One of the hardest but well understood aspects about building an e-commerce business is acquiring the breadth and depth of inventory that can keep shoppers engaged. However, the often ignored aspect in the online world is the art of exposing that inventory in ways that increases the profitability of the business. Physical retailers do a lot of up-the-funnel merchandising but until recently online players have mostly treated merchandising very tactically, limiting it to recommendations on product pages. While this down-the-funnel merchandising is efficient, it leads to a significant missed opportunity to increase the LTV (Life time value) of the already acquired customer.

Effective merchandising on the homepage can be used to engage the shopper at times when he/ she might not be considering buying from your online platform. However, getting it right requires a deeper understanding of user psychology. The problem is harder for players that focus on multiple verticals but solving it at scale can be very rewarding. It all boils down to what inventory to present, when and how.

In my mind there are four states that an effective merchandising strategy on the homepage could address:

• Create consideration through FOMO (Fear of missing out)
• Create consideration through needs that will likely arise
• Shape consideration
• Leverage previous purchase

Companies need to understand their core customers to know which aspect they should focus on more vs. less.

Create consideration though FOMO

This is all about capturing the fear of missing out. The idea is to drive purchase by creating a feeling of scarcity.

Daily deals: These are meant to get shoppers to come back for those small and big wins that they will feel great about. Everyone likes to win and deal hunting can be very addictive. These shoppers will visit your site few times every week just to check the new deals.

Events: These are limited time events featuring curated inventory within a particular sub-category or for a particular interest. With or without discounts, the idea is to catch shoppers attention and show them what they are missing out on.

Trending: This is more reserved for hobbyists/ collectors/ arbitrageurs who like to be in the thick of customer tastes and capture either perceived or real value from it.

Create consideration through needs that will likely arise

This is all about creating entry points for needs that will likely arise at some point. If your platform is there when the need arises, it is more likely to lead to a conversion.

Retail moments: These are inserts that funnel the shoppers into experiences that allow them to be smarter about the purchases they should make for special people on special days.

Seasonal needs: This is solely about capitalizing on the spikes in purchase patterns of your shoppers through the year before they go to any other site e.g. winters mean skiing, summers mean beach, etc.

Periodic needs: This is about capturing the needs for consumables because guess what, consumables run out. Given the high frequency of this purchase, the rewards in terms of volume can be realized in short term though low percentage margin of the category might mean that the dollar margin rewards might take longer to materialize.

Editor’s picks/ Deep curation: This is about convincing shoppers that what they are seeing is the best of the best and that they should consider bringing forward their purchase and not hold it for the future. The idea is to pick one product area and go deep into it with the help of rich images and content. It is easier to execute on narrow/ specialized vertical platforms.

Shape consideration

This is based on shaping consideration in areas where the shoppers have already shown some interest. If done right, this can lead to quick conversion.

Recently viewed: Very simple but effective way to ensure that the recently browsed products remain in the consideration set of the shopper while he/ she is doing price comparison across multiple platforms or simply waiting to make the purchase.

Categories you browsed: This gives the e-commerce players continued opportunity to surface new/ interesting inventory in the specific sub-categories that the shopper was shopping in. Since it is not clear if it was the inventory or pricing or something else that led to the shopper not making a purchase, showing this module allows the platforms to convince shoppers to reconsider them.

Collections: Collections consist of community curated inventory that is expected to spike one’s interest. What makes them interesting is the personalization based on the browse behavior of the shopper. Showing shoppers collections from the sub-categories they were shopping in can help inspire them in a way that leads to an impulse purchase.

Top sellers in the categories you browsed: These are designed to close the trust gap that might be inhibiting shoppers from making a purchase from sellers in a category they haven’t previously shopped in. By showing the Top sellers and their followers, the platform assures the shoppers that the community has vetted the sellers and that they can trust them. Following these sellers can lead to continued future purchases.

Leverage previous purchase

This is very tactical around making sure that the platform can make more of the already monetized shopper.

Buy it again: Straightforward approach to allow shoppers to buy the previously purchased consumables again.

Complements to what you ordered: The idea is to showcase complementary products to what has already been purchased. Not every purchase would fit this well but it can be a good way to create impulse purchase for some categories such as electronics, home & garden, cars, etc. In some cases, the shopper might not even have realized what complementary item he/ she is missing and this can help them figure that out.

Merchandising is fascinating. The kind of merchandising a platform does tells us a lot about what the platform thinks it stands for. Its hard to get it right in the first go and that is what makes it so interesting.