As the holiday season quickly approaches, the race is on for retailers to capture the bulk of consumers’ spending budget. Proven by retail giants like Amazon and Wal-Mart, increasing product assortment is an effective strategy for getting your customers to spend more, more often. It can be tempting to jump right into increasing your product assortment, but choosing the right mix of products to sell requires more than picking items with the best sales potential. There are a number of different reasons a product or brand may be a great addition to your product assortment, so we decided to put together a formula to help you determine the best fit for your business.
Product Breadth + Product Depth = Better Product Assortment
Product Assortment Breadth
Product breadth is essentially the level of variety in your product assortment. It can also be referred to as product assortment width. Target serves as a great example of a retailer with large product breadth.
Why is product breadth important to your assortment formula? Variety expands the reach of your marketing efforts by attracting new customers and recapturing the attention of existing customers. Disney recently partnered with Target to launch “shop-in-shop” locations at 25 Target stores, adding 450 new SKUs at each location. The products Disney plans to offer includes toys, games, apparel, and more.
While Disney greatly benefits from Target’s established, loyal customer base, Target is able to increase its product breadth and reach new consumers ahead of the holiday season through this partnership. This is an excellent example of how a product or brand can act as a magnet to draw customers into your store.
Product Assortment Depth
Product depth simply refers to the number of each item or style you carry for a specific product. For example, Costco maintains great product breadth with its wide variety of products offered, but lacks in product depth stocking only a relatively low number of SKUs for each product offered.
When considering new products and brands to add to your assortment, taking product depth into account is an important component – specifically for online retail. Many retailers avoid increasing the depth of their assortment over fear of inventory costs, but more agile online retailers are leveraging e-commerce distribution software to add product depth without assuming additional inventory risk.
Macy’s “vendor direct” model embodies this concept of increased depth by partnering with vendors to ship orders directly to the customer. Thanks to this model, Macy’s can offer expanded inventory to consumers without fear of assuming inventory risks and running out of stock early into the upcoming shopping season.
Putting it all together
A great place to start looking for products that fit your existing customer is on-site search data. You can view this data, for free, in Google Analytics. Simply look for common product searches that your e-commerce site does not satiate through relevant product results. Another strategy you can leverage is sending out surveys to your customers asking them about their interest in buying certain types of new products from your brand.
Once you have found the products you’d like to add to your product assortment, find third-party partners that offer direct-to-consumer fulfillment. You can add these partners’ products to your site without a large upfront investment which will leave you in a flexible position with your capital as well as with the ability to experiment with many products rather than go ‘all-in’ on a few. Capital flexibility enables you to market your new and existing products without the sunk costs of inventory.
Some products are magnets that bring customers into your store, others have profit margins that justify their inclusion, while others can be loss leaders that spur further sales. Consider your target customer, competition and brand as you select the assortment of products you’ll sell in your store.
If you would like to discover how a better product assortment can power your growth strategy, get in touch.