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The term Merchandising comes from retail and refers to activities that promote sales, especially by presenting and positioning products in the store. It includes setting up window and in-store displays, grouping related products together, shelf signage, and in-store ads featuring the merchandise to promote certain items and respond to customer demand.
This process is just as crucial in e-commerce stores, where the organization of products greatly affects the customer’s experience and interaction with the brand.

Now let’s see how merchandising techniques are used in digital commerce.

Labeling

Let’s start with the simple merchandising technique called “Labeling.” Businesses use labels to highlight some products by adding a sign on them like Sales or New or Best Seller or Best Value. It is like adding a tag to a product.
Labels should be indexed to allow customers to search and filter by a label. For example, a search query “autumn collection” should return all products with this label.

It is possible to have multiple labels assigned to a product, but you should put some thoughts when doing this. Having too many labels on the same product may clutter the store interface and confuse visitors. Some combinations may not work well together, for example, New Collection & Sale. To guard against this, you need to define the maximum number of labels to show and make some of them exclusive.

Labels can be assigned manually or generated based on predefined algorithms.

Product Relations

The most popular merchandising technique is connecting products by establishing different types of relations between them.

Up-sell

Up-sell refers to offering a more expensive version of a product or additional product options. The goal is to increase the price of an individual product in the cart.

For example, Mister Spex offers options to add progressive lenses, while an airline offers to add a bigger luggage allowance or upgrade to the business class.

Cross-sell

Cross-sell is offering related or complementary products to increase the order value. An airline offers car rental, hotel, and travel insurance when a customer buys a ticket, while a fashion brand would offer jeans and pullovers that match the selected boots.

Related Products

Related products are used to display similar products and alternatives when a product a customer is looking for is discontinued or out of stock.

The business motivation products store can offer to buy “Get Shit Done” stickers in addition to the cup with the same slogan.
The second example shows a discontinued product and its alternatives.

Product Set

Another way to group several products is a product set. A product set is a group of products that a merchant suggests buying together.  The “Shop-the-Look” is a prominent example of this approach.

Bundles

A bundle is a collection of products bought together. Offering multiple related products together with some potential discount increases the order value.

Besides being a collection of products, a bundle is a product itself with its own product information (name, description, images, …), variants, and prices.

In this example, an iPhone and AirPods are offered as a bundle, and it is $50 cheaper to buy the bundle than two separate products.

With bundles, customers are not given an option to buy included products separately. The quantity here means the number of bundles to add to the cart.

Bundles are used in all industries. A bundle can be a combination of a computer with a screen and keyboard, a gaming console plus a game, internet, and TV plans sold together, or a car and home insurance bundle.

Adding bundles to the catalog complicates the calculation of the product’s availability; a bundle is only in stock when all of its components are available. 

While a bundle is shown on the cart page as one line, the system should keep track of all bundle components behind the scene. Customers buy a bundle, but you work with bundle components when it comes to processing the order. The shipping cost also depends on bundle components, and they can be returned or exchanged separately.

Configurable Bundles

In some cases, merchants are selling a complex mixture of products, and you need to guide customers through several steps to make sure they buy the correct combination. You can break that process into several screens. The customer’s choice in previous steps may influence what options are available in the next step.
Other validation rules may be required to ensure the correct configuration. The final price could also change based on the choices made.

In this example, we ask the customer first to select a mobile phone, then a headset and charging cable. If she chooses an iPhone, only Apple-compatible headsets and cables should be offered.

Sometimes people mix up configurable products that we have discussed in the Product section and configurable bundles. So, let’s clarify it.

Buying a bundle is always buying several products together. A bundle can be predefined in the catalog, or you may allow a customer to configure a combination of products to include in the bundle. The latter is the Configurable Bundle feature.

On the other hand, a Configurable Product is always a single product. The main difference between regular and configurable products is that you allow a customer to modify (configure) a product before adding it to the cart. You can learn more about configurable products in this article.

With this out of the way, let’s look at some examples.

Configuring kitchen cabinets. Source Spryker.

Here is another example. Buying a TV plan with additional channels in three steps. Please note that configuration requires a customer to select 4 TV packs.

In some cases, it is convenient for a customer to have several different paths through the configuration process. For example, when buying a mobile phone with a plan, some customers would prefer selecting the phone first, while others would start by choosing a plan first. Initial choices may influence the availability of products in the following steps. You need to define compatibility rules to help customers avoid costly mistakes.

Selected products may affect the bundle price. For example, if a customer has chosen a two-year contract for his mobile phone, the phone can be offered at a significant discount.

When added to the cart, a configurable bundle is treated in the same way as a bundle – one cart item.

Searchandising

All modern Ecommerce implementations are relying on search to display products. Search engines are used to display Category pages and to show results of customer queries. We will talk about search in more details in the Product Discover Section of the Canvas. Here we discuss how to use search technology for merchandising.

The term Searchandising is a combination of words search and merchandizing. In digital commerce, it describes the way to use the site’s search engine to promote products when users search for specific keywords or phrases. In other words, it incorporates merchandising in the search experience.

Searchandising brings the benefits of brick-and-mortar merchandising to e-commerce, guiding customers on an engaging journey through the site. 

Source: Bloomreach

Product managers can define searchandising rules to align search results to their business objectives – whether by profitability, supplier, availability, or popularity.

Businesses can promote some products by boosting their search ranking, so they appear on the top of the list or bury them at the bottom.

Searchandising rules can be quite complex and consider categories, touchpoints, margin, available inventory, product attributes,.

Some slots on categories pages can be reserved for a specific purpose, such as promoting products from important suppliers.

For example, a travel aggregator, Booking.com, needs to find the right balance between satisfying customer needs, revenue generated for business partners, and its own margin.

With recommendations and search tied together and empowered by AI, the recommendation logic can adjust to each customer in real-time by combining customer data with customer behavior. System analyses clicks, shopping cart content, search terms used by customers, demographics, previous purchases, and even the weather. Thanks to AI, search results can be personalized for individual customers promoting to the top her preferred brands, colors, or categories.

Every digital commerce system has some built-in merchandising and Searchandising tools. However, that may not be enough if you want your business to benefit from advanced techniques utilizing artificial intelligence and empowering business users with powerful tools.
In that case, you will need to look at specialized systems like Bloomreach, Algolia, Factfinder, and others.

It is a good idea to continually monitor how customers are using the search on your site and adjust your Searchandising strategy based on changing customer preferences, business objectives, or new additions to the catalog.

Next Section

Product discovery

Success in digital commerce depends on how easy it is for customers to discover the products they need. Read about categorization, search & filtering, product content, product comparison, SEO, and other techniques.

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