The Retailer’s Roadmap to a Successful Merchandising Strategy

10/8/2024 Christopher Seal

With inflation lingering on and accompanying high interest rates refusing to abate, retailers continue to face an array of challenges as they seek to boost profits. Although retail sales have begun showing some improvement in recent months, hurdles persist for retail operations.

From sourcing products and overcoming obstacles to get them onto store shelves, to ensuring customers’ shifting demands are met and applicable technology is being utilized, retailers must continue to attract customers — and motivate them to make a purchase. What follows are key considerations to keep in mind as you plan your retail merchandising strategy.

Products and the supply chain

Ultimately, a retailer’s success lies in ensuring they have the right products in stock for their particular customers. Other factors certainly come into play — location, marketing, and customer service, for instance — but if the match of products to customers is misaligned, or if those favored products are rarely available, the retailer is unlikely to find long-term success.

Sourcing trending and innovative products — Researching and sourcing new and different items that are likely to interest and trigger buying customers is a critical, time-consuming process. Retailers have to not only keep up with changing consumer tastes locally, but regionally and perhaps nationally as well. Plus, a product that elicited a favorable customer response last year might gain zero traction this year, particularly with customers who are always looking for the “latest and greatest” items. 

Once a retailer has decided on what’s hot, tracking down suppliers for those products is yet another challenge. Securing a wholesale distributor for new products that will raise the retail bar can involve online as well as in-person searches. It can also require combing through industry directories and publications, networking via industry associations and with industry peers, and more. Another option is to partner with an organization that’s experienced in assisting retailers in researching and sourcing new products with the added ability to deliver winning merchandising experiences. 

Onboarding and the supply chain — After identifying and sourcing desired products, the retailer must then get those products in-store. The time between sourcing and ordering to receiving and actually getting products on the store floor (often to multiple locations) can be problematic. As nearly all organizations learned during the COVID-19 pandemic, the supply chain is unpredictable at times. To ensure the supply chain is as seamless as possible, today’s retailers must have systems and processes that enable them to forecast market demand, source products, coordinate suppliers, track inventory, and optimize distribution — and be agile enough to adapt should the supply chain develop a kink. 

Evolving customer demands

In addition to keeping up with which products customers are excited about, retailers also must be knowledgeable of other customer demands — even if those demands are not necessarily requested in the checkout line. For instance:

• Sustainability — Nearly a third (32%) of consumers report they take the environment into account all or most of the time when making purchases, according to a Green Gauge study from GfK Consumer Life. In addition, more than 60% of respondents in a 2020 McKinsey study said they would pay more for a product with sustainable packaging. Retailers can pursue sustainable options in various ways: in products and product packaging; in shipping and logistics efforts; in displays and signage; in marketing efforts; in shopping bags; in lighting; and elsewhere. 
• Omnichannel marketing — Customers are seeking buying options beyond the in-store experience. Retailers will benefit by offering online, mobile, social media, texting, and other purchasing channels. E-commerce is expected to drive retail sales for the foreseeable future, accounting for 20% of total retail sales by 2027, according to a report by Colliers. 
• Newer, developing technologies — Also in the omnichannel mix are: artificial intelligence (AI), augmented reality (AR), and virtual reality (VR), all of which have come into their own as technologies that can boost the retail customer experience. AI’s strides in retail have been especially noteworthy, with 69% of retailers reporting an increase in annual revenue attributed to AI adoption, according to Nvidia’s “State of AI in Retail and CPG” survey. In addition, 72% of retailers using AI indicated they experienced a decrease in operating costs.
• Experiential retail — Retailers can utilize AI, AR, and VR to create non-standard experiences that engage customers, but these can also be created using more traditional events and experiences. Some examples include music, art, celebrity appearances, lessons that tie into the retailer’s specialty, food courts, live game competitions, and more. Salesforce’s “State of the Connected Customer” research reports that 80% of customers feel that the experience a company provides is just as important as its products and services. No wonder, then, that more than a third of retailers indicate they plan to invest in interactive in-store experiences in the next 12-24 months, according to recent RRD research. 

Displays, signage, and other considerations 

Establishing the best location for product displays can be challenging, especially in retail establishments that have limited floor space. But poor placement of displays — due to cramped quarters, poor decision-making, or simple indifference —- can lead to decreased display visibility. Retailers can also unintentionally overlook displays that have been damaged or are showing wear. Consumers, however, are likely to be discouraged by displays that appear aged or in disrepair, as this can cast doubts on the products they contain. 

For retail establishments, signage can run the gamut from display toppers and overhead hanging signs to floor graphics, window decals, exterior promotional flags, video screens, and more. In all cases, their purpose is to attract customers and advertise a specific product, service, or seasonal promotion. 62% of video-aware respondents in RRD’s recent CPG & Grocery Consumer Report said that the video screens help them to notice new products or brands.

As with displays, all signage should be in good condition and recently produced for best effect. Customers are quick to notice faded colors, damaged substrates, and last year’s messaging. In addition, aging signage hardware and materials can pose an injury risk for customers and store personnel. Sixty percent of businesses noted an average sales increase of 10% or more by adding or updating their signs, according to a study by the Sign Research Foundation. A knowledgeable signage producer can assist you in choosing the correct materials and hardware for signs throughout your retail space.

Displays, signage, and such technologies as AI, VR, and AR can all unite for a store-within-a-store concept — establishing a distinct space within the store that features a specific brand or a focused group of brands dedicated to a single retail niche. An example of a store-within-a-store might be an area devoted to gluten-free products. The store-within-a-store can showcase known brands or emerging brands, and it can even highlight brands that previously had only an online presence. The store-within-a-store can also serve to entice a new demographic not currently on the retailer’s radar. 

Determining retail priorities

Retailers have to address many other considerations as they pursue post-Covid profitability: rising costs; intense competition from brick-and-mortar rivals and online sellers; pondering new revenue channels; staffing and training; marketing; keeping up with relevant technologies; and the challenges that come with opening additional locations.

In seeking retail success, however, targeting customer interest in the latest and greatest products should remain a priority. It’s here that retailers have the opportunity to truly push the envelope when it comes to bringing customers into the store and having them take a spot in the checkout queue. 

Christopher Seal is the SVP of Strategy & Consulting at RRD. For more information about RetailPulse, RRD's comprehensive solution for the retail sector, please visit rrd.com/retailpulse.