The art of merchandising has enjoyed decades of refinement in offline retail. Today, e-commerce retailers have just begun to figure out how to merchandise effectively online. This is an important area of study: a recent Forrester survey reported that 84 percent of e-tailers consider merchandising one of their most important objectives ("Making merchandising work," December 1999 *).

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One way to think about online merchandising is to compare it to what works best offline: the salesperson. A good salesperson can identify the customer's needs, recommend relevant products and give advice on how to use the products.

A literal translation of the live salesperson to the Internet, however, usually creates a bad customer experience. By not recognizing the technological constraints of the medium, sites that have tried to emulate the salesperson with "virtual sales assistants" have mostly failed in their merchandising attempts.

An effective merchandising strategy would use the best aspect of the salesperson -- understanding the customer's needs -- without making a mess of the technology in the process. The site should understand, either intuitively or through direct questioning, what products to suggest (and when) to the customer.

Another Forrester report found that targeting is the most important factor of success for online promotions ("The promotion commotion," April 2000 *). For perfect targeting, the retailer would have complete information on the specific shopper, including past purchases at other stores, known needs and even unarticulated desires. Obviously, it's unreasonable for e-tailers to expect to capture that much information about their customers. Without a huge database of information, though, there is still a way e-tailers can merchandise effectively.

* Client access only.

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