How to Build a Winning Online Merchandising Strategy
If you want to boost sales and profitability, you’ve come to the right place. The most effective way to do just that is by implementing an advanced eCommerce merchandising strategy.
As eCommerce technologies evolve and competition rises, it’s vital for online store brands to be able to continuously show the right product to the right potential customer at the right time.
This means maximizing onsite store real estate, moving to advanced multi-parameter product sorting on- and off-site, and being able to manage, monitor, and optimize strategies in real-time.
This post will take you through the vital steps online brands should follow to create a converting eCommerce merchandising strategy. Feel free to click and skip ahead to any stage.
- Understand the Core Trends and Technologies Driving Advanced eCommerce Merchandising
- Review Your Core eCommerce Merchandising and Display Elements
- Use Inventory Optimization to Factor In Retail and Marketing KPIs
- Go All-In With Multi-Parameter Product Sorting
- Optimize Your Merchandising in Real-Time Using the Right Data
But first, if you’re new to online merchandising, here’s a short recap:
Step #1: Understand the Core Trends and Technologies Driving Advanced eCommerce Merchandising in 2023
There are three 2023 eCommerce trends that retailers should consider and keep an eye on when building a winning eCommerce merchandising strategy:
1. Fine-Tuned Personalization
Personalization is a driving force behind online shopping, to the point that shoppers and potential customers expect shopping experiences that are unique to them.
With growing expectations, technology and strategies are evolving to incorporate buyers’ unique behaviors and other real-time data to streamline merchandising and the shopping experience.
Here are some eCommerce personalization trends you can expect to grow in 2023:
- Cookieless personalization and data privacy
- Increase in 1:1 personalization
- AI-powered product personalization
- New mCommerce personalization for omni-channel retailers
2. More Innovative Artificial Intelligence (AI) Technologies
Another advancing technology driving eCommerce merchandising is AI. According to Forbes, these will be 2022’s biggest AI trends:
- Autonomous vehicles
- Low-code and no-code AI
- The augmented workforce
- Creative AI
- Cybersecurity AI
- AI and the metaverse
- Bigger and better language modeling
From product recommendations and sorting to augmented reality, the applications for AI in streamlining merchandising strategies will be vital in being able to adapt in real-time.
3. Advanced Inventory Management and Optimization Tools
Finally, more sophisticated inventory management and optimization will also increase in 2023. It’s becoming more and more critical to optimize inventory management and optimization, with the latter playing a significant role in building an advanced eCommerce merchandising strategy that converts.
Because a winning eCommerce merchandising strategy should take into account marketing and retail KPIs, which in essence is what inventory optimization will allow you. But more on that later!
As online retailers grow, tracking inventory and managing logistics without advanced technology will be almost impossible.
Here are some additional warehouse and logistics management trends that are expected this year:
- The introduction of more drones
- Big increases in inventory management, and optimization and warehouse automation solutions
- Growth in sustainable warehousing practices
- Higher demand for last-mile delivery and new technologies to handle the increase
Step #2: Review Your Core eCommerce Merchandising and Display Elements
A good eCommerce merchandising strategy should take the entire shopping journey into consideration. This includes mapping out your best merchandising real-estate and matching product sorting and display to intent.
Here are the most essential merchandising elements (touchpoints) to include in your strategy:
1. Homepage Merchandising
We know that one of the most important elements in your merchandising journey is your store’s homepage.
For example, Very.co.uk store uses geolocation to show campaigns based on the weather near the user.
The key to successful merchandising is matching your homepage experience to specific users and how they came to be on your site, AKA personalization.
But not just any personalization; 1-1 personalization.
Personalization ensures that homepage experiences are tailored to each specific shopper using advanced AI-powered tools to help browsers and shoppers find the products they are looking for. This includes:
- CTA personalization
- Headlines and heroes personalization
- Product and category selections personalization (advanced product sorting)
2. Collections and Category-Based Merchandising
How you rank your products within your collection category pages is one of the most important elements of your overall merchandising strategy. Not only do you want to ensure that the right shopper sees the right product in your displays, but you obviously want to ensure you are moving the right stock.
In short: boosting sales and profits.
This is something that omnichannel retail brand Swarovski (IL) has achieved with customized multi-parameter sorting strategies for their collections while using advanced AI to continuously optimize collections based on real-time data. This strategy increased their brand profits by 8% in just four weeks.
Of course, you also want to ensure your UX is sound and includes:
- Product image selections
- Strategic search filter options
- Product ratings
This is something that Steve Madden understands and achieves well.
3. Product Page Merchandising
Merchandising strategies don’t stop once a potential customer clicks to a retail brand’s product page. Everything about product pages should be optimized to display the product in all its glory. This includes optimized:
- Product specifications and options
- Product images and videos (including 360° views)
- Detailed product descriptions
- Cross and upselling product displays
These should all be tailored to your specific audience, market, and brand. Skullcandy, for example, has optimized their product pages in such a way that each page is a landing page.
4. Onsite Promotion Merchandising
Another vital piece of merchandising real estate is your online promotions. It’s even better if you can personalize them (and the products or collections) to specific users.
Take a look at Old Navy’s onsite promotion strategy, which includes:
- Coupons for specific products and collections
- Strategically placed promotions
Onsite promotions shouldn't stop there. By combining advanced merchandising strategies with promotional landing pages, stores can push products aligned with inventory optimization KPIs and shoppers' needs and intent.
5. Email Marketing and Other Offsite Marketing
An online retailer’s email marketing and offsite promotions/marketing are the last core element of your merchandising strategy.
By using merchandising triggers for email and other offsite marketing, stores can:
- use important real-time product data to react to internal (inventory) and external (market shift) changes
- target customers and potential shoppers who are more likely to be interested in buying them
The best and most streamlined way to do this, especially for more established stores with a vast number of categories, is with merchandising trigger automation.
Automation that combines individual shoppers’ onsite behavioral data with general cohort data to develop tailor-made email marketing landing pages that drive conversion. This is something that our advanced merchandising solution can definitely assist brands with.
Step #3: Use Inventory Optimization to Factor In Retail and Marketing KPIs
The next step in building a winning online merchandising strategy is combining marketing and retail goals. To truly be profitable long-term, it’s not enough to just focus on marketing KPIs such as conversion rates and revenue. This is where inventory optimization comes in.
In short, eCommerce inventory optimization is the balance between a brand’s service-level goals, changing demand and supply market volatility, capital investment, stock margins and levels, and other important retail KPIs.
As we highlighted in our How Inventory Optimization Affects Profitability guide, poor inventory optimization negatively impacts stores in the following ways:
- Forces highly reduced promotions, costing big on profits
- Causes storage and backend flow blockages due to non-moving stock
- Skews focus towards best-selling products without reducing overstock or slow movers
- Skews demand forecasting metrics
- Creates lost profit potential when forced to radically reduce all stock prices
Instead, brands that factor in inventory optimization are able to reduce overall costs and wastage while boosting sales and profits. To duplicate this, you will factor in the following to optimize merchandising strategies:
- Demand forecasting
- Inventory levels and replenishment
- Inventory storage
- Product sorting
Step #4: Go All-In With Multi-Parameter Product Sorting
Once you have planned out where to display products for maximum impact and factored in important retail and marketing goals, you will need to match these to your product sorting strategy.
A multi-parameter product sorting strategy allows retailers to go well beyond product sorting personalization and include a multitude of metrics based on key specific goals. These include a combination of key product sorting parameters such as:
- Personalization based on real-time shopping behavior
- Margins and/or real margins (with discounts)
- Conversion rates
- Days to finish inventory (based on product daily sales rate)
- Inventory value
- Sales by quantity and/or revenue
- Variants stock ratio
- Number of days in stock
- Product reviews
- Product page views
- Best sellers
Here’s the thing: one of the most significant things contributing to profit loss is the eCommerce Pareto principle.
However, by finding a balance between reducing non-moving inventory, boosting revenue, and maximizing margins within your product sorting strategy, brands can overcome this and boost profits by as much as 30%.
Step #5: Optimize Your Merchandising in Real-Time Using the Right Data
Being able to both access and optimize merchandising, sorting, and inventory data continuously is what will really set your brand’s online merchandising strategy apart from other stores in your niche. This includes data that tracks performance for:
- Site and brand
- Categories or collections
- Retail KPIs
It is vital to be able to continuously optimize this performance by staying on top of important product insights such as dynamic bestsellers lists, low stock alerts, new recommended product promotion suggestions, and more.
This means monitoring inventory, sales, and engagement metrics for each product and collection in your merchandising strategy, and then using those metrics to optimize your sorting and merchandising strategy accordingly.
Final Thoughts: Building a Converting Online Merchandising Strategy Comes Down to Testing, Tweaking, and Optimizing
There you have it: five key steps to build an optimized, winning online merchandising strategy that doesn’t just boost sales but also drives profitability.
To recap, a well-build merchandising strategy will:
- Use new eCommerce technology and trends to ensure merchandising strategies outperform competitors
- Make the most of critical online merchandising display elements
- Factor in inventory optimization KPIs and strategies
- Take multiple parameters into consideration to optimize product sorting
- Be continuously optimized using real-time using key merchandising triggers and date
Like with any business change, eCommerce managers and teams will want to test, tweak, and optimize every new merchandising strategy to ensure they have a high-performing strategy set up for long-term success.
It would be even better if retailers can automatically test and select the most profitable product collections to boost profit potential.
Still got merchandising questions? Get in touch!