Correct merchandise display: Attract attention, increase profitability

Correct merchandise display: Attract attention, increase profitability

13 min read
Alex Bilousko
Alex BilouskoHead of customer success
Store Merchandise Display

Correct merchandise display in-store attracts the customer's attention and has a direct impact on sales growth. Global retail is in an era of change. New trends and customer habits are forcing retailers to rethink their merchandising principles and the basics of how to properly display products in their shops. How can they do this while maintaining sales and customer loyalty? What are the techniques and secrets of good merchandising for the modern retailer?

The world is changing rapidly, with changing retail laws, behavioral patterns and consumer attitudes. To win the attention and trust of the modern consumer, brands and retailers need to stay up to date and instantly adapt to changing habits and trends.

Recent neuro-marketing research on shopper behavior has shown that people today have to be "forced" to see the products on the sales floor. The modern human brain is overloaded because we are in a flood of information 24/7. Add to this the stress and distractions - what do we get as a result? The brain adapts and tries to spend as little effort as possible on processing new information. Have you ever noticed that news gets shorter, texts get simpler and video content takes over the world? The same thing is happening in retail.

People only see products that require minimal effort on the part of the brain to process.

Imagine a situation - you walk into an unfamiliar shop, you are completely unfamiliar with its range of products, the layout and display of goods in the sales area. How much time and effort will you spend shopping? Do you find the product you want or spend your time looking for a consultant? Do you find it frustrating that it can be so hard to find the product you want? You will probably spend a lot more time and effort than you would in a shop where you know where the products are located and are familiar with them.

The less time a customer spends on a purchase, the quicker, easier and more comfortable it is to find the right product, the more likely it is that a satisfied customer will buy and return again.

By the way, this is the reason why large retail chains keep uniform principles and layouts of goods in all their outlets around the world, develop uniform merchandising guides, uniform principles of planograms and consistent brand books - so that the customer will feel comfortable and accustomed to navigating the shop floor in any location. It doesn't matter whether the shop is in New York, Moscow or Paris, the customer will easily find the right shelf and the right product.

Let's talk about presenting the range correctly on the shelves and what it means to display products correctly in a shop.

What is a creative merchandise display in a shop?

In-store merchandising is a set of measures subject to the laws of merchandising, marketing and retailing aimed at ensuring a comfortable search for goods by customers, attracting attention to a certain group of goods, increasing sales, enhancing the image and reputation of the store/retail outlet/network and stimulating customer loyalty.

The display of goods on the sales floor is the point of contact between the customer and the retailer.

The interaction between shopper and retailer depends on how well the products are displayed. And a company's revenue and the overall success of its business depends on how well laid out and comfortable the products are in the shop.

Types and principles of retail merchandise displays

Classic merchandising involves dividing merchandising into several types that correspond to different retail objectives, industries and product groups. The principles of merchandising take into account the type of merchandise, the type of equipment, the sales environment, etc.

A horizontal merchandising display is an arrangement of goods of the same brand or category along the length of a shelf (or other retail equipment). Usually, lower shelves are used for low-margin, low-margin products. In the customer's field of view, at eye level, the highest priority goods for sales and demand are placed. When merchandise is displayed horizontally, it is placed from left to right. Traditionally, merchandisers use this type of layout for SKUs that are available in small quantities.

The vertical merchandising display is an arrangement of identical products in rows from top to bottom, following the natural trajectory of the customer's eye from left to right. Traditionally, vertical layouts have 5 levels of height corresponding to the area in the customer's field of vision:

For example, let's look at the drinks rack in a supermarket. It is divided on a simpler principle into 3 zones, but the principles of the creative merchandise display are illustrative and clear.

merchandise display

Display merchandise layout means placing merchandise on a freestanding stand (usually round cone-shaped bollards). This method of display is ideal for seasonal and promotional goods, provided that the display stand is placed prominently in the hot zone of the outlet, is well lit and neatly decorated, and is not overloaded with goods.

The bulk merchandise layout is used in times of seasonal sales, stock sales, liquidation sales. Typically, goods of the same category are taken and piled haphazardly into a basket, box or wire box. This type of display instantly associates products with low prices and cheapness, thus attracting a certain category of customers and requiring no staff effort.

How to choose the right merchandise display in the shop?

And how do you know if you've displayed your range of products correctly and if you've chosen the right type of display? To do this, you need to answer the following series of questions:

To analyze store merchandise display and its relevance to customer needs and company capabilities in more depth, and to help answer these questions, Leafio tools are used to assess the effectiveness of display.

Xmas Edition: Last-moment Merchandising Checklist

How to evaluate the effectiveness of the display of goods in the store? 

What is the cost of properly displaying goods?

Every shop has its presentation stock - the minimum quantity of goods that should always be present in the sales area.

The money invested in this stock is a significant part of the company's working capital, so it's critical to know the amount and keep track of it. With a clear understanding of the value of the presentation inventory in money, a company can plan its turnover more accurately.

It is easy to calculate the stock-in-kind if the layout of goods is managed using a positioning planogram.

A shelf merchandising planogram is a schematic representation of the retail merchandise display on a particular outlet according to the company's sales and development strategy, merchandising and brand guidelines.

A shop planogram is a clear algorithm, a document that records where, in what quantity, and how a product will be displayed on the equipment.

In large retail chains, planograms are developed by the marketing and sales team and approved by the head office, and then replicated and sent directly to the outlets. In turn, the shop or point of sale is responsible for ensuring that the merchandise is displayed correctly according to the planogram.

Previously, replicating, sending and controlling the layouts according to a planogram took a lot of staff time and effort, as all changes and clarifications to the planogram had to be agreed upon manually and communication was time-consuming.

Modern merchandising management systems do this automatically with a single click, and you can track and monitor layouts according to a planogram using a smartphone in real-time. With today's merchandising systems using a mobile app, it's easy to get periodic photo reports from the sales floor (realograms).

realogramm and planogram

In such a shelf plan, each product has its prescribed place and, accordingly, its planned stock on the shelf. The product and its price will be the cost of displaying the product on the sales floor.

What is the profitability of displaying merchandise according to the planogram?

An important point in a display analysis is to assess its profitability. Profitability can be calculated in several ways:

By comparing these figures over the reporting periods, the company gets a detailed picture of trading space efficiency at all levels:

Changing planograms with this analysis significantly increases the efficiency of the selling space used, as these figures are based on the profitability of each item of merchandise.

Does proper visual merchandising generate additional income?

Assessing merchandising for profit potential is one of the main objectives of merchandising in a company. In order to understand whether the layout and display of goods on the sales floor has the potential to increase the retailer's profits, two analyses need to be done - for the space occupied to match the level of sales and for the number of facings to match the share in profits.

An analysis of the correlation between floor space and share in sales will help to assess whether merchandise display areas are allocated correctly between categories, and to identify which categories are 'squeezed' and have the potential to increase revenue and profits.

Retailers often focus on their experience or intuition and place products incorrectly without relying on sales analysis and statistics. For example, expensive products with low demand levels may mistakenly take up more shelf space, preventing less expensive products with high demand levels from 'unlocking the potential'.

Good merchandising in a shop should be based solely on an analysis of demand and sales; you cannot rely on momentary or human factors.

The selling space is used most efficiently when the proportion of each category in the merchandise layout corresponds to its share of sales.

An analysis of the correspondence between the number of facings of products on the planogram and their share of profits will show the correct shelf space allocated to each SKU.

A bit of theory: product facing is a kind of unit of measurement of shelf space, the number of spaces an item occupies (SKU). The SKU is the amount of product a customer sees. For example, five bottles of milk are on the shelf, one after the other, but the customer sees one bottle. This counts as one facet.

The deviation of the shares in the number of facings from the shares defining the ABC(D) analysis categories is precisely what contains the potential for additional profits. Minimizing this deviation leads to an increase in the profitability of the layout.

ABCD analysis

How manageable and flexible is the lining?

When starting to assess and analyses the types of merchandise displays of products in the sales area, it is important to understand the extent to which the company manages it. Are all products on the sales floor? Are they in the right place and in the right quantities?

There are times when a shop sells a product that is not in the assortment matrix, not in the planograms. There is no way to influence the sales of such a product, as there is no understanding of how it is presented on the sales floor and how it will be presented in the future.

You can determine the degree of controllability of the display by calculating the share in sales of goods specified in the planograms to the total level of sales of the store. This proportion will show what percentage of revenue the prescribed products generate, the positioning of which can be managed if necessary.

How presentable is the product display?

In addition to the fact that the product must be in stock, it must also be presentable. Cluttered or empty shelves will not interest customers, nor will sloppy, damaged packaging or missing price tags.

Studies have proven that 67% of purchasing decisions are made directly in the store. Even if a shopper has planned a purchase, in 7 out of 10 cases the final decision will be made directly on the sales floor. Despite the abundance and availability of product reviews, testimonials and videos, until customers see the product, they won't buy it.

Every company strives to organize its store merchandise displays optimally. By automating the development of layouts according to the same rules and principles, based on sales and demand analysis, the layout and display of products in the sales area becomes a clear and simple tool for the customer and he can always easily orientate himself and find the right product.

The fundamental, basic rules of proper in-store merchandising, which are laid down in every merchandising book, state:

A breach of any of these rules will result in the buyer passing such a product by.

Modern merchandising management systems not only automate the process of creating layouts and layouts, but also check the actual picture (reprogram) for consistency, check and evaluate the presentability of the shelf, monitor the presence of the price tag, and so on. In other words, it is possible to remotely monitor the layout through the eyes of the shopper.

One such merchandising management system is ABM Shelf, which helps companies quickly establish business processes, automate product displays and evaluate performance through extensive visual and tabular analytics.

Thus, with a systematic approach to analyses and improve efficiency, the layout and display of products on the sales floor can be an additional source in boosting sales and profitability in your shops.

Merchandising and Planogram Automation: Tips to increase shelf space profitability

Alex Bilousko
Alex BilouskoHead of customer success

Don't miss our weekly news letter