Online Merchandising: What it Means, Why it Matters, Why it’s so Misunderstood

May 08, 2012

Go to article

Over 16 years ago, I took my first job in e-commerce. In today's terms, I was an Online Merchandiser, but back then, no one knew quite what to call it. My tool set was not sophisticated, nor were the metrics I used to do the job. I was relying on my "merchant intuition" and a lot of manual processes to make products in the online store discoverable and desirable to customers. I managed a calendar of promotions and placements for the main pages of the site, synching up with my retail and mail order counterparts on the photos and messaging, making adjustments to optimize for the online channel.

Since then, the job has evolved into one of the most critical and sought after positions on an e-commerce team. According to the 2011 Shop.org/Forrester State of Online Retailing report, e-commerce leaders planned to hire online merchants more than any other position last year.

Despite the rise of the role's importance, I am continually surprised by the number of companies who are either un-resourced or under-resourced in this critical area. In fact, I find online merchandising to be a largely misunderstood role in more cases than not.

So, what is online merchandising and why does it matter?

Merchandising, traditionally speaking, is largely about the product on the shelf; what's offered in the store. But, there's more to it. Take a look at this definition of merchandising:

"…merchandising refers to the variety of products available for sale and the display of those products in such a way that it stimulates interest and entices customers to make a purchase…" It's the second part of that definition: "display of products in such a way that stimulates interest and entices customers to make a purchase" that is at the heart of online merchandising. Online merchants typically don't select or manage the inventory, but they optimize the performance of the inventory in the online store environment based on customer behavior.

Today, the online merchandiser's tool set is rich and robust: sophisticated on site search tools, product recommendation software, product videos, side by side product comparisons, enhanced visualization tools, reviews and ratings, the list goes on. Site analytics help merchants identify how placement and presentation decisions are impacting conversion, basket size and sales. Site administration tools have advanced to help "non-technical' online merchants make presentation changes easily. A/B testing tools allow for ongoing testing, learning and optimizing based on what works. More than ever, online merchants are focused on site productivity; getting maximum product engagement, conversion and sales per order.

If you operate an online store and you don't have at least one really strong person in the online merchandising role, chances are good that you're missing opportunity to present products in a more compelling way, improve your conversion rate and increase your average order size. If your assortment is large, you need a team of these people responsible for each of your major categories. If you've purchased product recommendation tools or other point solutions to optimize your site, you might not be getting your maximum value without good site merchants mining the data, fine tuning the business rules and driving better results. All that marketing money you're spending? Not as productive as it might be if he site you're driving traffic to a site that isn't merchandised well.

What makes a great online merchant? Successful online merchants often have a "traditional" merchandising or buying background. They are data superheroes that aren't afraid to throw in some intuition when it comes to romancing and selling a product. They don't have to be tech heads but they have to be comfortable doing things in a technology based environment and driving improvements with technical tools. Bonus points if they have actually worked in a physical store and worked with real, live human customers. (I can't tell you how much of a difference that can make). They're collaborative, driving (or participating in) decisions about site design, new features & tools, marketing offers and product mix.

So, if the role is so important, why is it often so misunderstood?

I've been thinking about this a lot in the last few months. I've had numerous assignments in the last year that have been focused on helping clients understand and operationalize the online merchandising role. Here are some observations that might explain the confusion:

• Product focused or "merchant driven" organizations tend to think that merchandising is all about buying. The online merchant role is confusing because it usually does not include the buying function. Truthfully, store operations people and visual merchandisers would probably understand the online merchandising function more than buyers, as the roles are much more similar.
• Marketing focused organizations tend to center their e-commerce efforts on digital branding first, commerce second, with site ownership falling under marketing. Pieces and parts of the online merchant's job may wind up in various marketers' or agencies' hands vs. consolidated into a dedicated function.
• Technology focused companies may confuse online merchandising with UX design and/or marketing, lumping part of it in with "the front end" functions that usually fall under marketing. They may also assume that online merchandising tasks should be automated via algorithms alone.
• Companies new to e-commerce are often surprised by the heavy amount of site administration and merchandising skill required to have a successful online business. They worry about the platform, they worry about SEO and SEM, but they tend to overlook the importance of minding the store, or they think that those tasks "just happen" automatically. After all, this is the web, right?

Not to be overlooked, the scarcity factor for skilled online merchants only adds to confusion…with the position coming into demand more and more, some companies may choose to "do without" or morph the role to meet the skills of the people they have or are able to find.

If you're hiring for your online merchant team or re-positioning/re-defining the role, here are a few tips to help you avoid common mistakes:

• Hire as senior/experienced a person as you can find or afford: the skill is specialized, the tool set is sophisticated. You'll get more for your money if you hire someone who'd done this before, especially if you don't currently have this skill set in house.
• Online merchants should report to the leader of e-commerce. Don't make the mistake of having them report to buyers; you want your online merchants to make site placement decisions based on customer insights and data, not based on what slow moving product needs to be promoted.
• Be sure that the online merchant isn't a fancy title for product data administrator. Product data is of course critically important and the product data administrator is equally important. But, it's a different role than the online merchant. If you have heavy site data admin needs, hire people to do that so that your merchants can be merchants.

And, don't forget. Your online merchant is no longer just about merchandising the web site; they've also got the mobile site, the tablet app and a host of other placements and surfaces to look after. Chances are you need more than one.