The Definitive Guide to merchandising (Ref: BM-132)

Tags: Merchandising, Guide to merchandising, merchandising guide, benefits of merchandising, effective merchandising methods


A key consideration every retail distributor needs to know about is merchandising. (Positioning and visibility of products within stores). Successful merchandizing involves positioning products in such a way that they will catch the attention of their target customer base and entice them to buy.

This is particularly important when it comes to stores and outlets that sell products with a limited shelf life. If certain products aren’t sold within their sell by dates, they will have to be thrown away which costs money. Food and various cosmetics products would be prime examples of this.

The most effective merchandisers will position their products in a way that encourages their target customers to buy without them noticing that the products have been specifically positioned or promoted. As a general rule, the most expensive products will go on the highest shelves, and products that people will always seek out and buy regardless of price or promotion will go on the lower shelves. The least popular or obscure products will generally go on the bottom shelf. Shelves at eye level will usually contain products that are competitive or are enticing to customers and are likely to be purchased as an impulse buy.  Competitive items should be stocked vertically, and related items across from each other.

Many stores will place their promotional products in specific areas of the store or promotional baskets, where customers are used to seeing promotional offers and products. Customers will generally gravitate towards there to seek them out.

Products should always be placed and positioned in a way which is eye-catching for the customer. This can be done by combining products with similar or contrasting colors, using glass shelves and staggered shelves, the use of props, and trying to garner an emotional response enticing customers to purchase.

A clever strategy is to place essential items in the furthest corner of the store. This way, customers have to go past many other products on their way to what they have come to buy, meaning they are likely to buy additional products along the way.  

The main purpose of product positioning is to influence and position the mind of the customer. For many markets, product positioning will be a two-horse race; that of the market leader/s and their main competitors. A company should always know who their target audience is for all of their products. Shelf space should never be taken for granted. As much as 80% of all purchase decisions are made at the point of sale, which shows how important the position and placement of a product on a shelf actually is.

There are some key points that retailers and vendors need to know in terms of the interaction between the retailer, the brand and the consumer;

  • How much is the store’s shelf space worth?
  • Which products and brands would make the most profitable use of the shelf space?
  • Which products and assortments drive the greatest growth at the shelf?
  • How do you make sure the products are what the customers want?

Stocking the right product in the right place is essential for ensuring customer loyalty towards the store and the brand. The store should have a strong reputation for carrying a strong assortment of goods that are always available.

Many stores have slotting fees, slotting allowances, pay 2 stay, or pay 4 space. These are fees charged for product placement on retail shelves. Fees vary greatly depending on the product, vendor, and market conditions. No one knows exactly how much retailers collect in slotting allowances, but some estimates range between 6-18 billion dollars a year. Some retail chains have a flat fee for product introductions, whereas other retailers may have a fee schedule associated with shelf location, location in relation to eye level, and the location of the store the product is being promoted in.

 The fact that about 90% of new products fail or get withdrawn every year is a striking statistic.

The competition between vendors for promotional shelf space has 2 main effects:

  • Increased shelf space relative to the space they would have without payment.
  •  Change in the distribution of products on the shelves themselves.

Some retailers may grant vendors with exclusive or partly exclusive contracts for committing 85% of a select space for a specific brand in exchange for increased slotting fees.

One of the main challenges faced by retailers is how to properly allocate shelf space to the multitude of products they sell. A large retailer may carry more than 45,000 different items or stocking keeping units on an everyday basis. The main thing to understand is the fact that retail shelf space is extremely important and valuable real estate.

Display Planograms are also a vital aspect of merchandising. (Display Planograms are basically patterns designed to help customers find products more easily by placing the most searched products on the most visible locations on shelves).

 Reasons why some product manufacturers are following display planograms are as follows:

  •  It’s easier for consumers to locate products.
  • Display planograms minimize or eliminate conflicts between brands of similar products.
  • Stores can easily identify which products are fast-moving.
  • It’s easy to locate expiring products.
  • Makes it easier to return products to their allotted locations in case they get misplaced.

It is very frustrating when you go to the grocery store to find that your favorite product is sold out or out of stock. This has a serious effect on your customer experience and your perception of the retailer and the brand, and everyone has had this inconvenient occurrence happen to them at one time or another.  When a customer visits a retailer and the items they are looking for are not there due to them not having made it to the shelf or are out of stock, this damages the perception and reputation of both the brand and the retailer.

If you go to the store and the product or products are not there to buy for two weeks in a row what do you do? Most likely you will probably switch to a competitor store where the products you want are available. By doing this, you may also find that the other store has much cheaper products in general than the store you usually shop at. This makes that store your new store of choice to shop at.

Alternatively if you are a very loyal customer to that particular store, you may decide to switch to a cheaper or more expensive alternative brand. 

In each scenario, if the brand had been in stock and on the shelves, the customer would not have been inconvenienced and that customer would have been retained. This goes to show why the stakes are high in retail merchandising. 

As well as the product being offered, reliability and accessibility are also huge factors when it comes to customer retention. Products that are not correctly merchandise will result in lost sales, and in a worst case scenario can result in a shift of customer loyalty. Retail is an extremely competitive industry and if you are not storing the products your customers want, you can be sure that another retail (competition) in close proximity will be.

Retail merchandising requires constant attention to ensure that at any given time your product is in stock, on the shelf and priced, ensuring the availability and accessibility your average customer expects and needs.  

With GIS Mapping Software you have the power to visualize all the essential merchandizing and retail information listed above at the click of a button. You can do this with Business Mapper through selecting and plotting and seeing various layers, buffers, points of interest, survey information, retail merchandizing images and information, demographics, visual themes, saturation, customer and radius based information, as well as various other analytics based information. 

Note: If this article leads to you making an inquiry to us, please use reference RE: BM-132 when you email us with your inquiry.