How many products should I sell online?
This is a question many merchants struggle with when they are first starting out in eCommerce. I hear it all the time when I’m consulting with my bricks & mortar retail clients attempting to make that digital retail push. The thought process usually looks like this:
- In our stores we carry thousands of SKU’s / styles. Do we really need to have them all available for sale online?
- If we don’t sell everything, how many of our products does our site really need to launch?
- If we start small, do we need to have a plan to get all of our product online?
- What’s it cost to get products for sale online? How does this compare to my physical stores?
I can see how these are tough questions to answer. Think through what kind of back-office effects this has on the merchant. There is no doubt about it, the more product you choose to sell, the more work it is (quantity of hours/resources) to get these products merchandised online. For this reason and many others I don’t think it’s a yes/no question.
There is no right number of SKUs for everyone, there is just the right number for you.
Great merchants will frame their thinking about which products to sell around Revenue Per SKU. Assuming you build out a set of processes to receive and load new product to your site in an efficient matter, there is still a cost associated with those processes. This cost is obviously at the per-SKU level, so it only makes sense to think about gross revenue per SKU as the first variable to figure out if an item is worth listing.
As much as everyone wants sales, it isn’t the only variable that needs to be considered. If you are multi-brand retailer there is also the concept that some brands will be loss-leader products that are only meant to drive in traffic. Just like regular retail channels, loss-leader products are dangerous and can get out of hand quickly. In the online world you need to factor in new costs like shipping, returns, and customer service in addition to the product cost and retail price.
Frame of Mind
I think the first step in addressing the “how many products” question is moving past the concept that you will either have too much or too little listed. I see many merchants getting hung up on this problem by thinking of it as binary. Too often I see merchants looking to other businesses that they think are similar to theirs (i.e. – What do other electronics retailers do? What do other multi-brand fashion retailers do? etc…) instead of looking at what makes them unique.
I like to think about the problem of product count using the following strategy filters:
Note: None of these have to do with basics like gross profit margin, is the item shippable etc… ? I assume you’ve already filtered your potential product catalog using the obvious / basics.
Who is your target customer persona? What are they looking for?
Start here with everything you do, not just deciding on product selection. Knowing your customer is retail 101. eCommerce isn’t any different. If your customer is one that likes to hunt for obscure, hard to find products then that tells you what to focus on listing for sale (and how much to invest in each SKU).
If your retail stores attract customers seeking advice on what to wear (for example), then product selection on the site should follow that same idea. Help your customers pick which items rather than just showing them tons of product and asking them to choose.
I believe that if you go through the exercise of identifying your customer persona, choosing which products to list online for sale becomes a lot easier. Your customers shop in your physical stores for a reason(s), what is it?
What is the minimum number of SKUs you require to create a good user experience?
Note that I said good user experience, not perfect user experience. This is a tough pill to swallow, especially for bricks & mortar retailers with a history of having very strong product selection in their stores.
Your retails stores didn’t start off perfect and nor should your online store. Don’t be afraid to make a few mistakes, this is how we learn. What if you decided to put the same offering online as you have in your stores only to find out that your ideal online shopper really only cares about a smaller number of the brands or categories you carry? It could even be that some of your products aren’t that sellable on digital channels, so why invest in them?
I always like testing brands or categories of products first to gauge demand and selling potential before going deep and investing into merchandising all of any particular brand or category. Is this ideal? No. Is it effective? Yes.
Related: The Parallax Effect in eCommerce
Curation and Authority are more important than vast selection.
Nobody is going to out-Amazon Amazon. They are the store you go to when you know exactly what you want. This is also the big opportunity for everyone else. We have too much choice in todays society. Too much content, too much product, too much noise, too much everything! This “too much” trend isn’t slowing down.
I believe the opportunity in 2015 lies in becoming the authority in your area/vertical/market. Instead of listing thousands of products for sale, why don’t you list the 1,000 best you have to offer and tell people why these are the best?
Be the curator, not the clearance house.
If you are a multi-brand retailer and have tens of thousands of products to sell, I’d start asking if this is sustainable long term? It used to be that more product listings was good strategy because it meant a higher likelihood of potential shoppers finding your store in the search engines. Used to be…
Is the best path to grow your business, let alone go digital, to add more SKUs? Or is the best path to grow your business becoming the person/company that your target consumer turns to for cutting through the noise. For helping them pick the best product fit. I’m going to go with the store who provides this value over the store who simply looks to transact.