Unleashing the Power of Merchandising: A Blueprint for Start-up Success

Having worked closely with small businesses, I've noticed a common trend: there's a lack of awareness surrounding merchandising. Many entrepreneurial founders in the retail sector, lacking a background in this area, simply aren't familiar with the concept. Even the average person has likely not heard of merchandising, which has traditionally remained in the shadows compared to its more visible counterpart, visual merchandising and it’s more famous partner, buying. I can't help but recall moments from over two decades ago when my own family (mainly my dad) and friends would ask if my job involved rearranging stock on store shelves. It appears that, despite the passage of time, this fundamental aspect of retail remains widely misunderstood. While product innovation, marketing strategies, and customer acquisition play pivotal roles, merchandising is the often overlooked function that plays a critical part in driving business growth.

Not to be confused with visual merchandising, merchandising is the data driven science of delivering a range of products in a way that maximizes sales and profitability.  Merchandising provides expertise on product range building, purchasing quantities, consumer behaviours, market channels, timing, pricing, promotions, replenishment: key components of value creation and essential tools to create competitive advantage. It is a critical component of retail success. Yet, for many founders who haven't had prior experience in the retail sector, understanding the “5 Rs” of merchandising and its impact on business performance can be a daunting task.

Merchandising, as defined by Paul Mazur in 1927, encompasses the five rights of merchandising:

1. The Right Merchandise: Offering products that align with target market's needs and preferences. Understanding customer demand is crucial for selecting the right merchandise mix. This involves regular analysis of key product attributes to understand product performance.
2. In the Right Quantities: Balancing inventory levels is essential to meet customer demand without tying up capital in excess stock. Start-ups need to analyze sales data and plan demand accurately to optimize inventory levels.
3. At the Right Time: Timing is critical. Businesses must anticipate seasonal trends, market dynamics, and consumer behaviour to ensure they offer products when demand is highest.
4. At the Right Price: Pricing plays a significant role in determining a product's perceived value and competitiveness in the market. As well as offering the product at a competitive price for the consumer, it also needs to hit required margin targets to be profitable.
5. In the Right Place: The distribution channels through which products are sold significantly impact their accessibility to customers. Start-ups must strategically choose the most effective channels, whether it be online marketplaces, brick-and-mortar stores, or direct-to-consumer platforms, to ensure their merchandise reaches the right audience.

One of the primary challenges faced by start-ups and small businesses is the lack of awareness about merchandising and its significance. Without a depth of understanding of their current performance, businesses struggle to build future ranges that resonate with their target audience and drive sales.

Identifying growth opportunities and expanding product ranges becomes a Herculean task when the necessary tools and expertise to analyse performance and react to current trade positions are absent.

Unlocking Growth Potential:

However, in the face of these challenges, there's a significant opportunity to utilise merchandising effectively and stimulate growth. Through strategic merchandising practices, start-ups can:

1. Maximise Sales: Analyse & interpret sales data to understand which products are performing well and identifying slow-moving items. This insight enables businesses to make data driven decisions to trade current stocks effectively and to plan future ranges in the right product mix and quantities.
2. Optimise Inventory Management: Well-executed merchandising strategies can help retailers improve inventory turnover rates, leading to better cash flow management and reduced carrying costs associated with excess inventory.
3. Drive Profitability: By improving supplier terms, planning pricing, promotions, and placement, start-ups can improve margins and drive profitability.

As start-ups continue to navigate the complexities of the retail landscape, embracing merchandising as a core pillar of their growth strategy can pave the way for long-term success. By investing in the right tools, expertise, and processes, start-ups/ SMEs can thrive in today's competitive market.