an outfit. Likewise, gondola ends can be used to promote items on sale for a limited time only or group products
complementary to those in the aisle.
 DotActiv is a specialist category management firm. We provide
all-in-one integrated category software, which enables the
automation of data-driven product layouts, localised assortments
CONCLUSION and advanced retail analytics. We work with small, medium, and
large retailers, and suppliers.

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