Merchandise - To group products by brand (maybe not)

I was reading a post on Seth Godin's blog who wrote about the practice of organizing product by brand or by product type and titled it Reorganizing for profit. 

The basis for the post was that most retailers organize products by brand/designer or label? and within that, they organize by type of item?and within that, by style ?and finally, by size.  Simple enough, right?  Nope.  He argued that retailers should organize by product type because that's how people shop.  And retailers should also cross-sell (place shirts, socks and ties next to the suits for sale for an easier shopping experinece).
 
Having spent years working in the beauty retailing biz, we constantly faced the conundrum of how to merchandise products.  Manufacturers wanted their products merchandised together while customer often want similar products such as shampoos grouped together so you can compare and contrast.  Well, maybe not. 

Consumers are so brand loyal when it comes to certain product categories such as cosmetics that grouping all the products in a brand together makes sense.  Other product categories, such as writing utensils isn't a brand loyal category so group all pencils together.

THE REAL WORLD RETALING TAKEAWAY
Tune into your customers' wants and needs, then use common sense when merchandising your products.  What you sell and how you sell it should be based on your customers' needs, not your own.

The other consideration is cross-selling -- that is, selling products next to each that relate to each other.  For instance, sell throw blankets and pillows with sofas or with body wash, merchandise bubble bath and soaps, as well as body scrub brushes and loofahs, and even washcloths, towels and robes alongside the body wash.  Put the idea in your customer's mind to buy more vs. less.

This is quite effective online and most online retailers have the "other customers also purchased" for a reason -- recommend more products and customers buy more.  Take that philosophy and adapt it in store.