What Is Merchandising and Why Is It Important?

Merchandising is a proven, effective way of increasing sales in your retail store. And all it requires is forethought, preparation, and a thorough understanding of customer behaviour.

This article will explain the basics of merchandising, how it can benefit your business and merchandising best practices that you can apply to your retail store.

What is Merchandising?

Merchandising is how products in a store are displayed and presented in order to encourage customers to buy. This includes shelf layout, promotional signage, foot traffic paths and pricing. 

Who uses it?

Brick-and-mortar retail stores are the businesses that use merchandising the most. Different stores apply merchandising strategies in different ways, even if they sell the same products as other stores in their niche. 

Why is merchandising important?

Put yourselves in the shoes of a customer. Imagine you’re going into a store. Products are placed haphazardly, seemingly without rhyme or reason. Toys are on the shelves next to hardware products; canned goods are next to the toothpaste, and so on. Aisles aren’t properly labelled, and the prices on the shelves don’t match that of your promotional flyer. 

It’s impossible to even find anything, much less buy.

What do you do?

A smart customer will leave and go to a different store. 

Compare this to a store with proper shelving and signage, along with a cohesive merchandising strategy, and you will see a much higher amount of foot traffic and vastly increased sales. 

But let’s be specific. In what ways can a retail store benefit from proper merchandising?

  • Increased Sales
  • Better customer satisfaction
  • More time in-store
  • Faster-moving inventory
  • Increased customer loyalty
  • Better brand recognition
  • More effective promotions
  • Increased employee productivity
  • Maximized retail space

Merchandising affects so many different aspects of your retail operations that it could make or break your business.

What are some effective merchandising strategies?

Let’s go over some of the most common merchandising strategies:

Product samples and demonstrations. 

You see this all the time in places like Costco, where promoters prepare food samples and hand them out to shoppers to taste. It’s also common to sample beauty products like perfumes, soaps and lotions. The point is to let the customer either try it themselves or see the product in action, so they will be encouraged to buy. 

Promotional merchandising (a.k.a discounts)

Discounts are an effective merchandising strategy because it can do multiple things. First, it can draw more customers into the store. Second, it can function as a loss leader to lead the customer to buy more items. And finally, it can help clear slow-moving inventory. 

Strategic store design and layout

There’s a surprising amount of psychology and strategy that goes into how retail stores are laid out. For instance, how can you encourage the customer to walk through the entire store? Maybe by putting the most commonly-purchased or most discounted items all the way in the back. 

Plan your layout based on what you want the customer to do, and see what kind of floor plan will get you the best results. 

Plentiful and clear store signage

Proper signage and labelling make it easy for customers to find their favourite products. This improves their store experience and increases the chance they will visit your store again. But that’s just half the battle.

Clear and enticing promotional signage draws a buyer’s attention and encourages them to investigate. You can use these like breadcrumbs to draw them deeper into the store and past other displays that they may want to browse through as well. 

Effective Product Displays

Out of all the strategies listed here, product displays are one of the most basic, yet most important, merchandising strategies you should be implementing. There are many subtle tactics you can employ to create enticing displays that they deserve a section of their own.

How do I Create Effective Product Displays?

Retail store product displays are an art form in and of themselves. An effective display can be an invisible yet powerful influence on a shopper’s buying behaviour. 

Here are some of the basic product retail merchandising techniques/principles stores use:

Eye-level sells the most

Products shelved at eye-level are the ones that sell the most. This is because eye-level shelves are the easiest for buyers to browse, and therefore, the first area buyers look at. Place your top-selling or most profitable items at eye-level and up.

Fill the shelves

Always keep your shelves as full as possible, even if it means keeping the entire stock of product out on the floor. It gives buyers the impression that your store has a deep inventory and can easily meet the buyer’s needs. It also has the additional benefit of clearing the backroom, allowing you to keep stock of more items. 

Check your prices—then check it again

Pay very close attention to the prices on your shelves, especially those items that are on sale. Customers don’t respond well when the checkout scanner and the shelf sticker have different prices.

Beyond that, many provinces have laws regarding scanner accuracy, and so do major retail organizations. Familiarize yourself with these rules and make sure your staff is familiar with your store policies regarding pricing discrepancies.

Display items vertically instead of horizontally

Vertical displays provide a better shopping experience than horizontal displays, because in a vertical arrangement, the shopper can just stand in one place and scan at their leisure. Horizontal displays are harder to scan and it will be more challenging for the customer to find what they want. 

If the shelf is long, like in a supermarket aisle, create “scan zones” where products that are a specific brand or type are displayed in a vertical column that is a couple of feet or so wide. 

Group similar items together

Cross-merchandising is when you place similar items next to each other to increase the chances that they will be bought together. It’s an effective tactic if you understand the customer’s mindset when they’re shopping. 

For example, a customer that is buying spaghetti noodles is most likely cooking pasta. Therefore, they will need pasta sauce to go with it. That’s why you always see pasta and bolognese stocked on the same aisles. You can do this with other items, like toothbrushes and toothpaste, notebooks and pens, and more. 

What are retail cycles and how do they apply to retail merchandising?

Retail works in seasons, just like real life. Your inventory will change depending on what time of year it is and what holidays are coming up next. For example, Easter involves plenty of chocolates and bunny-themed items and the like. 

But it’s not just products that get cycled in or out: your store signage and layout will change as well,and so will your promotions. These changes often take place months ahead of the actual holiday, so that shoppers have plenty of opportunities to shop before the items are needed. 

From Concept to Execution

Every retailer that owns a physical store should master the art of merchandising if they want their business to succeed. Seemingly simple and minor shifts in store layout and shelf organization can impact your business in big ways, so pay close attention to any shifts in customer behaviour whenever you change anything. 

Follow the merchandising advice above, and your shoppers will come more often, browse longer, and buy more. All the while, letting you move inventory faster and increase profits. 

It’s a win-win-win situation.


Ready to start your business? Ownr has helped over 15,000+ entrepreneurs hit the ground running quickly – and affordably. If you have questions about how to register or incorporate your business, give us a call at 1-800-766-6302, Monday through Friday from 9 am to 5 pm EST, or email us support@ownr.co

This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed.  All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.