Profit Driving Merchandising Tips, Part 1

As US annual eCommerce sales pass $500 billion dollars for the first time and become increasingly important to the overall retail industry, building a strong, effective web presence using online merchandising best practices becomes critical to future success. As the eCommerce sphere has matured and become more competitive, online merchandising has increased in prevalence and sophistication. However, many companies are still struggling to manage their inventory, monitor analytics, and capture the greatest number of customers due to the limitations of their tools. With more effective systems that allow them to more precisely use their data, companies can improve their productivity, increase sales, and reduce costs.

Understanding effective merchandising

In order to improve year over year, retailers, merchandisers, and eCommerce VPs need to understand how to effectively use online merchandising to make more sales at higher margins, acquire new customers, decrease attrition, and improve customer satisfaction. Building an eCommerce website isn’t simply about listing products, it’s about creating a friendly, intuitive experience for the customer in which they can easily locate products they want, that they are likely to buy, and that are in stock. This means that retailers must be able to consistently analyze customer buying habits, rearrange their online inventory for maximum exposure of in-stock, popular, and high-margin items, and easily make adjustments to their site layout on a regular basis.

This blog post series will help companies understand how to more effectively use online merchandising to increase market share and drive profits in online stores.

Critical Components of Effective Merchandising

1. Inventory Management

“Products that sit ‘above the fold’ on your website, should be in stock.”

Many businesses don’t place enough value on the relationship between product organization and their current inventory. This creates a significant problem when the first thing customers see on a site are items that aren’t currently available. Customers are significantly less likely to complete a purchase when the items they want are out-of-stock. This can lead to lost sales, frustration for customers, and logistical problems for companies. Web users spend over 80% of their time above the fold on websites, only visiting other parts of the site less than a fifth of the time. Retailers cannot afford to waste above the fold real estate on products customers can’t even buy. In order to prevent customers from becoming discouraged and abandoning the site, out of stock inventory should be merchandised lower on the page and only in-stock items should be featured above the fold. This should also apply to particular product details. Retailers should have not only the ability to manage inventory at the item level, but also specific sizes, types, and colors of items. This can be accomplished only with tools that provide comprehensive inventory data and that allow users to quickly reorganize products as inventory fluctuates.

Customers are also much less likely to have a satisfactory shopping experience when many of the most visible items on a site are out-of-stock. It can be an incredibly frustrating experience for a customer to find something that they want and not be able to purchase it. Even in cases where the site provides the option for customers to back-order out-of-stock items, it can still lead to less than optimal experiences when shipping times are delayed or orders are canceled. Customers consistently report lower levels of satisfaction when they must wait longer for items.

Omni Channel Management

Omni-channel sales are becoming increasingly important for eCommerce businesses. There is growing evidence that consumers prefer the option of being able to buy a retailer’s products from multiple channels. 71% of respondents to a recent survey said that the ability to view information online about products available in-store was important to them, and shoppers who buy products both in-store and online have an estimated 30% higher lifetime value than those who only buy in only one channel. Of course, achieving sales across multiple channels requires more robust inventory management. The complex interaction between sales on the site, sales on third-party online platforms, and sales in retail locations can make effectively overseeing inventory even more challenging. In order to better manage this problem, businesses need to be able to easily view their inventories and make real-time decisions when inventory needs to be shifted across channels.

2. Analytics

“Are you merchandising and optimizing according to your analytic data?”

The ability to gather large sets of data and perform complex analytics has drastically changed business across countless industries, making companies more efficient, better prepared for change, and better able to serve their customers. eCommerce retailers that want to stay competitive in the coming years cannot afford to ignore this trend. One survey found that 89% of business leaders thought that data and analysis will revolutionize business operations in the same way the Internet did and 79% said that companies that do not embrace data will be uncompetitive in the future.

But how can eCommerce companies make the most use of analytics, and which data points are most critical to success?

Key Data Points

Conversion Rates – Understanding how likely a customer is to purchase a product after viewing it is critical to a company’s marketing and merchandising efforts. This metric allows companies to more easily determine whether product photography is effective, if the copy needs to be adjusted, or if a product should be more prominently featured on the site.

Abandonment rates – Reducing shopping cart abandonment rates is a major challenge in eCommerce. The average business has an abandonment rate of 68.3% and any reduction can translate directly to more sales. In order to effectively improve this, businesses must closely monitor changes in the rate and understand why abandonment is occurring. This might entail making adjustments to the checkout process, adjusting shipping rates, or engaging in an email campaign to encourage customers to complete their purchase.

Profit margins – Being able to easily see the profit margins of specific products is important to eCommerce for two reasons. The first is that it allows companies to determine the deepest discount they can offer while still maintaining adequate levels of profitability. The second is that it provides insight into which products should be featured prominently on the site, which should be discontinued, and which should be more heavily advertised. This statistic can be particularly useful when used in conjunction with total product sales and conversion rates. By looking at the profit margin coupled with these statistics, merchandisers can ensure that their most profitable and highest selling products are in a place where customers can easily find them.

Total sales – Another key data point is the total sales of each specific product. This can provide a general overview of how each item is performing and is a particularly powerful piece of information when combined with other statistics.

The importance of simple eCommerce analytics solutions

Although most companies agree that analytics is a critical part of good business, many still fail to implement systems that allow them to easily act on data. In order for analytics to be most effective, companies must be able to access them easily and act on them promptly. This necessitates a simple, streamlined system that allows users to view data and make changes to their website. Effective merchandising tools should provide clear analytics directly incorporated into product information. This allows users to easily make judgments about which products to feature on the site and what functionality should be implemented to improve sales and customer experience.

In our next blog post, we will cover the importance of Social Listening and Ratings/Reviews and the impact on eCommerce. Stay tuned for the next installment of this Merchandising Tips series. Don’t want to wait? No problem! Give us a shout at or 877-962-7478, and let’s get started with time saving merchandising tools.