Merchandise hierarchy refers to the way you organize and display your merchandise. Each hierarchy level divides similar types of merchandise into progressively smaller categories. When developing your merchandise hierarchy, each level should be organized so that it is separate from the other. In addition, your hierarchy levels should not contain so much merchandise that it becomes unmanageable. The goal of a merchandise hierarchy is to organize your merchandise so that your customers can quickly find what they are looking for.

Level One: Store

Your store is the highest level of merchandise hierarchy. Customers make the decision to patronize your store based on the type of merchandise you sell and the price. A general merchandise store usually receives more customer visits than a specialty store. Your store’s layout also affects your customer count. A brightly-lit, well-organized store attracts more customers than a store with cluttered merchandise.

Level Two: Department

When customers come into your store, the first thing they look for is a specific department, such as jewelry or men’s wear. Departments are designed to hold a wide variety of one type of merchandise. Most stores place their most popular departments at or near the store entrance and relegate less attractive merchandise to the back areas. For example, women’s clothing and electronics are two departments strategically placed at or near the store entrance. However, departments such as appliances and automotive supplies usually are relegated to the back areas of the store.

Level Three: Division

Each department organizes its merchandise into similar divisions designed to help customers find what they want quickly and easily. For example, you can organize your women’s department merchandise into teens and petites. Your boy’s clothing department can be organized into boys, pre-teen and teen.

Level Four: Product

Different products within a division are grouped together based on similar characteristics. For example, three different products for women’s clothes would be dresses, skirts and pants. Common products in men’s apparel are suits, shirts and jackets.

Level Five: Class

A merchandise class groups similar products together that share specific qualities. For example, women’s evening wear can be broken down into floor length dresses and street length dresses. Boy’s shirts are placed in classes based on similar qualities such as short sleeve, long sleeve or sleeveless shirts.

Level Six: Sub-Class

The sub-class is where your customers make their decision to buy your merchandise. Sub-classes group items that are in the same class together based on specific attributes. Some common sub-classes are size and color. For example, you can display girl’s shirts by color regardless of the size, by size regardless of the color or by size and color. Keeping track of sub-class sales reveals how fast your merchandise sells.