Whether you're running a brick-and-mortar store, an online shop, or both, finding fresh ways to draw in customers and boost sales is likely at the top of your agenda. You might have a standout product, superior customer service, or more competitive pricing—but these alone don't guarantee overnight success.
Improving sales and the shopping experience is a continuous process, often involving smart merchandising strategies. Smart merchandising includes tactics like optimizing product placement, rotating promotions, and fine-tuning inventory management to effectively meet consumer demand.
Below, you’ll learn what smart merchandising involves, highlight key strategies, and introduce the leading tools for 2024.
What is smart merchandising?
Smart merchandising involves strategies for increasing sales and improving the in-store and online shopping experience. Merchandise means the products available for sale.
Smart merchandising strategies rely on data analysis to determine the best way to arrange products, choose which items to emphasize and manage inventory effectively.
In retail, effective smart merchandising usually involves several key tactics:
- Product placement: Placing products in a way that catches the eye, at the end of aisles, near the checkout, or in high-traffic areas.
- Layout optimization: Designing store layouts to guide customers through a natural flow, encouraging them to browse more products.
- Digital integration: Using tech like digital displays or mobile apps to provide additional product information or personalized recommendations.
- Inventory management: Tracking which items sell well and adjusting stock levels accordingly to maximize availability without overstocking.
📚 Learn more: What Is Merchandising?
How does smart merchandising work?
Smart merchandising relies on tech and data insights to improve sales and the shopping experience.
Here’s a closer look at the process:
1. Data collection
Regardless of your chosen tactics, they usually start with gathering data on the customer journey, sales trends, and inventory levels. Relevant customer data can come from in-store sensors, online shopping patterns, and point-of-sale systems.
2. Analysis and insights
Using analytics tools, you can interpret the collected data to understand what products are popular, which displays attract more attention, and how to price products. Shopify’s analytics tools provide valuable insights into shopping trends and customer behavior.
At a glance, see which products are flying off the shelves, what times of day are busiest, and which promotions are working best.
3. Strategic product placement
Based on these insights, you can strategically place products to maximize visibility. For example, you might place high-demand products at eye level or near the entrance and promotional items at the end of aisles.
Shopify supports visual merchandising through customizable online store themes and in-store digital display integrations. These tools help create attractive layouts that draw customers in and guide their journey through the store.
4. Inventory optimization
Smart merchandising systems help manage inventory by predicting demand and suggesting optimal restock levels. This reduces the risk of overstocking or stockouts, ensuring that popular items are always available. Shopify simplifies product management by letting you track inventory across multiple locations.
5. Dynamic promotions
You could use data insights to create targeted promotions that appeal to specific customer segments. For example, if data shows that a particular product is popular among Gen Z, you may offer a special discount on it during hours when they are most likely to shop.
Alternatively, you might increase the price of best-selling items online.
6. Continuous improvement
While the data collection, analysis, and adjustment cycle continues, you can continuously evolve your strategies. This iterative process will help you tune into customer experience and increase sales over time.
Learn: Retail Merchandising 101: Get Started with In-Store Merchandising
Why use smart merchandising?
Other than improving the shopping experience, smart merchandising has several other benefits. Here are four reasons why you should consider using it:
- Increases sales and revenue: Smart merchandising increases impulse buys and overall sales by strategically placing high-demand items and tailoring displays to market trends.
- Enhances customer engagement: Engaging displays and personalized shopping experiences make customers feel valued and more likely to interact with your brand, in-store and online.
- Improves inventory management: With better data, you can predict trends, understand customer preferences, and manage stock levels more efficiently.
- Reduces overstock and markdowns: Smart merchandising helps you avoid excess stock and deep discounts by aligning your inventory with consumer demand.
How to use smart merchandising in your ecommerce store
Looking for some inspiration on how to use smart merchandising in your ecommerce store? Here are some smart online merchandising strategies and examples of merchants using them.
Personalized product recommendations
Personalizing your shopping experience is a great way to get customers to return––over half (56%) of consumers say they will become repeat buyers after a personalized experience.
Personalizing the shopping experience shows you recognize and cater to individual needs––it's an opportunity to make customers feel valued and understood.
For example, Taelor, a menswear rental platform, uses a combination of AI and human stylists to create personalized shopping experiences. Customers receive a monthly curated box that reflects their individual style preferences, which they specify through the website's interactive features.
Dynamic pricing models
Dynamic pricing lets you adjust prices on the fly. These models adjust product pricing using market demands, competitor pricing, and customer data.
For example, as a product becomes more popular, its price might increase to maximize revenue, or decrease if demand wanes to attract more buyers. Alternatively, if a customer keeps abandoning their cart, you might offer them a small discount to convert.
Virtual fitting rooms
Virtual fitting rooms help retailers bridge the gap between physical and online shopping. Instead of having to go in-store to try items, customers can try on clothes virtually before making a purchase.
Virtual fitting rooms use augmented reality (AR) or sophisticated imaging technologies integrated into your online store, letting customers upload photos of themselves or input body measurements to see how different clothing items would look on them.
Based on the customer's dimensions and the fit data of clothes, the feature can recommend the best size to reduce the chances of returns due to poor fits.
This strategy can help reduce return rates and increase customer satisfaction by providing a more accurate feel for products' appearance.
For example, the lingerie brand Knix uses virtual fittings to provide customers with sizing guidance. When customers set up virtual appointments, they receive personalized consultations from Knix experts (Knixperts) who help them find the perfect fit from home.
📚 Read more: Essential Fashion Merchandising Guide
Chatbots and virtual assistants
AI-driven chatbots can guide customers through a personalized shopping experience, providing product recommendations, customer support, and transactional assistance.
Chatbots provide round-the-clock support, answering questions, resolving issues, and guiding users through the purchase process anytime.
Plus, using data from customer interactions and purchase histories, chatbots can make personalized product recommendations, similar to a live salesperson.
For example, Gymshark uses an AI chatbot on its site to help customers track orders and answer other simple queries, providing a way for customers to get immediate help.
Automated inventory management
Automated inventory management gives you real-time stock data and helps streamline operations. Accurate stock information helps prevent backorders and delays, improving customer experience.
With better stock control and product availability, businesses can reduce lost sales due to out-of-stock items and respond more agilely to market demand.
How it works:
- Real-time updates: Automated systems update inventory levels in real-time as sales are made and stock is received, ensuring accurate data is always available.
- Demand forecasting: Algorithms analyze sales data and trends to forecast future product demand, helping retailers make informed decisions about stock levels and reorder times.
- Optimized reordering: When stock levels fall below predetermined thresholds, the system automatically generates purchase orders, ensuring timely replenishment without manual intervention.
AI-powered visual search tools
AI-powered visual search tools let shoppers search for products using images instead of words. Customers can upload photos or use cameras to find similar products available in your store. Visual search is particularly useful for fashion, home decor, and accessories, where appearance is a key deciding factor.
Visual search bridges the gap between what customers see and what they can describe. It eliminates the challenges of language barriers and inaccurate search results, directly linking shoppers with the products they seek.
Shoppers are more likely to purchase when they find exactly what they're looking for quickly, reducing bounce rates and increasing conversions.
For example, Designer Wallcoverings and Fabrics has a visual search tool that helps shoppers find wallpaper and fabric designs by uploading images. The tech lets users quickly find products that match or are visually similar to their design inspirations. The online shopping experience is more interactive and efficient, particularly appealing to customers looking to match specific items, patterns, or styles.
In-store navigation apps
In-store navigation apps can help bridge the gap between online and physical shopping. These apps enhance customer engagement by guiding shoppers through a physical store using mobile devices, which can be particularly useful for large retail spaces.
Customers can use their smartphones to find the exact location of products they’ve seen online. The app shows the best path through the store, saving time and improving the shopping experience.
As customers move through the store, the app can send personalized promotions and deals based on their location and shopping history, increasing the likelihood of purchases.
Digital maps can highlight featured products and promotions, encouraging further exploration and interaction with a broader range of products.
Learn: Product Merchandising: 11 Effective Retail Display Ideas
Top tools for smart merchandising
Whether you’re looking to optimize product placement or implement dynamic pricing, tools make it possible to implement effective smart merchandising strategies.
1. Kimonix
Kimonix uses machine learning to optimize product placement and inventory levels in real-time. It’s designed to boost online sales performance and customer satisfaction by showcasing the most relevant products.
Key features:
- Adjusts prices in real-time based on market demand, competition, and inventory levels
- Ranks products on category pages according to consumer behavior and preferences
- Provides comprehensive insights into merchandising performance and customer interactions
- Helps manage stock levels by predicting future sales trends
- Tailors product suggestions to individual customer profiles
Pricing: Plans start from $15/month
2. Prisync
Prisync has a robust dynamic pricing engine designed specifically for ecommerce merchandising. It automatically tracks competitor prices and stock levels so businesses can adjust their pricing strategies in real-time to drive sales revenue.
Key features:
- Monitors prices and stock availability from competitors across the web to provide a comprehensive market overview
- Automatically adjusts your pricing based on predefined rules, competitor actions, and market conditions
- Offers data-driven insights to set optimal prices that maximize profitability while remaining competitive
- Provides detailed reports and dashboards to track pricing trends, market changes, and the impact of pricing strategies on sales
- Sends instant notifications when competitors change prices or when products go out of stock
Pricing: Plans start from $99/month
3. Klevu
Klevu is a powerful AI-driven tool that enables smarter product discoveries and personalized shopping environments. It analyzes shopper behavior and preferences, automatically optimizing product searches and recommendations.
Key features:
- Optimizes search and merchandising functions across multiple languages, making it ideal for global retailers
- Enhances search capabilities with natural language processing, understanding user intent, and delivering relevant search results quickly
- Offers customized product suggestions based on individual browsing behavior and historical data, increasing the likelihood of purchase
- Automatically sorts products within categories based on their performance and shopper interactions to maximize the visibility of high-performing items
- Provides detailed insights into search trends, keyword effectiveness, and customer search behavior to refine marketing strategies continually
Pricing: Plans start from $449/month
4. Algolia Recommend
Algolia Recommend uses AI to power personalized product recommendations across ecommerce platforms. Designed to enhance customer engagement and increase sales, Algolia Recommend analyzes user interactions to deliver highly relevant product suggestions in real-time.
Key features:
- Machine learning algorithms suggest products based on user behavior, browsing history, and purchase patterns
- Updates recommendations based on real-time user actions to ensure the relevance and effectiveness of suggestions
- Enhances product discovery by suggesting complementary items, encouraging increased cart sizes
- Easily integrates with existing ecommerce platforms, maintaining a consistent user experience without disrupting site performance
- Allows retailers to fine-tune recommendation strategies to align with business goals and customer preferences
Pricing: Free for up to 10k monthly search requests
Build a profitable ecommerce business with smart merchandising
Implementing smart merchandising solutions will help you attract your target audience and encourage them to convert. Smart merchandising will also help you stand out from competitors. The first step is to choose the right tools for the tactics you want to use. As you learn what works for your store, test other smart merchandising tactics to improve the shopping experience.
Smart merchandising FAQ
How does smart merchandising integrate with existing ecommerce platforms?
Smart merchandising tools integrate with ecommerce platforms by using APIs and plugins that connect with your site's backend. They allow real-time data syncing and updates to product displays, pricing, and inventory without disrupting the user experience.
Can smart merchandising help in reducing stockpiling and warehousing costs?
Yes, smart merchandising can significantly reduce stockpiling and warehousing costs. By analyzing sales data and customer behavior, these tools provide accurate demand forecasting, which lets you optimize inventory levels.
You only stock what you are likely to sell, reducing excess inventory that ties up capital and increases storage costs. Efficient inventory management also minimizes the need for deep discounting to clear out old stock, preserving profit margins.
What are the challenges of implementing smart merchandising, and how can they be overcome?
Implementing smart merchandising involves several challenges, but you can effectively manage them with strategic approaches:
Challenges:
- Data quality: Maintaining accurate data and effective integrations can be complex.
- Technology adoption: Upgrading legacy systems to new tech can be expensive and require training.
- Implementation complexity: Setting up and maintaining advanced merchandising systems requires technical expertise.
Solutions:
- Improve data management: Regularly audit and validate data to maintain its quality.
- Gradual integration: Adopt new tech in phases to minimize disruption and allow for adjustment.
- Training and support: Provide training for your team and choose tech with reliable customer support.
