What Is Cross-Merchandising?
- What cross-merchandising is
- How cross-merchandising can boost sales
- How to set up a cross-merchandising strategy
Developing a sound strategy to display, advertise, and draw attention to products in a retail space is both an art and a science. Before any customer enters the store, business owners must attractively organize their goods. Determining which methods to use for optimal impact and purchasing potential can sometimes take years. Yet, with the help of a few well-established merchandising ideas, any retailer can reap the rewards in no time.
Cross-merchandising is one of the most effective ways to display products. It has been subject to extensive research and case studies since its inception in the mid 20th century. The purpose of this article will be to introduce this term, give some examples of how it works, and discuss its effects on suppliers.
What is cross-merchandising in retail?
Cross merchandising, sometimes called secondary product placement, is a merchandising or advertising practice. It deals with the question, “How does one display different products together?”
Marketers often call it secondary product placement because retailers and store owners are trying to sell a second item along with the product the consumer initially intended to buy. Like furniture stores often place matching products together into a modular design, this mod or modset technique is easy to transfer to any business and store layout.
For example, a retailer may locate batteries near the shelving display of a popular tool or holiday toy that requires batteries. Grocers often place filet knives in the fish aisle or nutcrackers on a shelf next to the nuts. In each case, the retailer wants to trigger a buying response in the consumer. There are several techniques used:
- Displaying a brand new product by placing it beside older items
- Triggering the imagination by introducing an unexpected combination of items
- Saving the customer time in large stores by putting complementary things together
- Reminding visitors to the store of secondary items they might forget to buy
- Strategically using the endcap to display featured items or an add-on sale
From small self-owned businesses to massive bulk grocery stores, any vendor can benefit from cross-merchandising. Below, we’ll go into more detail on how large box stores drive up secondary purchasing effectively.
How does cross-merchandising benefit suppliers?
While retailers are often the link in the supply chain responsible for cross-merchandising, suppliers, such as consumer packaged goods suppliers (CPGs), can play their part as well.
A supplier, for one, can serve as a valuable source of advice and market research for retailers to turn to for guidance. Segmentation analysis is another tool that suppliers can use to understand the target market and appeal to specific groups. Using this analysis, vendors can “segment” their chosen market into smaller pieces, making cross-merchandising much easier.
Suppliers aren’t only interested in getting their merchandise into retail stores. They also want their products to sell as efficiently as possible. Vendors with open communication channels with their retailers can gather helpful information about the best way to cross-merchandise products in a brand.
Say, for instance, a supplier sells several components for a large outdoor grill. In a store like Walmart, the consumer may need to pick up tongs, charcoal, grill cleaner, and other products separately. The supplier will benefit from communicating to the retailer why sales may improve by stationing all the components together.
Cross-merchandising is an effective strategy to target and resolve marketing issues like:
- Making sales occur without an appeal to cost
- Conveying and displaying product value in new and unexpected ways
- Accelerating innovation by making secondary product placement a priority
- Selling “solutions” or lifestyles (e.g., grilling) instead of goods
How do stores like Walmart or Kroger use cross-merchandising?
Retailers from all economic levels use cross-merchandising techniques, from boutique owners to industry leaders like Walmart and Kroger. The key to increasing sales, drawing new customers, and creating hype is, many times, achievable with cross-merchandising. But how do retail giants do it?
A typical cross-marketing technique used in Walmart and Kroger is to sell in bundles. The effect that a bundled product often has on a consumer can vary. Grouping merchandising by theme or lifestyle is effective. For example, selling golf balls along with branded hand towels, tees, and clothing is an excellent way to make an impression on the customer.
Another method that big box stores use to drive up sales with cross-merchandising is to display products in clever or unexpected ways. Careful market research can clarify which products consumers buy together, even if the items are from different departments of the store.
Let’s take an example. Tesco, a British retailer, found that men make up the majority of diaper buyers. Their cross-merchandising campaign displayed typical male purchases like beer and snacks near the diapers. Sales leaped in response.
There is one final way that Walmart and Kroger use cross-merchandising. They draw attention to products that aren’t selling well. Some products naturally fit into the secondary product placement category. Cherry pitters and cherries, for example. When large grocery stores see that products aren’t catching consumers’ eye, they place them near popular products.
How do suppliers set up cross-merchandising?
There are several ways for suppliers to help retailers follow the best cross-merchandising techniques for their product line.
One strategy is to sell samples and demo products to retailers. Department stores have effectively used this technique with cosmetics. By offering customers a free sample, they are more likely to purchase products marketed as complementary to the item or commonly bought in tandem with it.
Suppliers can set up cross-merchandising also by studying sales in competing stores. Suppliers can research the competition trends and shopping patterns that other retailers experience, then alter their supply to match. The research will lead to further insight into how consumers are reacting to advertising. Eventually, the data can allow suppliers to set up incremental purchasing plans.
Using a planogram is an excellent way to visualize consumers’ buying habits and optimal for predicting which products they commonly purchase together, on a whim, or seasonally. Suppliers should use these tools and give retailers detailed breakdowns on how supply needs to change to fit cross-merchandising trends.
Every retailer and every supplier will need to arrive at their own cross-merchandising strategies to match their customers’ needs and desires. Bundling themed products, putting things in unexpected combinations, and adding a “You may also like…” notice to popular items are just a few ways to capitalize on secondary product placement.
Done correctly, cross-merchandising is a sure way to boost sales, keep customers inspired, and remind people of the products they may (or may not) have forgotten.
Use data to get insights into consumer behavior
With proper data insights, you can view how your category stacks up and make cross-merchandising decisions with ease. Using the Sales by Category metric in SupplyPike’s Retail Intelligence software, you can quickly see how your products compare with your competitors.
Retail Intelligence – Sales Comparison – Sales by Category Metric
Written by The SupplyPike Team
About The SupplyPike Team
SupplyPike builds software to help retail suppliers fight deductions, meet compliance standards, and dig down to root cause issues in their supply chain.Read More