When it comes to doing business, the rule for success is pretty simple: sell as many goods as you can at the highest margin possible. Sounds pretty straightforward? Well, not really.
If you are an entrepreneur, you probably know that selling your services or goods at a high mark-up is actually one of the biggest business challenges you constantly have to face. Your profit margin, for one, is dependent on many things and if you want to get the best return, then you’ll have to be flexible and smart enough to know how to handle these factors. In this article, we will talk about one of the most important things that affect a business’s overall margin: your merchandise.
So what are the different kinds of merchandise that your store should have?
Overall, six different types of retail merchandise make up a retail store. Now, if there’s one thing that any entrepreneur should understand first and foremost, it is the fact that these six types do not contribute the same amount of profitability to your store. However, each and everyone plays an important role in your overall retail plan and, most importantly, the customer experience you offer. Let’s delve into each below:
1. Bread and Butter Merchandise
Also called your destination merchandise, these are the items that convert the most among your inventory. To be precise, these goods are what brings the regular customers in—the ones that you can consider to be your main and strongest sellers. Sometimes, this can be a limited item or signature merchandise, though more often than not, these are your regular stocks that do not need any special marketing techniques to sell. They are not necessarily cheap or expensive, either. Most of the time, they are averagely priced, another reason why they convert well.
2. The Wow Merchandise
These are the items that pack up in the wow factor and serve to impress your customers. Usually, these are your limited edition and high-tier goods which are meant to enhance the image of your business to your target audience. The rules of retail suggest having this merchandise make up only 10 percent of a business’s inventory due to the reason that while they may impress buyers, they don’t necessarily purchase them. Therefore, it’s best to control and keep their stocks low. Despite their possibly low contribution to sales, however, image-enhancing merchandise is still important because they are the ones that create word-of-mouth among your target market.
3. The Add-ons
These items are the upsells in retail merchandising. Say you are running a store that focuses on haircare products. Your add-ons or transaction builders are additional products that your customers can buy to use your main items. For the case of the example that we are using here, something as simple as hair caps, clips, or more expensive items like styling tools can act as your add-ons. One way businesses do their pricing is that they offer discounts on the price of a high converting product they have and offer upsells on their transaction builders, relying on the latter’s higher margins to make up on profit. For this strategy to be effective though, a solid sales strategy and even retail display are needed. Your staff, for example, should know how to upsell an item while your merchandising design should be done in a way that your add-on items can easily be seen with your main items.
4. The Traffic Magnets
A little bit similar to your bread and butter merchandise, the traffic magnets are the part of your merchandise that is designed to make your customers come back to your store AND keep them there longer. The main difference between traffic magnets and destination merchandise is that the latter does not always keep a customer lingering in your store—remember, they are easy to grab and convert—so they also do not always leave room for additional purchases.
Your traffic builders, however, cater more to the curiosity of your target market so that you keep them more exposed and engaged with your store and the rest of your products. While these are mostly special products, they can also come in the form of retail displays that catch the attention of your market.
5. The Profit Makers
Your traffic builders, however, cater more to the curiosity of your target market so that you keep them more exposed and engaged with your store and the rest of your products. While these are mostly special products, they can also come in the form of retail displays that catch the attention of your market.
6. The Eye Catchers
These are the items that you put on sale or put big discounts on. Often, these are the leftovers in your inventory that you need to clear out. The eye-catchers are the part of your merchandise that you want to put in your retail displays if you want to attract new customers or make a quick profit because they invite everyone to your turf and are also easy to sell.
Having a solid retail store merchandise strategy is important for every business. To make sure that it can truly deliver, however, it needs to be supported by other elements such as a well-trained sales force and an attractive, customer-focused retail display plan.
