What's the greatest thing about shopping online?
There are plenty of answers to that, but the one that most customers agree on is prospect of a virtually infinite inventory. Deloitte's Retail in Transition survey revealed that 76 percent of shoppers prefer going online to find a greater "variety of products/styles available" and 57% prefer ecommerce due to the "availability of hard to find/unique products." Product diversity is the strength of an online store, and you will perform at your best when you play to the strengths of the channel.
By diversifying your ecommerce offering, you can widen your appeal to more shoppers while improving the shopping experience for your best customers.
There are three stages in transforming your ecommerce store into a diversified online destination for dedicated shoppers:
- Understanding what your customers want from product diversity
- Prioritizing the presentation of your most important items
- Learning best practices in product diversification
Step 1: What is product diversity and why does it matter?
Let's start out by defining our terms. "Product diversity" simply means offering more different types of items in your store. Amazon has been the master at this ecommerce strategy, starting with only books and now covering virtually any item you can think of. (Just like the A to Z arrow in their logo implies.)
The most common type of product diversification in ecommerce stores is concentric diversification, which means slowly expanding out to related items.
The most common type of product diversification in ecommerce stores is concentric diversification, which means slowly expanding out to related items. Apple Computers is one of the thought leaders of this strategy: they moved from personal computers to mp3 players to computer-like phones. It was so successful that Apple dropped "Computers" from their name in 2007.
A rare but highly disruptive strategy is known as horizontal diversification, which means pivoting the entire company to a new value proposition. That's what happened when Wrigley, a company that made laundry soap, discovered that customers loved their free gum giveaways so much that the company forgot about soap and became a global gum powerhouse.
What matters is not what you sell, but what your customers want to buy from you.
What matters is not what you sell, but what your customers want to buy from you. Figuring that out makes all the difference between market winners and losers.
Step 2: Which items deserve the most attention?
Your brand is your company's personality. It makes sense for Harley Davidson to sell things other than motorcycles in their online shop — such as branded leather jackets, baby clothes and cigarette lighters — because these things create community, which translates back into brand advocacy. The items they sell are not arbitrary; they've been carefully selected to build specific customer segments and deepen relationships.
To diversify intelligently, you'll have to start with a better understanding of who you are and who your customers want you to be.
To diversify intelligently, you'll have to start with a better understanding of who you are and who your customers want you to be. Brands often diversify in the wrong direction when they don't pay close enough attention to self-awareness and changes in customer needs.
One popular saying in ecommerce circles is "The riches are in the niches." By identifying an underserved niche that syncs with your brand identity, you can more easily research and respond to their needs. The best ecommerce sellers combine width with depth. Commodity items are those that shoppers could buy anywhere. They won't deliver profits, but they are there to bring customers to your site. Mix low priced commodities, perhaps through partner fulfillment, with the high-premium/high-quality goods that only you can provide. That's where you get the depth of commitment for repeat sales and referrals.
Step 3: How did the product diversity experts do it?
You can't be everything to everyone. Fortunately, ecommerce as an industry has evolved to the point where there are partners that can take over the most complex tasks and handle them efficiently.
You can't be everything to everyone.
Dropshipping is one of those labor-savers. Instead of pre-paying and sitting on inventory, you arrange to contact a third party automatically when a sale goes through. That company is then responsible for shipping the item to the customer, but you may have to arrange white labeling ahead of time.
Top ecommerce brands start with a community, which is where social media comes in. Just as Zappos built its brand on Twitter through great customer service, new entrants are experimenting with Instagram and other platforms to build an audience before they build an empire.
Make sure your ecommerce store is professional, engaging and fun to shop. Don't try to reinvent the wheel, as having an established ecommerce site will give you instant credibility.
Concentrate on increasing cart sizes while decreasing your cost of acquire new customers.
From there, concentrate on increasing cart sizes while decreasing your cost of acquire new customers. Community building takes time, but it doesn't have to be expensive. Non-scalable acts of customer care and support are critical at the early stages are you build the relationships that will become the core of your business.
The Art and Science of Ecommerce
There's no magic bullet for ecommerce success, but those that have succeeded have done paid close attention to three factors: they stay in close contact with customers to find out what they want to buy, they work on maintaining a memorable buying experience and they rely on community-building to keep customer acquisition costs low. Product diversification is a key component of that strategy, but only when it is done with intelligently, strategically and with an understanding of what the brand means to customers.Have any questions about diversifying your products? Leave us a comment!