By Frances Riseley Senior Consultant
Martec International Merchandising processes should be different for eRetailers compared to store based operators - they are more similar to catalog and home shopping companies. However, the basic principles are the same for all types of retailing. The aim of this short article is to highlight areas where there are differences and where most benefit can be achieved by adopting more targeted merchandising techniques. The Merchandising Process for eRetailers The process is summarized in the chart below. Merchandising for eRetailers or catalog retailers is essentially a more straightforward process, where potentially less inventory is needed to service the customer, as there is no need to distribute via stores. At the moment most eRetailers are capturing only size and color information about the merchandise they sell. In future, web retailers will use a much more complex set of data including the assortment and depth of item attributes as well as consumer traits. 
Assortment Planning Assortment planning is an essential process for all types of retailers. It is the plan for the mixture of items found on the web site. Some of the analyses that a merchant would consider when planning an e-tail assortment include: · Sales analysis by product trait, e.g. color · Comparison of new items to similar items · Contribution of the product to the segment or category · Time to contribution analysis · Product sales vs. plan comparison · Best and worse sellers ranked by sales contribution · Historical assortment trending, e.g. colors and sizes Open-to-Buy At first many web retailers did not operate an Open-to-Buy system, mainly because they did not hold much inventory - vendors fulfilled their orders. There are about four main types of merchandise held by eRetailers: Normal inventory held by the web retailer - this should be handled through the open- to-buy as normal. Special orders - most eRetailers do not include these in their open-to-buy as they do not affect cash flow or add extra inventory that is not allocated to a customer. Consignment inventory - it is sensible for this type of inventory to be monitored in the OTB as a separate category from regular merchandise. Sale or return merchandise - again this should be handled as a separate category in the OTB, as it can be taken back to the vendor and so does not affect cash flow in the same way as regular merchandise.
Pricing eRetailers, such as priceline.com are already run their business on new pricing models where consumers effectively name the price they are prepared to pay for goods and services. Some pricing strategies eRetailers are adopting include: Changing prices depending on time and circumstances. For example a compact disk may sell for $12 in the first 3 weeks it is out, $9 in the next 2 weeks, $6 if the sales go platinum or $4 for a frequent buyer who buys two other CDs at the same time. This is a much easier strategy for an eRetailer to implement than a bricks and mortar retailer. Premium pricing for exclusive products - it may be possible to charge premium prices for goods sold on the web before they are introduced into the bricks and mortar stores. Using the web to test the effect or either increasing or decreasing prices to accelerate sales. You can then set a more realistic price for the bricks and mortar stores. Reduce prices to frequent customers to boost sales. eRetailers like CDNow offer customers the chance to keep a "wish list" of CDs. It would be possible to offer a discount to these frequent shoppers at certain times. A web site also offers the ability to vary the layout of the store dynamically according to consumers' preferences. If you ask what price ranges are acceptable to them you can present goods that fall into the correct price bands for them. Also you can build up a picture of their price sensitivity. Web Merchandising Key Performance Indicators
Finally, a word about measuring the success of your web merchandising. E-tailing introduces a new set of KPIs to measure success. These include: Look and buy conversion ratio, which measures the ratio between the number of consumers accessing the site and those that made a purchase. Traffic / page measure, which determines the number of consumers who accessed specific pages on the web site. Basket size, the number and total cost of the items purchased on each shopping occasion. Fulfillment ratio, the number of orders that can be fulfilled within n days of the order being received. Returns ration, the percentage of returns made against a specific product - this can be as high as 40% for apparel.
So, good luck with merchandising in this exciting, fast moving retail channel and remember to feedback results and successes into the other sales channels. FREE NEWSLETTER, click here | 