What is Merchandising? A Comprehensive Guide

Merchandising is the backbone of any successful shopping experience. Whether you’re curating displays in a physical store or personalising recommendations using online storefront software, it’s all about delivering the right products to your customers in ways that grab their attention and inspire purchases.

Done right, merchandising has the power to boost sales, build brand loyalty, and create a memorable journey for your shoppers. Here are a few key strategies to optimise your merchandising, and how to overcome common challenges.

Merchandising is the process of presenting and promoting a brand’s products and services to attract customers and encourage them to make a purchase. At its core, merchandising is about positioning products effectively — whether in-store or online — to meet the needs and expectations of your shoppers.

In retail marketing, merchandising might look like eye-catching displays or carefully organised shelves that help customers quickly find what they need. For ecommerce merchandising, it’s about creating a seamless experience through the use of tools and strategies like personalised promotions and intuitive navigation on your ecommerce website.

The ultimate goal of merchandising is simple: to increase sales while enhancing the customer experience.

Merchandising is more than making your products look good — it’s the engine behind stronger sales, happier customers, and creating lasting experiences that stick with your shoppers. Here are five benefits of merchandising to consider for your in-store and ecommerce strategy.

• Increased sales - Whether it’s personalised product recommendations on your ecommerce platform or pairing items together in-store, merchandising helps customers find value in your products. This equals more sales and increased revenue.
• Boosted brand perception - From beautiful in-store displays to crisp photos on your website, merchandising is the king of positive first impressions and improved brand perception.
• Improved customer experiences - Thoughtful merchandising turns simple shopping trips into memorable experiences for your customers. All of this builds brand loyalty and creates positive lasting impressions.
• Inventory management - Using merchandising data to track demand lets you avoid running out of bestsellers or leaving excess inventory gathering dust. This ensures you have the right products at the right time, keeping customers happy while saving you money.
• Automated efficiency - Great merchandising equals greater efficiency. Automated tools can adjust displays based on real-time customer behaviour, helping you highlight top-selling items and keep shelves optimised without constant manual input.

We’ve spoken about why merchandising is important, but now let’s dive into how it works. Here are the eight core pillars that make for brilliant merchandising online and in-store.

1. Product selection - Before you can display your products, you need to know which ones to offer and have a mix that reflects customer preferences. These decisions are often based on existing sales figures and demand forecasting.
2. Pricing strategies - How are you going to price products to give your customers the best value while staying profitable? Businesses also need to consider tactics like promotions and dynamic pricing to create urgency and drive purchases.
3. Visual displays - How will you create an attractive display for your products? In-store, this involves everything from lighting and signage to shelf arrangements. On an ecommerce site, think professional images, well-written product pages, and a great UX.
4. Advertising strategies - Promotion is critical to effective merchandising. Special offers, product bundling and advertising outreach paint a picture of your brand and highlight key products, bringing new customers through your door.
5. Omnichannel retailing: This strategy involves advertising across multiple channels such as your ecommerce website, physical store, and app, to create a consistent experience for your customers. Omnichannel retail means that customers can shop seamlessly, no matter which sales channels they use to engage with your brand.
6. Cross-merchandising: This involves strategically pairing related items to boost sales. For example, suggesting accessories alongside clothing items or using personalised recommendations to recommend complementary products on your online store.
7. Inventory management - Great merchandising also has a behind-the-scenes element. Businesses need to track customer and inventory data to make sure they can keep stock levels at the right level, ensuring customer satisfaction without expensive overstocking.
8. Ongoing analysis - As you might expect, merchandising isn’t a set-and-forget strategy. Organisations should analyse data on an ongoing basis to make sure they can adapt to trends and market changes.

New advances in AI are making all of these aspects easier, faster, and more intelligent than ever. Now, merchandisers can work side-by-side with autonomous agents that can analyse vast amounts of data (like historical sales, customer preferences, and more) to determine everything from which products to display to the best prices to set.

Digital and in-store merchandising have a lot of crossover — both look to attract and convert shoppers by showcasing the right products at the right time. However, there are important differences that will inform how you strategise for each.

Visual displays and strategic product placement are vital to in-store merchandising. Businesses can’t rely on search bars and big data to keep customers engaged. They need to evoke emotion and manage everything from stock and colours to lighting and layout to keep people walking through their doors.

As you can imagine, achieving this requires a lot of careful planning and management, as there isn’t as much flexibility to adapt on the fly. With that in mind, businesses often only have one chance to give customers the tactile, engaging experience they’re looking for.

Digital merchandising centres around convenience and ease-of-use. Customers want to be able to find the product they’re looking for quickly, meaning search functionality and an accessible UX are essential.

Visuals are still important, but they’re supported by search bars and personalised product recommendations, so there are more opportunities to capture attention and drive conversions. Digital storefronts can also adapt their offering in real-time based on shopper behaviour, which is something that can be hard to replicate in an in-store setting.

You don’t have to rely on guesswork to build a great merchandising plan. You can use a combination of data, creativity, and customer insights to drive real results. Here are some of the key elements.

Offering the right product mix is critical to meeting customer expectations and maximising sales. For example, an electronics retailer might stock the latest trending gadgets alongside practical accessories, while a sports equipment store might also offer athletic apparel.

Pricing is one of the most effective levers for influencing customer behaviour. Dynamic pricing (adjusting prices based on demand), promotional campaigns, or bundling discounts can encourage purchases while driving up the average order value. Think about how subscription streaming services offer “family plans” to appeal to broader audiences while increasing revenue per user.

Striking the right inventory balance is an art and a science. Overstock can lead to excess costs, while understock risks customer dissatisfaction. To solve this, rely on tools to track demand, forecast trends, and optimise inventory turnover.

AI can also help here by keeping a watchful eye on inventory levels and analysing the supply chain flow automatically. AI agents can complete complex inventory tasks quickly and monitor inventory levels in real-time, like facilitating communication with suppliers, automating reorder processes, and ensuring timely restocking.

Visual media is about telling a story and guiding the customer on a journey. In physical stores, this could mean creating themed displays that evoke emotions or celebrate cultural events, like a holiday-specific showcase for a home goods retailer.

Online, it’s about improving your ecommerce website with engaging videos, immersive product demos, and interactive 360-degree images that let shoppers experience products before buying.

The best merchandising strategies evolve with customer needs. Regularly reviewing performance metrics — like conversion rates, sell-through percentages, or abandoned cart rates — can reveal valuable opportunities for improvement.

For example, a fashion brand may notice a product trending in one geographic region and decide to localise its marketing efforts or adjust inventory accordingly.

While merchandising is key to driving sales and creating a great customer experience, it’s not without its hurdles. Here are a few considerations to keep in mind whether you’re in the retail industry or running an online store.

Customer preferences and market trends are always changing. For example, trends like sustainability and personalisation are reshaping how customers make buying decisions, from seeking eco-friendly packaging to wanting curated product recommendations.

Remember to regularly take stock of these preferences and analyse customer behaviour so you can pivot your strategy to meet new demands.

Today’s merchandising decisions rely on data, but collecting, analysing, and applying it effectively can be tricky. Businesses need the right tools and processes in place to unify their data and draw insights from the vast amount of sales reports, customer preferences, and digital interactions they possess.

Technology is essential for modern merchandising. Tools like AI-driven analytics, inventory management systems, and point-of-sale (POS) solutions are powerful and essential for creating a seamless shopping experience. Look to integrate these tools and you’ll find agile decision-making and personalised customer experiences become your standard practice rather than an ambitious goal.

Merchandising comes with challenges, but the benefits of merchandising are more than worth it. When your strategy accounts for your customers’ needs and uses the right tools, you can turn merchandising into a unique competitive advantage. And that means higher sales as well as a stronger brand.

From AI-powered insights to tools that unify your ecommerce marketing and in-store experiences, Commerce Cloud gives you everything you need to elevate your merchandising approach and outcomes. Get started now with Commerce Cloud.