Customers have the option to filter by designer, price, item type, etc., but I have not been able to find any information on how to merchandise/arrange the products on the aisle level category page.
For example, if the category is "Acme Home Decor", should I group all vases together, all dinnerware together, etc., or intersperse them on the page(s) to create the impression of variety?
Many big e-commerce retailers provide sorting options. For example, Amazon provides the following sort options:
Their default is "Featured". I'm sure they probably have some staggeringly complicated algorithm to determine which order items appear in their "Featured" sort, but for your case, perhaps initially sorting by "Best sellers" or "Highest rated" would suffice.
In your example, I may be curious what the best selling items are, so I'd sort by that. Or perhaps I'm on a tight budget and would like to view by ascending price. Or perhaps I kind of remember the name of the item and there's not a crazy amount of items in this category, so I can sort alphabetically and browse.
In any case, when you're unsure of where to start with these kinds of design decisions, I'd recommend taking a look at the big players and analyzing their choices. The e-commerce giants have put huge sums of money into how to get people to buy more things online. I do not recommend a practice of blindly copying how big companies do things, as certainly several features may be solutions for their unique niche or service, but there are many valuable things to learn from this exercise.
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I don't think you should intersperse the products just to create an impression of variety but items can appear in more than one category.
The 2nd book I listed here has a few retail examples that you can apply. The question you're asking seems to be about concepts of information architecture because it also depends on a bunch of other factors.
Your site's inventory e.g. will you have subcategories; what kind of shopping site is this? High-end, budget-conscious ... is there a physical store as well?
What about your user profiles: Are they repeat customers? Will they be interested in discovery or shopping quickly?
The Why of IA How to Make Sense of Any Mess by Abby Covert
The How of IA Information Architecture : Blue Prints for the Web
Another way to get started is to do a card sort with people in your team. Get them to group the products according to how they think they should be organized. Expand this activity to your target demographic for more insights. Card sorting works really well for retail products and you can use product photos too.
