Maximising revenue is at the heart of a merchandiser’s role.  To achieve this, there’s a need to have a deep understanding of your product group so that each item can be promoted and presented to drive revenue in the most effective way.

In traditional bricks and mortar merchandising, stock is able to be displayed in large volumes, grouped into categories, built into outfits or attractive displays enabling cross-selling and upselling to be achieved easily for the retailer. E-commerce merchandising lacks the large amounts of real-estate in the physical retail space that have been calculated into effective merchandising plans by careful money mapping and zone analysis. Given that the space to display each item to your customer is strictly limited, the importance of prioritising your most commercially appropriate product in the inventory becomes paramount.

Product inventory is dynamic with forces constantly changing – meaning this makes managing the pursuit of revenue somewhat challenging.

The best merchandisers have a full appreciation of their inventory; they know how to shift products and balance sales to maximise margins. In our experience this comes from knowing how to prioritise product sets and to do this effectively, the following is paramount.  

Know your products

Product prioritisation depends on deep knowledge of the inventory.

Having a good understanding of the products allows merchandisers to manage revenue as effectively as possible.  To be fair, most merchandisers are buried in a sea of spreadsheets, so even the basic levels of knowledge can be a challenge.  When it comes to products though, it’s crucial to know:  

  • Best sellers: these are your top products.  They’re the ones that fly off the shelves and can be defined as volume sales or by margin – depending on whether you take a customer focused approach or base your analysis on what’s best for your business.
  • Unsung heroes: these extend your best sellers taking into consideration your top 50.  
  • Slow sellers: these products are slow to shift, but they round out your inventory.  They’re included because it gives you a rounded product offering.   
  • New products: products change all the time.  New product developments, ranges and seasonality all affect the inventory.  New products drive sales, especially in fashion, so incorporating them into campaigns is essential.
  • Branded products: whilst margins may be lower, branded products attract customers and bolster your inventory.  

Know how to combine products effectively

If the product inventory is the base of your knowledge, then the next major focus has to be about combining products for effective sales.  This takes careful consideration and experience to know the right combinations.  You’ve got to know the products, how to formulate rules and how to drive the maximum revenue – no mean feat when there are layers of complexity.

It’s possible to automate certain types of combinations.  For example, simple recommendations or prioritisation can lead to better performance, for example:

  • Hot = best sellers
  • Trending = latest products that are selling right now
  • Popular = everyday essentials
  • Accessorise with = gentle cross-sell with associated products
  • High buy = large volume stock quantities bought in mass; your best sellers
  • Low buy = small stock quantities; possibly weaker margin smaller stock purchases; included to provide a story or theme and enhance branding

Most simple recommendations systems are able to give this level prioritisation, but what happens when you layer stock levels, supplier promotions and other methodologies for relatedness?

Just because you can promote a product, should you?  Do you really know what the impact will be on the bottom line?

Considerations with product promotions

Dynamically managing price reductions, promotions and marketing activities can be a complex matter.  Product feeds, inventory and stock levels, not to mention customer data, all impact the rules for effectively displaying your products.

But just because you can promote a product, should you?  

Take heed of these considerations:

  • Boosting based on stock levels / managing stock levels: ensure that your systems are integrated so that products can be downgraded from being displayed on the store or within recommendations, even better, removed in real-time
  • Combining loss leaders and favourites to balance margins: often it’s loss leaders that drive sales, so there’s a need to balance your margins by mixing these into the recommendations, particularly alongside relevant cross-sell opportunities
  • Showing relatedness by sales: it’s not just product attributes that form relatedness, sales can show relatedness too, so consider this in the mix
  • Overriding continual discounting so rules are balanced: continual discounting impacts the bottom line, so why do it if you don’t need to
  • Introducing new products: don’t be afraid to incorporate new products within the inventory, even if they have no known data in terms of sales.  This is especially so with seasonal changes.

It’s important to effectively manage margins and trading objectives. Therefore, lists for recommendations aren’t just simply based on product relatedness, they should be considered in light of a multitude of factors driven by the product inventory, stock levels, sales and margins.  After all, you need to shift the stock, and only you know the best way to do that.