Product Assortment Index Provides Important Lessons For Retailers Heading Into The Holidays

It’s becoming clearer every week that product assortment is the new growth metric for retailers.

According to the CommerceHub Product Assortment Index, traditional retailers like Sears, Target and Walmart have been consistently adding SKUs to their websites in 2014 as they race to catch up with Amazon’s massive listings and create the level of product choice busy consumers demand as they prep for holiday shopping. Through the end of the third quarter, the non-Amazon retailers in the index collectively grew their product assortment by 82 percent — 26 percent in Q1, 25 percent in Q2 and 15 percent in Q3.

After a slow start to the year — Amazon increased listings only 10 percent in the first half of the year and actually reduced SKUs in the first quarter — the e-commerce giant grew its assortment by 43 percent in Q3 heading into the holidays. And much of that growth came in popular holiday categories such as electronics, home goods, and health and beauty products.

The CommerceHub Product Assortment Index, which tracks more than 600 million products on the websites of mass merchants, department stores and marketplaces, provides some important lessons for retailers heading into Black Friday and the holiday shopping season.

Most importantly, the data shows that product assortment expansion has become a key driver of revenue. Simply put, if retailers want to grow, they need to add more products to their websites. Amazon has proved that an “endless aisle” leads to increased sales, and other retailers are following the company’s lead by aggressively expanding their product assortments to provide consumers exactly what they want.

But retailers also need to have a strategy for how they’re going to expand their product assortment and in which categories. While Amazon has invested millions of dollars in fulfillment centers worldwide to build physical inventory and can quickly expand product assortment through its popular and trusted marketplace, most retailers can’t scale that easily. So as an alternative, traditional retailers have to carefully choreograph an omni-channel strategy that relies on a combination of tactics such as using physical stores as fulfillment centers, adding third-party fulfillment capabilities through drop-shipping, and figuring out how they want to play in marketplaces. And they need a partner, like CommerceHub, who can seamlessly pull all the pieces together to provide the perfect customer experience.

It’s a dance that most retailers still haven’t mastered. But the CommerceHub Product Assortment Index shows that they’re getting there, even if Amazon still has the advantage.