As a retailer, it can sometimes feel like you’re fighting to survive in an Amazon world. The sheer size of Amazon’s product selection, combined with the ease with which consumers can quickly turn to competitors, means retailers need to aggressively grow product assortment to remain competitive.
Efforts to expand product assortment pay off big time for retailers. Those that offer a wider assortment enjoy more sales and greater customer loyalty. In fact, CommerceHub data indicates that when retailers expand product assortment they experience a 12 percent increase in sales for every 10 percent increase in unique products sold.
But despite the ease with which retailers can add SKUs through drop-shipping strategies, many are left in the dark about which products make the most sense to add to their inventories. Some make the fatal error of blindly adding to their assortments rather than looking to data to drive product expansion.
Assortment expansion with no insight into customer demand is a recipe for retail disaster.
Assortment growth requires a smarter approach.
Drop shipping is the fastest and most cost-effective way to offer customers a wider selection of products. With drop shipping, brands get their products in front of more consumers, and retailers sidestep the sizeable upfront investments in fulfillment centers and inventory. It’s a win-win for everyone involved.
But just because you can easily add a virtually unlimited number of SKUs through your existing supplier network doesn’t mean you should make snap judgments that aren’t driven by data. Product assortment expansion is effective only if you truly know what your customers want to buy in addition to the products you already offer.
For example, if you’re primarily a clothing and accessories retailer, should you start selling shoes? Maybe, but additional market research on product performance and customer preferences is critical before making the leap. The wrong products will fail to deliver additional revenue and can confuse customers or harm your retail brand reputation.
Assortment expansion is the right move, but it needs to target product categories that make sense for both your customers and your business.
Smart product assortment expansion begins with smart data.
The key to a smarter product assortment strategy is actionable data. A combination of customer preference information and supplier performance data determines which products you should offer – and which products you should avoid.
Suppose the data shows that a supplier in your network carries a brand of shoes that is performing well at competing retailers. There’s no reason why you shouldn’t offer those shoes, too. By adding them to your product catalog, you can excite customers and create new revenue opportunities on your e-commerce site.
Good data is hard to come by on your own. Retailers should consider partners with access to the supply chain data they need to expand product assortment intelligently. As a hub that connects retailers and suppliers, CommerceHub has visibility into the entire supply chain, and insights into the hottest-selling brands in each supplier’s inventory.
And in a world where retailers struggle to compete with Amazon, an intelligent and cost-effective product assortment expansion strategy can make all the difference.
Find out more about CommerceHub’s product assortment offerings today.