The Merchandising Dimension (IRM56)
Merchandising is one of the most traditional retail disciplines, but as it extends across channels it’s also becoming one of the most revolutionary. InternetRetailing recently investigated the area as part of its Top500 Dimension Reports.
At the cutting edge of merchandising, some retailers are already starting to offer website visitors personalised pages compiled using sophisticated algorithms. In time, it’s likely that most traders will show shoppers whole individualised websites.
Such developments mean that digital merchandising is starting to surpass what can be done in the store. But the store remains essential: in the foreseeable future it’s clear that customers will still want to look, touch, feel and test the products they want to buy for themselves.
The ability to bring those strands together lies at the heart of the discipline. It’s easy to take merchandising for granted, that’s something online retailers do at their peril. Just as it’s important to make layout count in the store, so it’s essential to show products to their best advantage online. That doesn’t just mean high-quality images – although those count enormously. Modern merchandisers, rather, start by pre-empting customers’ questions, using reviews and product descriptions to do so. They then go on to use highly advanced tools, from search and analytics to a single view of inventory, to understand customers. From there they can most effectively present the range, and the most relevant choices. Retailers that are featured in this Dimension Report have both met and exceeded these standards.
The UK’s largest retailers are getting better at online merchandising, and over the past year they have made great strides in improving retail website design. In October 2015, the InternetRetailing research team went back to the websites of the largest 150 retailers to assess visual appeal – and found a 38% improvement since we first carried out our study back in September 2014. In 2014, we awarded our highest score for visual appeal to a little less than a quarter (24%) of the retail websites that we assessed. In this report, the figure had risen to 35%, an increase of more than 10 percentage points.
Eleven of the retailers that scored highly in the first report kept their positions in this one. Asos and Karen Millen were among the top retailers in this aspect.
Meanwhile, seven retailers stood out for the work they had done to improve their websites over that period of time. These were Tesco, Fat Face, Virgin Holidays, Joules Clothing, F&F, Spotify and Specsavers.
Movement was by no means all upwards: 67% of the retailers analysed won lower marks for website appeal this time around. Visual appeal is, of course, a subjective measure, judged when researchers rate their own reaction to the site. But there’s also some evidence to show that visual appeal is linked to the number of product images on a site.
More relevant search findings: John Lewis, Karen Millen, Net-A-Porter and Argos stand out for the quality of search results for the second year in a row. When search findings are relevant to the initial query, customers are more likely to find the items they want to buy and to go on to make a purchase. In 2014 and 2015, we examined search findings, defining them as the quality of word match to the request that was typed in the search bar, and rated them on a scale. Overall, we found that the group of the largest 150 retailers in the IRUK Top500 improved search relevance by 14%. The number of retailers rated at the highest level didn’t change over the course of the year, although some retailers moved up to that group – and others down.
Thorntons was the most improved by this measure, while T.K. Maxx also scored highly for search relevance this year.
Dropdown search: The move towards introducing dropdown search options – which offer suggested search terms even as shoppers type in the search bar – is gathering momentum. Of the 136 retailers that appeared in the largest 150 group of retailers both in 2014 and 2015, 63% now offer dropdown search options. That’s up from 46%, and a rise of 17 percentage points, or 38%, over the year. “This,” says InternetRetailing researcher Polina Modenova, is a “big improvement.” She adds: “Retailers must be realising the effect this feature has on customers. It has
the potential to improve site usability and increase conversions.”
T.K. Maxx is among the retailers that have introduced more sophisticated dropdown word options. It scored highest in this area for a combination of both relevant search results and dropdown word options. Others that did well in this area include H&M, Ernest Jones, Specsavers and Superdrug.
Cross-selling and upselling: The traditional tools of store-based merchandising, cross-selling and upselling, appear to have taken on a whole new lease of life online. When researchers looked in 2015 at the websites of retailers from the largest 150 group, they found 75% of sites showed extra items that the shopper might buy. “When retailers place products by the till in stores it works really well,” says Modenova. “Our study shows most retailers use similar approaches online to those that work so well in-store.”
Less product information: Telling consumers about the products they are considering buying is a necessity for effective sales. In 2014, we found almost 90% of retailers showed extra product information, beyond basics such as name and price. This year, we went further and analysed the quality of additional information, awarding a high index value to 32% of traders. Consumer electronics retailers stood out – this was the sector where we found the highest quality of additional information. However, only 40% of retailers show stock availability on the website.
Social sharing: Enabling shoppers to share their retail purchases or wishlists over social media can mean items are seen by more people who have an interest in knowing what products their friends like. According to our Top500 2015 research, 68% of retailers enabled shoppers to do this through social media sharing or ‘like’ buttons. We expected to find, thanks to reports of the growing importance of the selfie in fashion, that clothing websites would be the most likely to enable social merchandising of this kind – and our expectation was confirmed. Some 21% of fashion retailers provided social sharing.
Where do we go from here? What’s the long-term strategy? As Giles Colborne, Managing Director, cxpartners, says in the report, the future will lie increasingly in selling services rather than goods. Retailers will need to work out not just new ways of selling, but new ways of merchandising items that customers don’t yet know they want. To do that successfully, the sales pitch must be both personal and relevant to the shopper. We foresee a rapid move towards personalisation at scale. As those at the cutting edge start to serve their web visitors and email list highly relevant messages and website pages, customers will start to expect this kind of personal attention wherever they shop. In essence, this is about improving the service traders offer shoppers through their merchandising. As some improve, other traders will need to move in that direction as well, and we expect that we’ll see real differences when we revisit this area in coming years.
If traders are to achieve this without exhausting their resources, they’ll most likely need to find new and smarter ways to make their case. That’s where new solutions and smarter approaches to merchandising will come into play and we look forward to hearing of them as they emerge. One thing’s for sure: the way retailers sell will continue to change, and fast, in coming years. Retailers need to prepare in earnest for what lies ahead.