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In this Hub I will be presenting my point of view of the basic and more general tools that the person responsible for implementing the Merchandising criteria of a retail store, outlet, supermarket or any similar self-service selling space should take into consideration in order to have a more profitable business.
Before going any further I want to make clear the idea or concept that I am calling a Merchandising Tool, it is any resource or strategy been put into action to make any selling space be more profitable through selling what ever it is supposed to sell.
In the way to implement this Merchandising Tools any person responsible to make the selling space profitable must know the more the better about the next topics:
- The industry in which the business is participating
- Your company overall business strategy
- SWOT (strengths, weaknesses, opportunities, threads)
- Branding standards and
- Branding objectives
- The behavior of the market
- The competition
- The customers and clients
- Why do they buy?
- When do they buy?
- How do they buy?
- How to make them buy more?
Now the things this person responsible of implementing the Merchandising Tools should know about are (not necessarily but would be better if could know of):
- Sales budget and/or sales objectives
- Expenses budget
With that been said, lets get into the Merchandising Tools.
I. The Merchandise Mix. This tool is the number one because you could have a great selling space but, if you don’t have the right merchandise, won’t be able to sell. To be able to have the right merchandise mix (what, when, how much) you need to know all that was explained above and specially you need to know your customers and/or clients. You have to study your clients and follow up the statistics .
You need to know how long and how deep the products categories should go in your store and how much you should keep in stock of each skus’ (stock keeping units).
Keeping track of this factor is very important because if you have a lot of what you sell less and less of what you sell more (to put it in black and white), you will end up having a problems with your clients or losing them and also you could end up compromising the overall profitability. And how is that so? Think of this:
- Product A sales 6 units per day
- Product B sales 10 units per day
- Product A gives you 35% profit margin
- Product B gives you 20% profit margin
- They are both substitutes, the same product with different brands.
Which product should you sell more?…think…think…Product A is the winner!
So you need to drive yourself very carefully not to loose those customers buying product B by having what they are looking for but maybe you could give product A more exposure and promotion in order to sell more of it and less of the other. That means that you are going to need more of product A to keep your profitability to the optimum level.
Another very important factor in the merchandise mix is the pricing. The pricing is a part of the overall image of the business and will be sometimes a reflect of the costs plus the return of investments the owners will be expecting at the end of the year.
II. The Store Setting. This refers to the position that the different shelves, displays and other components will have in the store floor space. The setting is very important because it is going to drive your customers through the store and should do it in a very logical flowing manner. Customers should feel comfortable, that they are not losing time going back and forth looking for what they need. Also this is a very powerful tool when used to make impulsive sales by placing displays and out of shelf products exhibitions. The store setting is all about getting the must profits out of every inch of the store. This tool acts like the store seller presenting the products, making recommendations and communicating to the customer. Also makes its contribution to the image that the clients are perceiving from the store. Have you ever heard the phrase “I won’t go to that store any more, I feel I can’t find any thing!” that is because of a bad store setting.
When planning the store setting you should respond to these questions:
- Where should the entrance and exit be? To facilitate both actions.
- What and how many sections will the store have? Depending on the type of store and business objectives.
- How and in which order should this sections go? To facilitate the traveling through the store.
- What size should this sections have? Depending on customers and market targeting.
- How many check out lanes should the store have? Depending on the size of the selling space and the amount of customers the store can handle.
- How should the furniture be placed?
- How should the lighting be?
- Which are the hot and the cold spots or zones? To bring balance to them.
- How are you improving visibility?
- What should be the sound system be and what music and sound should it play?
- What temperature should the store have inside?
- How and where should the signage be?
- How wide should the corridors be?
- And so on.
This store setting should always be a case study in order to respond to the customers needs and to continuously improve the return of investment.
III. Shelving. When shelving, you will use the must of the concepts of the store setting but applied to a smaller section of the store, the gondolas. When done correctly, gondolas will:
- Attract the customer’s attention
- Sell products
- Facilitate the selection of products
- Provoke impulse sells
The gondolas are where the final marketing battle takes place. This is where the customers will do the selection of the brand they prefer. You don’t need to be a scientist to see that the more space a specific brand gets of the shelf the more opportunities to make sales it has.
Usually there are three factors taken in consideration to assign the amount of space or the amount of facings each product (sku) should get on the shelves. Some times these factors are taken separately and other times in combination. These are:
- Profits margin
- Amount of sales/product rotation
- Market share
Now, often times there are other factors taken in consideration by the store owners:
- Private labeling
- Trade/commercial agreements
There are two general ways to establish product shelving: horizontally or vertically.
The more popular and the one that I personally consider more effective is the vertical display of products. I believe so because you give your product participation on all the levels of the gondola and so, helping improve it’s sales.
IV. Store Animation. This refers to the different actions
that the store makes to have a more appealing purchasing experience for
the customers. Must of the times these efforts will be done with the
participation of the manufacturers of the products involved in these
actions. Usually the initiative will be taken by the store who will
then look for the sponsorship of the manufacturers. This actions will
be regarding the store’s anniversary, special promotions, special times
of the year, holidays and other occasions. Some other times the
initiative will be taken by the manufacturer who will be pursuing some
type of differentiation from their competition. There are several ways
to do this animation, among them:
- Outside and inside decorations
- Exhibitions out of gondola
- Special displays
- Promotional offers, like 2x1, 3x1, 1+free…
- Sound special announcements
- Point of purchase materials, POP
is no limit for this store animations. Every day there are new things.
At the end, this will only depend on the imagination of the people
Well that is it for now. Have great business. Bye.
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