What Is Merchandising?

Merchandising is the promotion of goods and/or services that are available for retail sale. Merchandising includes the determination of quantities, setting prices for goods and services, creating display designs, developing marketing strategies, and establishing discounts or coupons. More broadly, merchandising may refer to retail sales itself: the provision of goods to end-user consumers.

Key Takeaway

  • Merchandising, broadly speaking, is synonymous with retail sales where businesses sell products to consumers.
  • Merchandising, more narrowly, may refer to the marketing, promotion, and advertising of products intended for retail sale.
  • Technology is changing the face of merchandising, with electronic point-of-sale terminals to targeted and personalized mobile ads.

Cycles of merchandising are specific to cultures and climates. These cycles may accommodate school schedules and incorporate regional and seasonal holidays, as well as the predicted impact of weather.

How Merchandising Works

Merchandising can take on different and more specific definitions in regard to different aspects of retail sales. For example, in marketing, merchandising can refer to the use of one product, image, or brand to sell another product, image, or brand.

The word merchandise comes from the Old French word marchandise, from marchand, which means "merchant."

Since retailers may or may not be producers of the goods they sell, measuring the gross value of all sales provides insight into the company’s performance. This is especially true in the customer-to-customer market, where the retailer serves as a third-party mechanism for connecting buyers and sellers without actually participating as either.

Merchandising may also provide value to retailers in the consignment sector. In this sector, retailers never officially purchase their inventory. Even though the items are often housed within a company’s retail location, the business functions as the authorized reseller, often for a fee, of another person’s or entity’s merchandise or property. Generally, they are never the true owner of the item because the person or entity that placed the item on consignment may return and claim the item if they so choose.

Gross merchandise value is the total value of merchandise sold over a given period of time through a customer-to-customer exchange site. It is a measure of the growth of the business.

Special Considerations

Retail Cycles in the United States

In the United States, the routine retail cycle starts at the beginning of January. During this time, merchandising includes the promotion of Valentine's Day and St. Patrick's Day products and related items or services. Shortly following this, Presidents' Day is represented through special sales and discounts.

The next major holiday in the United States is Easter. During this time, not only the holiday is promoted, but springtime and associated warmer weather are also accounted for. Most promoted products at that time of year include clothing items appropriate for warmer weather, in addition to tools and other items suited for outdoor activities, such as gardening and picnics. These items are typically made available mid-winter and heavily marketed and promoted to move such items from shelves to make room for the next batch of products.

The cycle continues through the rest of the year in the same manner, accounting for Mother's Day, Memorial Day, graduation season, Father's Day, the Fourth of July, Labor Day, Halloween, Thanksgiving, and Christmas.

Merchandising typically varies within retail chains but will vary greatly depending upon the region of the country (and within states themselves).

The Changing Face of Merchandising

All around the world, but most notably in the United States, the reality of merchandising is getting an update. The roles and rules of merchandising are experiencing an evolution. Chief merchants, formerly concerned mainly with the selection and presentation of products, now have broader accountability and a heavier hand in customer experience, as well as the development of design and talent related to display and marketing design.

Because consumer savvy is broadening, and technology is playing such a massive role in merchandising, companies need to stay ahead of consumers’ expectations. Innovation and experimentation have a central role in retailers' merchandising strategies.

Merchandising Company vs. Service Company

As the name suggests, a merchandising company engages in the sale of tangible goods to consumers. These businesses incur costs, such as labor and materials, to present and ultimately sell products. Service companies do not sell tangible goods to produce income; rather, they provide services to customers or clients who value their innovation and expertise. Examples of service companies include consultants, accountants, financial planners, and insurance providers.