How to Build a Winning Product Assortment Strategy for e-Commerce
Product assortment is not a novel concept that got created in the digital era. However, it is one of the vital strategies used by retailers, brick and mortar, and e-commerce owners to increase their ROI and other KPIs.
Product assortment strategy finds its value in traditional retailing and in businesses that focus on e-commerce. However, the effectiveness of assortment planning depends on the way the customer interacts with the product and, consequently, the brand.
Devising a successful product assortment is both art and a science
An effective product mix needs to have a blend of intuition and a data-driven approach.
Studying the consumer tastes, preferences, and buying behavior coupled with the inventory data and the right merchandising tools will provide your business the competitive edge necessary to bring in revenue and increase website traffic.
What is product assortment?
In general terms, product assortment in e-commerce is the product mix a business presents before the customer to maximize sales. For instance, FMCG goods tend to sell more efficiently while not having a huge profit margin. On the other hand, products like jewelry have a high margin but do not get sold quickly.
Product assortment also determines which inventory the business relies most upon and requires a profitable product assortment strategy. Two primary components that exist in product assortment are depth and breadth/width.
A 'Product Depth' is how many different varieties of each product the store carries, which could be in terms of colors, sizes, or features of the same product. The more variations, the deeper the store's product assortment.
Meanwhile, a 'Product breadth' is how many different products a store is selling. E.g., Target offers its customers a broad assortment of products to purchase, ranging from apparel, groceries, and electronics.
Why retailers should create a product assortment strategy
Product assortment strategy can either make or break a business, and that is why assortment decisions are to be carried out in the pre-planning stages, which occur before the purchase of products. A strong product assortment strategy optimizes revenue and profit and minimizes the risk. It can also drive inventory decisions.
To have better sales and grow the customer base, should consider an effective assortment strategy in place. It is essential because it will decide what products the customer will be exposed to, leading to his purchase decisions.
One of the points for a business owner to remember is that more is not always better. If a customer is offered several varieties in a product line, it will make it a more complicated decision to make purchases. However, it is a double-edged sword as too few options can leave a customer dissatisfied and directly impact the sales revenue.
Along with understanding the concept of product assortment, a retailer must conduct comprehensive market research relating to the customer's taste, preferences, and environmental factors. For example, an online apparel store can plan to have an assortment of winter clothing on their landing page during the cold weather and light cotton wear for the summer season.
Given that e-commerce is spreading globally, online retailers must constantly monitor online visitor and buyer experiences to stay ahead in the game. The ever-changing consumer behavior, if studied meticulously, can help businesses get better results. The current brands adapting to survive are choosing to have better-optimized product assortment, segmentation, and pricing that will only increase their sales performances and make them victorious in the online marketplace.
How to Build an effective Product Assortment Strategy for your e-commerce store
A single product assortment strategy does not work for all forms of business. However, there are necessary points to be considered to churn profit out of the assortment strategy a business selects. The below can help a retailer make informed decisions before he decides on a product mix.
1. Decide on the target market, research the sector
Product assortment will be easier to achieve once the retailer decides on the type of market he prefers to operate. As a business owner, you have an idea of what your brand is and the value it holds for the customers; an assortment strategy will be relatively simpler to devise. However, in the event there is ambiguity, the target group will be left confused.
For instance, a small store with a niche market is likely to have a deep product assortment in a particular category. At the same time, a store that caters to diverse age groups and people of different genders will have comprehensive product assortment strategies in place.
On the other hand, every store doesn't need to follow a similar product assortment strategy; it can vary depending on the market and the preferences of their target group.
2. Understand the dynamic nature of consumers' tastes, preferences
Make peace with the fact that something that a consumer liked and bought a week ago will not be what he will like two days from now. With better options and broader varieties to choose from, the consumer will be on the move if your business fails to live up to their expectations. Unfortunately, one of the pitfalls of businesses is keeping up with the ever-changing demands of the consumers.
With new tools on hand, retailers are not only concentrating on maintaining higher inventory levels but monitoring the public behavior both in-store and online. The insights accumulated through these tools concerning the customers' buying patterns will help ascertain the business's assortment strategy.
In the current era, social media has become one of the vital tools used to determine the consumption pattern of people.
3. Observe market trends, national and local
Even if a retailer has to formulate temporary assortment strategies, then he should do so. Uncertainties can plaque the market before giving any intimation, which happened in the pandemic. As a result, a significant shift took place in the buying behavior of customers.
One of the industries that faced an existential crisis was the fashion industry. With lockdown enforced and remote work becoming the norm, the purchase of fashionable clothes plummeted. When blazers and formal pants took a backseat, the sleepwear and loungewear segment rose to the occasion. Given the increase in the dependency on face masks, retailers indulging in the sale of apparel tried to capitalize on the growing demand by offering fashionable masks that matched the attire.
Retailers did not constrict themselves to stick to what they knew best; instead, they adapted and provided products based on the consumers' demand.
4. Study your inventory data
Understanding and analyzing sales and inventory data helps decide the number of units of a particular product needed to order. In addition, this very inventory will also help in formulating an assortment strategy.
The way a product of a particular brand gets sold out, the retailer can consider stocking his inventory with more products of that particular brand, thereby having a wide assortment of products. Similarly, suppose the retailer notices that customers are buying different varieties of the same product in terms of size or color; this should be taken as a cue to fill the stock of the varied colors and sizes belonging to the same product. Thus, it is opting to have a deep assortment strategy.
5. Generate more sales with strong visual merchandising
A compelling visual merchandising strategy can play a crucial role in assortment planning for e-commerce.
You can have the edge over your competitors by correctly aligning marketing, sales, operations, and design efforts to strengthen your assortment. Visual merchandising, in general terms, is an attractive form of product display to drive in customers and encourage them to buy. Visual merchandising finds its application not only in traditional retailing but also in online retailing. In an e-commerce setting, visual merchandising helps guide customers through the buyer’s journey as easy as possible.
This marketing practice helps buyers get exposed to relevant product categories and offers before moving on to another website.
6. Fill product gaps in your retail assortment planning
Fill the gaps in demand to not find yourself in a situation where your competitors outdid you. Compare the breadth and depth of your product assortment to fix the problem on areas needing improvement in the section of pricing, product categories, etc.
7. Historical data for forecasting future assortment strategies
Assortment planning done by using historical data will help online retailers set realistic targets for the future. For example, the past data will help understand which product categories attracted revenue or which products sold out too early. It will also help in singling out weaker assortment planning strategies.
With data on hand, you can set benchmarks of the kind of assortment plan your business can benefit from.
8. Track Competitor Pricing
One of the vital aspects of the formulation of assortment planning is setting a sound pricing strategy. It is possible by tracking competitor’s pricing. Even if assortment planning is adequate, but the pricing is not favorable, the customer experience will be unsatisfactory. The wrong pricing strategy can also leave a stock full of unsold inventory on sale at slashed prices.
A pricing methodology known as competitive pricing intelligence will also come into play here. It is an approach where an e-commerce store sets prices of its products depending on the actual market situation and based on several parameters set by the same e-commerce store. However, poor visibility into the market will make it difficult for you to understand the price game, so one has to be proactive in setting prices.
9. Consider complementary products for cross-selling
When crafting assortment decisions for e-commerce, online retailers should consider cross-selling to increase profits. It will also help you think about how different items in the product assortment can go well with each other.
Cross-selling helps customers buy items with higher profit margins and other products they might want or need. It is the reason why cross-selling finds its relevance in e-commerce as an effective, profit-increasing tool.
How Web Scraping can help you create a profitable product assortment strategy
Retailers and e-commerce businesses have adopted creative forms of advertising to create awareness about their products, one of the methods being video marketing (E.g., YouTube ads). However, it is not very easy to quantify the customer's reaction to the ads; web scraping helps a retailer know customers' sentiments, moods, and reactions by extracting their comments. Web scraping will help retailers know if there is a market for the product or not. Web scraping will help prevent overstocking of products which will cause wastage and will attract higher costs than profit.
Web scraping can help a business owner understand their competitors and what is helping them stay afloat or soar in the market. It will help find out what types of products are driving the profits and what are pushing the customers away. Understanding why the competitor fails will help to prevent the mistakes the former did. With the available data from web scraping, a retailer owner should have an assortment of products with enough demand to sustain different competitors in the market.
Web scraping provides real-time insights and helps remove the products that are not reaping any profits, and helps change the product assortment strategy. For example, you can switch inventory with goods that are attracting higher revenue, and with the data, the retailer can also know whether there is a demand for new products. A key takeaway in this regard is that product assortment is a continuous process.
Looking for a fully managed web scraping service for your product assortment needs? Contact Datahut to learn more.