How To Optimize Merchandising for Your Ecommerce Store With Antony Kattukaran of Tagalys

Guillaume: Hello everyone. Guillaume Le Tual here, host of the Ecommerce Wizards Podcast where I feature leaders in e-commerce and business. Today’s guest is

Antony Kattukaran, CEO and co-founder of Tagalys, and today’s topic is Why Merchandising is Important for Your E-commerce Store. Tony, thanks for being here today.

Tony: Thank you so much, Guillaume. I’m looking forward to it.

Guillaume: So you’ve built an application that’s specializing in merchandising, so you have quite a lot of hours spent trying to master the topic. Let’s dive right into it. So why merchandising is important for your e-commerce store and, of course, some best practices, tips and advice. Let’s get started.

Tony: Thank you so much. I mean, before we go into why e-commerce is important, let’s talk about, I guess, the fundamentals. In today’s day and age e-commerce is just another channel for a lot of our customers, the kind of customers that want merchandising typically already have an offline presence. So when they have an offline presence, they already have an understanding about the kind of user experience they want to deliver to their audience or visitors walking into the store. Now the same visitors that have been visiting their stores are the ones that actually want to also come online because it’s more convenient. So while most customers in this sort of segment already have online stores, trying to also deliver the sort of user experience in terms of what they see when they walk down that aisle, that’s what merchandising does for you. And if you look at most e-commerce tools at a certain amount of scale they will have like a couple of 100 categories out there.

And if I look at each category to be an aisle, you want each aisle to kind of match the sort of user journey experience that you want to deliver for your brand. For example, some brands may want to show things based on print, some may want to show things based on color. So how do you keep people engaged in an online store? That’s what merchandising does for you.

Guillaume: Agreed. Very important. So that’s the first part. And I agree from my own experience that this is part of the engagement aspect, you go to a website you feel like it’s easy to find what you’re looking for. Are you interested in buying the merchandise that you see right away when you start browsing or they are not interesting collections. So it can change, especially, if you’re a first time visitor how interesting you think this website is and if you stay or not. If you’re a returning visitor you’re familiar with the brand, you will forgive a messy merchandising and inventory presentation that you would ditch for the right value that you might find somewhere else. Now, what are some of the best practices in this regard?

Tony: So again, when it comes to e-commerce specifically, there’s one thing you can do. When you start showcasing merchandise in a category, you want to also consider the availability of, for example, sizes. So it can be a lot of best practices by vertical but one of the things we see a lot of fashion customers do is you don’t want to just show things that match your brand story online, it could be a color story, but you also want to make sure the products you’re showcasing and the color story have enough size available to resize the curve. So when you click on the first product, you have seven sizes to engage from versus just one size that’s remaining in stock. So that’s kind of one of the basic requirements if you’re looking into fashion, which is where I think we have the most experience so far to understand.

The other thing we’ve kind of seen customers also do is, merchandising is a mix of not just what your visitors want, it’s also what the business wants sometimes. So while you may think your audience wants to kind of engage in a category by color, you may want to, for example, push up certain high margin products because you have that data with you. Those sorts of business insights which are not available in the data can also be something which is considered winning merchandising on top because you have profitability, revenue, or the top line also going up. So monitoring should be a mix of both what I think the business wants and what I think your customers and visitors want to get the best impact down the line.

Guillaume: And you’ve talked about having multiple sides and so on, would you show products that are sort of out of stock as part of that experience for merchandising?

Tony: Absolutely, such a great question. When you say merchandising, every question we will talk about, I’m going to say it depends because every brand is different. So when you look at, say, out of stock products showing them on top, we have seen customers that want to push out of stock products on top because some of them think that’s a way to kind of build the brand, build the hype, and they have a pre-order option. So in that situation it makes sense having things on top. But if it’s going to be a product which just comes and goes out and let’s say two weeks and you are never going to get it back in a business like that, you may never want to show things which are out of stock on top. So having the flexibility to kind of make sure merchandising also matches your business and your supply chain, that’s also what’s considered in a good tool that can do all of this together.

Guillaume: Right, another variation of what you just said that we also see in businesses is that you can order an out of stock item but there will be a fulfillment deli. They’ll notify you this is out of stock but you can proceed with the checkout, you’ll have like eight to 10 weeks shipping delay, are you okay with this? Yes or no. So it’s connected to their ERP system. Typically, they know when they will get a new shipment from overseas and so on.

Tony: And the reverse of that, again Guillaume, is the pre-order option. So things which are not yet available today, you can put them on top and kind of create the bus thing coming soon and get them to pre-order things as well. So it’s both ways.

Guillaume: They can put a deposit so it works great. The car industry right now is pretty crazy with this, you put a $500 car deposit. They just collect deposits just so you have some kind of commitment from the customer even if it’s nothing in terms of percentage versus the whole order. What’s next? So in merchandising you can choose which product goes at the top, maybe it’s a bestseller, a higher margin, you talked about size, out of stock, what else can we control or should we care about?

Tony: Again, I think different merchants have different sorts of requirements. But it’s humanly impossible to, when you look at an e-commerce you have like 500 categories. So it’s two things you should be considering, one, is how can you do this most efficiently? And secondly, how can I do it most effectively? So what we’ve seen our customers do is, when you have 500 collections of categories there’s a certain sort of a common merchandising strategy for a set of collections together. You may have 10 new arrivals collections and you want to match them a certain way. So being able to kind of group merchandising into certain sort of global settings to apply them to sets of collections allows you to kind of standardize merchandising into a family. And then there’s 20% or like 10% of the collections where they do want to do it individually. So for example, if they’re bestsellers collection, some merchants may want to sort it based on three days’ revenue. Some merchants may want to consider 30 days of revenue depending again on the vertical. So again, having the flexibility to choose the right sort of analytics for your business based on your sell through rates is a requirement, I feel, like one size does not fit all.

Guillaume: So you could have some pages or categories or brands that you sort perhaps manually, the most important one and the other one you sort of leave it to an automation tool with a little bit of supervision and training.

Tony: Well, you should have the ability to have a tool that provides automation by default. If you want to limit the automation you can kind of control whether it’s 50% or 60%, automation. And even in the last mile, even if you have automation, if you want to tweak one product you should be able to do that easily.

Guillaume: Everything’s automated but you can override the automation with a manual input.

Tony: What’s also important is for the kinds of customers that are in the size and scale, the kinds of users that come to use it are more design-centric as well. They do have a very good sense of design and have a tool that is also easier for them to understand because even if the merchandising is full of analytics, you want to have an interface that matches the user persona to get the most out of the tool. So they can start using it to the best of their ability. So all of that comes into play.

Guillaume: Right. Now what we see mostly is rule based stuff, sort of, if this then do that, if that, and the merchant sets a lot of rules, or the developer sets a lot of rules. And those of course, change over time to evolve and they can be manually overwritten. But I do believe where this is going eventually, there will be some machine learning that you sort of teach the AI what you want and then it will more and more do this automatically and just set manual new rules. That’s a future down the road in a few years.

Tony: Absolutely, and that’s definitely the vision. I would say that is what all the best in class companies are looking forward to as we speak, but now I think everyone’s working on collecting enough data to start building intelligent systems to make decisions for us in the end. So that’s the key of what we everyone’s doing right now. But that is going to eventually become the future when you have enough data to make those decisions.

Guillaume: Okay, so where should merchants care about merchandising? There is of course the product listing page, you have a product category listing page and you have a homepage, are there any other places where merchandising happens?

Tony: I think merchandising can happen and should happen in pretty much every part of the visitor journey. I think how much time you invest in the merchandising effort is, I would say, kind of correlational to the actual sell through rate through a channel. So if you think ‘search’, typically 10% of your audience is going to search. If that 10% equates to, let’s say, 30% of your revenue or 40% of revenue, yes, it makes sense spending time inside of that. But there are certain categories which not many people search enough, they actually want to browse a lot more. But I think that defines which other matches the channels and once they search, and again after that, depending on the kind of vertical of its passion, nobody buys the first product they see, like nobody does. You want to look at one and you want to consider four more products. So you want to have the right set of recommendations.

So I think recommendations also should be something which the merchant has complete control over. Because as far as, again, what we’ve seen across the market so far, even within fashion, what is perceived to be similar changes from different kinds of verticals in fashion itself. For example, if you were a company that was selling, let’s say, T-shirts, what you may want to show in similar products could be T-shirts from the same brand, or maybe T-shirts from the same different colors, for example, for the same T-shirt type. But if you were a company selling jeans, your recommendations may be the same style but different fits for example. So what the user wants, the customer actually knows the merchant store. And also being able to consider that requirement to kind of configure the tool to then also use that market funnel is possible. So I think all three funnels, it’s really important to have the business to set the right configuration to match them.

Guillaume: I do see this as something evolving right now. Again, from the traditional rule base of, if this then this, we would recommend a product and cross-selling to evolving, again, with what you’re suggesting and new technology made available to e-commerce merchants such as automatic image recognition from, again, the beginning of AI being usable in a commercial setting. You could ask, ‘Show me similar’ but what does similar mean? Is that similar color, similar patterns on the clothes, or is it actually similar caps but with different colors and different patterns? Right now it will need some input from the user but you could very soon have this automated on the merchant side so that you have an AI tool with image recognition.

There’s some pretty good one already from Adobe that is available with Adobe Sensei, which is available with Adobe Commerce, also known as Magento and formerly Magento Enterprise. You can also see that when you go on Adobe store to buy stock images, not everybody knows this, but you can upload an image and you say, show me similar images and then it will detect this and show you a lot of similar images and save you a ton of time when you’re trying to find stock images. Because AI can now recognize patterns and images and right away sort through the whole catalog for you and show you similar stuff. So this is something that is possible nowadays but it’s still new. But if some merchant implements this now they would have a competitive advantage because very few brands have this or have this in an automated way that is efficient and effective as you’re saying. Because a lot of brands who have some semblance of this do it manually by just tagging their products which is super labor intensive and so not very scalable. If you have image detection and image recognition, which is available commercially now, and implement it you can be ahead of the competition for the time being.

Tony: Yes, and I think a lot of merchants are now leveraging image, especially in the fashion space, where image recognition is like a requirement I think, because it seems just the amount of time they can’t say that’s skill.

Guillaume: Exactly, like you’re talking about a store of 500 categories, if you have, I imagine at least 10 to 100 products per category that becomes quite a catalog pretty quickly if 50k catalog or it may be even more than that, 100,000 products or more. So for sure you will want automation as much as possible there.

Tony: Absolutely.

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Guillaume: So a bit of a shotgun question here. Anything else regarding merchandising and designing, the clients’ experiences, what kind of product they see and what’s being presented to them?

Tony: So again, when we talk about visual merchandising there’s of course, products that specialize in that. But I also feel like where this is going to be heading to and depending on the size and scale of the merchant, merchandising is also going to be done by segments. So in other words, how you want to showcase products to say new versus returning visitors, will be a lot different. How you want to show products to somebody sitting in New York and address this like a category versus the San Diego, and address this category is going to be different. And that’s again, becoming a requirement for our customers to sort of, in some way, ensure we use a lot of localized analytics, localized inventory, localized data, to make it a lot more effective for them. So it is, like I said, a requirement and again, with online, you can start doing this in a very, very effective manner and scale.

Guillaume: Yeah, because when you have data for returning customers like what they like. The customer you don’t have data so you don’t know what they like yet. So they need to give you typically at least three clicks before the AI can start to make any recommendation that makes sense such that you can see, okay, they’re browsing home hardware or something like that. And then you say, okay, we’ll start suggesting stuff from this and maybe suggest a little bit of other topics just to see if anything else interests them and that sort of stays as stock in this silo than never discovering the interests of the other person. But of course, we will mainly push this and then start to get to know the profile of that person and what else they are interested in, especially by presenting high level categories.

Tony In the e-commerce space I think there’s different layers to it, like you said, it starts with like matching where you’re either doing it at the store level or a segment level and rightfully said, afterwards if you look at Amazon today, the second time you visit the Amazon website it’s always showing your entire personalized recommendations upfront to get you back into the same user journey which you left earlier. So you start with something that works at a certain scale and once you understand the user data then you basically personalization takes over. So they all kind of flow in together, marching starts first, but it goes towards personalization at the end.

Guillaume: Yeah, and the products that you’ve already viewed, I like this as well, it can lead to some sale as the person is browsing and might even have a hard time to find another product again in a catalog if in a very large catalog if they did not add it to their ‘favorites’ or something like this, or ‘add to cart’ to then sort cart later.

Tony: These are the facts, I mean, I know you make it sound so simple right now but, I mean, these are basics. But you still see a lot of people that don’t have these basics in place, which is at least, showing me what I just clicked on like a recent history, it just helps me find that, because like you said, a catalog of 5,000 or 10,000 or 20,000, I won’t remember how I saw that but I just know I like something on the store, where is that?

Guillaume: Yeah.

Tony: So having that available just makes you kind of kickstart the user journey again and get the user engaged.

Guillaume: Totally cool. Anything else you’d like to cover for this topic today?

Tony: Yeah, so again in the merchandising space I think it’s more than just the products I feel, so there’s a lot, we spoke about segmentation but a lot of other things that like reviews as well, are a very important part of merchandising. Because now unlike today’s golden age if you’re buying something online people are going to kind of immediately look for social proof, especially if you’re a new visitor or a first time customer. So trying to push up social proof makes the conversion rate a slightly higher chance of going up. So trying to ensure you can also include reviews data while merchandising kind of ties in one more and offers an entire circle of acquisition and retention.

Guillaume: And if you have third party reviews on your own website it can increase even more the trust that those are legitimate reviews because they’re verified reviews. Otherwise, the person needs to feel that you’re a high traffic store, not as much as Amazon, of course, nobody’s as big as Amazon, but they need to feel that it’s a high traffic site, that those reviews are probably from real people and not the merchant promoting his own greatness of whatever he’s selling. So they need to feel it’s authentic reviews and that they can trust the reviews there.

Tony: Exactly. So going back to the original question of why merchandising says in age, if you don’t merchandise with all of these considerations, in today’s day and age, you can spend a lot of money I think bringing visitors to your store but it’s easy to lose them in a couple of seconds if you don’t have all of these signals kind of pop up because every company is fighting for the attention of your consumer today. If you don’t get them engaged in your store in the first 30-40 seconds, you’re going to lose them. So leverage as much data as you have in your online store and use all of that to kind of match and showcase what’s actually trending in your store.

Guillaume: Yeah, and if they do give you 30-42 seconds you’re already on the right track. So then just make sure that they stay interested afterwards. But it would mean that the landing is interesting enough to give you more than 10 seconds for them to keep browsing a little bit more and stay interesting. So they stay more than 30-40 seconds and they start shopping for real. It is part of a critical aspect of, does this, let’s say if we’re talking about the launch of a new e-commerce store, does it get left off or not? Because you need to send traffic to it but then, of course, it has to be targeted relevant traffic sent to the right page or right offer, right section, but then do you get left off or not? Is the website interesting for them? You know, is it presented correctly? Am I finding what I need? Does it address my concerns? I might have ordered the wrong thing and then I’m stuck with a return. So it’s just these simple things, that is, all the information that’s necessary for a decision, present on the webpage and is easy to access and so on.

Tony: I mean, what you just said, like, all of these things when they come together, that is when conversion goes up. It is not just because of one thing they are all merchandising. It starts right from marketing, relevant traffic coming in, the right products in front, right recommendations, right process, right user experience.

Guillaume: It’s a chain and if one is not working you lose and you will get exponential return on this if you get all of them right. Versus if you have just two or three and then you interest two or three people out of a hundred that you sent to the website.

Tony: Exactly. So when this comes together that’s when conversion goes up. No single app drives conversion up. It’s all of us together.

Guillaume: Yeah. You’re creating an ecosystem here, the chain link system. Cool. Any last thoughts to wrap up today’s episode?

Tony: No, I mean, like I said, it’s an exciting space to be in right now. I think much is, especially with COVID-19, a lot of brands are embracing online really, really fast. And a lot of them I think already have an understanding of what their customers want in the offline world, that’s where they spend most of their time. So matching is becoming all the more important today because they’re trying to unify the brand experience both online and offline. So definitely an exciting space to be in and a lot of collaborations to be built out here.

Guillaume: All right, well, and Tony if somebody wants to get in touch with you, what’s the best way?

Tony: Email or the website chat. I’m available on LinkedIn, but my email is [email protected]. So that’s probably the easiest way to get to me.

Guillaume: All right. Well, thanks for being here today Antony.

Tony: Thank you so much for your time.