What is eCommerce Merchandising And Why Does It Matter?

eCommerce Merchandising has always been about bridging the gap between customer preferences and what you’re selling.

I talk a lot about “merchandising” on here: “marketers should team up with merchants”, “use merchandising to make your advertising efficiency improve”, etc. So what am I really talking about?

Traditionally, the job description of an eCommerce Merchandiser entails uploading new products to the website, putting the products into the appropriate categories in the navigation menu and updating creative assets like homepage banners. That’s not what I’m talking about here.

Traditionally, the job description of a Merchandiser at a traditional retail brand entails some mixture of shopping the market, being aware of emerging trends, and then interpreting that information into line plans and a pricing strategy. Merchandisers answer questions like “how many different teapot SKUs should we carry, and what price range should they cover? That’s not what I’m talking about here either.

So what am I talking about? Exploiting a major blind spot that still exists for most eCommerce brands that sell more than 3-5 products.

eCommerce Merchandising & The Traffic Blind Spot

Before eCommerce came along there were two major business models for brands looking to sell their goods: sell to another store, or open up your own stores and sell direct*. In both of these models “lead gen”–aka bringing customers through the door–was taken care of for you. Either the wholesale account drove the traffic or you opened your store in a location with growing, relevant foot traffic, like a mall.

The wholesaler and the mall developer planned their physical locations meaningfully. They put the buildings within driving distance of a relevant audience for the products they sold, or the types of retailers they hoped to attract. In that way, they did some work to ensure that the merchandise was relevant to the people who would walk through their doors.

The wholesaler went a step further, studying the buying habits of its customers and, in some cases, developing close relationships with its biggest spenders. Buyers employed by the wholesaler could then purchase an edited selection of products from several brands that would be especially relevant to the local clientele.

For the brands themselves, this process was pretty opaque. And that led to one of the major misconceptions about eCommerce: that your audience is “everyone” and that you can and should list your entire assortment online.

That’s only partially true. Your audience could be anyone, but your actual audience is a function of the channels you use to drive customer acquisition. Like the wholesaler and the mall developer, the owners of these channels have worked to cultivate their own audiences. And the makeup of those audiences determines what products and what price points perform best in the platform’s advertising.

So when I’m talking about merchandising, part of what I’m talking about is getting to know which segment of a social network’s user base has a high propensity to buy when they see an ad. When you get a handle on these preferences, you can determine which channels your brand should prioritize and what products you should feature.

eCommerce Merchandising & The Customer Lifecycle

When I talk about merchandising, I’m also talking about using your knowledge of the product and your customer’s relationship to the product to extend lifetime value.

Part of this is simple cross-selling and up-selling. If someone buys a top, they might want matching jeans. If someone buys flour, sugar and eggs they might want a cookie sheet or a rolling pin.

But an underutilized part of using merchandising to extend the customer lifecycle is understanding how high value customers typically enter your business and determining how to use the entire assortment to win additional purchases.

If you know that most of your best customers purchased boots the first time they shopped with you, you would build marketing funnels featuring boots to bring in more of those customers. If you know that your best customers entered your brand through the skincare category and then progressed to color cosmetics, you could build retention messaging featuring those categories.

You can also use these insights to develop new products that your current customers need, but that you don’t currently offer. If you’re selling beekeeping suits that your customers absolutely love, why not parlay that brand love into a salve for bee stings?

eCommerce Merchandising & Sales Forecasting

Merchandising has always been about bridging the gap between customer preferences and the assortment. eCommerce gave us the ability to study how our customers express those preferences over time–not just the products that they buy, but the prices they’re willing to pay and the offers they find compelling.

Using this data we can create some “rules of thumb” about how our existing customers will behave at scale. And with those rules, we can get a clearer picture of how many existing customers will shop with us in the future, how much they will spend, and what they will buy. I wrote about some of those rules–which apply to most single-brand consumer businesses–here.

We can then work to increase sales from returning customers by developing new products that suit their preferences and designing offers and promotions we know will appeal to them. We can also estimate the impact different business decisions–like price increases or a new product launch–will have on returning customer spend.

This helps to reduce some of the risk and ambiguity from marketing and buying strategy. Sales targets in excess of what returning customers are likely to spend need to be met with new customer acquisition. And products in the assortment that sit outside returning customer preferences will probably need to be purchased by new customers.

Recap: What Is Modern eCommerce Merchandising

Effective eCommerce merchandising isn’t just about fashion trends or website sort orders. It’s about leveraging a brand’s unique relationship between its marketing channels, customers and product assortment to reduce the cost of marketing and sell through more inventory.

Modern eCommerce merchandising can tell you:

  • Which products you should send as part of your influencer seeding strategy if you want to maximize the conversion rate of your ads
  • What products and messaging to put in your post-purchase email flows to convert more new customers to a second order
  • What products or product categories you can’t afford to remove from your assortment
  • How to plan your annual calendar of sales and events to maximize customer lifetime value
  • How much you need to budget for customer acquisition next year to achieve your revenue goals

By the way, I can help you answer all of the questions above for your brand. Drop me a line here if you’d like to learn more.

*Channels like catalogs, door to door sales and home shopping also existed, and still exist.