Using Digital Merchandising to Break Free of the Dreaded eCommerce Trap and Actually Drive Profits

You may not know it yet, but your digital merchandising strategy could have you stuck in a profit-sucking cycle. 

But there is a fix — and it’s not as complicated as you might think. 

However, you will need to forget everything you know about digital merchandising because digital merchandising is not about selling anymore. 

What? 

We said it! But stay with us. We have the data and sound digital merchandising strategy to back that up, and we’re sharing them with you in this post. 

Why? 

We’re online-merchandising obsessed and are on a mission to help as many retailers as we can to go beyond “right-now” tactics to build sustainable growth over time.

In fact, we’re so dedicated that if this post still leaves you with unanswered questions about our digital merchandising strategy, you can send them to our support team here.  

So grab that coffee, and let’s jump in. 

So, Why Is Digital Merchandising Not Just About Selling More?

Not all high-converting products are actually profitable. Some may have thin margins, meaning you’re selling a lot but making very little. 

Focusing only on conversions means you're likely optimizing for short-term sales rather than long-term profitability. While it is great to see more orders coming in, conversion rates alone don’t tell the whole story of how well your store is actually performing.

Here’s what happens when conversions take priority over everything else:  

• Firstly, your bestsellers tend to get overpromoted, which leads to regular stockouts. Why? Because stores tend to push their highest-converting products to the front, which accelerates stock depletion and out-of-stock panics. This, unfortunately, sends high-intent shoppers elsewhere. 

• Secondly, while your bestsellers fly off the shelves, other inventory sits untouched, eating up storage space and tying up cash flow. This means that stores are stuck in a discounting default, which erodes margins and makes it harder to sell at stable prices in the long run.

• Thirdly, profit margins are ignored, which, as we know, is not sustainable.  

By prioritizing conversions alone, slow movers and high-margin products are being ignored, and many stores are stuck in a cycle of stockouts and markdowns. 

So, what is this fix? 

Smarter digital merchandising for better profit — or, as we call it, Profit-Driven Merchandising. 

What Does Profit-Driven Merchandising Actually Mean?

Profit-driven merchandising is about selling the right products to increase both sales and profit — not just chasing conversions. Instead of only pushing bestsellers, you can balance high-margin products, slow movers, and trending items to keep your retail cash flow steady and inventory moving.  

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And the goal is simple: earn more revenue without constantly relying on discounts or running out of stock, making your inventory work for you instead of against you.

It’s a strategy we are so passionate about, we built our entire online merchandising toolkit around it — so get ready for some insider, highly actionable tips. It’s also your best defence for escaping the eCom best-seller trap! 

Are You Stuck in the Best-Seller Trap? (And How to Escape It) 

So we know that relying on bestsellers too much means you keep selling the same few products while the rest of your inventory just sits there, costing you money. 

• If a bestseller runs out of stock, you lose sales because you haven’t built demand for other products. 

It doesn’t help that old-school product sorting systems keep pushing those high-selling products to the top of category pages — leaving so many opportunities for more profitable purchases undiscoverable. In fact, there is a big chance that high-margin items that could make you more profit in the long run are being totally ignored. 

It’s what we call The eCommerce Pareto Principle. 

And how can you escape this profit-draining loop? 

By mixing in high-margin products, slow movers, and new arrivals alongside your bestsellers to keep inventory flowing. The key is balancing what’s popular with what’s profitable so you’re not stuck in a cycle of constant stockouts and dead stock.

This is precisely what Davosa USA set out to do. 

By implementing an advanced merchandising strategy, they saw a 16% decrease in non-moving inventory and a 32% increase in conversion rates. This example shows how focusing solely on bestsellers can lead to cash flow issues and how a balanced approach can be more effective.

The trick to duplicating their results is first knowing where you stand. 

The Key Metrics That Show If Your Merchandising Is Helping or Hurting

To truly know where your digital merchandising stands, it’s time to think outside of the “conversion rate” box. 

That doesn’t mean you need to overcomplicate things — you already have the important data you need. Here’s our recommended list of key metrics to watch in terms of product performance and what their levels say about your store’s merchandising health. 

Okay, but what does all this mean? 

• While traditionally, stores focused on a single parameter (conversion rates) when determining their best-sellers list, the modern approach is factoring in other key metrics to find products that don’t just sell well but earn well in terms of profits. 

However, to upgrade your product sorting and digital merchandising strategy, you need to take this even further! 

• Creating an advanced merchandising plan that factors in a multitude of marketing and retail parameters to help you match the perfect product to each shopper, which also earns you the most amount of revenue when they buy. 

Breaking Free: A Practical and Effective Digital Merchandising Strategy That Keeps Sales and Profits in Check

We’ve covered why traditional digital merchandising falls short and which key metrics reveal actual profitability. Now, we will show you how we put it all together into one strategy that actually works.

This isn’t a quick fix or fad; it's backed by all the in-house data and experience we have at our disposal. 

It is designed to help you keep your inventory moving while preventing dramatic stockouts or dead stock — all while increasing profits (without discounting) and improving shopper retention. 

Phew, that’s a lot of punch for one strategy! But don’t worry; we’ve broken it down into actionable steps. 

Step #1: Stop Ranking Products Based Only on Sales Performance

Before anything else, you will want to break the automatic best-seller loop that prioritizes past sales over profitability. After all, if bestsellers keep getting all the visibility, slow movers and high-margin products never have a chance to sell.

To do this, you want to adjust your online merchandising settings to consider other vital metrics beyond sales numbers, such as profit margins, stock levels, and sell-through rates. This alone can be incredibly remarkable. JD Sport, for instance, boosted their conversion rates by 142% after shifting from a sales-only ranking system to a multi-factor approach.

Step #2: Restructure Your Visual Merchandising Real Estate for a Balanced Product Mix

Once bestsellers stop dominating, you will need to rebalance product visibility to include products that will help increase earnings and/or help improve cash flow. 

You can start simply by reorganizing your product collections to show a mix of high-margin, bestsellers, new arrivals, and slow movers. This will ensure your bestsellers still convert while making room for other products to sell profitably. 

How profitable? Swarovski, for instance, used our structured merchandising rules to increase profits by 8% in just four weeks, without heavy discounting.

But that doesn’t mean you want to stop there; the more details you get with your merchandising management, the better the results will be — but you’ll need some AI to get you over the line. 

Step #3: Use AI to Automate Your Strategy Based on Customer Behavior and Merchandising Shifts 

We know manually adjusting product sorting, displays, and recommendations isn’t sustainable. And while basic automation — like promoting high-margin products with good stock — is helpful, traditional, rule-based automation only scratches the surface.

To truly optimize merchandising, AI needs to do the heavy lifting, adapting product visibility, recommendations, and promotions in real-time. But you want AI-powered collection sorting that uses marketing and inventory data while factoring in shopper behavior.

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Step #4: Expand This Technique to All Your On and Offsite Merchandising 

To fully capitalize on this digital merchandising strategy, you should extend it across every touchpoint — both on and off your site. This means using personalized product recommendations based on customer behavior and inventory in your cross-sell and upsell promotions, offsite advertising, and email marketing. 

Alembika provides an excellent example here. They were able to extend their advanced merchandising beyond their site by adding Kimonix’s personalized product recommendations to their Klaviyo emails, which resulted in a 29% conversion rate and an 88X ROI. That's not too shabby for hitting customers’ inboxes with the right products at the right time!

Step #5: Focus on Retention by Prioritizing Long-Term Customer Value

Finally, you want to ensure you are set up to play the long game. This means that after optimizing product sorting and sales channels, you want to keep optimizing based on important post-purchase insights. 

And the payoff? Stores with strong retention-based merchandising generally see higher CLV and better profit stability. The trick is using post-purchasing data to help optimize merchandising for your new and existing customers!  

Here are two ways this could work: 

• Think repeat-purchase products and loyalty incentives for your merchandising displays to return shoppers 
• Use high return rates as a signal to reduce product visibility until you have fixed the expectation/product issue 

What About Managing Inventory Without Panic Sales?

Even if you have implemented this strategy to escape the eCommerce trap, you will face bottlenecks. It’s the nature of the eCom business and is particularly relevant when selling highly seasonal products.

But there is a difference between strategic promotions and desperate markdowns! And to maintain long-term profit, we’re aiming for strategic promotions.

To get there, you need to first: 

• Balance demand and supply without over-ordering! 

Then it’s about keeping an eye on slow movers and setting up promotions before they become the profit-sucking dead stock we want to avoid at all costs (pun intended!. 

How might this look? 

Let’s say you’re running an online apparel store, and you notice a batch of spring jackets isn’t selling as fast as expected. Instead of waiting until summer hits and slashing prices in a panic, you spot the slowdown early and run a targeted mid-season promo — just enough to give sales a boost without killing margins. 

By the time the season ends, you’ve strategically cleared most of the stock, avoiding heavy markdowns and keeping your profits intact.

Your Turn! Moving from a Sales-Focused to a Profit-First Mentality 

As we have shown you, moving from a sales-focused to a profit-focused digital merchandising strategy is a must when growing your online retail business in the long term. 

Why? 

The past strategy of over-relying on bestsellers while ignoring high-margin or slow-moving products doesn’t hurt just your immediate cash flow and prevent future revenue. Running blanket discounts instead of targeted promotions also means reducing profit margins while positioning your products away from their values toward promotion-only shoppers. 

And how do we avoid this?

By focusing on more than just sales volume and getting more innovative with your digital merchandising tactics.

It doesn’t have to be overwhelming; the strategy in this post will get you there. But, to ease you into the profit-first mindset, here are three simple tweaks to help you get out of the best-seller loop with your digital merchandising that you can test now: 

• Focus on long-term growth by seeing where you can balance conversions, margins, and inventory turnover  
• Reorder your product collections to show high-margin items along with your bestsellers 
• Plan your limited-time promotions to help move inventory along now, so you don’t have to resort to dramatic discounts later 
• Combine marketing and inventory data with shopper preferences to show the right products to the right shopper at the right time 
• Harness the power of our profit-driven merchandising AI to automate and optimize your strategies 

Now, you’re on your way to driving more profits with your digital merchandising strategy! 

Still have merchandising questions? Our team is standing by to answer them! 

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