What is online merchandising?
Online or digital merchandising can be described as ‘the selection and presentation of products and content to make best use of screen real estate’.
The screen real estate, i.e. your digital selling space, includes all areas on an e-commerce website where products are displayed - product pages, category pages, search results pages, recommendations, banner ads etc. You need to have an online merchandising strategy for managing these areas.
Online visual merchandising, on the other hand, is about using a wide range of elements to enhance the overall user experience: from stunning photos and awesome design, to homepage storytelling, user generated content and rich product descriptions.
Why is online merchandising important?
Since screen real estate is a limited resource, only a small fraction of a product catalogue gets seen by any one visitor, which makes it critical to ensure that the right product is in the right place at the right time. So, how screen real estate is managed is vital.
Furthermore, online retail competition is fierce. Average conversion rates in online retail have risen by less than 1% in five years to barely 4,5%. To increase conversions, average order value and customer lifetime value, there needs to be a focus on the online customer journey and user experience.
How online merchandising differs from offline
An online store is a different animal from a brick-and-mortar one. The selling space online is extremely limited, but on the other hand, you don’t have to show the same products to everyone.
Regardless of the customers’ entry and route through the store, online merchandising makes sure they see the most relevant products, in the best order, presented in the most compelling way.
A manual merchandising approach won’t do it
Online merchandising, carried out manually, can never deliver the sales growth required to justify retailers’ huge investment in driving quality traffic to their online stores. It has too many limitations.
There are simply not enough merchandisers out there, nor hours in the day, to effectively analyse the huge amounts of customer and product data required to optimise product exposure in real time across catalogues running to tens of thousands of products.
What you need is a system powered by AI and machine learning and predictive analytics based on customer behavioural data, context and crowd wisdom. It presents each shopper with the most relevant selection, and ordering, of products possible.
Consistent user experience and relevance
Relevance in this case means the probability of a customer making a purchase of a certain product. Relevance is defined by the context, which means that rather than merely providing a ‘personalised’ journey on an e-commerce site, the entire customer experience needs to be tracked intelligently.
From the second customers lands on your site you need to identify exactly what is of optimum relevance at each and every separate interaction. To learn what they like and don’t like from their previous activity, you need their full data story and history.
That means tracking everything from site search and navigation to recommendations, banner ads and promotional panels. Using AI and machine learning, the result will be a consistent user experience, where customers will always see product assortments driven by the same AI decision making.
Catching e-commerce trends
One of the most common complaints from online retailers is about a lack of agility. Many lose out on vital sales, and longer-term brand loyalty, through a failure to react quickly to trends, especially micro-trends driven by social media. It can take at least 24 hours to respond - that is simply too late.
Merchandising powered by AI and machine learning technologies changes the game by automating product assortment and sort order decisions. Trends are spotted in real time, and everything from search and recommendations to promotional panels instantly push trending products to the fore, and the system adapts just as quickly once trends fizzle out.
Human and machine doing what they’re best at
Of course, the route to retail success is not solely one of more sales, it’s also about driving cost and resource efficiency. For online retailers still relying on manual merchandising, that is particularly difficult, since scaling up teams to do more of the same is expensive.
In truth, much of the day to day merchandising job is one of number crunching - a task that is ideally suited to computers. AI and automation completely change the nature of merchandising. The day to day decisions are in the hands of computers - reacting to massive amounts of customer data in real time.
That leaves merchandisers to focus where their skills can have the greatest impact - in making higher level, strategic and creative decisions.