Merchandising Theories

Merchandising principles operate under the assumptions that the more effectively you display and present your merchandise, the more likely consumers are to buy it. Merchandising theories target signage, packaging, promotions, advertising, location of displays and the physical characteristics of your presentation. The factors that go into your merchandising decisions should be based on your market analysis.

One merchandising theory holds that when consumers are drawn to a product in a retail environment based on its price, they are more likely to see -- and buy -- nearby items. For example, if you run a sale on a staple such as bread, you could place pastries and cakes nearby that carry a higher margin, reducing your loss on the bread’s price reduction and increasing overall profits. Pricing also is used in advertising when a popular item is used as a “loss leader.” You’re willing to take the hit on losing profit on one item, in the hopes that you can upgrade the customers once they enter the store.

Cross merchandising is similar to pricing placement, but it doesn’t rely on using sales or low prices to increase profits. Instead, the theory is that when you place like items together, customers are more likely to pick up additional, related items to go with their original purchase. According to Reference for Business, for example, you might locate a selection of wine near a cheese display and provide consumers with information about which wine goes best with which cheese. Consumers are intrigued with the information and may increase their total ticket price, putting your merchandising theory into action.

A traditional theory of merchandising is that customers buy what they can see and they tend to follow similar patterns in how they approach a store and its products. If you watch your customers enter your store, for example, they typically will turn in the same direction and follow the same line of sight throughout the establishment. It’s in that line of sight that you want to place your most pleasing, and higher-priced items. Seasonal products typically are placed within the first opening line of sight because they are popular. The same merchandising theory applies to online shoppers who tend to read a page from upper left to lower right. Popular, higher-priced items should be placed within the top left banner of a page to get the most traction.

Modern merchandising theory embraces a more total store concept and relies heavily on company themes and customer experiences as much, if not more, than single displays and attractive windows. Instead, the theory holds that when customers are involved with the theme in the store, whether it offers a child’s wonderland or an antique atmosphere, they will buy more. The attraction to the store and its merchandise is the experience as much as it is carrying out the purchased items. Consumers drawn to an inviting environment are tempted to spend. Instead of relying on a strong window, stores embracing the overall merchandising theme use open entryways to lure traffic into their places of business and captivate customers with displays that enrich the themed concept. A few examples of popular themed stores that paved the way are Disney stores, Hard Rock Cafe shops and Ralph Lauren boutiques.